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Exhibit 10.10    
    

ABRAXAS ENERGY PARTNERS, L.P.

LONG-TERM INCENTIVE PLAN  

 PHANTOM UNIT AWARD AGREEMENT  

        This Phantom Unit Award Agreement ("Agreement") is made and entered into effective as
of                                    , 2008
(the "Grant Date") by and between ABRAXAS ENERGY PARTNERS, L.P., a Delaware limited partnership (the
"Partnership"),
and                                    (the "Participant").
 

        WHEREAS, the Partnership considers it to be in its best interest that certain key Employees of the Partnership, the Company or an
Affiliate thereof be given an added incentive to advance the interests of the Partnership; and 

        WHEREAS, the Partnership desires to accomplish such objective by granting the Participant Phantom Units (hereinafter, the
"Phantom Units"), as permitted under Section 6B. of the Abraxas Energy Partners, L.P. Long-Term Incentive Plan, as amended,
which is incorporated by reference herein (the "Plan"), along with a tandem grant of Distribution Equivalent Rights, as set forth herein. 

        NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, the parties hereby agree as follows: 

        1.    Defined Terms.    Unless otherwise defined herein, capitalized
terms used in this Agreement shall have the meaning given such terms in the Plan. 

        2.    Grant of Phantom Units.    The Partnership hereby grants to
Participant                                    Phantom Units, under
and subject to the terms and conditions of this Agreement and the Plan. This grant of Phantom Units also includes a tandem grant of Distribution
Equivalent Rights (each a "DER" and collectively, the "DERs"), with respect to each Phantom Unit, which
shall entitle Participant to an award of DER Phantom Units (as defined herein) pursuant to the terms of Section 3 of this Agreement. 

        3.    DER Phantom Units.    

        (a)   The
Phantom Units and accompanying DERs awarded hereunder shall be evidenced by an entry in a bookkeeping account. Pursuant to each DER, within 45 days following
the end of each fiscal quarter for which distributions were made by the Partnership with respect to a Unit, the Participant shall be awarded an additional number of Phantom Units (the
"DER Phantom Units") equal to: (i) the Partnership Distribution Amount (as defined herein) reflecting the most recent quarterly cash distribution
made by the Partnership, multiplied by (ii) the sum of the number of Phantom Units and DER Phantom Units, if any, previously granted pursuant to
this Agreement, and divided by (iii) the Fair Market Value on the date of such distribution. The award of DER Phantom Units shall be recorded in
the Participant's bookkeeping account and be designated as attributable to an outstanding Phantom Unit. Upon the vesting of Phantom Units pursuant to  Section 4(a) to which the DER Phantom Units are
designated as attributable, the Participant shall be entitled to payment pursuant to  Section 4(c) of this Agreement. 

        (b)   Upon
the vesting of a Phantom Unit, the DER attributable to such Phantom Unit will expire, and Participant shall no longer be entitled to an award of DER Phantom Units
pursuant to such DER. 

        4.    Vesting Schedule; Settlement of Phantom Units.    

        (a)    Vesting of Phantom Units (and DER Phantom Units).    Provided that Participant remains in continuous employment
with the Partnership, the Company or an Affiliate thereof from the Grant Date through the relevant Vesting Date (as defined herein), Participant shall vest in, and be entitled to payment under, 25% of
the Phantom Units (including DER Phantom Units, if any, attributable to such Phantom Units) on each of the first four anniversaries of the Grant Date (each anniversary referred to herein as a
"Vesting Date"), until Participant has vested in 100% of the Phantom Units (including DER 

 

Phantom
Units, if any, attributable to such Phantom Units) granted pursuant to this Agreement. Notwithstanding anything in this Agreement to the contrary, all Phantom Units (including DER Phantom
Units, if any, attributable to such Phantom Units) not previously vested will vest immediately prior to the effective date of, and contingent upon, a Change of Control. 

        (b)    Vesting of DERs.    The DERs granted in tandem with each Phantom Unit shall vest immediately upon the Grant
Date; however, in the event the Participant does not remain in the continuous employment of the Partnership, the Company or an Affiliate thereof from the Grant Date through the relevant Vesting Date
of the Phantom Units associated with each DER, the Participant shall forfeit the DER and DER Phantom Units awarded in accordance with Section 3
hereunder. 

        (c)    Payment.    

          (i)  On
each Vesting Date for each 25% tranche of Phantom Units, the Participant shall be entitled to receive a payment equal to the product of: (i) the Performance
Milestone Multiplier (as defined herein) as determined as of the applicable Vesting Date, multiplied by (ii) the total number of vested Phantom
Units (including any DER Phantom Units attributable to such Phantom Units), and multiplied by (iii) the Fair Market Value as of the Vesting Date.
Payment shall be made as soon as administratively practicable, but in no event later than 45 days following the Vesting Date. Notwithstanding anything to the contrary set forth in this
Agreement, in the event the Performance Milestone Multiplier (as defined herein) equals zero (0), the payment to Participant shall be $0 and the vested Phantom Units (including any DER Phantom Units
attributable to such Phantom Units), shall be forfeited as of that Vesting Date. 

         (ii)  Payments
of all amounts due under this Agreement shall be made in cash (unless otherwise determined by the Committee in its sole discretion). Upon Participant's receipt
of payment from the Partnership with respect to any Phantom Units and accompanying DER Phantom Units, such Phantom Units and accompanying DER Phantom Units shall cease to be outstanding and
Participant shall not be entitled to any further payment with respect to such Phantom Units and accompanying DER Phantom Units. 

        5.    Performance Milestones.    

        (a)   The
Phantom Units and accompanying DER Phantom Units awarded hereunder, and the settlement thereof, are subject to certain performance milestones, which are a function
of increases in the amount of the quarterly cash distribution made by the Partnership with respect to each Unit (the "Partnership Distribution Amount")
during each twelve (12) month period ending on each Vesting Date (each, an "Applicable Period") as further described herein. The
"Performance Milestone Multiplier" shall be calculated as follows: 

          (i)  If
the Partnership Distribution Amount increased by 15% or more during the Applicable Period, the Performance Milestone Multiplier shall equal two (2). 

         (ii)  If
the Partnership Distribution Amount increased by more than 5%, but less than 15%, during the Applicable Period, the Performance Milestone Multiplier shall be equal
to one (1) plus one-tenth (1/10) for every whole percentage point above 5%, rounded to the nearest whole percentage, by which cash distributions increased during the
Applicable Period. As an example but not by way of limitation: if the Partnership Distribution Amount increases by 6%, then the multiplier would equal 1.1; if the Partnership Distribution Amount
increases by 9%, then the multiplier would equal 1.4; if the Partnership Distribution Amount increases by 12%, then the multiplier would equal 1.8.; if the Partnership Distribution Amount increases by
14%, then the multiplier would equal 1.9. 

        (iii)  If
the Partnership Distribution Amount increased by 5% during the Applicable Period, the Performance Milestone Multiplier shall equal one (1). 

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        (iv)  If
the Partnership Distribution Amount increased by less than 5% or if the Partnership Distribution Amount decreased during the Applicable Period, the Performance
Milestone Multiplier shall equal zero (0). 

        (b)   For
purposes of determining the Performance Milestone Multiplier and calculating the percentage increase (or decrease) in the Partnership Distribution Amount for each
Applicable Period: 

          (i)  the
Partnership Distribution Amount as of the Grant Date is
$                                    per Unit, which is equal to the
quarterly cash distribution made by the Partnership with
respect to a Unit immediately prior to the Grant Date (the "Initial Partnership Distribution Amount"); 

         (ii)  for
the Applicable Period relating to the first Vesting Date, the percentage increase (or decrease) in the Partnership Distribution Amount shall be calculated by
comparing (x) the Initial Partnership Distribution Amount (as set forth in Section 5(b)(i) above) to (y) the Partnership
Distribution Amount reflecting the quarterly cash distribution made by the Partnership with respect to a Unit that immediately preceded the first occurring Vesting Date; and 

        (iii)  for
Applicable Periods relating to each subsequent Vesting Date, the percentage increase (or decrease) in the Partnership Distribution Amount shall be calculated by
comparing (x) the Partnership Distribution Amount reflecting the quarterly cash distribution made by the Partnership with respect to a Unit that immediately preceded the preceding Vesting Date
to (y) the Partnership Distribution Amount reflecting the quarterly cash distribution made by the Partnership with respect to a Unit that immediately preceded the Vesting Date to which the
relevant Applicable Period relates. For example, for the Applicable Period relating to the second Vesting Date, the increase (or decrease) in the Partnership Distribution Amount would be calculated by
comparing (x) the Partnership Distribution Amount reflecting the quarterly cash distribution made by the Partnership that immediately preceded the first Vesting Date to (y) the
Partnership Distribution Amount reflecting the quarterly cash distribution made by the Partnership that immediately preceded the second Vesting Date. 

        6.    General Restrictions.    The Phantom Units and accompanying DERs
and DER Phantom Units shall not be assignable or transferable, except as expressly provided in the Plan or approved by the Committee is its sole discretion. 

        7.    Death or Disability.    In the case of termination of
Participant's employment with the Partnership, the Company or any Affiliate thereof due to death or Disability (as defined herein), the Phantom Units and accompanying DERs and DER Phantom Units shall
be deemed vested on or before the date of death or Disability. "Disability" shall mean the determination by a physician selected by the Partnership that
Participant has been unable to substantially perform Participant's usual and customary duties for a period of at least one hundred twenty (120) consecutive days or a non-consecutive
period of one hundred eighty (180) days during any twelve-month period as a result of incapacity due to mental or physical illness or disease. 

        8.    Termination of Employment Other Than for Death or
Disability.    In the case of termination of Participant's employment with the Partnership, the Company or any Affiliate thereof, whether by action of the Participant
or the Partnership, the Company or any Affiliate thereof, for any reason other than due to Participant's death or Disability, all unvested and outstanding Phantom Units and accompanying DERs and DER
Phantom Units (including the DER account) shall be automatically and immediately forfeited, and no payment shall be due or payable with respect to such Phantom Units, DERs and DER Phantom Units. In
the event of termination under this Section 8 after a tranche of Phantom Units has vested but prior to payment by the Partnership pursuant to  Section 4(c)
, the Participant shall be entitled to payment for that tranche of vested Phantom Units and accompanying DER Phantom Units within
15 days of termination. Further, Participant hereby agrees to undertake any action and execute any document or instrument requested by the Partnership to effect such forfeiture 

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of
Phantom Units, DERs, and DER Phantom Units resulting from any such termination of employment. 

        9.    Rights as Unitholder.    The Participant shall have no rights as
a unitholder, and is not entitled to receive any Partnership Units as a result of the grant of Phantom Units, DERs, and DER Phantom Units hereunder. 

        10.    Plan Controlling Document.    Participant agrees that the Plan
is the controlling instrument and that to the extent there is any conflict between the terms of the Plan and this Agreement, the Plan shall control and be the governing document. 

        11.    Taxes.    The Partnership, the Company or an Affiliate thereof
are authorized to withhold from any payment relating to the Phantom Units and accompanying DERs and DER Phantom Units granted hereby, or any payroll or other payment to Participant, amounts of
withholding and other taxes due or potentially payable in connection with the Phantom Units granted hereby, and to take such other action as the Committee may deem advisable to enable the Partnership,
the Company or an Affiliate thereof, and Participant to satisfy obligations for the payment of withholding taxes and other tax obligations relating to the Phantom Units granted hereby. This authority
shall include authority to withhold or receive Units or other property and to make cash payments in respect thereof in satisfaction of Participant's tax obligations, either on a mandatory or elective
basis in the discretion of the Committee. 

        12.    Section 409A Acknowledgement and Release.    Participant
understands that payments under the Plan and this Agreement are potentially subject to Section 409A of the Code and that if the Plan and this Agreement do not satisfy an exception to Code
Section 409A or do not comply with the requirements of Section 409A and the applicable guidance thereunder, then Participant may incur adverse tax consequences under Section 409A.
Participant acknowledges and agrees that (a) Participant is solely responsible for all obligations arising as a result of the tax consequences associated with payments under this Agreement
including, without limitation, any taxes, interest or penalties associated with Section 409A, (b) Participant is not relying upon any written or oral statement or representation by the
Partnership, the Company or any Affiliate thereof, or any of their respective employees, directors, officers, attorneys or agents (collectively, the "Partnership
Parties") regarding the tax effects associated with the execution of this Agreement and the payment under this Agreement and the Plan, and (c) in deciding to enter into
this Agreement, Participant is relying on his or her own judgment and the judgment of the professionals of his or her choice with whom Participant has consulted. Participant hereby releases, acquits
and forever discharges the Partnership Parties from all actions, causes of actions, suits, debts, obligations, liabilities, claims, damages, losses, costs and expenses of any nature whatsoever, known
or unknown, on account of, arising out of, or in any way related to the tax effects associated with the execution of this Agreement and any payment under the Plan and this Agreement. 

        13.    No Right to Continued Employment.    Nothing in this Agreement
shall be deemed by implication or otherwise to confer upon the Participant the right to continue in the employment or service of the Partnership, the Company or any Affiliate thereof, or impose any
limitation on any right of the Partnership, the Company or any Affiliate thereof, to terminate the Participant's employment or service at any time for any reason. 

        14.    Employment Relationship.    For purposes of this Agreement,
Participant will be considered to be in continuous employment as long as Participant remains an Employee of the Partnership, the Company or an Affiliate thereof. Any question as to whether and when
there has been a termination of such employment, and the cause of such termination, will be determined by the Committee, and its determination will be final. 

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        15.    Notices.    Any notices given in connection with this Agreement
shall, if issued to Participant, be delivered to Participant's current address on file with the Partnership, or if issued to the Partnership, be delivered to the Partnership's principal offices. 

        16.    Execution of Receipts and Releases.    Any payments to
Participant, or to Participant's legal representatives, heirs, legatees or distributees, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims
of such persons hereunder. The Partnership may require Participant or Participant's legal representatives, heirs, legatees or distributees, as a condition precedent to such payment, to execute a
release and receipt therefor in such form as it shall determine. 

        17.    Governing Law.    This grant shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to its conflicts of laws principles thereof. 

        18.    Successors.    This Agreement shall be binding upon
Participant, Participant's legal representatives, heirs, legatees and distributees, and upon the Partnership, its successors and assigns. 

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the day and year first above written. 

	 	 	ABRAXAS ENERGY PARTNERS, L.P.
	

 	
 	

By:	

Abraxas General Partner, LLC
	 	 	Its:	General Partner
	

 	
 	

By:	

    
 Barbara M. Stuckey

President and Chief Operating Officer
	

 	
 	
PARTICIPANT:
	

 	
 	

By:	

    

	 	 	Printed Name:	    

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Exhibit 10.11    
    

$50,000,000  

 SUBORDINATED CREDIT AGREEMENT  

Among 

ABRAXAS ENERGY PARTNERS, L.P.
  as Borrower, 

THE LENDERS PARTY HERETO FROM TIME TO TIME
  as Lenders, 

SOCIÉTÉ GÉNÉRALE
  as Administrative Agent, 

and 

THE ROYAL BANK OF CANADA
  as Syndication Agent 

January 31,
2008 

SG
Americas Securities, LLC as Sole Bookrunner and Arranger 

 

  TABLE OF CONTENTS  

	 
	 	 
	 	 
	 	Page

	ARTICLE I	 	DEFINITIONS AND ACCOUNTING TERMS	 	1
	  	 	 	 	 	 	 
	 	Section 1.01	 	 	 	Certain Defined Terms	 	1
	 	Section 1.02	 	 	 	Computation of Time Periods	 	18
	 	Section 1.03	 	 	 	Accounting Terms; Changes in GAAP	 	18
	 	Section 1.04	 	 	 	Types of Advances	 	18
	 	Section 1.05	 	 	 	Miscellaneous	 	18
	

ARTICLE II	
 	

CREDIT FACILITIES	
 	

19
	  	 	 	 	 	 	 
	 	Section 2.01	 	 	 	Commitment for Advances	 	19
	 	Section 2.02	 	 	 	Borrowing Base	 	19
	 	Section 2.03	 	 	 	Method of Borrowing	 	19
	 	Section 2.04	 	 	 	Reduction of the Commitments	 	21
	 	Section 2.05	 	 	 	Prepayment of Advances	 	21
	 	Section 2.06	 	 	 	Repayment of Advances	 	22
	 	Section 2.07	 	 	 	Letters of Credit	 	22
	 	Section 2.08	 	 	 	Fees	 	22
	 	Section 2.09	 	 	 	Interest	 	23
	 	Section 2.10	 	 	 	Payments and Computations	 	23
	 	Section 2.11	 	 	 	Sharing of Payments, Etc	 	24
	 	Section 2.12	 	 	 	Breakage Costs	 	25
	 	Section 2.13	 	 	 	Increased Costs	 	25
	 	Section 2.14	 	 	 	Taxes	 	26
	

ARTICLE III	
 	

CONDITIONS OF LENDING	
 	

27
	  	 	 	 	 	 	 
	 	Section 3.01	 	 	 	Conditions Precedent to Initial Borrowings and the Initial Letter of Credit	 	27
	 	Section 3.02	 	 	 	Conditions Precedent to All Borrowings	 	31
	

ARTICLE IV	
 	

REPRESENTATIONS AND WARRANTIES	
 	

31
	  	 	 	 	 	 	 
	 	Section 4.01	 	 	 	Existence; Subsidiaries	 	31
	 	Section 4.02	 	 	 	Power	 	32
	 	Section 4.03	 	 	 	Authorization and Approvals	 	32
	 	Section 4.04	 	 	 	Enforceable Obligations	 	32
	 	Section 4.05	 	 	 	Financial Statements	 	32
	 	Section 4.06	 	 	 	True and Complete Disclosure	 	33
	 	Section 4.07	 	 	 	Litigation; Compliance with Laws	 	33
	 	Section 4.08	 	 	 	Use of Proceeds	 	34
	 	Section 4.09	 	 	 	Investment Company Act	 	34
	 	Section 4.10	 	 	 	Federal Power Act	 	34
	 	Section 4.11	 	 	 	Taxes	 	34
	 	Section 4.12	 	 	 	Pension Plans	 	34
	 	Section 4.13	 	 	 	Condition of Property; Casualties	 	35
	 	Section 4.14	 	 	 	No Burdensome Restrictions; No Defaults	 	35
	 	Section 4.15	 	 	 	Environmental Condition	 	35
	 	Section 4.16	 	 	 	Permits, Licenses, Etc	 	36
	 	Section 4.17	 	 	 	Gas Contracts	 	36
	 	Section 4.18	 	 	 	Liens; Titles, Leases, Etc	 	36
	 	Section 4.19	 	 	 	Solvency and Insurance	 	37
	 	Section 4.20	 	 	 	Hedging Agreements	 	37

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	 	Section 4.21	 	 	 	Material Agreements	 	37
	

ARTICLE V	
 	

AFFIRMATIVE COVENANTS	
 	

37
	  	 	 	 	 	 	 
	 	Section 5.01	 	 	 	Compliance with Laws, Etc	 	37
	 	Section 5.02	 	 	 	Maintenance of Insurance	 	38
	 	Section 5.03	 	 	 	Preservation of Existence, Etc	 	38
	 	Section 5.04	 	 	 	Payment of Taxes, Etc	 	38
	 	Section 5.05	 	 	 	Visitation Rights	 	39
	 	Section 5.06	 	 	 	Reporting Requirements	 	39
	 	Section 5.07	 	 	 	Maintenance of Property	 	43
	 	Section 5.08	 	 	 	Agreement to Pledge	 	43
	 	Section 5.09	 	 	 	Use of Proceeds	 	43
	 	Section 5.10	 	 	 	Title Opinions	 	43
	 	Section 5.11	 	 	 	Further Assurances; Cure of Title Defects	 	43
	 	Section 5.12	 	 	 	Hedging Arrangements	 	44
	 	Section 5.13	 	 	 	Deposit Accounts	 	44
	

ARTICLE VI	
 	

NEGATIVE COVENANTS	
 	

44
	  	 	 	 	 	 	 
	 	Section 6.01	 	 	 	Liens, Etc	 	44
	 	Section 6.02	 	 	 	Debts, Guaranties, and Other Obligations	 	46
	 	Section 6.03	 	 	 	Agreements Restricting Liens and Distributions	 	47
	 	Section 6.04	 	 	 	Merger or Consolidation; Asset Sales	 	47
	 	Section 6.05	 	 	 	Restricted Payments	 	47
	 	Section 6.06	 	 	 	Investments	 	48
	 	Section 6.07	 	 	 	Affiliate Transactions	 	48
	 	Section 6.08	 	 	 	Compliance with ERISA	 	49
	 	Section 6.09	 	 	 	Sale-and-Leaseback	 	49
	 	Section 6.10	 	 	 	Change of Business	 	49
	 	Section 6.11	 	 	 	Organizational Documents, Name Change	 	49
	 	Section 6.12	 	 	 	Use of Proceeds; Letters of Credit	 	49
	 	Section 6.13	 	 	 	Gas Imbalances, Take-or-Pay or Other Prepayments	 	50
	 	Section 6.14	 	 	 	Limitation on Hedging	 	50
	 	Section 6.15	 	 	 	Additional Subsidiaries	 	51
	 	Section 6.16	 	 	 	Account Payables	 	51
	 	Section 6.17	 	 	 	Current Ratio	 	51
	 	Section 6.18	 	 	 	Interest Coverage Ratio	 	51
	 	Section 6.19	 	 	 	Initial Acquisition Instruments/Private Placement Documents	 	51
	

ARTICLE VII	
 	

EVENTS OF DEFAULT; REMEDIES	
 	

51
	  	 	 	 	 	 	 
	 	Section 7.01	 	 	 	Events of Default	 	51
	 	Section 7.02	 	 	 	Optional Acceleration of Maturity	 	53
	 	Section 7.03	 	 	 	Automatic Acceleration of Maturity	 	53
	 	Section 7.04	 	 	 	Right of Setoff	 	54
	 	Section 7.05	 	 	 	Non-exclusivity of Remedies	 	54
	 	Section 7.06	 	 	 	Application of Proceeds	 	54
	

ARTICLE VIII	
 	

THE ADMINISTRATIVE AGENT	
 	

55
	  	 	 	 	 	 	 
	 	Section 8.01	 	 	 	Appointment and Authority	 	55
	 	Section 8.02	 	 	 	Rights as a Lender	 	55
	 	Section 8.03	 	 	 	Exculpatory Provisions	 	55
	 	Section 8.04	 	 	 	Reliance by Administrative Agent	 	56
	 	Section 8.05	 	 	 	Delegation of Duties	 	56

ii

 

	 	Section 8.06	 	 	 	Successor Administrative Agent	 	56
	 	Section 8.07	 	 	 	Non-Reliance on Administrative Agent and Other Lenders	 	57
	 	Section 8.08	 	 	 	No Other Duties, etc	 	57
	 	Section 8.09	 	 	 	Collateral Matters	 	57
	

ARTICLE IX	
 	

MISCELLANEOUS	
 	

58
	  	 	 	 	 	 	 
	 	Section 9.01	 	 	 	Amendments, Etc	 	58
	 	Section 9.02	 	 	 	Notices, Etc	 	59
	 	Section 9.03	 	 	 	No Waiver; Cumulative Remedies	 	60
	 	Section 9.04	 	 	 	Costs and Expenses	 	60
	 	Section 9.05	 	 	 	Indemnification	 	60
	 	Section 9.06	 	 	 	Reimbursement by Lenders	 	61
	 	Section 9.07	 	 	 	Waiver of Damages	 	61
	 	Section 9.08	 	 	 	Successors and Assigns	 	61
	 	Section 9.09	 	 	 	Confidentiality	 	64
	 	Section 9.10	 	 	 	Counterparts; Effectiveness	 	64
	 	Section 9.11	 	 	 	Survival of Representations, etc	 	64
	 	Section 9.12	 	 	 	Severability	 	64
	 	Section 9.13	 	 	 	Interest Rate Limitation	 	65
	 	Section 9.14	 	 	 	Governing Law	 	65
	 	Section 9.15	 	 	 	Submission to Jurisdiction; Waiver of Venue; Service of Process	 	65
	 	Section 9.16	 	 	 	Waiver of Jury Trial	 	65
	 	Section 9.17	 	 	 	USA Patriot Act	 	66
	 	Section 9.18	 	 	 	Integration	 	66
	
EXHIBITS:	
 	

 	
 	

 	
 	

 
	  	 	 	 	 	 	 
	 	Exhibit A	 	 	 	—        Form of Assignment and Acceptance	 	 
	 	Exhibit B	 	 	 	—        Form of Compliance Certificate	 	 
	 	Exhibit C	 	 	 	—        Form of Guaranty	 	 
	 	Exhibit D	 	 	 	—        Form of Intercreditor Agreement	 	 
	 	Exhibit E	 	 	 	—        Form of Mortgage	 	 
	 	Exhibit F	 	 	 	—        Form of Note	 	 
	 	Exhibit G	 	 	 	—        Form of Notice of Borrowing	 	 
	 	Exhibit H	 	 	 	—        Form of Notice of Conversion or Continuation	 	 
	 	Exhibit I	 	 	 	—        Form of Pledge Agreement	 	 
	 	Exhibit J	 	 	 	—        Form of Security Agreement	 	 
	 	Exhibit K	 	 	 	—        Form of Transfer Letters	 	 
	
SCHEDULES:	
 	

 	
 	

 	
 	

 
	  	 	 	 	 	 	 
	 	Schedule I	 	—	 	Addresses and Commitments	 	 
	 	Schedule 3.01(p)	 	—	 	Hydrocarbon Hedge Agreements	 	 
	 	Schedule 4.01	 	—	 	Subsidiaries	 	 
	 	Schedule 4.05	 	—	 	Existing Debt	 	 
	 	Schedule 4.07	 	—	 	Litigation	 	 
	 	Schedule 4.17	 	—	 	Gas Imbalances	 	 
	 	Schedule 4.21	 	—	 	Material Agreements	 	 
	 	Schedule 6.07	 	—	 	Affiliate Transactions	 	 

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  SUBORDINATED CREDIT AGREEMENT  

        This Subordinated Credit Agreement dated as of January 31, 2008 is among ABRAXAS ENERGY
PARTNERS, L.P., a Delaware limited partnership ("Borrower"), the lenders party hereto from time to time as Lenders (as defined below), and  SOCIÉTÉ
GÉNÉRALE, as Administrative Agent (as defined below). 

        The
parties hereto agree as follows: 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS  

        Section 1.01    Certain Defined Terms.    As used in this Agreement, the term defined above shall have the
meaning set forth therein and the following terms shall have the following meanings: 

        "APC" means Abraxas Petroleum Corporation, a Nevada corporation. 

        "Acceptable Security Interest" in any Property means a Lien which (a) exists in favor of the Administrative Agent for the benefit
of the Secured Parties, (b) is superior to all Liens or rights of any other Person in the Property encumbered thereby other than Permitted Subject Liens, (c) secures the Obligations, and
(d) is perfected and enforceable. 

        "Acquisition" means the purchase by the Borrower or any of its Subsidiaries of any business, including the purchase of associated assets
or operations or of stock (or other ownership interests) of a Person. 

        "Acquisition Assets" means the assets and other Property being sold by the Sellers and being acquired by the Borrower pursuant to the
Purchase and Sale Agreement. 

        "Act" is defined in Section 9.17. 

        "Adjusted Reference Rate" means, for any day, the fluctuating rate per annum of interest equal to the greater of (a) the Reference
Rate in effect on such day and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%. 

        "Administrative Agent" means Société Générale, in its capacity as agent
pursuant to Article VIII, and any successor agent pursuant to Section 8.06. 

        "Administrative Questionnaire" means an administrative questionnaire in a form supplied by the Administrative Agent. 

        "Advance" means the advance by a Lender to the Borrower of such Lender's Pro Rata Share of the Loan pursuant to Section 2.01(a). 

        "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. 

        "Agreement" means this Subordinated Credit Agreement, as the same may be amended, supplemented, restated, extended, substituted,
increased, replaced, renewed, refinanced or otherwise modified from time to time. 

        "Applicable Lending Office" means (a) with respect to any Lender, the office, branch, subsidiary, affiliate or correspondent bank
of such Lender specified in its Administrative Questionnaire or such other office, branch, subsidiary, affiliate or correspondent bank as such Lender may from time to time specify to the Borrower and
the Administrative Agent from time to time and (b) with respect to the Administrative Agent, the address specified for such Person on 

1

 

 Schedule I or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties. 

        "Applicable Margin" means, with respect to any Advance, (a) during such times as any Event of Default exists, 3% per annum plus the
rate per annum set forth below for the relevant Type of such Advance based on the applicable date, and (b) at all other times, the rate per annum set forth below for the relevant Type of such
Advance based on the applicable date. The Applicable Margin for any Advance shall change when and as the relevant date changes and when and as any such Event of Default commences or terminates. 

	Date
 
	 	Eurodollar Rate Advances
	 	Base Rate Advances
	 
	Closing Date to April 30, 2008	 	5.00	%	4.00	%
	April 30, 2008 to July 31, 2008	 	5.50	%	4.50	%
	July 31, 2008 or any date thereafter	 	6.50	%	5.50	%

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

        "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of the attached Exhibit A or any other form approved by the Administrative Agent. 

        "Available Cash" means, with respect to any fiscal quarter: 

        (a)   the
sum of (i) all cash and cash equivalents of the Borrower on hand (other than Cash Security) at the end of such fiscal quarter and (ii) all additional
cash and cash equivalents the Borrower has on hand
(other than Cash Security) on the date of determination of Available Cash with respect to such fiscal quarter resulting from working capital borrowings made subsequent to the end of such fiscal
quarter, less 

        (b)   the
amount of all cash reserves established by the board of managers of, or the equivalent governing body of, the General Partner in their reasonable discretion to
(i) provide for the proper conduct of the business of the Borrower and its Subsidiaries (including reserves for future maintenance and capital expenditures including drilling and for
anticipated future credit needs of the Borrower and its Subsidiaries, if necessary), (ii) comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Borrower or any Subsidiary is a party or bound by which it is bound or its assets are subject, and (iii) provide funds for Restricted Payments with
respect to any one or more of the next four fiscal quarters. 

        "Borrower" shall have the meaning set forth in the preamble hereof. 

        "Borrowing" means, subject to Section 2.03(c)(ii), a borrowing consisting of simultaneous Advances of the same Type made by each
Lender pursuant to Section 2.03(a), continued by each Lender pursuant to Section 2.03(b), or Converted by each Lender to Advances of a different Type pursuant to Section 2.03(b). 

        "Borrowing Base" shall have the definition given to such term in the Senior Credit Agreement. 

        "Borrowing Base Deficiency" shall have the definition given to such term in the Senior Credit Agreement. 

        "Business Day" means a day of the year on which banks are not required or authorized to close in Houston, Texas and New York, New York,
and, if the applicable Business Day relates to 

2

 

any
Eurodollar Rate Advances, on which dealings are carried on by banks in the London interbank market. 

        "Capital Leases" means, as applied to any Person, any lease of any Property by such Person as lessee which would, in accordance with GAAP,
be required to be classified and accounted for as a capital lease on the balance sheet of such Person. 

        "Cash Collateral Account" shall have the definition given to such term in the Senior Credit Agreement. 

        "Cash Security" means (a) all cash and cash equivalents securing obligations of Borrower or any Subsidiary, including obligations
under Hedging Contracts and obligations with respect to letters of credit but excluding Obligations, and (b) all cash and cash equivalents held in the Cash Collateral Account pursuant to the
Senior Credit Agreement. 

        "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, state and local analogs, and
all rules and regulations and requirements thereunder in each case as now or hereafter in effect. 

        "Change in Control" shall mean the occurrence of any of the following events: 

        (a)   the
occurrence of any transaction, the result of which is that (i) the General Partner is no longer the sole general partner of the Borrower, or (ii) the
Borrower ceases to own, either directly or indirectly, 100% of the Equity Interest in any Subsidiary; 

        (b)   any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person
or group has the right to acquire (such right, an "option right"), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 25% or more of the
Equity Interest of the Borrower; provided, that a "group of persons" shall not include the underwriter in any firm underwriting undertaken in connection with any public offering of the Borrower; or 

        (c)   during
any period of 12 consecutive months, a majority of the members of the board of managers or other equivalent governing body of the General Partner cease to be
composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent
governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body
or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the
time of such election or nomination at least a majority of that board or equivalent governing body. 

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

        "Closing Date" means the date on which all of the conditions in Section 3.01 have been met or waived in writing as permitted
herein. 

        "Closing Date Acquisition" means the acquisition by the Borrower of the Acquisition Assets pursuant to the Purchase and Sale Agreement. 

3

 

        "Closing Date Acquisition Instruments" means, collectively, the Purchase and Sale Agreement and all other documents executed and delivered
by the Sellers and the Borrower in connection with the Closing Date Acquisition. 

        "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute. 

        "Collateral" means (a) all "Collateral", "Pledged Collateral" and "Mortgaged Properties" (as defined in each of the Mortgages, the
Security Agreements, and the Pledge Agreement, as applicable) or similar terms used in the Security Instruments, and (b) all amounts contained in the Borrower's and its Subsidiaries' bank
accounts. 

        "Commitment" means, for any Lender, the amount set opposite such Lender's name on the Schedule I as its Commitment, or if such
Lender has entered into any Assignment and Acceptance, as set forth for such Lender as its Commitment in the Register maintained by the Administrative Agent pursuant to Section 9.08(c), as such
amount may be reduced or terminated pursuant to Section 2.04 or Article VII or otherwise under this Agreement. The amount of the aggregate Commitments is $50,000,000. 

        "Company Group" shall mean Borrower, General Partner and each of their respective Subsidiaries. 

        "Compliance Certificate" means a compliance certificate in the form of the attached Exhibit B signed by a Responsible Officer of
the Borrower. 

        "Contribution Agreement" means that certain Contribution, Conveyance and Assumption Agreement, dated as of May 25, 2007, entered
into by and among APC, the General Partner, the Borrower, Abraxas Energy Investments, LLC, a Texas limited liability company, and the Operating Company, as amended in accordance with the terms
hereof. 

        "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. "Controls", "Controlled
by", "Controlling" and "Controlled" have meanings correlative thereto. Without
limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, the power to vote 10% or more of the
securities having ordinary voting power for the election of directors, managing general partners or the equivalent. 

        "Controlled Group" means all members of a controlled group of corporations and all businesses (whether or not incorporated) under common
control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. 

        "Convert," "Conversion," and "Converted"
each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.03(b). 

        "Debt," for any Person, means without duplication: (a) indebtedness of such Person for borrowed money; (b) obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments; (c) obligations of such Person to pay the deferred purchase price of Property or services (including obligations
that are non-recourse to the credit of such Person but are secured by the assets of such Person, but excluding trade accounts payable); (d) obligations of such Person as lessee
under Capital Leases; (e) obligations of such Person under letters of credit and agreements relating to the issuance of letters of credit or acceptance financing; (f) obligations of such
Person under any Hedge Contract; (g) obligations of such Person owing in respect of redeemable preferred stock or other preferred equity interest of such Person; (h) any obligations of
such Person owing in connection with any volumetric or production prepayments; (i) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) of such Person to purchase or otherwise acquire, or otherwise to assure a creditor 

4

 

against
loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (h) above; (j) indebtedness or obligations of others of the kinds
referred to in clauses (a) through (i) secured by any Lien on or in respect of any Property of such Person; and (k) all liabilities of such Person in respect of unfunded vested
benefits under any Plan. 

        "Default" means (a) an Event of Default or (b) any event or condition which with notice or lapse of time or both would
become an Event of Default. 

        "Disposition" means a sale, lease, transfer, assignment, Farmout, conveyance, release, surrender, or other disposition of Property
(including any working interest, overriding royalty interest, production payment, net profits interest, royalty interest, or mineral fee interest) in any transaction or series of transactions. 

        "Dollars" and "$" means lawful money of the United States of America. 

        "EBITDA" means, for any period, without duplication, (a) consolidated Net Income for such period  plus (b) to the extent deducted in determining consolidated
Net Income, Interest Expense, taxes, depreciation, amortization, depletion, and other
non-cash charges for such period (including any provision for the reduction in the carrying value of assets (including Hedge Contracts) recorded in accordance with GAAP and including
non-cash charges resulting from the requirements of SFAS 133 or 143 and any non-cash expenses incurred pursuant to SFAS 123R) for such period  minus (c) all non-cash items of income which
were included in determining such consolidated Net Income (including
non-cash income resulting from the requirements of SFAS 133 or 143). 

        "Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, (d) a commercial
bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $250,000,000 and approved by the Administrative Agent in its sole discretion, which
approval shall not be unreasonably withheld, (e) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development
or a political subdivision of any such country and which has total assets in excess of $250,000,000, provided that such bank is acting through a branch or agency located in the United States and such
bank is approved by the Administrative Agent in its sole discretion, which approval shall not be unreasonably withheld, (f) a finance company, insurance company, or other financial institution
or fund that is engaged in making, purchasing, or otherwise investing in commercial loans or securities in the ordinary course of its business and having (together with its Affiliates) total assets in
excess of $250,000,000 and approved by the Administrative Agent in its sole discretion, which approval shall not be unreasonably withheld, (g) any other Person (other than a natural person)
approved by (i) the Administrative Agent in its sole discretion, which approval shall not be unreasonably withheld and (ii) unless a Default has occurred and is continuing at the time
any assignment is effected pursuant to this Agreement, the Borrower, which approval shall not be unreasonably withheld; provided that notwithstanding
the foregoing, "Eligible Assignee" shall not include the Borrower or any Affiliate or Subsidiary of a Loan Party. 

        "Engineering Report" means either an Independent Engineering Report or an Internal Engineering Report and includes the Initial Engineering
Reports where applicable. 

        "Environment" or "Environmental" shall have the meanings set forth in 42 U.S.C. 9601(8)
(1988). 

        "Environmental Claim" means any third party (including governmental agencies and employees) action, lawsuit, claim, demand, regulatory
action or proceeding, order, decree, consent agreement or notice of potential or actual responsibility or violation (including claims or proceedings under the Occupational Safety and Health Acts or
similar laws or requirements relating to health or safety of employees) which seeks to impose liability under any Environmental Law. 

5

 

 

        "Environmental Law" means, as to the Borrower or its Subsidiaries, all Legal Requirements or common law theories applicable to the
Borrower or its Subsidiaries arising from, relating to, or in connection with the Environment, health, or safety, including CERCLA, relating to (a) pollution, contamination, injury,
destruction, loss, protection, cleanup, reclamation or restoration of the air, surface water, groundwater, land surface or subsurface strata, or other natural resources; (b) solid, gaseous or
liquid waste generation, treatment, processing, recycling, reclamation, cleanup, storage, disposal or transportation; (c) exposure to pollutants, contaminants, hazardous, infectious, or toxic
substances, materials or wastes; (d) the safety or health of employees; or (e) the manufacture, processing, handling, transportation, distribution in commerce, use, storage or disposal
of hazardous, infectious, or toxic substances, materials or wastes. 

        "Environmental Liability" shall mean all liabilities, obligations, damages, losses, claims, actions, suits, judgments, orders, fines,
penalties, fees, expenses and costs (including administrative oversight costs, natural resource damages and remediation costs), whether contingent or otherwise, arising out of or relating to
(a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is
assumed or imposed with respect to any of the foregoing. 

        "Environmental Permit" means any permit, license, order, approval, registration or other authorization under Environmental Law. 

        "Equity Interest" means, with respect to any Person, any shares, interests, participation, or other equivalents (however designated) of
corporate stock, membership interests or partnership interests (or any other ownership interests) of such Person. 

        "Equity Issuance" means any issuance of equity securities or any other Equity Interests (including any preferred equity securities) by a
Person other than equity securities issued (i) to the Borrower or one of its Subsidiaries, (ii) to APC, and (iii) pursuant to employee or director and officer stock option or
similar plans in the ordinary course of business. 

        "Equity Issuance Proceeds" means, with respect to any Equity Issuance, all cash and cash equivalent investments received by the Borrower
or any of its Subsidiaries from such Equity Issuance after
payment of, or provision for, all underwriter fees and expenses, SEC and blue sky fees, printing costs, fees and expenses of accountants, lawyers and other professional advisors, brokerage commissions
and other out-of-pocket fees and expenses actually incurred in connection with such Equity Issuance. 

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

        "ERISA Affiliate" means each member of a controlled group of corporations and all businesses (whether or not incorporated) under common
control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. 

        "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Federal Reserve Board (or any successor),
as in effect from time to time. 

        "Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate Advance comprising the same Borrowing, the interest rate per
annum (rounded upward to the nearest whole multiple of 1/100 of 1% per annum) set forth on Reuters Reference LIBOR01 as the London Interbank Offered Rate, for deposits in Dollars at 11:00 a.m.
(London, England time) two Business Days before the first day of such Interest Period and for a period equal to such Interest Period; provided, that, if
no such quotation appears on the Reuters Reference LIBOR01, the 

6

 

Eurodollar
Rate shall be an interest rate per annum equal to the rate per annum at which deposits in Dollars are offered by the principal office of Société
Générale in London, England to prime banks in the London interbank market at 11:00 a.m. (London, England time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the Eurodollar Rate Advance to be maintained by the Lender that is the Administrative Agent in respect of such Borrowing and for a period equal to
such Interest Period. 

        "Eurodollar Rate Advance" means an Advance which bears interest as provided in Section 2.09(b). 

        "Eurodollar Rate Reserve Percentage" of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage
applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental, or
other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. 

        "Event of Default" has the meaning specified in Section 7.01. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        "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 any Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise or "margin" or similar taxes imposed on it
(in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction
in which any Borrower is located and (c) in the case of a Foreign Lender (other than an assignee request by the Borrower and any Lender party to this Agreement on the Closing Date), any
withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to such Foreign
Lender's failure or inability (other than as a result of a Change in Law) to comply with Section 2.14(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled,
at the time of designation of a new lending office (or assignment), to receive additional amounts from any Borrower with respect to such withholding tax pursuant to Section 2.14(a).
Notwithstanding anything to the contrary contained in this definition, "Excluded Taxes" shall not include any withholding tax imposed at any time on payments made by or on behalf of a Borrower that is
not a resident of the United States for tax purposes to any Lender or Administrative Agent hereunder or under any other Credit Document, provided that such Lender and such Administrative Agent shall
have complied with Section 2.14(e). 

        "Farmout" means an arrangement pursuant to agreement whereby the owner(s) of one or more oil, gas and/or mineral lease or other oil and
natural gas working interest with respect to a property from which production of Hydrocarbons is sought agrees to transfer or assign an interest in such property to one or more Persons in exchange for
(a) drilling, or participating in the cost of the drilling of (or agreeing to do so) one or more wells, or undertaking other exploration or development activity or participating in the cost of
such activity, to attempt to obtain production of Hydrocarbons from such property, or (b) obtaining production of Hydrocarbons from such property, or participating in the costs of such
production. 

7

 

        "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business
Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for any such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it. 

        "Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any of its successors. 

        "Fee Letter" means that certain fee letter dated December 20, 2007 among the Borrower, Société
Générale, and SG Americas Securities, LLC, as amended by the Amendment to Fee Letter dated as of January 29, 2008 and as the same may be further amended,
modified or supplemented from time to time. 

        "Financial Statements" means the pro forma unaudited consolidated balance sheet of the Borrower as of the date of this Agreement after
giving effect to the consummation of the Closing Date Acquisition and the Borrowings made hereunder on the Closing Date, and including the certification of a Responsible Officer of the Borrower, all
prepared in accordance with GAAP (except for the absence of footnotes and adjustments typically made at year-end), the copies of which have been delivered to the Administrative Agent and
the Lenders. 

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

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

        "GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the
requirements of Section 1.03. 

        "Gas Imbalance" means (a) a sale or utilization by Borrower or other members of the Company Group of volumes of natural gas in
excess of its gross working interest, (b) receipt of volumes of natural gas into a gathering system and redelivery by Borrower or other members of the Company Group of a larger or smaller
volume of natural gas under the terms of the applicable transportation agreement, or (c) delivery to a gathering system of a volume of natural gas produced by Borrower or a member of the
Company Group that is larger or smaller than the volume of natural gas such gathering system redelivers for the account of Borrower or such member of the Company Group, as applicable. 

        "General Partner" means Abraxas General Partner, LLC, a Delaware limited liability company. 

        "Governmental Authority" means the government of the United States of America or any other nation, or of any political subdivision
thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank). 

        "Guarantor" means each entity, which may from time to time, execute a Guaranty or a supplement to a Guaranty, including each Subsidiary of
the Borrower and the General Partner. 

8

 

        "Guaranty" means a Guaranty in substantially the form of the attached Exhibit C and executed by a Guarantor. 

        "Hazardous Substance" means the substances identified as such pursuant to CERCLA and those regulated under any other Environmental Law,
including pollutants, contaminants, petroleum, petroleum products, radionuclides, radioactive materials, and medical and infectious waste. 

        "Hazardous Waste" means the substances regulated as such pursuant to any Environmental Law. 

        "Hedge Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate
transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward
bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions,
cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the
foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject
to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master
Agreement. 

        "Hydrocarbon Hedge Agreement" means a Hedge Contract between the Borrower or one of its Subsidiaries and any financial institution or
other counterparty which is intended to reduce or eliminate the risk of fluctuations in the price of Hydrocarbons. 

        "Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, and all other
liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith from a well bore and all products, by-products, and other substances derived therefrom or the processing
thereof, and all other minerals and substances produced in conjunction with such substances, including sulfur, geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores, or
substances of value and the products and proceeds therefrom. 

        "Indemnified Taxes" means Taxes other than Excluded Taxes. 

        "Independent Engineer" means DeGolyer and MacNaughton or any other third party engineering firm acceptable to the Administrative Agent in
its sole discretion. 

        "Independent Engineering Report" means a report, in form and substance satisfactory to the Administrative Agent and each of the Lenders,
prepared by an Independent Engineer, addressed to the Administrative Agent and the Lenders with respect to the Oil and Gas Properties owned by the Borrower or any of its Subsidiaries (or to be
acquired by the Borrower or any of its Subsidiaries, as applicable) which are, or are to be, included in the Borrowing Base, which report shall (a) specify the location, quantity, and type of
the estimated Proven Reserves attributable to such Oil and Gas Properties, (b) contain a projection of the rate of production of such Oil and Gas Properties, (c) contain an estimate of
the net operating revenues to be derived from the production and sale of Hydrocarbons from such Proven Reserves based on product price and cost escalation assumptions specified by the Administrative
Agent and the Lenders which are consistent with the Administrative Agent's and the Lenders' customary internal standards and practices for valuing and redetermining the value of Oil and Gas Properties
in connection with reserve based oil 

9

 

and
gas loan transactions, and (d) contain such other information as is customarily obtained from and provided in such reports or is otherwise reasonably requested by the Administrative Agent
or any Lender. 

        "Information "is defined in Section 9.09. 

        "Initial Acquisition" means the acquisition of certain Oil and Gas Properties by the Borrower and its Subsidiaries pursuant to the
Contribution Agreement. 

        "Initial Acquisition Instruments" means, collectively, the Contribution Agreement, the Omnibus Agreement and all other documents,
instruments, and agreements executed and delivered by the sellers and other parties named in the Contribution Agreement or the Borrower or any Guarantor in connection with the Initial Acquisition. 

        "Initial Engineering Reports" means, collectively, an Independent Engineering Report dated as of June 30, 2007 and the
St. Mary's Engineering Report, covering the Proven Reserves of the Loan Parties (after giving pro forma effect to the Closing Date Acquisition) and otherwise in form acceptable to the
Administrative Agent. 

        "Intercompany Debt" means Debt incurred by one or more Loan Parties and owing to any other Loan Party or Loan Parties. 

        "Intercreditor Agreement" means the Intercreditor and Subordination Agreement, dated the date hereof and substantially in the form of
Exhibit D hereto, executed and delivered by the Administrative Agent, the Senior Agent and the Loan Parties pursuant to the terms of this Agreement. 

        "Interest Expense" means, for the Borrower and its consolidated Subsidiaries for any period, total interest, letter of credit fees, and
other fees and expenses incurred in connection with any Debt for such period, whether paid or accrued, including, without limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, imputed interest under Capital Leases, and net costs under Interest Hedge Agreements, all as determined in conformity with GAAP. 

        "Interest Hedge Agreement" means a Hedge Contract between the Borrower or one of its Subsidiaries and one or more financial institutions
providing for the exchange of nominal interest obligations between the Borrower and such financial institution or the cap of the interest rate on any Debt of the Borrower. 

        "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Reference Rate Advance into a Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.03 and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period
selected by the Borrower pursuant to the provisions below and Section 2.03. The duration of each such Interest Period shall be one, two, three, or six months, in each case as the Borrower may,
upon notice received by the Administrative Agent not later than 11:00 a.m. (New York time) on the third Business Day prior to the first day of such Interest Period, select;  provided, however, that:

        (a)   the
Borrower may not select any Interest Period which ends after the Maturity Date; 

        (b)   Interest
Periods commencing on the same date for Advances comprising part of the same Borrowing shall be of the same duration; 

        (c)   whenever
the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on
the 

10

 

next
succeeding Business Day; provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar
month, the last day of such Interest Period shall occur on the immediately preceding Business Day; and 

        (d)   any
Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of the calendar month in which it would have ended if there were a numerically corresponding day in such calendar month. 

        "Internal Engineering Report" means a report, in form and substance satisfactory to the Administrative Agent and each Lender, prepared by
the Borrower and certified by a Responsible Officer of the Borrower, addressed to the Administrative Agent and the Lenders with respect to the Oil and Gas Properties owned by the Borrower or any of
its Subsidiaries (or to be acquired by the Borrower or any of its Subsidiaries, as applicable) which are, or are to be, included in the Borrowing Base, which report shall (a) specify the
location, quantity, and type of the estimated Proven Reserves attributable to such Oil and Gas Properties, (b) contain a projection of the rate of production of such Oil and Gas Properties,
(c) contain an estimate of the net operating revenues to be derived from the production and sale of Hydrocarbons from such Proven Reserves based on product price and cost escalation assumptions
specified by the Administrative Agent and the Lenders which are consistent with the Administrative Agent's and the Lenders' customary internal standards and practices for valuing and redetermining the
value of Oil and Gas Properties in connection with reserve based oil and gas loan transactions, and (d) contain such other information as is customarily obtained from and provided in such
reports or is otherwise reasonably requested by the Administrative Agent or any Lender. 

        "Leases" means all oil and gas leases, oil, gas and mineral leases, oil, gas and casinghead gas leases, wellbore assignments or any other
instruments, agreements, or conveyances under and pursuant to which the owner thereof has or obtains the right to enter upon lands and explore for, drill, and develop such lands for the production of
Hydrocarbons. 

        "Legal Requirement" means, as to any Person, any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or
official interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, including Regulations D, T, U, and X, which is applicable to
such Person. 

        "Lender Hedging Obligations" means all obligations arising from time to time under Hedge Contracts entered into from time to time between
any Loan Party and a counterparty that is a Lender or an Affiliate of a Lender; provided that if such counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder, Lender Hedging
Obligations shall only include such obligations to the extent arising from transactions entered into at the time such counterparty was a Lender hereunder or an Affiliate of a Lender hereunder. 

        "Lenders" means the lenders listed on the signature pages of this Agreement and each Eligible Assignee that shall become a party to this
Agreement pursuant to Section 9.08. 

        "Lien" means any mortgage, lien, pledge, assignment, charge, deed of trust, security interest, hypothecation, preference, deposit
arrangement or encumbrance (or other type of arrangement having the practical effect of the foregoing) to secure or provide for the payment of any obligation of any Person, whether arising by
contract, operation of law, or otherwise (including the interest of a vendor or lessor under any conditional sale agreement, synthetic lease, Capital Lease, or other title retention agreement). 

11

 

 

        "Liquid Investments" means: 

        (a)   direct
obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States maturing within 270 days from
the date of any acquisition thereof; 

        (b)   (i)
negotiable or nonnegotiable certificates of deposit, time deposits, or other similar banking arrangements maturing within 270 days from the date of
acquisition thereof or which may be liquidated for the full amount thereof without penalty or premium ("bank debt securities"), issued by (A) any Lender or Senior Lender (or any Affiliate of
any Lender or any Senior Lender), or (B) any other bank or trust company so long as either (i) such certificate of deposit is pledged to secure the Borrower's or any Subsidiaries'
ordinary course of business bonding requirements, or (ii) the amount thereof is less than or equal to $100,000, or any other bank or trust company, if at the time of deposit or purchase, such
bank debt securities are rated A or A2 or better by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., and (ii) commercial paper issued by (A) any
Lender or Senior Lender (or any Affiliate of any Lender or any Senior Lender) or (B) any other Person if at the time of purchase such commercial paper is rated at the highest or the second
highest credit rating given by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., or upon the discontinuance of both of such services, such other nationally
recognized rating service or services, as the case may be, as shall be selected by the Borrower with the consent of the Required Lenders; 

        (c)   deposits
in money market funds investing exclusively in investments described in clauses (a) and (b) above; 

        (d)   repurchase
agreements relating to investments described in clauses (a) and (b) above with a market value at least equal to the consideration paid in
connection therewith, with any Person who regularly engages in the business of entering into repurchase agreements and has a combined capital and surplus and undivided profit of not less than
$500,000,000.00, if at the time of entering into such agreement the debt securities of such Person are rated at the highest or the second highest credit rating given by either Standard & Poor's
Ratings Group or Moody's Investors Service, Inc.; and 

        (e)   such
other instruments (within the meaning of Article 9 of the Uniform Commercial Code in effect in New York) or investment property as the Borrower may request
and the Administrative Agent may approve in writing. 

        "Loan Documents" means this Agreement, the Notes, the Guaranties, the Security Instruments, any Hedge Contract with a Swap Counterparty,
the Intercreditor Agreement, the Post-Closing Agreement, and each other agreement, instrument, or document executed by the Borrower, any Guarantor, or any of the Borrower's or a
Guarantor's Subsidiaries or any of their officers at any time in connection with this Agreement or in connection with any of the Obligations. 

        "Loan Party" means the Borrower, the General Partner, or any Guarantor. 

        "Material Adverse Change" means (a) a material adverse change in the business, assets (including the Oil and Gas Properties),
condition (financial or otherwise), results of operations or prospects of the Borrower individually, or the Company Group, taken as a whole, since the Closing Date (but after giving pro forma effect
to the Closing Date Acquisition) or (b) a material adverse effect on the Borrower's, individually, or the Company Group's, taken as a whole, ability to perform its obligations under this
Agreement, any Note, any Guaranty, or any other Loan Document. 

12

 

        "Maturity Date" means January 31, 2009. 

        "Maximum Rate" means the maximum nonusurious interest rate under applicable law (determined under such laws after giving effect to any
items which are required by such laws to be construed as interest in making such determination, including if required by such laws, certain fees and other costs). 

        "Mortgage" means the mortgage or deed of trust executed by any one or more of the Loan Parties in favor of the Administrative Agent for
the ratable benefit of the Secured Parties in substantially the form of the attached Exhibit E or such other form as may be requested by the Administrative Agent, together with any assumptions
or assignments of the obligations thereunder by the Borrower, any Guarantor or any of their respective Subsidiaries. 

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

        "Net Income" means, with respect to the Borrower and its consolidated Subsidiaries, for any period, the net income for such period after
taxes, as determined in accordance with GAAP, excluding, however, (a) extraordinary items, including (i) any net non-cash gain or loss during such period arising from the
sale, exchange, retirement or other disposition of capital assets (such term to include
all fixed assets and all securities) other than in the ordinary course of business, and (ii) any write-up or write-down of assets, including without limitation, Oil and
Gas Properties and Hedge Contracts, and (b) the cumulative effect of any change in GAAP. 

        "Note" means a promissory note of the Borrower payable to the order of any Lender in an amount not to exceed the Commitment of such
Lender, in substantially the form of the attached Exhibit F, evidencing indebtedness of the Borrower to such Lender resulting from the Advance owing to such Lender. 

        "Notice of Borrowing" means a notice of borrowing in the form of the attached Exhibit G signed by a Responsible Officer of the
Borrower. 

        "Notice of Conversion or Continuation" means a notice of conversion or continuation in the form of the attached Exhibit H signed by
a Responsible Officer of the Borrower. 

        "Obligations" means (a) all principal, interest, fees, reimbursements, indemnifications, and other amounts payable by the Borrower,
any Guarantor or any of their respective Subsidiaries to the Administrative Agent or the Lenders under the Loan Documents (other than the Hedge Contracts with a Swap Counterparty) and (b) all
Lender Hedging Obligations. 

        "Oil and Gas Business" means (a) the acquisition, exploration, exploitation, development, operation and disposition of interests in
Oil and Gas Properties and Hydrocarbons, (b) the gathering, marketing, treating, processing, storage, selling and transporting of any production from such interests or properties, including the
marketing of Hydrocarbons obtained from unrelated Persons, (c) any business relating to or arising from exploration for or development, production, treatment, processing, storage,
transportation or marketing of oil, gas and other minerals and products produced in association therewith, (d) any business relating to oilfield sales and service, and (e) any activity
that is ancillary or necessary or desirable to facilitate the activities described in clauses (a) through (d) of this definition. 

        "Oil and Gas Properties" means fee mineral interests, term mineral interests, Leases, subleases, Farmouts, royalties, overriding
royalties, net profit interests, carried interests, production payments, back-in interests and reversionary interests and similar mineral interests, and all unsevered and unextracted
Hydrocarbons in, under, or attributable to such oil and gas Properties and interests. 

13

 

        "Omnibus Agreement" means the Omnibus Agreement dated May 25, 2007, among APC, the General Partner, the Operating Company and the
Borrower, as amended in accordance with the terms hereof. 

        "Operating Company" means Abraxas Operating, LLC, a Delaware limited liability company. 

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

        "Participant" has the meaning assigned to such term in paragraph (d) of Section 9.08. 

        "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 

        "Permit" means any approval, certificate of occupancy, consent, waiver, exemption, variance, franchise, order, permit, authorization,
right or license of or from any Governmental Authority, including an Environmental Permit. 

        "Permitted Holder" means any holder of Equity Interest in the Borrower on the Closing Date. 

        "Permitted Liens" is defined in Section 6.01. 

        "Permitted Subject Liens" means the Liens permitted under paragraphs (c), (d), (e), (f), (g) and (i) of
Section 6.01. 

        "Person" (whether or not capitalized) means an individual, partnership, corporation (including a business trust), joint stock company,
limited liability company, limited liability partnership, trust, unincorporated association, joint venture or other entity, Governmental Authority or other entity. 

        "Plan" means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Borrower or any member of the
Controlled Group and covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code. 

        "Pledge Agreement" means a Pledge Agreement in substantially the form of the attached Exhibit I, executed by the Borrower or any of
its Subsidiaries or any of the Guarantors (other than the General Partner), if applicable, covering the Equity Interests in the Operating Company and each direct or indirect Subsidiary of Borrower or
General Partner. 

        "Post-Closing Agreement" means the post-closing letter agreement dated as of January 31, 2008 between the
Borrower and the Administrative Agent. 

        "Private Placement" means the private placement of the general and limited partnership Equity Interests of the Borrower to APC and such
other third parties pursuant to the terms of the Private Placement Agreement. 

        "Private Placement Agreement" means the Purchase Agreement among the Borrower, the General Partner, APC, the Operating Company and the
purchasers named therein dated as of May 25, 2007 pursuant to which such purchasers have purchased the Common Units (as described therein) of the Borrower for an aggregate purchase price of
$100,000,117.28, as amended in accordance with the terms hereof. 

        "Private Placement Documents" means, collectively, the Private Placement Agreement, the Registration Rights Agreement, and all other
documents, instruments, and agreements executed and delivered by the General Partner, APC or the purchasers named in the Private Placement Agreement in connection with the Private Placement or the
Registration Rights Agreement. 

14

 

        "Property" of any Person means any property or assets (whether real, personal, or mixed, tangible or intangible) of such Person. 

        "Proven Reserves" means, at any particular time, the estimated quantities of Hydrocarbons which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from known reservoirs attributable to Oil and Gas Properties included or to be included in the Borrowing Base under then
existing economic and operating conditions (i.e., prices and costs as of the date the estimate is made). 

        "Pro Rata Share" means, with respect to any Lender, (a) if such Commitments have not been terminated, the ratio (expressed as a
percentage) of such Lender's Commitment at such time to the aggregate Commitments at such time, or (b) if the aggregate Commitments have been terminated, the ratio (expressed as a percentage)
of Advances owing to such Lender to the aggregate Advances owing to all such Lenders. 

        "Purchase and Sale Agreement" means the Purchase and Sale Agreement dated as of December 11, 2007 between the Sellers and Operating
Company, as it may be amended, supplemented or otherwise modified from time to time. 

        "PV-10" means estimated future net revenue from Hydrocarbons discounted at a rate of 10% per annum, before income taxes and
with no price or cost escalation or de-escalation in accordance with guidelines promulgated by the SEC. 

        "Reference Rate" means a fluctuating interest rate per annum as shall be in effect from time to time equal to the rate of interest
publicly announced by Société Générale as its reference rate, whether or not the Borrower has notice thereof. 

        "Reference Rate Advance" means an Advance which bears interest as provided in Section 2.09(a). 

        "Register" has the meaning set forth in paragraph (c) of Section 9.08. 

        "Registration Rights Agreement" means the Registration Rights Agreement dated as of May 25, 2007 among the Borrower and the
purchasers named therein, as amended by Amendment No. 1 to Registration Rights Agreement dated as of December 5, 2007 and as the same may be further amended in accordance with the terms
hereof. 

        "Regulations D, T, U, and X" mean Regulations D, T, U, and X of the Federal Reserve Board, as the same is from time to time
in effect, and all official rulings and interpretations thereunder or thereof. 

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

        "Release" shall have the meaning set forth in CERCLA or under any other Environmental Law. 

        "Reportable Event" means a "reportable event" described in Section 4043 of ERISA and the regulations issued thereunder. 

        "Required Lenders" means, at any time, Lenders holding at least 662/3% of the Commitments or, if the Commitments have been
terminated or expired, the outstanding principal amount of the Advances. 

        "Response" shall have the meaning set forth in CERCLA or under any other Environmental Law. 

15

 

        "Responsible Officer" means (a) with respect to any Person that is a corporation, such Person's Chief Executive Officer, President,
Chief Financial Officer, or Vice President, (b) with respect to any Person that is a limited liability company, if such Person has officers, then such Person's Chief Executive Officer,
President, Chief Financial Officer, or Vice President, and if such Person is managed by members, then a Responsible Officer of such Person's managing member, and if such Person is managed by managers,
then a manager (if such manager is an individual) or a Responsible Officer of such manager (if such manager is an entity), and (c) with respect to any Person that is a general partnership or a
limited liability partnership, the Responsible Officer of such Person's general partner or partners. 

        "Restricted Payment" means, with respect to any Person, principal or interest payments (in cash, Property or otherwise) on, or redemptions
of, subordinated debt of such Person (other than the Obligations). 

        "SEC" means the United States Securities and Exchange Commission. 

        "Secured Parties" means the Administrative Agent, the Lenders and the Persons that are owed Lender Hedging Obligations. 

        "Security Agreements" means the Security Agreements, each in substantially the form of the attached Exhibit J, executed by the
Borrower, any of its Subsidiaries, or any of the Guarantors. 

        "Security Instruments" means, collectively: (a) the Mortgages, (b) the Transfer Letters, (c) the Pledge Agreement,
(d) the Security Agreements, (e) each other agreement, instrument or document executed at any time in connection with the Pledge Agreement, the Security Agreements, or the Mortgages, and
(f) each other agreement, instrument or document executed at any time in connection with securing the Obligations. 

        "Sellers" means St. Mary Land & Exploration Company, a Delaware corporation, Ralph H. Smith Restated Revocable Trust dated
August 14, 1997, Ralph H. Smith, Trustee, and the Kent J. Harrell Revocable Trust dated January 19, 1995, Kent J. Harrell, Trustee. 

        "Senior Agent" means Société Générale or such other Senior Lender serving in
the capacity as the "administrative agent" under the Senior Credit Agreement to the extent permitted under the Senior Credit Agreement and the Intercreditor Agreement. 

        "Senior Collateral" means the "Collateral" as defined in the Senior Credit Agreement. 

        "Senior Credit Agreement" means the Amended and Restated Credit Agreement dated as of the date hereof between the Borrower, the Senior
Agent and the Senior Lenders, as amended, supplemented, restated, extended, substituted, increased, replaced, renewed, refinanced or otherwise modified. 

        "Senior Debt" means the "Senior Indebtedness" as defined in the Intercreditor Agreement. 

        "Senior Event of Default" means an "Event of Default" as defined in the Senior Credit Agreement. 

        "Senior Lender Hedging Obligations" means the "Lender Hedging Obligations" as defined in the Senior Credit Agreement. 

        "Senior Lenders" means the lenders party to the Senior Credit Agreement from time to time. 

        "Senior Loan Documents" means the "Loan Documents" as defined in the Senior Credit Agreement. 

        "Senior Security Instruments" means the "Security Instruments" as defined in the Senior Credit Agreement. 

16

 

 

        "Solvent" means, with respect to any Person as of the date of any determination, that on such date (a) the fair value of the
Property of such Person (both at fair valuation and at present fair saleable value) is greater than the total liabilities, including contingent liabilities, of such Person, (b) the present fair
saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured,
(c) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations, and other commitments as they mature in the normal course of business,
(d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (e) such
Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving
due consideration to current and anticipated future capital requirements and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is
engaged. In computing the amount of contingent liabilities at any time, such liabilities shall be computed at the amount which, in light of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or matured liability. 

        "St. Mary's Engineering Report" means the Internal Engineering Report that evaluates as of December 1, 2007 the Oil and Gas
Properties to be acquired by the Borrower and any of its Subsidiaries pursuant to the Closing Date Acquisition. 

        "Subsidiary" means, with respect to any Person (the "parent") at any date, any other
Person the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of
such date, as well as any Person, a majority of whose outstanding Voting Securities (other than directors' qualifying shares) shall at any time be owned by such parent or one or more Subsidiaries of
such parent. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower. 

        "Swap Counterparty" means any Lender (or Affiliate of a Lender) that is party to any Hedge Contract with the Borrower or any other Loan
Party. 

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

        "Termination Event" means (a) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder
(other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), (b) the withdrawal of the Borrower or any of its Affiliates from a
Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which
constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. 

        "Transfer Letters" means, collectively, the letters in lieu of transfer orders in substantially the form of the attached Exhibit K
and executed by the Borrower, any Guarantor or any of their respective Subsidiaries executing a Mortgage. 

        "Type" has the meaning set forth in Section 1.04. 

        "Voting Securities" means (a) with respect to any corporation (including any unlimited liability company), capital stock of such
corporation having general voting power under ordinary circumstances to elect directors of such corporation (irrespective of whether at the time stock of 

17

 

any
other class or classes shall have or might have special voting power or rights by reason of the happening of any contingency), (b) with respect to any partnership, any partnership interest
or other ownership interest having general voting power to elect the general partner or other management of the partnership or other Person, and (c) with respect to any limited liability
company, membership certificates or interests having general voting power under ordinary circumstances to elect managers of such limited liability company. 

        Section 1.02    Computation of Time Periods.    In this Agreement, with respect to the computation of periods
of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". 

        Section 1.03    Accounting Terms; Changes in GAAP.    Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall (unless
otherwise disclosed to the Lenders in writing at the time of delivery thereof) be prepared, in accordance with GAAP applied on a basis consistent with those used in the preparation of the latest
financial statements furnished to the Lenders hereunder (which prior to the delivery of the first financial statements under Section 5.06, shall mean the Financial Statements). All calculations
made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with that used in
the
preparation of the annual or quarterly financial statements furnished to the Lenders pursuant to Section 5.06 most recently delivered prior to or concurrently with such calculations (or, prior
to the delivery of the first financial statements under Section 5.06, used in the preparation of the Financial Statements). In addition, all calculations and defined accounting terms used
herein shall, unless expressly provided otherwise, when referring to any Person, where applicable, refer to such Person on a consolidated basis and mean such Person and its consolidated Subsidiaries. 

        Section 1.04    Types of Advances.    Advances are distinguished by "Type." The "Type" of an Advance refers to
the determination whether such Advance is a Eurodollar Rate Advance or Reference Rate Advance. 

        Section 1.05    Miscellaneous.    The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be
construed to include such Person's successors and assigns, (c) the words "herein," "hereof" and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, paragraphs, Exhibits and Schedules shall be construed to refer to Articles, Sections and
paragraphs, of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended,
modified or supplemented from time to time and (f) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights. 

18

 
ARTICLE II

CREDIT FACILITIES  

        Section 2.01    Commitment for Advances.    

        (a)    Advances.    Each Lender severally agrees, on the terms and conditions set forth in this Agreement (including
without limitation, the terms set forth in Section 3.01), to make a single advance term loan
on the Closing Date in accordance with its Pro Rata Share on a non-revolving basis to the Borrower in an amount equal to such Lender's Commitment. Any Advances which have been prepaid or
repaid may not be reborrowed. 

        (b)    Evidence of Debt.    The Advance made by each Lender shall be evidenced by the records maintained by the
Administrative Agent in the ordinary course of business. The records maintained by the Administrative Agent shall be conclusive absent manifest error of the amount of the Advances made by the Lenders
to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay
any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in
respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender to Borrower made through the Administrative
Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which, in addition to such records maintained by the Administrative Agent, shall evidence the
obligation of the Borrower to repay the Advance made by such Lender to the Borrower. Each Lender may attach schedules to a Note and endorse thereon the date, Type (if applicable), amount, currency and
maturity of its Advance and payments with respect thereto, but such action or the failure to do so shall not control over the records thereof maintained by the Administrative Agent. 

        Section 2.02    [Reserved].    

        Section 2.03    Method of Borrowing.    

        (a)    Notice.    Each Borrowing shall be made pursuant to a Notice of Borrowing (or by telephone notice promptly
confirmed in writing by a Notice of Borrowing), given not later than 11:00 a.m. (New York time) (i) on the third Business Day before the date of the proposed Borrowing, in the case of a
Borrowing comprised of Eurodollar Rate Advances or (ii) on the Business Day of the proposed Borrowing, in the case of a Borrowing comprised of Reference Rate Advances, by the Borrower to the
Administrative Agent, which shall in turn give to each Lender prompt notice of such proposed Borrowing by facsimile. Each Notice of Borrowing shall be in writing (by facsimile or otherwise) specifying
the information required therein. In the case of a proposed Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent shall promptly notify each Lender of the applicable interest rate
under Section 2.09(b). Each Lender shall, before 12:00 noon (New York time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative
Agent at its address referred to in Section 9.02, or such other location as the Administrative Agent may specify by notice to the Lenders, in same day funds, in the case of a Borrowing, such
Lender's Pro Rata Share of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative
Agent shall make such funds available to the Borrower at its account with the Administrative Agent. 

        (b)    Conversions and Continuations.    The Borrower may elect to Convert or continue any Borrowing under this
Section 2.03 by delivering an irrevocable Notice of Conversion or Continuation to the Administrative Agent at the Administrative Agent's office no later than 11:00 a.m. (New York time)
(i) on the date which is at least three Business Days in advance of the proposed Conversion or 

19

 

continuation
date in the case of a Conversion to or a continuation of a Borrowing comprised of Eurodollar Rate Advances and (ii) on the Business Day of the proposed Conversion, in the case of a
Conversion to a Borrowing comprised of Reference Rate Advances. Each such Notice of Conversion or Continuation shall be in writing (by facsimile or otherwise) specifying the information required
therein. Promptly after receipt of a Notice of Conversion or Continuation under this Section, the Administrative Agent shall provide each Lender with a copy thereof and, in the case of a Conversion to
or a continuation of a Borrowing comprised of Eurodollar Rate Advances, notify each Lender of the applicable interest rate under Section 2.09(b). 

        (c)    Certain Limitations.    Notwithstanding anything to the contrary contained in paragraphs (a) and
(b) above: 

          (i)  at
no time shall there be more than one Interest Period applicable to outstanding Eurodollar Rate Advances and the Borrower may not select Eurodollar Rate Advances for
any Borrowing at any time that a Default has occurred and is continuing; 

         (ii)  if
any Lender shall, at least one Business Day before the date of any requested Borrowing, Conversion, or continuation, notify the Administrative Agent that any Change
in Law makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its Applicable Lending Office to perform its obligations under this
Agreement to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances, the right of the Borrower to select Eurodollar Rate Advances from such Lender shall be suspended until such
Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and the Advance made by such Lender in respect of such Borrowing, Conversion, or
continuation shall be a Reference Rate Advance; 

        (iii)  if
the Administrative Agent is unable to determine the Eurodollar Rate for Eurodollar Rate Advances comprising any requested Borrowing, the right of the Borrower to
select Eurodollar Rate Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Reference Rate Advance; 

        (iv)  if
the Required Lenders shall, at least one Business Day before the date of any requested Borrowing, notify the Administrative Agent that the Eurodollar Rate for
Eurodollar Rate Advances comprising such Borrowing will not adequately reflect the cost to such Lenders of making or funding
their respective Eurodollar Rate Advances, as the case may be, for such Borrowing, the right of the Borrower to select Eurodollar Rate Advances for such Borrowing or for any subsequent Borrowing shall
be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall
be a Reference Rate Advance; and 

         (v)  if
the Borrower shall fail to select the duration or continuation of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in
the definition of "Interest Period" in Section 1.01 and paragraph (b) of this Section 2.03, the Administrative Agent shall forthwith so notify the Borrower and the Lenders and
such Advances shall be made available to the Borrower on the date of such Borrowing as Reference Rate Advances or, if an existing Advance, Convert into Reference Rate Advances. 

        (d)    Notices Irrevocable.    Each Notice of Borrowing and Notice of Conversion or Continuation shall be irrevocable
and binding on the Borrower. In the case of any Borrowing for which the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender
against any loss, out-of-pocket cost, or expense incurred by such Lender as a result of any failure by the Borrower to fulfill on or before the date specified in such Notice of 

20

 

Borrowing
for such Borrowing the applicable conditions set forth in Article III including any loss (including any loss of anticipated profits), cost, or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure,
is not made on such date. 

        (e)    Funding by Lenders; Presumption by Administrative Agent.    Unless the Administrative Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent
may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section 2.03 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 a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by the Borrower, the interest rate
applicable to Base Rate Advances. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly
remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid
shall constitute such Lender's Advance included in such Borrowing. Any payment by the Borrower shall be without
prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent. 

        (f)    Lender Obligations Several.    The failure of any Lender to make the Advance to be made by it as part of any
Borrowing shall not relieve any other Lender of its obligation, if any, to make its Advance on the date of such Borrowing. No Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing. 

        Section 2.04    Reduction of the Commitments.    Upon the making of the Advances on the on the Closing Date,
each Lender's Commitment shall be reduced to $0. 

        Section 2.05    Prepayment of Advances.    

        (a)    Optional.    The Borrower may prepay the Advances, after giving by 11:00 a.m. (New York time):
(i) in the case of Eurodollar Rate Advances, at least three Business Days' or (ii) in the case of Reference Rate Advances, same Business Day's, irrevocable prior written notice to the
Administrative Agent stating the proposed date and aggregate principal amount of such prepayment. If any such notice is given, the Borrower shall prepay the Advances in whole or ratably in part in an
aggregate principal amount equal to the amount specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid and amounts, if any, required to
be paid pursuant to Section 2.12 as a result of such prepayment being made on such date; provided, however, that each partial prepayment shall be
made in minimum amounts of $500,000 and in integral multiples of $100,000 in excess thereof. Full prepayments of any Borrowing are permitted without restriction of amounts. 

21

 

  
        (b)    Mandatory.    

        (i)    Equity Issuance.    If the Borrower or any Subsidiary receives Equity Issuance Proceeds, so long as
(a) no Borrowing Base Deficiency exists under the Senior Credit Agreement and (b) no Senior Event of Default exists, then immediately upon the receipt thereof by the Borrower such Equity
Issuance Proceeds shall be applied ratably, according to the then unpaid amounts thereof, without preference or priority of any kind among them, to the payment of the Advances then due and payable;  provided that in no event shall the Borrower be required to make prepayments pursuant to this paragraph with respect to Equity Issuance Proceeds in
excess of $100,000,000. 

        (ii)    Illegality.    If any Lender shall notify the Administrative Agent and the Borrower that Change in Law makes
it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful for such Lender or its Applicable Lending Office to perform its obligations under this Agreement to
maintain any Eurodollar Rate Advances of such Lender then outstanding hereunder, (i) the Borrower shall, no later than 11:00 a.m. (New York time) (A) if not prohibited by law, on
the last day of the Interest Period for each outstanding Eurodollar Rate Advance made by such Lender or (B) if required by such notice, on the second Business Day following its receipt of such
notice, prepay all of the Eurodollar Rate Advances made by such Lender then outstanding, together with accrued interest on the principal amount prepaid to the date of such prepayment and amounts, if
any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date, (ii) such Lender shall simultaneously make a Reference Rate Advance to the
Borrower on such date in an amount equal to the aggregate principal amount of the Eurodollar Rate Advances prepaid to such Lender, and (iii) the right of the Borrower to select Eurodollar Rate
Advances from such Lender for any subsequent Borrowing shall be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist. 

        (c)    Interests, Costs and Application of Payments.    Each prepayment pursuant to any provision of this
Section 2.05 shall be accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.12 as a result
of such prepayment being made on such date. Each prepayment under this Section 2.05(b) (other than paragraph (iv) above) shall be applied to the Advances as determined by the
Administrative Agent and agreed to by the Lenders in their sole discretion. 

        (d)    No Additional Right; Ratable Prepayment.    The Borrower shall have no right to prepay any principal amount of
any Advance except as provided in this Section 2.05, and all notices given pursuant to this Section 2.05 shall be irrevocable and binding upon the Borrower. Each payment of any Advance
pursuant to this Section 2.05 shall be made in a manner such that all Advances comprising part of the same Borrowing are paid in whole or ratably in part. 

        Section 2.06    Repayment of Advances.    The Borrower shall repay to the Administrative Agent for the ratable
benefit of the Lenders the outstanding principal amount of each Advance, together with any accrued interest thereon, on the Maturity Date or such earlier date pursuant to Section 7.02 or
Section 7.03. 

        Section 2.07    [Reserved].    

        Section 2.08    Fees.    The Borrower agrees to pay to the Administrative Agent the fees described in the Fee
Letter. 

22

 

        Section 2.09    Interest.    The Borrower shall pay interest on the unpaid principal amount of each Advance
made by each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: 

        (a)    Reference Rate Advances.    If such Advance is a Reference Rate Advance, a rate per annum equal at all times to
the Adjusted Reference Rate in effect from time to time plus the Applicable Margin in effect from time to time, payable quarterly in arrears on the last
day of each March, June, September, and December and on the date such Reference Rate Advance shall be paid in full. 

        (b)    Eurodollar Rate Advances.    If such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times
during the Interest Period for such Advance to the Eurodollar Rate for such Interest Period plus the Applicable Margin in effect from time to time,
payable on the last day of such Interest Period and, in the case of any Interest Period longer than three months in duration, on the third monthly anniversary of the beginning of such Interest Period
as well as the last day of such Interest Period. 

        (c)    Additional Interest on Eurodollar Rate Advances.    The Borrower shall pay to each Lender, so long as any such
Lender shall be required under regulations of the Federal Reserve Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional
interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the effective date of such Advance until such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for
such Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period,
payable on each date on which interest is payable on such Advance. Such additional interest payable to any Lender shall be determined by such Lender and notified to the Borrower through the
Administrative Agent (such notice to include the calculation of such additional interest, which calculation shall be conclusive in the absence of manifest error). 

        (d)    Usury Recapture.    

          (i)  If,
with respect to any Lender, the effective rate of interest contracted for under the Loan Documents, including the stated rates of interest and fees contracted for
hereunder and any other amounts contracted for under the Loan Documents which are deemed to be interest, at any time exceeds the Maximum Rate, then the outstanding principal amount of the loans made
by such Lender hereunder shall bear interest at a rate which would make the effective rate of interest for such Lender under the Loan Documents equal the Maximum Rate until the difference between the
amounts which would have been due at the stated rates and the amounts which were due at the Maximum Rate (the "Lost Interest") has been recaptured by such Lender. 

         (ii)  If,
when the loans and reimbursement obligations made hereunder are repaid in full, the Lost Interest has not been fully recaptured by such Lender pursuant to the
preceding paragraph, then, to the extent permitted by law, for the loans and other credit extensions made hereunder by such Lender the interest rates charged under Section 2.09 hereunder shall
be retroactively increased such that the effective rate of interest under the Loan Documents was at the Maximum Rate since the effectiveness of this Agreement to the extent necessary to recapture the
Lost Interest not recaptured pursuant to the preceding sentence and, to the extent allowed by law, the Borrower shall pay to such Lender the amount of the Lost Interest remaining to be recaptured by
such Lender. 

        Section 2.10    Payments and Computations.    

        (a)    Payment Procedures.    The Borrower shall make each payment under this Agreement not later than
11:00 a.m. (New York time) on the day when due in Dollars to the Administrative Agent at 1221 Avenue of the Americas, New York, New York 10020 (or such other location as the Administrative 

23

 

Agent
shall designate in writing to the Borrower) in same day funds without deduction, setoff, or counterclaim of any kind. The Administrative Agent shall promptly thereafter cause to be distributed
like funds relating to the payment of principal, interest or fees ratably (other than amounts payable solely to the Administrative Agent or a specific Lender pursuant to Section 2.08(c),
2.09(c), 2.12, 2.13, 2.14, 9.04, 9.05, or 9.06, but after taking into account payments effected pursuant to Section 7.04) in accordance with each Lender's Pro Rata Share to the Lenders for the
account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this Agreement. 

        (b)    Computations.    All computations of interest based on the Reference Rate and of fees shall be made by the
Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate and the Federal Funds Rate shall be made by the
Administrative Agent, on the basis of a year of 360 days, in each case for the actual number of days (including the first day, but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Administrative Agent of an interest rate or fee shall be conclusive and binding for all purposes, absent manifest error. 

        (c)    Non-Business Day Payments.    Whenever any payment shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case
may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the immediately preceding Business Day. 

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

        Section 2.11    Sharing of Payments, Etc.    If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Advances or other obligations hereunder resulting in such Lender's receiving payment of a proportion
of the aggregate amount of its Advances and accrued interest thereon or other such obligations greater than its pro rata share thereof as provided herein, then the Lender receiving such greater
proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Advances and such other obligations of the other
Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of
and accrued interest on their respective Advances and other amounts owing them, provided that: (i) if any such participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and (ii) the provisions of this Section shall not
be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its Advances to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to 

24

 

which
the provisions of this Section shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable Legal Requirement, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff 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 2.12    Breakage Costs.    If (a) any payment of principal of any Eurodollar Rate Advance is
made other than on the last day of the Interest Period for such Advance, whether as a result of any payment pursuant to Section 2.05, the acceleration of the maturity of the Obligations
pursuant to Article VII, or otherwise, or (b) the Borrower fails to make a principal or interest payment with respect to any Eurodollar Rate Advance on the date such payment is due and
payable, the Borrower shall, within 10 days of any written demand sent by any Lender to the Borrower through the Administrative Agent, pay to the Administrative Agent for the account of such
Lender any amounts required to compensate such Lender for any additional losses, out-of-pocket costs or expenses which it may reasonably incur as a result of such payment or
nonpayment, including any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund
or maintain such Advance. 

        Section 2.13    Increased Costs.    

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

          (i)  impose,
modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the
account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the Eurodollar Rate Reserve Percentage); 

         (ii)  subject
any Lender to any tax of any kind whatsoever with respect to this Agreement or any Eurodollar Rate Advance made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 2.14 and the imposition of, or any change in the rate of, any Excluded Tax payable by
such Lender); or 

        (iii)  impose
on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Advances 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 Rate Advance (or of maintaining its obligation to make any such Advance) or
to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, 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 affecting such Lender or any lending
office of such Lender or such Lender's holding company, if any, 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, the Commitments of such Lender or the Advances made by such Lender to a level below that which such Lender or such Lender's
holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy),
then from time to time the Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such
reduction suffered. 

        (c)    Certificates for Reimbursement.    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 

25

 

paragraph (a)
or (b) of this Section and delivered to the Borrower 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)    Delay in Requests.    Failure or delay on the part of any Lender to demand compensation pursuant to this
Section shall not constitute a waiver of such Lender's right to demand such compensation. 

        Section 2.14    Taxes.    

        (a)    Payments Free of Taxes.    Any and all payments by or on account of any obligation of the Borrower hereunder or
under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided
that if the Borrower shall be required by applicable Legal Requirement to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent 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 shall make such deductions and (iii) the Borrower shall timely pay the
full amount deducted to the relevant Governmental Authority in accordance with applicable Legal Requirement. 

        (b)    Payment of Other Taxes by the Borrower.    Without limiting the provisions of paragraph (a) above, the
Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Legal Requirement. 

        (c)    Indemnification by the Borrower.    The Borrower shall
indemnify the Administrative Agent and each Lender, within 10 Business Days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf
of a Lender, 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 to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. 

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

26

 

        Without
limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States of America, any Foreign Lender shall deliver to the
Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and
from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable: 

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

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

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

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

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

ARTICLE III

CONDITIONS OF LENDING  

        Section 3.01    Conditions Precedent to Effectiveness.    The obligation of each Lender to make its Advance on
the Closing Date is subject to the conditions precedent that: 

        (a)    Documentation.    The Administrative Agent shall have received the following duly executed by all the parties
thereto, in form and substance satisfactory to the Administrative Agent and the Lenders, and, where applicable, in sufficient copies for each Lender: 

          (i)  this
Agreement, a Note payable to the order of each requesting Lender in the amount of its Commitment, the Security Agreements, the Guaranties, the Pledge Agreements,
and Mortgages encumbering substantially all of the Borrower's and its Subsidiaries' personal property and encumbering at least 90% of the PV-10 of the Loan Parties' Proven Reserves (as set
forth in the Initial Engineering Reports) and Oil and Gas Properties in connection therewith (including the Oil 

27

 

and
Gas Properties to be acquired under the Closing Date Acquisition), and each of the other Loan Documents, including the Intercreditor Agreement, and all attached exhibits and schedules; 

         (ii)  a
favorable opinion of (A) the Borrower's and the Guarantors' primary counsel dated as of the date of this Agreement in form and covering such matters as the
Administrative Agent may reasonably request and (B) the Borrower's and the Guarantors' local counsel dated as of the date of this Agreement in form and covering such matters as the
Administrative Agent may reasonably request; 

        (iii)  copies,
certified as of the date of this Agreement by a Responsible Officer of the General Partner of (A) the resolutions of the board of managers of the
General Partner approving the Loan Documents to which the Borrower or the General Partner is a party, (B) the articles or certificate of formation of the General Partner and the company
agreement of the General Partner, (C) the certificate of limited partnership of the Borrower, (D) the partnership agreement of the Borrower, and (E) all other
documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Notes, and the other Loan Documents; 

        (iv)  certificates
of the secretary or assistant secretary of the General Partner certifying the names and true signatures of the officers of the General Partner authorized
to sign this Agreement, the Notes, Notices of Borrowing, Notices of Conversion or Continuation, and the other Loan Documents to which the Borrower or the General Partner is a party; 

         (v)  other
than as otherwise required under clause (iii) above, copies, certified as of the date of this Agreement by a Responsible Officer or the secretary or an
assistant secretary of each Guarantor of (A) the resolutions of the Board of Directors (or other applicable governing body) of such Guarantor approving the Loan Documents to which it is a
party, (B) the articles or certificate (as applicable) of incorporation (or organization) and bylaws of such Guarantor, and (C) all other documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to the Guaranty, the Security Instruments, and the other Loan Documents to which such Guarantor is a party; 

        (vi)  a
certificate of the secretary or an assistant secretary of each Guarantor certifying the names and true signatures of officers of such Guarantor authorized to sign the
Guaranty, Security Instruments and the other Loan Documents to which such Guarantor is a party; 

28

 

 

       (vii)  a
certificate dated as of the Closing Date from a Responsible Officer of the Borrower stating that (A) all representations and warranties of the Borrower set
forth in this Agreement are true and correct in all material respects; (B) no Default has occurred and is continuing; and (C) the conditions in this Section 3.01 have been met; 

      (viii)  appropriate
UCC-1 and UCC-3, as applicable, Financing Statements covering the Collateral for filing with the appropriate authorities and any
other documents, agreements or instruments necessary to create an Acceptable Security Interest in such Collateral; 

        (ix)  property
insurance certificates evidencing insurance which meets the requirements of this Agreement and the Security Instruments (including business interruption
insurance), and which is otherwise satisfactory to the Administrative Agent; 

         (x)  the
Initial Engineering Reports; 

        (xi)  to
the extent required in connection with the Pledge Agreements, (A) stock or, to the extent applicable under the Person's organizational documents, membership
or partnership interest certificates, and stock powers executed in blank for each such stock certificate endorsed in blank to the Administrative Agent and (B) to the extent such Person is a
limited liability company or a limited partnership, copies of its limited liability company agreement, partnership agreement or other similar document the terms of which expressly provide that
membership interests or partnership interests, as applicable, in such Person are securities governed by Chapter 8 of the Uniform Commercial Code as in effect in the State of New York; 

       (xii)  copies,
certified by a Responsible Officer of the Borrower, of all of the Closing Date Acquisition Instruments and all exhibits and schedules thereto, together with
all amendments, modifications or waivers thereto in effect as of the date of this Agreement; 

      (xiii)  a
Compliance Certificate completed and executed by a Responsible Officer of the General Partner showing the calculation of, and Borrower's pro forma compliance with
Section 6.17 as of the Closing Date after giving effect to the Closing Date Acquisition and the Borrowings requested and made on the Closing Date; 

      (xiv)  certificates
of good standing and existence for each Loan Party in (a) the state, province or territory in which each such Person is organized and
(b) each state, province or territory in which such good standing is necessary, which certificates shall be dated a date not earlier than 30 days prior to the date hereof; and 

       (xv)  such
other documents, governmental certificates, agreements and lien searches as the Administrative Agent or any Lender may reasonably request. 

        (b)    Payment of Fees.    On the date of this Agreement, the Borrower shall have paid the fees required by
Section 2.08 and all costs and expenses that have been invoiced and are payable pursuant to Section 9.04. 

        (c)    Delivery of Financial Information.    The Administrative Agent and the Lenders shall have received true and
correct copies of (i) the Financial Statements and (ii) such other financial information as the Lenders may reasonably request. 

        (d)    Security Instruments.    The Administrative Agent shall have received all appropriate evidence required by the
Administrative Agent and the Lenders in their sole discretion necessary to determine that the Administrative Agent (for its benefit and the benefit of the Lenders) shall have an Acceptable Security
Interest in the Collateral (which shall include, at least 90% of the PV-10 of the Loan Parties' Proven Reserves (as set forth in the Initial Engineering Reports) and Oil and Gas Properties
in connection therewith, including the Oil and Gas Properties to be acquired under the Closing Date 

29

 

Acquisition)
and that all actions or filings necessary to protect, preserve and validly perfect such Liens have been made, taken or obtained, as the case may be, and are in full force and effect. 

        (e)    Title.    The Administrative Agent shall be satisfied in its sole discretion with the title to the Oil and Gas
Properties included in the Borrowing Base and that such Oil and Gas Properties, after giving effect to the Closing Date Acquisition, constitute at least 71% of the PV-10 Value of the Loan
Parties' Proven Reserves (as set forth on the Initial Engineering Reports), including mortgagee's title opinions or other title evidence in form and substance satisfactory to the Administrative Agent
and, in the case of title opinions, issued by title counsel satisfactory to the Administrative Agent. 

        (f)    Environmental.    The Administrative Agent shall have received reports as it may reasonably require and shall
be satisfied with the condition of the Oil and Gas Properties with respect to the Borrower's compliance with Environmental Laws. 

        (g)    No Default.    No Default shall have occurred and be continuing. 

        (h)    Representations and Warranties.    The representations and warranties contained in Article IV and in
each other Loan Document shall be true and correct in all material respects. 

        (i)    Material Adverse Change.    No event or circumstance that could cause a Material Adverse Change shall have
occurred. 

        (j)    No Proceeding or Litigation; No Injunctive Relief.    No action, suit, investigation or other proceeding
(including the enactment or promulgation of a statute or rule) by or before any arbitrator or any Governmental Authority shall be threatened or pending and no preliminary or permanent injunction or
order by a state or federal court shall have been entered (i) in connection with this Agreement or any transaction contemplated hereby or (ii) which, in any case, in the judgment of the
Administrative Agent, could reasonably be expected to result in a Material Adverse Change. 

        (k)    Consents, Licenses, Approvals, etc.    The Administrative Agent shall have received true copies (certified to
be such by the Borrower or other appropriate party) of all consents, licenses and approvals required in accordance with applicable Legal Requirements, or in accordance with any document, agreement,
instrument or arrangement to which the Borrower, any Guarantor or any of their respective Subsidiaries is a party, in connection with the execution, delivery, performance, validity and enforceability
of this Agreement, the other Loan Documents, and the Closing Date Acquisition Instruments. In addition, the Borrower, the Guarantors and their respective Subsidiaries shall have all such material
consents, licenses and approvals required in connection with the continued operation of the Borrower, such Guarantors and such Subsidiaries and such approvals shall be in full force and effect, and
all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on this
Agreement and the actions contemplated hereby. The Administrative Agent shall be satisfied that the consummation of the Closing Date Acquisition does not contravene any law or any contractual
restriction binding on or affecting the Borrower or any Subsidiary, the Sellers or any other party to the Closing Date Acquisition Instruments. 

        (l)    Material Contracts.    The Borrower shall have delivered to the Administrative Agent copies of all material
contracts, agreements or instruments listed on the attached Schedule 4.21. 

        (m)    Notice of Borrowing.    The Administrative Agent shall have received a Notice of Borrowing from the Borrower in
the form of Exhibit G, with appropriate insertions and executed by a duly authorized Responsible Officer of the Borrower. 

        (n)    Closing Date Acquisition.    All conditions to the consummation and effectiveness of the Closing Date
Acquisition (other than the payment of the purchase price) shall have been met. Furthermore, the Administrative Agent shall have received (i) payoff letters, if any, in form and substance
reasonably satisfactory to the Administrative Agent covering all Debt secured by liens that 

30

 

encumber
any of the Properties being purchased by the Borrower under the Closing Date Acquisition and (ii) UCC financing statement terminations, deed of trust and mortgage lien releases and
other evidence reasonably required by the Administrative Agent indicating that all liens encumbering the Acquisition Assets to be acquired by the Borrower and its Subsidiaries have been terminated or
released. 

        (o)    USA Patriot Act.    The Borrower has delivered to each Lender that is subject to the Act such information
requested by such Lender in order to comply with the Act. 

        (p)    Hydrocarbon Hedge Agreements.    The Borrower shall have entered into Hydrocarbon Hedge Agreements covering
notional volumes at least equal to the minimum volumes set forth on Schedule 3.01(p) and establishing pricing at least equal to the minimum prices set forth on such Schedule 3.01(p). 

        (q)    Minimum Liquidity.    The sum of the Borrower's unrestricted cash and Unused Commitment Amount as of the
Closing Date after giving effect to the Closing Date Acquisition and the Borrowings requested and made on the Closing Date shall be at least $15,000,000. 

        (r)    Senior Debt.    (i) The Borrower shall have entered into the Senior Credit Agreement, (ii) the terms and
conditions thereof shall be reasonably satisfactory to the Administrative Agent and the Lenders, and (iii) the conditions precedent set forth in Section 3.01 of the Senior Credit
Agreement shall contemporaneously herewith have been satisfied or waived in writing as of the date hereof. The Borrower shall have delivered copies of the Senior Credit Agreement and each other
agreement, instrument, or document executed by the Borrower or any of its Subsidiaries or any of their Responsible Officers at any time in connection with the Senior Credit Agreement on or before the
date hereof. 

        Section 3.02    Conditions Precedent to Borrowings.    The obligation of each Lender to make a Borrowing on the
occasion of each Borrowing shall be subject to the further conditions precedent that on the date of such Borrowing: 

        (a)   the
following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Notice of Conversion or Continuation and the acceptance by the
Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing such statements are true): 

          (i)  the
representations and warranties contained in Article IV of this Agreement and the representations and warranties contained in the Security Instruments, the
Guaranties, and each of the other Loan Documents are true and correct in all material respects on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the
application of the proceeds from such Borrowing, as though made on and as of such date; and 

         (ii)  no
Default has occurred and is continuing or would result from such Borrowing or from the application of the proceeds therefrom; and 

        (b)   the
Administrative Agent shall have received such other approvals, opinions, or documents reasonably deemed necessary or desirable by the Administrative Agent as a
result of circumstances occurring after the date of this Agreement. 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES  

        The Borrower represents and warrants as follows: 

        Section 4.01    Existence; Subsidiaries.    The Borrower is a limited partnership duly organized, validly
existing and in good standing under the laws of Delaware and in good standing and qualified to 

31

 

do
business in each other jurisdiction where its ownership or lease of Property or conduct of its business requires such qualification. Each Subsidiary of the Borrower is duly organized, validly
existing, and in good standing under the laws of its jurisdiction of formation and in good standing and qualified to do business in each jurisdiction where its ownership or lease of Property or
conduct of its business requires such qualification. The General Partner is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware and in good
standing and qualified to do business in each jurisdiction where its ownership or lease of Property or conduct of its business requires such qualification. As of the date of this Agreement,
Schedule 4.01 sets forth the capital structure of the Borrower and the Subsidiaries of the Borrower. 

        Section 4.02    Power.    The execution, delivery, and performance by the Borrower of this Agreement, the
Notes, and the other Loan Documents to which it is a party and by the Guarantors of the Guaranties and the other Loan Documents to which they are a party and the consummation of the transactions
contemplated hereby and thereby (a) are within the Borrower's and such Guarantors' governing powers, (b) have been duly authorized by all necessary governing action, (c) do not
contravene (i) the Borrower's or any Guarantor's certificate or articles of incorporation, bylaws, limited liability company agreement, or other similar governance documents or (ii) any
law or any contractual restriction binding on or affecting the Borrower or any Guarantor, and (d) will not result in or require the creation or imposition of any Lien prohibited by this
Agreement. At the time of each Advance, such Advance, and the use of the proceeds of such Advance, will be within the Borrower's governing powers, will have been duly authorized by all necessary
governing action, will not contravene (i) the Borrower's articles or certificate of incorporation or other organizational documents or (ii) any law or any contractual restriction binding
on or affecting the Borrower and will not result in or require the creation or imposition of any Lien prohibited by this Agreement. 

        Section 4.03    Authorization and Approvals.    No consent, order, authorization, or approval or other action
by, and no notice to or filing with, any Governmental Authority or any other Person is required for the due execution, delivery, and performance by the Borrower of this Agreement, the Notes, or the
other Loan Documents to which the Borrower is a party or by each Guarantor of its Guaranty or the other Loan Documents to which it is a party or the consummation of the transactions contemplated
thereby. No consents, licenses and approvals are required in accordance with applicable Legal Requirements, or in accordance with any document, agreement, instrument or arrangement to which the
Borrower, the Guarantors, and their respective Subsidiaries is a party, in connection with the execution, delivery, performance, validity and enforceability of the Closing Date Acquisition
Instruments. At the time of each Borrowing, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority will be required for such Borrowing or the use
of the proceeds of such Borrowing. 

        Section 4.04    Enforceable Obligations.    This Agreement, the Notes, and the other Loan Documents to which
the Borrower is a party have been duly executed and delivered by the Borrower and the Guaranties and the other Loan Documents to which each Guarantor is a party have been duly executed and delivered
by such Guarantors. Each Loan Document is the legal, valid, and binding obligation of the Borrower and any Guarantor which is a party to it enforceable against the Borrower and each such Guarantor in
accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar law affecting creditors' rights generally and
by general principles of equity. 

        Section 4.05    Financial Statements.    

        (a)   The
Borrower has delivered to the Administrative Agent and the Lenders copies of the Financial Statements, and the Financial Statements present fairly the financial
condition of Borrower and its Subsidiaries as of their respective dates and for their respective periods in accordance with GAAP. As of the date of the Financial Statements, there were no material
contingent obligations, 

32

 

liabilities
for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower, except as disclosed therein in accordance with GAAP and adequate
reserves for such items have been made in accordance with GAAP. 

        (b)   All
projections, estimates, and pro forma financial information furnished by the Borrower were prepared on the basis of assumptions, data, information, tests, or
conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished. 

        (c)   Since
the date of the Financial Statements, no event or circumstance that could reasonably be expected to cause a Material Adverse Change has occurred. 

        (d)   As
of the date of this Agreement and after giving effect to the Closing Date Acquisition but before giving effect to the making of the Advances, neither the Borrower nor
any of its Subsidiaries has any Debt other than the Debt listed on Schedule 4.05. 

        Section 4.06    True and Complete Disclosure.    All factual information (excluding estimates and projections
such as the estimates and projections contained in the Engineering Reports) heretofore or contemporaneously furnished by or on behalf of the Borrower or any of the Guarantors in writing to any Lender
or the Administrative Agent for purposes of or in connection with this Agreement, any other Loan Document or any transaction contemplated hereby or thereby is, and all other such factual information
hereafter furnished by or on behalf of the Borrower and the Guarantors in writing to the Administrative Agent or any of the Lenders shall be, true and accurate in all material respects on the date as
of which such information is dated or certified and does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein not
misleading at such time. All projections and estimates furnished by the Borrower (including, without limitation, all estimates and projections contained in the Engineering Reports) were prepared on
the basis of assumptions, data, information, tests, or conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished. This
Section 4.06 shall not be applicable to the Financial Statements as to which the representations and warranties set forth in Section 4.05 shall be applicable. 

        Section 4.07    Litigation; Compliance with Laws.    

        (a)   Other
than as set forth in Schedule 4.07, there is no pending or, to the best knowledge of the Borrower, threatened action or proceeding affecting the Borrower or
any of the Guarantors before any court, Governmental Authority or arbitrator which could reasonably be expected to cause a Material Adverse Change or which purports to affect the legality, validity,
binding effect or enforceability of this Agreement, any Note, or any other Loan Document. Additionally, there is no pending or, to the best knowledge of the Borrower, threatened action or proceeding
instituted against the Borrower or any of the Guarantors which seeks to adjudicate the Borrower or any of the Guarantors as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property, to the extent required herein. 

        (b)   The
Borrower and its Subsidiaries have complied in all material respects with all material statutes, rules, regulations, orders and restrictions of any Governmental
Authority having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property. 

33

 

  
        Section 4.08    Use of Proceeds.    The proceeds of the Advances will be used by the Borrower for the purposes
described in Section 5.09. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U). No
proceeds of any Advance will be used to purchase or carry any margin stock in violation of Regulation T, U or X. 

        Section 4.09    Investment Company Act.    Neither the Borrower nor any of the Guarantors is an "investment
company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 

        Section 4.10    Federal Power Act.    No Credit Party and no Subsidiary of a Credit Party is subject to
regulation under the Federal Power Act, as amended or any other Legal Requirement which regulates the incurring by such Person of Debt, including Legal Requirements relating to common contract
carriers or the sale of electricity, gas, steam, water or other public utility services. 

        Section 4.11    Taxes.    

        (a)    Reports and Payments.    All Returns (as defined below in clause (c) of this Section 4.11)
required to be filed by or on behalf of the Borrower, the Guarantors, or any member of the Controlled Group (hereafter collectively called the "Tax Group") have been duly filed on a timely basis or
appropriate extensions have been obtained and such Returns are and will be true, complete and correct, except where the failure to so file would not be reasonably expected to cause a Material Adverse
Change; and all Taxes shown to be payable on the Returns or on subsequent assessments with respect thereto will have been paid in full on a timely basis, and no other Taxes will be payable by the Tax
Group with respect to items or periods covered by such Returns, except in each case to the extent of (i) reserves reflected in the Financial Statements or subsequent financial statements
delivered under Section 5.06 or (ii) taxes that are being contested in good faith. The reserves for accrued Taxes reflected in the financial statements delivered to the Lenders under
this Agreement are adequate in the aggregate for the payment of all unpaid Taxes, whether or not disputed, for the period ended as of the date thereof and for any period prior thereto, and for which
the Tax Group may be liable in its own right, as withholding agent or as a transferee of the assets of, or successor to, any Person, except for such Taxes or reserves therefor, the failure to pay or
provide for which does not and would not reasonably be expected to cause a Material Adverse Change. 

        (b)    Taxes Definition.    "Taxes" in this Section 4.11 shall mean all taxes, charges, fees, levies, or other
assessments imposed by any federal, state, local, or foreign taxing authority, including income, gross receipts, excise, real or personal property, sales, occupation, use, service, leasing,
environmental, value added, transfer, payroll, and franchise taxes (and including any interest, penalties, or additions to tax attributable to or imposed on or with respect to any such assessment). 

        (c)    Returns Definition.    "Returns" in this Section 4.11 shall mean any federal, state, local, or foreign
report, estimate, declaration of estimated Tax, information statement or return relating to, or required to be filed in connection with, any Taxes, including any information return or report with
respect to backup withholding or other payments of third parties. 

        Section 4.12    Pension Plans.    All Plans are in compliance in all material respects with all applicable
provisions of ERISA. No Termination Event has occurred with respect to any Plan, and each Plan has complied with and been administered in all material respects in accordance with applicable provisions
of ERISA and the Code. No "accumulated funding deficiency" (as defined in Section 302 of ERISA) has occurred, and for plan years after December 31, 2007, no unpaid minimum required
contribution exists, and there has been no excise tax imposed under Section 4971 of the Code. No Reportable Event has occurred with respect to any Multiemployer Plan, and each Multiemployer
Plan has complied with and been administered in all material respects in accordance with applicable provisions of ERISA and the Code. The present value of all benefits vested under each Plan (based on 

34

 

the
assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the value of the assets of such Plan allocable to such vested benefits by more than
$1,000,000. Neither the Borrower nor any member of the Controlled Group has had a complete or partial withdrawal from any Multiemployer Plan for which there is any withdrawal liability in excess of
$1,000,000. As of the most recent valuation date applicable thereto, neither the Borrower nor any member of the Controlled Group would become subject to any liability under ERISA in excess of
$1,000,000 if the Borrower or any member of the Controlled Group has received notice that any Multiemployer Plan is insolvent or in reorganization. Based upon GAAP existing as of the date of this
Agreement and current factual circumstances, the Borrower has no reason to believe that the annual cost during the term of this Agreement to the Borrower or any member of the Controlled Group for
post-retirement benefits to be provided to the current and former employees of the Borrower or any member of the Controlled Group under Plans that are welfare benefit plans (as defined in
Section 3(1) of ERISA) could, in the aggregate, reasonably be expected to cause a Material Adverse Change. 

        Section 4.13    Condition of Property; Casualties.    Each of the Borrower and the Guarantors has good and
defensible title to all of its Properties free and clear of all Liens except for Permitted Liens. The material Properties used or to be used in the continuing operations of the Borrower and each of
the Guarantors are in good repair, working order and condition, ordinary wear and tear excepted. Since the date of the Financial Statements, neither the business nor the material Properties of the
Borrower and each of the Guarantors, taken as a whole, has been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of Property or cancellation of contracts, Permits, or concessions by a Governmental Authority, riot, activities of armed forces, or acts of God or of
any public enemy. 

        Section 4.14    No Burdensome Restrictions; No Defaults.    

        (a)   Neither
the Borrower nor any Guarantor is a party to any indenture, loan, or credit agreement or any lease or other agreement or instrument or subject to any charter or
corporate restriction or provision of applicable Legal Requirement that could reasonably be expected to cause a Material Adverse Change. Neither the Borrower nor any of its Subsidiaries is in default
under or with respect to any contract, agreement, lease, or other instrument to which the Borrower or any Subsidiary is a party and which could reasonably be expected to cause a Material Adverse
Change or under any agreement in connection with any Debt. Neither the Borrower nor any of its Subsidiaries has received any notice of default under any material contract, agreement, lease, or other
instrument to which the Borrower or such Subsidiary is a party. 

        (b)   No
Default has occurred and is continuing. 

        Section 4.15    Environmental Condition.    

        (a)    Permits, Etc.    The Borrower and the Guarantors, or to the extent that the right of operation is vested in
others, such operators on behalf of the Borrower and the Guarantors, (i) have obtained all Environmental Permits necessary for the ownership and operation of their respective Properties and the
conduct of their respective businesses except where the failure to obtain such Environmental Permit could not reasonably be expected to cause a Material Adverse Change; (ii) have at all times
been and are in compliance with all terms and conditions of such Permits and with all other requirements of applicable Environmental Laws except where the failure to be in compliance could not
reasonably be expected to cause a Material Adverse Change; (iii) have not received notice of any material violation or alleged violation of any Environmental Law or Permit; and (iv) are
not subject to any actual or contingent Environmental Claim, which could reasonably be expected to cause a Material Adverse Change. 

35

 

        (b)    Certain Liabilities.    To the Borrower's actual knowledge, none of the present or previously owned or operated
Property of the Borrower or any Guarantor or of any of their former Subsidiaries, wherever located: (i) has been placed on or proposed to be placed on the National Priorities List, the
Comprehensive Environmental Response Compensation Liability Information System list, or their state or local analogs, or have been otherwise investigated, designated, listed, or identified as a
potential site for removal, remediation, cleanup, closure, restoration, reclamation, or other response activity under any Environmental Laws; (ii) is subject to a Lien, arising under or in
connection with any Environmental Laws, that attaches to any revenues or to any Property owned or operated by the
Borrower or any of the Guarantors, wherever located, which could reasonably be expected to cause a Material Adverse Change; or (iii) has been the site of any Release of Hazardous Substances or
Hazardous Wastes from present or past operations which has caused at the site or at any third-party site any condition that has resulted in or could reasonably be expected to result in the need for
Response that would cause a Material Adverse Change. 

        (c)    Certain Actions.    Without limiting the foregoing: (i) all necessary notices have been properly filed,
and no further action is required under current Environmental Law as to each Response or other restoration or remedial project undertaken by the Borrower or the Guarantors (or to the extent that the
right of operation is vested in others, undertaken by such operators on behalf of the Borrower or the Guarantors), or any of their former Subsidiaries on any of their presently or formerly owned or
operated Property and (ii) the present and, to the Borrower's knowledge, future liability, if any, of the Borrower and the Guarantors which could reasonably be expected to arise in connection
with requirements under Environmental Laws will not result in a Material Adverse Change. 

        Section 4.16    Permits, Licenses, Etc.    The Borrower and the Guarantors, or to the extent that the right of
operation is vested in others, such operators on behalf of the Borrower and the Guarantors, possess all authorizations, Permits, licenses, patents, patent rights or licenses, trademarks, trademark
rights, trade name rights and copyrights which are material to the conduct of their business. The Borrower and the Guarantors, or to the extent that the right of operation is vested in others, such
operators on behalf of the Borrower and the Guarantors, manage and operate their business in all material respects in accordance with all applicable Legal Requirements and good industry practices. 

        Section 4.17    Gas Contracts.    Other than as set forth in Schedule 4.17, neither the Borrower nor any
of the Guarantors, as of the date hereof and as of the Closing Date: (a) is obligated in any material respect by virtue of any prepayment made under any contract containing a
"take-or-pay" or "prepayment" provision or under any similar agreement to deliver hydrocarbons produced from or allocated to any of the Borrower's and its Subsidiaries' Oil and
Gas Properties at some future date without receiving full payment therefor at the time of delivery, or (b) has produced gas, in any material amount, subject to, and none of the Borrower's and
the Guarantors' Oil and Gas Properties is subject to, balancing rights of third parties or subject to balancing duties under governmental requirements, in each case other than in the ordinary course
of business and which prepayments and balancing rights, in the aggregate, do not result in the Borrower or any Guarantor having net aggregate liability at any time in excess of an amount equal to 1%
of the Proven Reserves categorized as "proved, developed and producing" on the most recently delivered Engineering Report. 

        Section 4.18    Liens; Titles, Leases, Etc.    None of the Property of the Borrower or any of the Guarantors is
subject to any Lien other than Permitted Liens or Liens to be released on the Closing Date. On the Closing Date, all governmental actions and all other filings, recordings, registrations, third party
consents and other actions which are necessary to create and perfect the Liens provided for in the Security Instruments will have been made, obtained and taken in all relevant jurisdictions. All
Leases and agreements for the conduct of business of the Borrower and the Guarantors are valid and subsisting, in full force and effect and there exists no default or event of default or circumstance
which with the giving of notice or lapse of time or both would give rise to a default under any such Leases or agreements which could reasonably be expected to cause a Material Adverse Change. Neither
the 

36

 

Borrower
nor any of the Guarantors is a party to any agreement or arrangement (other than this Agreement and the Security Instruments), or subject to any order, judgment, writ or decree, which either
restricts or purports to restrict its ability to grant Liens to secure the Obligations against their respective assets or Properties. 

        Section 4.19    Solvency and Insurance.    Before and after giving effect to the making of the Advances and
after giving effect to the Closing Date Acquisition, each of the Borrower and its Subsidiaries is Solvent. Additionally, each of the Borrower and its Subsidiaries carry insurance required under
Section 5.02. 

        Section 4.20    Hydrocarbon Hedge Agreements.    The Hydrocarbon Hedge Agreements in effect on the Closing Date
meet the minimum volume and minimum pricing requirements set forth in Section 3.01(p). 

        Section 4.21    Material Agreements.    Schedule 4.21 sets forth a complete and correct list of all
material agreements, leases, indentures, purchase agreements, obligations in respect of letters of credit, guarantees, joint venture agreements, and other instruments in effect or to be in effect as
of the date hereof and as of the Closing Date (other than (a) the Hydrocarbon Hedge Agreements and (b) the Closing Date Acquisition Instruments and any material agreements or instruments
disclosed therein) providing for, evidencing, securing or otherwise relating to any Debt of the Borrower or any of the Guarantors, and all obligations of the Borrower or any of the Guarantors to
issuers of surety or appeal bonds issued for account of the Borrower or any such Guarantor, and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to
the Debt or lease obligations outstanding or to be outstanding and the Property subject to any Lien securing such Debt or lease obligation. Also set forth on Schedule 4.21 is a complete and
correct list of all material agreements and other instruments of the Borrower and the Guarantors relating to the purchase, transportation by pipeline, gas processing, marketing, sale and supply of
natural gas and other Hydrocarbons. Except as detailed otherwise in Schedule 4.21, the Borrower has heretofore delivered to the Administrative Agent and the Lenders a complete and correct copy
of all such material credit agreements, indentures, purchase agreements, contracts, letters of credit, guarantees, joint venture agreements, or other instruments, including any modifications or
supplements thereto, as in effect on the date hereof and as of the Closing Date. 

ARTICLE V

AFFIRMATIVE COVENANTS  

        So long as any Obligation shall remain outstanding, or any Lender shall have any Commitment hereunder, the Borrower agrees, unless the Required Lenders shall
otherwise consent in writing, to comply with the following covenants: 

        Section 5.01    Compliance with Laws, Etc.    The Borrower shall comply, and cause each of its Subsidiaries to
comply, in all material respects with all Legal Requirements. Without limiting the generality and coverage of the foregoing, the Borrower shall comply, and shall cause each of its Subsidiaries to
comply, in all material respects, with all Environmental Laws and all laws, regulations, or directives with respect to equal employment opportunity and employee safety in all jurisdictions in which
the Borrower, or any of its Subsidiaries do business; provided, however, that this Section 5.01 shall not prevent the Borrower or any of its
Subsidiaries from, in good faith and with reasonable diligence, contesting the validity or application of any such laws or regulations by appropriate legal proceedings. Without limitation of the
foregoing, the Borrower shall, and shall cause each of its Subsidiaries to, (a) maintain and possess all authorizations, Permits, licenses, trademarks, trade names, rights and copyrights which
are material to the conduct of its business and (b) obtain, as soon as practicable, all consents or approvals required from the United States or any states of the United 

37

 

States
(or other Governmental Authorities) necessary to grant the Administrative Agent an Acceptable Security Interest in the Borrower's and its Subsidiaries' Oil and Gas Properties. 

        Section 5.02    Maintenance of Insurance.    

        (a)   The
Borrower shall, and shall cause each of its Subsidiaries to, procure and maintain or shall cause to be procured and maintained continuously in effect policies of
insurance in form and amounts and issued by companies, associations or organizations reasonably satisfactory to the Administrative Agent covering such casualties, risks, perils, liabilities and other
hazards reasonably required by the Administrative Agent, including business interruption insurance. In addition, the Borrower shall, and shall cause each of its Subsidiaries to, comply with all
requirements regarding insurance contained in the Security Instruments. 

        (b)   All
certified copies of policies or certificates thereof, and endorsements and renewals thereof shall be delivered to and retained by the Administrative Agent. Unless
the Senior Credit Agreement requires otherwise, the policies of insurance shall either have attached thereto a lender's loss payable endorsement for the benefit of the Administrative Agent, as loss
payee in form reasonably satisfactory to the Administrative Agent or shall name the Administrative Agent as an additional insured, as applicable. The Borrower shall furnish the Administrative Agent
with a certificate of insurance or a certified copy of all policies of insurance required. Unless the Senior Credit Agreement requires otherwise, all policies or certificates of insurance shall set
forth the coverage, the limits of liability, the name of the carrier, the policy number, and the period of coverage. Unless the Senior Credit Agreement requires otherwise, all policies of insurance
required under the terms hereof shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act of
negligence of the Borrower, or a Subsidiary or any party holding under the Borrower or a Subsidiary which might otherwise result in a forfeiture of the insurance and the further agreement of the
insurer waiving all rights of setoff, counterclaim or deductions against the Borrower and its Subsidiaries. Without limiting the generality of the foregoing provisions, unless the Senior Credit
Agreement requires otherwise, Administrative Agent will be named as an additional insured and will be provided a waiver of subrogation on the Borrower's general liability and umbrella policies. Unless
the Senior Credit Agreement requires otherwise, all such policies shall contain a provision that notwithstanding any contrary agreements between the Borrower, its Subsidiaries, and the applicable
insurance company, such policies will not be canceled, allowed to lapse without renewal, surrendered or amended (which provision shall include any reduction in the scope or limits of coverage) without
at least 30 days' prior written notice to the Administrative Agent unless such is cancelled for non-payment of premium and then the Administrative Agent will be given 10 days
notice of cancellation. In the event that, notwithstanding the "lender's loss payable endorsement" requirement of this Section 5.02, the proceeds of any insurance policy described above are
paid to the Borrower or a Subsidiary and any Obligations are outstanding and the Senior Debt has been indefeasibly paid in full, the Borrower shall deliver such proceeds to the Administrative Agent
immediately upon receipt. 

        Section 5.03    Preservation of Existence, Etc.    The Borrower shall preserve and maintain, and cause each of
its Subsidiaries to preserve and maintain, its partnership, corporate or limited liability company, as applicable, existence, rights, franchises, and privileges in the jurisdiction of its formation,
and qualify and remain qualified, and cause each such Subsidiary to qualify and remain qualified, as a foreign entity in each jurisdiction in which qualification is necessary or desirable in view of
its business and operations or the ownership of its Properties, and, in each case, where failure to qualify or preserve and maintain its rights and franchises could reasonably be expected to cause a
Material Adverse Change. 

        Section 5.04    Payment of Taxes, Etc.    The Borrower shall pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent, (a) all taxes, assessments, 

38

 

and
governmental charges or levies imposed upon it or upon its income or profits or Property that are material in amount, prior to the date on which penalties attach thereto and (b) all lawful
claims that are material in amount which, if unpaid, might by law become a Lien upon its Property; provided, however, that neither the Borrower nor any
such Subsidiary shall be required to pay or discharge any such tax, assessment, charge, levy, or claim which is being contested in good faith and by appropriate proceedings, and with respect to which
reserves in conformity with GAAP have been provided. 

        Section 5.05    Visitation Rights.    At any reasonable time and from time to time, upon reasonable notice, the
Borrower shall, and shall cause its Subsidiaries to, permit the Administrative Agent and any Lender or any of their respective agents or representatives thereof, to (a) examine and make copies
of and abstracts from the records and books of account of, and visit and inspect at their reasonable discretion the Properties of, the Borrower and any such Subsidiary, and (b) discuss the
affairs, finances and accounts of the Borrower and any such Subsidiary with any of their respective officers or directors. 

        Section 5.06    Reporting Requirements.    The Borrower shall furnish to the Administrative Agent and each
Lender (unless otherwise provided below): 

        (a)    Annual Financials.    As soon as available and in any event not later than 120 days after the end of
each fiscal year (commencing with fiscal year ending December 31, 2007) of the Borrower and its consolidated Subsidiaries (or such later date authorized by the SEC, if applicable; provided
that, the Borrower shall have delivered proper and timely notices of late filings filed with the SEC and also delivered such to the Administrative Agent and such later date may not be a date later
than 120 days after the end of such fiscal year): (i) the Form 10-K filed with the SEC for such fiscal year end, if any (ii) to the extent not otherwise
provided in such Form 10-K, a copy of the annual audit report for such year for the Borrower and such consolidated Subsidiaries, including therein the Borrower's and such
consolidated Subsidiaries' balance sheets as of the end of such fiscal year and the Borrower's and such consolidated Subsidiaries' statements of income, cash flows, and retained earnings, in each case
certified by independent certified public accountants of national standing reasonably acceptable to the Administrative Agent and including any management letters delivered by such accountants to the
Borrower or any Subsidiary in connection with such audit; provided that, with respect to the fiscal year ending December 31, 2007 only, the requirements of this clause (ii) with respect
to such fiscal year shall be satisfied by delivering (A) the annual audit report of APC and the related financial information described in this clause (ii) with respect to APC instead of
the Borrower, and (B) unaudited financial statements of the type described in this clause (ii) with respect to the Borrower for such period, (iii) a certificate of such accounting
firm to the Administrative Agent and the Lenders stating that, in the course of the regular audit of the business of the Borrower and its consolidated Subsidiaries (or APC, if applicable), if any,
which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is
continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, and (iv) a Compliance Certificate executed by a
Responsible Officer of the Borrower; 

        (b)    Quarterly Financials.    As soon as available and in any event not later than 60 days after the end of
each of the first three fiscal quarters of each fiscal year (commencing with fiscal quarter ending March 31, 2008) of the Borrower and its consolidated Subsidiaries (or such later date
authorized by the SEC, if applicable; provided that the Borrower shall have delivered proper and timely notices of late filings filed with the SEC and
also delivered such to the Administrative Agent and such later date may not be a date later than 90 days after the end of such fiscal quarter): (i) the Form 10-Q filed
with the SEC for such fiscal quarter end, if any, (ii) to the extent not otherwise provided in such Form 10-Q, unaudited balance sheet and the unaudited statements of income,
cash flows, and retained earnings of each such Person for the period commencing at the end of the previous year and ending with the end of such fiscal quarter, all in reasonable detail and duly
certified with respect to such consolidated statements (subject to the absence of footnotes and to year-end audit adjustments) by a Responsible Officer of the Borrower as having been
prepared in accordance with GAAP; and (iii) a Compliance Certificate executed by a Responsible Officer of the Borrower; 

39

 

        (c)    Oil and Gas Reserve Reports.    

          (i)  As
soon as available but in any event on or before February 28th (or 29th, as applicable) of each year, an Independent
Engineering Report dated effective as of the immediately preceding December 31; provided that the Independent Engineering Report due on
February 29, 2008 shall be comprised of (A) an Independent Engineering Report dated effective as of December 31, 2007 and delivered on or before February 29, 2008, covering
all of the Oil and Gas Properties owned by the Borrower or any of its Subsidiaries (other than those Oil and Gas Properties acquired pursuant to the Closing Date Acquisition), and (B) an
Independent Engineering Report dated effective as of a date on or before March 31, 2008 and delivered on or before April 30, 2008, covering all of the Oil and Gas Properties acquired by
the Borrower or any of its Subsidiaries pursuant to the Closing Date Acquisition, in each case, together with such other information as may be reasonably requested by any Lender with respect to the
Oil and Gas Properties included or to be included in the Borrowing Base; 

         (ii)  shall
be delivered in accordance with Section 2.02(b)(i) hereof; 

        (iii)  As
soon as available but in any event on or before August 31st of each year, an Internal Engineering Report dated effective as of the
immediately preceding June 30; 

        (iv)  Such
other information as may be reasonably requested by the Administrative Agent or any Lender with respect to the Oil and Gas Properties included or to be included in
the Borrowing Base; 

         (v)  With
the delivery of each Engineering Report, a certificate from a Responsible Officer of the Borrower certifying that, to the best of his knowledge and in all material
respects: (a) (i) the factual information contained in the Engineering Report and any other information delivered in connection therewith is true and correct in all material respects, and
(ii) all estimates and projections contained in the Engineering Report and any other information delivered in connection therewith was prepared on the basis of assumptions, data, information,
tests, or conditions believed to be reasonable at the time such Engineering Report or other information was delivered, (b) the Borrower or its Subsidiary, as applicable, owns good and
defensible title to the Oil and Gas Properties evaluated in such Engineering Report, and such Properties are subject to an Acceptable Security Interest to the extent required herein and are free of
all Liens except for Permitted Liens, (c) 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 with respect to its
Oil and Gas Properties evaluated in such Engineering Report which would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (d) none of its Oil and Gas Properties have been sold since the date of the last Borrowing Base determination under the Senior
Credit Agreement 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 Required
Lenders, (e) attached to the certificate is a list of its Oil and Gas Properties added to and deleted from the immediately prior Engineering Report and a list showing any change in working
interest or net revenue interest in its Oil and Gas Properties occurring and the reason for such change, (f) attached to the certificate is a list of all Persons disbursing proceeds to the
Borrower or to its Subsidiary, as applicable, from its Oil and Gas Properties, (g) except as set forth on a schedule attached to the certificate, 90% of the PV-10 of the Proven
Reserves evaluated by such Engineering Report are pledged as Collateral for the Obligations and attached to the certificate is a schedule detailing compliance with Section 5.08, and
(h) attached to the certificate is a monthly cash flow budget for the 12 months following the delivery of such certificate setting forth the Borrower's projections for production
volumes, revenues, expenses, taxes and budgeted capital expenditures during such period; 

40

 

  
        (d)    Production Reports.    As soon as available and in any event within 60 days after the end of each
fiscal
quarter, commencing with the fiscal quarter ending December 31, 2007, a report certified by a Responsible Officer of the Borrower in form and substance satisfactory to the Administrative Agent
prepared by the Borrower covering each of the Oil and Gas Properties of the Borrower and its Subsidiaries and detailing quarterly on a field by field basis (i) the production, revenue, and
price information and associated operating expenses for each such quarter, (ii) any changes to any producing reservoir, production equipment, or producing well during each such quarter, which
changes could cause a Material Adverse Change, and (iii) any sales of the Borrower's or any Subsidiaries' Oil and Gas Properties during each such quarter; 

        (e)    Defaults.    As soon as practicable and in any event within five days after (i) the occurrence of any
Default or (ii) the occurrence of any default under any instrument or document evidencing Debt of the Borrower or any Subsidiary, in each case known to any officer of the Borrower or any of its
Subsidiaries which is continuing on the date of such statement, a statement of a Responsible Officer of the Borrower setting forth the details of such Default or default, as applicable, and the
actions which the Borrower or such Subsidiary has taken and proposes to take with respect thereto; 

        (f)    Quarterly Hedging Reports.    Within 60 days after the end of each calendar quarter end, a statement
prepared by Borrower and certified as being true and correct in all material respects by a Responsible Officer of the Borrower, (i) setting forth in reasonable detail all Hydrocarbon Hedge
Agreements to which any production of oil, gas or other Hydrocarbons from the Oil and Gas Properties of the Borrower and its Subsidiaries is then subject, together with a statement of Borrower's
position with respect to each such Hydrocarbon Hedge Agreement, provided, however, if the price of any of the oil, gas or other Hydrocarbons produced
from such Oil and Gas Properties is subject to a Hydrocarbon Hedge Agreement, then Borrower shall promptly notify the Administrative Agent and the Lenders if such Hydrocarbon Hedge Agreement is
terminated, modified, amended or altered prior to the end of its contractual term, or if there is an amendment, adjustment or modification of the price of any of the oil, gas or other Hydrocarbons
produced from such Oil and Gas Properties that is subject to or established by a Hydrocarbon Hedge Agreement, and (ii) demonstrating the Borrower's compliance with Section 5.12 hereof. 

        (g)    Termination Events.    As soon as practicable and in any event (i) within 30 days after
(A) the Borrower knows or has reason to know that any Termination Event described in clause (a) of the definition of Termination Event with respect to any Plan has occurred, or
(B) the Borrower acquires knowledge that any member of the Controlled Group knows that any Termination Event described in clause (a) of the definition of Termination Event with respect
to any Plan has occurred, and (ii) within 10 days after (A) the Borrower knows or has reason to know that any other Termination Event with respect to any Plan has occurred, or
(B) the Borrower acquires knowledge that any of its Affiliates knows that any
other Termination Event with respect to any Plan has occurred, a statement of a Responsible Officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such
Affiliate proposes to take with respect thereto; 

        (h)    Termination of Plans.    Promptly and in any event within two Business Days after (i) receipt thereof by
the Borrower from the PBGC, or (ii) the Borrower acquires knowledge of any Controlled Group member's receipt thereof from the PBGC, copies of each notice received by the Borrower or any such
member of the Controlled Group of the PBGC's intention to terminate any Plan or to have a trustee appointed to administer any Plan; 

        (i)    Other ERISA Notices.    Promptly and in any event within five Business Days after (i) receipt thereof by
the Borrower from a Multiemployer Plan sponsor, or (ii) the Borrower acquires knowledge of any Controlled Group member's receipt thereof from a Multiemployer Plan sponsor, a copy of each notice
received by the Borrower or any member of the Controlled Group concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA; 

41

 

        (j)    Environmental Notices.    Promptly upon the receipt thereof by the Borrower or any of its Subsidiaries, a copy
of any form of request, notice, summons or citation received from the Environmental Protection Agency, or any other Governmental Authority, concerning (i) violations or alleged violations of
Environmental Laws, which seeks to impose liability therefor and could cause a Material Adverse Change, (ii) any action or omission on the part of the Borrower or any Subsidiary or any of their
former Subsidiaries in connection with Hazardous Waste or Hazardous Substances which could reasonably result in the imposition of liability therefor that could cause a Material Adverse Change,
including any information request related to, or notice of, potential responsibility under CERCLA, or (iii) concerning the filing of a Lien upon, against or in connection with the Borrower or
any Subsidiary or their former Subsidiaries, or any of their leased or owned Property, wherever located; 

        (k)    Other Governmental Notices.    Promptly and in any event within five Business Days after receipt thereof by the
Borrower or any Subsidiary, a copy of any notice, summons, citation, or proceeding seeking to modify in any material respect, revoke, or suspend any material contract, license, permit or agreement
with any Governmental Authority; 

        (l)    Material Changes.    Prompt written notice of any condition or event of which the Borrower has knowledge, which
condition or event has resulted or may reasonably be expected to result in (i) a Material Adverse Change (other than global changes in the Oil and Gas Business or the world economy generally)
or (ii) a breach of or noncompliance with any material term, condition, or covenant of any material contract to which the Borrower or any of its Subsidiaries is a party or by which they or
their Properties may be bound; 

        (m)    Disputes, Etc.    Prompt written notice of (i) any claims, legal or arbitration proceedings, proceedings
before any Governmental Authority, or disputes, or to the knowledge of the Borrower threatened, or affecting the Borrower, or any of its Subsidiaries which, if adversely determined, could reasonably
be expected to cause a Material Adverse Change, or any material labor controversy of which the Borrower or any of its Subsidiaries has knowledge resulting in or reasonably considered to be likely to
result in a strike against the Borrower or any of its Subsidiaries and (ii) any claim, judgment, Lien or other encumbrance (other than a Permitted Lien) affecting any Property of the Borrower
or any Subsidiary if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $1,000,000; 

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

        (o)    Notices Under Other Loan Agreements.    Promptly after the furnishing thereof, copies of any statement, report
or notice furnished to any Person pursuant to the terms of any 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 5.06; 

        (p)    SEC Filings.    Promptly after the sending or filing thereof, copies of all proxy material, reports and other
information which the Borrower or any of its Subsidiaries sends to or files with the SEC or sends to the limited partners of the Borrower or the holders of Equity Interests in any of its Subsidiaries;
and 

        (q)    Other Information.    Such other information respecting the business or Properties, or the condition or
operations, financial or otherwise, of the Borrower or any of its Subsidiaries, as any Lender through the Administrative Agent may from time to time reasonably request. 

42

 

        The
Administrative Agent agrees to provide the Lenders with copies of any material notices and information delivered solely to the Administrative Agent pursuant to the terms of this
Agreement. 

        Section 5.07    Maintenance of Property.    Subject to Section 6.04, the Borrower shall, and shall cause
each of its Subsidiaries to, maintain their owned, leased, or operated Property in good condition and repair, ordinary wear and tear excepted; and shall abstain, and cause each of its Subsidiaries to
abstain from, knowingly or willfully permitting the commission of waste or other injury, destruction, or loss of natural resources, or the occurrence of pollution, contamination, or any other
condition in, on or about the owned or operated Property involving the Environment that could reasonably be expected to result in Response activities and that could reasonably be expected to cause a
Material Adverse Change. 

        Section 5.08    Agreement to Pledge.    The Borrower shall, and shall cause each Subsidiary to, grant to the
Administrative Agent an Acceptable Security Interest in all personal Property of the Borrower or any Subsidiary now owned or hereafter acquired, and shall, and shall cause each Subsidiary to, grant to
the Administrative Agent an Acceptable Security Interest in at least 90% of the PV-10 of the Proven Reserves of the Borrower and its Subsidiaries based on its most recently delivered
Engineering Report. 

        Section 5.09    Use of Proceeds.    The Borrower shall use the proceeds of the Advances to fund the acquisition
of the Acquisition Assets from the Sellers pursuant to the Closing Date Acquisition Instruments. 

        Section 5.10    Title Opinions.    The Borrower shall from time to time after March 31, 2008, upon the
reasonable request of the Administrative Agent, take such actions and execute and deliver such documents and instruments as the Administrative Agent shall require to ensure that the Administrative
Agent shall, at all times, have received satisfactory title evidence (including, if requested, supplemental or new title opinions addressed to it) covering at least 80% of the PV-10 of the
Proven Reserves of the Borrower and its Subsidiaries as reasonably determined by the Administrative Agent and at least 80% of the PV-10 of the Proven Reserves which are categorized as
"proved, developed and producing", which title opinions shall be in form and substance acceptable to the Administrative Agent in its sole discretion and shall include opinions regarding the before
payout and after payout ownership interests held by the Borrower and the Borrower's Subsidiaries, for all wells located on the Oil and Gas Properties covered thereby as to the ownership of Oil and Gas
Properties of the Borrower and its Subsidiaries, and reflecting that the Administrative Agent has an Acceptable Security Interest in such Oil and Gas Properties of the Borrower and its Subsidiaries. 

        Section 5.11    Further Assurances; Cure of Title Defects.    The Borrower shall, and shall cause each
Subsidiary to, cure promptly any defects in the creation and issuance of the Notes and the execution and delivery of the Security Instruments and this Agreement. The Borrower hereby authorizes the
Lenders or the Administrative Agent to file any financing statements without the signature of the Borrower to the extent permitted by applicable Legal Requirements in order to perfect or maintain the
perfection of any security interest granted under any of the Loan Documents. The Borrower at its expense will, and will cause each Subsidiary to, promptly execute and deliver to the Administrative
Agent upon request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower or any Subsidiary, as the case may be, in the Security
Instruments and this Agreement, or to further evidence and more fully describe the collateral intended as security for the Obligations, or to correct any omissions in the Security Instruments, or to
state more fully the security obligations set out herein or in any of the Security Instruments, or to perfect, protect or preserve any Liens created pursuant to any of the Security Instruments, or to
make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith or to enable the Administrative Agent to exercise and enforce its rights
and remedies with respect to any Collateral. Within 30 days after (a) a request by the Administrative Agent or the Lenders to cure any title defects or exceptions which are not Permitted
Liens raised by such 

43

 

information
or (b) a notice by the Administrative Agent that the Borrower has failed to comply with Section 5.10, the Borrower shall (i) cure such title defects or exceptions
which are not Permitted Liens or substitute acceptable Oil and Gas Properties with no title defects or exceptions except for Permitted Liens covering Collateral of an equivalent value and
(ii) deliver to the Administrative Agent satisfactory title evidence (including supplemental or new title opinions meeting the foregoing requirements) in form and substance acceptable to the
Administrative Agent in its reasonable business judgment as to the Borrower's and its Subsidiaries' ownership of such Oil and Gas Properties and the Administrative Agent's Liens and security interests
therein as are required to maintain compliance with Section 5.10. 

        Section 5.12    Hedging Arrangements.    The Borrower shall maintain in effect all of the Hydrocarbon Hedge
Agreements required to be established on the Closing Date pursuant to Section 3.01(p). 

        Section 5.13    Deposit Accounts.    Unless the Senior Credit Agreement requires otherwise, the Borrower shall,
and shall cause each of its Subsidiaries to, maintain their principal operating accounts and other deposit accounts with the Administrative Agent or any Lender or any other bank that has executed an
account control agreement reasonably acceptable in form and substance to the Administrative Agent. 

        Section 5.14    Securities Offering.    Within nine months after the Closing Date, the Borrower
(a) shall have completed a private placement of equity or (b) shall have engaged one or more investment bank reasonably acceptable to the Administrative Agent to publicly sell or
privately place common equity securities, in each case, the net proceeds of which shall equal or exceed the amount of the Obligations and shall be available to repay the Obligations on or before the
Maturity Date ("Securities Offering"). Notwithstanding anything to the contrary contained herein, in the event of a failure by the Borrower to initiate a Securities Offering within nine months after
the Closing Date, the Borrower shall engage a financial institution reasonably acceptable to the Administrative Agent to pursue the issuance of Debt in an amount sufficient to repay in full in cash
the Obligations. 

        Section 5.15    Post-Closing Requirements.    On or prior to March 31, 2008, the Borrower
shall satisfy each of the requirements set forth in that certain Post-Closing Agreement, in each case to the satisfaction of the Administrative Agent as set forth therein. 

ARTICLE VI

NEGATIVE COVENANTS  

        So long as any Obligation shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower agrees, unless the Required Lenders shall
otherwise consent in writing, to comply with the following covenants: 

        Section 6.01    Liens, Etc.    The Borrower shall not create, assume, incur, or suffer to exist, or permit any
of its Subsidiaries to create, assume, incur, or suffer to exist, any Lien on or in respect of any of its Property whether now owned or hereafter acquired, or assign any right to receive income,
except that the Borrower and its Subsidiaries may create, incur, assume, or suffer to exist (all of which shall be referred to as "Permitted Liens"): 

        (a)   Liens
securing the Obligations; 

        (b)   Liens
securing the Senior Debt to the extent permitted under the Intercreditor Agreement; 

        (c)   purchase
money Liens or purchase money security interests upon or in any equipment acquired or held by the Borrower or any of its Subsidiaries in the ordinary course of
business prior to or at the time of the Borrower's or such Subsidiary's acquisition of such equipment; provided that the Debt secured by such Liens
(i) was incurred solely for the purpose of financing the acquisition of such equipment, and does not exceed the aggregate purchase price of such equipment, (ii) is secured only by 

44

 

such
equipment and not by any other assets of the Borrower and its Subsidiaries, and (iii) is not increased in amount; 

        (d)   Liens
for taxes, assessments, or other governmental charges or levies not yet due or that (provided foreclosure, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings, and such reserve as may be required by GAAP shall have been made therefor; 

        (e)   Liens
in favor of vendors, carriers, warehousemen, repairmen, mechanics, workmen, materialmen, suppliers, laborers, construction, or similar Liens arising by operation
of law in the ordinary course of business in respect of obligations that are not yet due or that are being contested in good faith by appropriate proceedings,  provided that such reserve as may be
required by GAAP shall have been made therefor; 

        (f)    Liens
to operators and non-operators under joint operating agreements arising in the ordinary course of the business of the Borrower or the relevant
Subsidiary to secure amounts owing, which amounts are not yet due or are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made
therefor; 

        (g)   royalties,
overriding royalties, net profits interests, production payments, reversionary interests, calls on production, preferential purchase rights and other burdens
on or deductions from the proceeds of production, that do not secure Debt for borrowed money and that are taken into account in computing the net revenue interests and working interests of the
Borrower or any of its Subsidiaries warranted in the Security Instruments; 

        (h)   Liens
arising in the ordinary course of business out of pledges or deposits under workers' compensation laws, unemployment insurance, old age pensions or other social
security or retirement benefits, or similar legislation or to secure public or statutory obligations of the Borrower; 

        (i)    Liens
arising under operating agreements, unitization and pooling agreements and orders, Farmout agreements, gas balancing agreements and other similar agreements, in
each case that are customary in the Oil and Gas Business and that are entered into in the ordinary course of business that are taken into account in computing the net revenue interests and working
interests of the Borrower or any of its Subsidiaries warranted in the Security Instruments, to the extent that any such Lien referred to in this clause does not materially impair the use of the
Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; 

        (j)    easements,
rights-of-way, and other similar encumbrances, and minor defects in the chain of title that are customarily accepted in the oil and
gas financing industry, none of which interfere with the ordinary conduct of the business of Borrower or any Subsidiary or materially detract from the value or use of the Property to which they apply; 

        (k)   Liens
in favor of landlords or lessors under operating leases or Capital Leases of a Loan Party; provided that (i) any such Lien shall secure only the obligations
of such Loan Party arising under the applicable operating lease or Capital Lease, and (ii) the Debt under such Capital Leases is permitted under Section 6.02 below; 

        (l)    Liens
on cash or securities pledged to secure performance of bids, tenders, performance bonds, surety and appeals bonds, or regulatory compliance or other obligations of
a like nature incurred in the ordinary course of business and not in connection with the borrowing of money; 

        (m)  Liens
in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of any of the Company Group
on deposit with or in possession of such bank; 

45

 

  
        (n)   Liens on cash and Liquid Investments securing the performance obligations of Borrower under any Hedge Contract (subject to the limitations set forth in
Section 6.14); 

        (o)   Liens
in favor of Persons financing unpaid insurance premiums so long as (i) such Liens are limited to insurance policies with respect to which such premiums are
financed, and (ii) the obligations secured by such Liens do not exceed $500,000 in the aggregate; 

        (p)   Subject
to paragraphs (d) and (e) of this Section 6.01, non-consensual statutory Liens on pipeline or pipeline facilities, Hydrocarbons
or Properties of the Company Group which arise out of operation of law and are not in connection with the borrowing of money; 

        (q)   Liens
described in Schedule 4.05; and 

        (r)   Liens
resulting from any judgment or award that is not a Default or Event of Default. 

        Section 6.02    Debts, Guaranties, and Other Obligations.    The Borrower shall not, and shall not permit any
of its Subsidiaries to, create, assume, suffer to exist, or in any manner become or be liable in respect of, any Debt except: 

        (a)   Debt
of the Borrower and its Subsidiaries under the Loan Documents; 

        (b)   Debt
of the Borrower and its Subsidiaries under the Senior Loan Documents; 

        (c)   Debt
not otherwise permitted by this Section 6.02 and listed on Schedule 4.05; provided that the amount of
such Debt may not be increased; 

        (d)   Debt
in the form of obligations for the deferred purchase price of Property or services incurred in the ordinary course of business which are not yet due and payable or
are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been established; 

        (e)   Debt
secured by the Liens permitted under paragraph (c) of Section 6.01; provided that, the sum of such Debt and other unsecured Debt permitted under
paragraph 6.02(k) does not exceed $250,000 at any time; 

        (f)    Debt
under Hydrocarbon Hedge Agreements or Interest Hedge Agreements which are not prohibited by the terms of Section 6.14; 

        (g)   Debt
consisting of sureties or bonds provided to any Governmental Authority or other Person and assuring payment of contingent liabilities of the Borrower in connection
with the operation of the Oil and Gas Properties, including with respect to plugging, facility removal and abandonment of its Oil and Gas Properties; 

        (h)   Intercompany
Debt; 

        (i)    Debt
constituting letters of credit for the account of any member of the Company Group provided as security (i) for any matter which is a Lien permitted under
paragraphs (e), (l), (n) or (o) or Section 6.01; provided that the amount of such Debt shall not exceed the obligations secured by such Lien, and (ii) to secure
payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; 

        (j)    Debt
arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course
of business if extinguished within two (2) Business Days of incurrence and does not exceed $50,000; and 

        (k)   Debt
not otherwise permitted under this Section 6.02, provided that (i) such Debt is not secured by any
Lien, and (ii) the aggregate of amount of such Debt plus the aggregate amount of Debt permitted under Section 6.02(e) shall not to exceed $250,000 at any time. 

46

 

        Section 6.03    Agreements Restricting Liens and Distributions.    The Borrower shall not, nor shall it permit
any of its Subsidiaries to, create, incur, assume or permit to exist any contract, agreement or understanding (other than this Agreement, the Security Instruments and the Senior Loan Documents) which
in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property, whether now owned or hereafter acquired, to secure the Obligations or restricts
any Subsidiary from paying dividends to the Borrower, or which requires the consent of or notice to other Persons in connection therewith. 

        Section 6.04    Merger or Consolidation; Asset Sales.    

        (a)   The
Borrower shall not, nor shall it permit any of its Subsidiaries to merge or consolidate with or into any other Person other than the merger or consolidation of a
Loan Party with and into the Borrower or another Loan Party. 

        (b)   The
Borrower shall not, nor shall it permit any of its Subsidiaries to enter into or effect a Disposition of any of its Properties other than: (i) the sale of
Hydrocarbons in the ordinary course of business, (ii) the Disposition of equipment that is (A) obsolete, worn out, depleted or uneconomic and disposed of in the ordinary course of
business, (B) no longer necessary for the business of such Person or (C) contemporaneously replaced by equipment of at least comparable use, (iii) Farmouts of undeveloped acreage
and assignments in connection with such Farmouts, (iv) Dispositions of Oil and Gas Properties or any interest therein or Subsidiaries owning Oil and Gas Properties  provided that (A) 100% of
the consideration received in respect of such Disposition shall be cash, (B) the consideration received in
respect of such Disposition shall be equal to or greater than the fair market value of the Oil and Gas Property, interest therein or Subsidiary subject of such Disposition (as reasonably determined by
the board of managers or the equivalent governing body of the General Partner and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the
Borrower certifying to that effect), and (C) if any such Disposition is of a Subsidiary owning Oil and Gas Properties, such Disposition shall include all the Equity Interests of such
Subsidiary; (v) the sale, release, surrender (in accordance with the terms of the applicable lease) or other disposition of leasehold interests in any Oil and Gas Property to which no Proven
Reserves are attributed,(vi) Dispositions of Properties between and among Loan Parties, and (vii) any Disposition of Properties not otherwise regulated by Section 6.04(b) and having a
fair market value not to exceed $250,000 during any 12-month period. 

        (c)    Restricted Payments.    The Borrower shall not, nor shall it permit any of its Subsidiaries to, make any
Restricted Payments. 

        Section 6.05    Investments.    The Borrower shall not, nor shall it permit any of its Subsidiaries to, make or
permit to exist any loans, advances, or capital contributions to, or make any investment in (including the making of any Acquisition), or purchase or commit to purchase any stock or other securities
or evidences of indebtedness of or interests in any Person, except: 

        (a)   Liquid
Investments; 

        (b)   trade
and customer accounts receivable which are for goods furnished or services rendered in the ordinary course of business and are payable in accordance with customary
trade terms; 

        (c)   creation
of any additional Subsidiaries in compliance with Section 6.15; 

        (d)   investments
in negotiable instruments for collection in the ordinary course of business; 

        (e)   investments
made in the ordinary course of business and of a nature that is customary in the Oil and Gas Business as a means of actively exploiting, exploring for,
acquiring, developing, processing, gathering, marketing or transporting oil and gas through agreements, transactions, interests or arrangements which provide for the sharing of risks or costs or
satisfy other objectives of the Oil and Gas Business, jointly with third parties, including entering into operating agreements, working interests, 

47

 

royalty
interests, mineral leases, processing agreements, Farmouts, farm-in agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas,
unitization and pooling declarations and agreements and area of mutual interest agreements, production sharing agreements or other similar or customary agreement, transactions, properties, interest
and investments and expenditures in connection therewith; provided that (i) no such investments includes an investment in any Equity Interest in a Person, (ii) any Debt incurred or Lien
granted or permitted to exist pursuant to such Investments is otherwise permitted under Section 6.01 and Section 6.02, respectively, and (iii) such investments are taken into
account in computing the net revenue interests and working interests of the Borrower or any of its Subsidiaries warranted in the Security Instruments; 

        (f)    Hedge
Contracts to the extent permitted by Sections 6.02 and 6.14; 

        (g)   Investments
in Intercompany Debt; and 

        (h)   Investments
not otherwise permitted under this Section 6.06 in an aggregate amount not to exceed $500,000. 

        Section 6.06    Affiliate Transactions.    Other than as set forth on Schedule 6.07, the Borrower shall
not, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of transactions (including the purchase, sale, lease or exchange of
Property, the making of any investment, the giving of any guaranty, the assumption of any obligation or the rendering of any service) with any of their Affiliates unless such transaction or series of
transactions is on terms no less favorable to the Borrower or the Subsidiary, as applicable, than those that could be obtained in a comparable arm's length transaction with a Person that is not such
an Affiliate. 

        Section 6.07    Compliance with ERISA.    The Borrower shall not, nor shall it permit any of its Subsidiaries
to, directly or indirectly, (a) engage in, or permit any Subsidiary or ERISA Affiliate to engage in, any transaction in connection with which the Borrower, any Subsidiary or any ERISA Affiliate
could be subjected to either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code, in either
case, in excess of $1,000,000; (b) terminate, or permit any Subsidiary or ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could
result in any liability to the Borrower, any Subsidiary or any ERISA Affiliate to the PBGC in excess of $1,000,000; (c) fail to make, or permit any Subsidiary or 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 Legal Requirement, the Borrower, a Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto; (d) permit to exist, or allow any Subsidiary or ERISA Affiliate to permit to exist, any accumulated funding deficiency (or unpaid minimum required
contribution for plan years after December 31, 2007) within the meaning of Section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan;
(e) permit, or allow any Subsidiary or ERISA Affiliate to permit, the actuarial present value of the benefit liabilities (as "actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA) under any Plan maintained by the Borrower, any Subsidiary or any ERISA Affiliate which is regulated under Title IV of ERISA to exceed the current
value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities by more than $1,000,000; (f) contribute to or
assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan in excess of $1,000,000;
(g) acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to the Borrower, any Subsidiary
or any ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to,
(1) any Multiemployer Plan under which any Subsidiary or ERISA Affiliate would have an obligation to contribute more than $1,000,000, or (2) any other Plan that is subject to Title IV of
ERISA under which the actuarial present value of the benefit liabilities 

48

 

under
such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities by more than
$1,000,000; (h) incur, or permit any Subsidiary or ERISA Affiliate to incur, a liability to or on account of a Plan under section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA;
(i) contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any employee welfare benefit
plan, as defined in section 3(1) of ERISA, including any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole
discretion at any time without any material liability; (j) amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the
Borrower, any Subsidiary or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29) of the Code; or (k) permit to exist any occurrence of any Reportable
Event (as defined in Title IV of ERISA), or any other event or condition, which presents a material (in the opinion of the Required Lenders) risk of such a termination by the PBGC of any Plan. 

        Section 6.08    Sale-and-Leaseback.    The Borrower shall not, nor shall it permit any
of its Subsidiaries to, sell or transfer to a Person any Property (other than with respect to Property that is permitted to be sold or transferred pursuant to Section 6.04), whether now owned
or hereafter acquired, if at the time or thereafter the Borrower or a Subsidiary shall lease as lessee such Property or any part thereof or other Property which the Borrower or a Subsidiary intends to
use for substantially the same purpose as the Property sold or transferred. 

        Section 6.09    Change of Business.    The Borrower shall not, nor shall it permit any of its Subsidiaries to,
make any material change in the character of its business as an independent oil and gas exploration and production company, nor will the Borrower or any Subsidiary operate or carry on business in any
jurisdiction other than the United States or Canada. 

        Section 6.10    Organizational Documents, Name Change.    The Borrower shall not, nor shall it permit any of
its Subsidiaries to, amend, supplement, modify or restate their articles or certificate of incorporation, bylaws, limited liability company agreements, or other equivalent organizational documents or
amend its name or change its jurisdiction of incorporation, organization or formation, in any case, without prior written notice to, and prior consent of, the Administrative Agent. 

        Section 6.11    Use of Proceeds.    The Borrower will not permit the proceeds of any Advance to be used for any
purpose other than those permitted by Section 5.09. The Borrower will not engage in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning
of Regulation U). Neither the Borrower nor any Person acting on behalf of the Borrower has taken or shall take, nor permit any of the Borrower's Subsidiaries to take any action which might
cause any of the Loan Documents to violate Regulation T, U or X or any other regulation of the Board of Governors of the Federal Reserve System 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, including the use of the proceeds of any Advance to purchase or
carry any margin stock in violation of Regulation T, U or X. 

        Section 6.12    Gas Imbalances, Take-or-Pay or Other Prepayments.    The Borrower shall
not, nor shall it permit any of its Subsidiaries to, allow Gas Imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower or any
Subsidiary which would require the Borrower or any Subsidiary to deliver their respective Hydrocarbons produced on a monthly basis from such Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor other than Gas Imbalances, take-or-pay or other prepayments incurred in the ordinary course of business and which Gas Imbalances,
take-or-pay, or other prepayments and balancing rights, in the aggregate, do not result in the Borrower or any Guarantor having net aggregate liability at any time in excess of
an amount equal to 1% of the Proven Reserves that are categorized as "proved, developed and producing" on the most recently delivered Engineering Report. 

49

 

  
        Section 6.13    Limitation on Hedging.    The Borrower shall not, nor shall it permit any of its Subsidiaries
to: 

        (a)   purchase,
assume, or hold a speculative position in any commodities market or futures market or enter into any Hedge Contract for speculative purposes; 

        (b)   be
party to or otherwise enter into any Hydrocarbon Hedge Agreement, Interest Hedge Agreement or any other Hedge Contract which (i) is entered into for reasons
other than as a part of its normal business operations as a risk management strategy and/or hedge against changes resulting from market conditions related to the Borrower's operations,
(ii) fixes a price for a term of more than 5 years, (iii) that covers notional volumes in excess of the greater of (A) 90% of the anticipated production volumes of crude
oil and natural gas, calculated separately, attributable to Proven Reserves categorized as "proved, developing and producing" of such Loan Party during the period such hedge arrangement is in effect
as shown on the most recently delivered Independent Engineering Report (or such separate or supplemental reserve data or other information acceptable to the Administrative Agent in its sole
discretion) and (B) 85% of the anticipated production volumes of crude oil and natural gas, calculated separately, attributable to the total Proven Reserves of such Loan Party during the period
such hedge arrangement is in effect as shown on the most recently delivered Independent Engineering Report (or such separate or supplemental reserve data or other information acceptable to the
Administrative Agent in its sole discretion), (iv) except for (A) the Collateral under the Security Instruments with respect to Lender Hedging Obligations, (B) the Senior
Collateral under the Senior Security Instruments with respect to Senior Lender Hedging Obligations, and (C) letters of credit up to $500,000 in the aggregate with respect to Hedge Contracts
entered into from time to time with a counterparty that is not a Lender or a Senior Lender or an Affiliate of a Lender or a Senior Lender, requires such Loan Party to put up money, assets, or other
security against the event of its nonperformance prior to actual default by such Loan Party in performing its obligations thereunder, or (iv) is with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is a Senior Lender or one of its Affiliates) at the time the contract is made has long-term obligations rated less than
A- or A3, respectively, by Standard & Poor's Ratings Group or Moody's Investors Service, Inc; or 

        (c)   allow
the aggregate monthly production of crude oil and natural gas, calculated separately (determined, in the case of contracts that are not settled on a monthly basis,
by a monthly proration reasonably acceptable to Administrative Agent), for any single month during the period such hedge arrangements are in effect to be less than the aggregate notional volumes
covered by any Hydrocarbon Hedge Agreements, Interest Hedge Agreements or similar hedge arrangements; provided that if such production deficiency is the
result of a force majeure event, such production deficiency shall not constitute a breach hereunder unless such production deficiency shall be continuing for a period of more than three months. 

        Section 6.14    Additional Subsidiaries.    The Borrower shall not, nor shall it permit any of its Subsidiaries
to, create or acquire any additional Subsidiaries without (a) prior written notice to the Administrative Agent and the Required Lenders, (b) such new Subsidiary executing and delivering
to the Administrative Agent, at its request, a Guaranty, a Pledge Agreement (if applicable), a Security Agreement and a Mortgage (if applicable), and such other Security Instruments as the
Administrative Agent or the Required Lenders may reasonably request, (c) the equity holder of such Subsidiary executing and delivering to the Administrative Agent a Pledge Agreement pledging
100% of the Equity Interest owned by such equity holder of such Subsidiary along with the certificates pledged thereby, if any, and appropriately executed stock powers in blank, if applicable, and
(d) the delivery by the Borrower and such Subsidiary of any certificates, opinions of counsel, title opinions or other documents as the Administrative Agent may reasonably request relating to
such Subsidiary. 

50

 

        Section 6.15    Account Payables.    The Borrower shall not, nor shall it permit any of its Subsidiaries to,
allow any of its trade payables or other accounts payable to be outstanding for more than 90 days beyond the date when due (except in cases where any such trade payable is being disputed in
good faith and adequate reserves under GAAP have been established). 

        Section 6.16    Current Ratio.    The Borrower shall not permit, as of the end of any fiscal quarter, the ratio
of (a) its consolidated current assets to (b) its consolidated current liabilities, to be less than 1.00 to 1.00. For purposes of this calculation, (i) "current assets" shall
include, as of the date of calculation, the aggregate Unused Commitment Amounts but shall exclude, as of the date of calculation (A) any cash deposited with or at the request of a counterparty
to any Hedge Contract and (B) any assets representing a valuation account arising from the application of SFAS 133 and 143, and (ii) "current liabilities" shall exclude, as of the
date of calculation, (A) the current portion of long-term Debt and (B) any liabilities representing a valuation account arising from the application of SFAS 133 and
143. 

        Section 6.17    Interest Coverage Ratio.    The Borrower (a) shall not permit, as of the fiscal quarter
ending December 31, 2007, the ratio of (i) the consolidated EBITDA of the Borrower calculated for the three fiscal quarters then ended, to (ii) the consolidated Interest Expense
of the Borrower for the three fiscal quarters then ended, to be less than 2.50 to 1.00; and (b) shall not permit, as of the end of each fiscal quarter ending on or after March 31, 2008,
the ratio of (i) the consolidated EBITDA of the Borrower calculated for the four fiscal quarters then ended, to (ii) the consolidated Interest Expense of the Borrower for the four fiscal
quarters then ended, to be less than 2.50 to 1.00. 

        Section 6.18    Initial Acquisition Instruments/Private Placement Documents.    The Borrower shall not, nor
shall it permit any of its Subsidiaries to, modify, amend, supplement or replace, any of the Initial Acquisition Instruments or the Private Placement Documents, in any respect that would adversely
affect the
Lenders or the Borrower's ability to perform the Obligations, without the prior written consent of the Administrative Agent and the Required Lenders. 

        Section 6.19    Senior Debt.    Except as otherwise permitted by the terms of this Agreement and the
Intercreditor Agreement, neither the Borrower nor any of its Subsidiaries shall amend, supplement or otherwise modify the terms of the Senior Debt. 

ARTICLE VII

EVENTS OF DEFAULT; REMEDIES  

        Section 7.01    Events of Default.    The occurrence of any of the following events shall constitute an "Event
of Default" under any Loan Document: 

        (a)    Payment.    Any Loan Party (i) fails to pay any principal when due under this Agreement or
(ii) fails to pay, within three (3) Business Days of the date when due, any other amount due under this Agreement or any other Loan Document, including payments of interest, fees,
reimbursements, and indemnifications. 

        (b)    Representation and Warranties.    Any representation or warranty made or deemed to be made (i) by the
Borrower, any Guarantor or any of their respective Subsidiaries (or any of their respective officers) in this Agreement or in any other Loan Document, or (ii) by the Borrower, any Guarantor or
any of their respective Subsidiaries (or any of their respective officers) in connection with this Agreement or any other Loan Document, shall prove to have been incorrect in any material respect when
made or deemed to be made; 

        (c)    Covenant Breaches.    The Borrower, any Guarantor or any of their respective Subsidiaries shall fail to
(i) perform or observe any covenant contained in Section 5.02(a), Section 5.06(e), Section 5.12, Section 5.13 or Article VI or (ii) fail to perform or
observe any other term or covenant 

51

 

set
forth in this Agreement or in any other Loan Document which is not covered by clause (i) above or any other provision of this Section 7.01, if such failure shall remain unremedied
for 30 days after the occurrence of such breach or failure; 

        (d)    Cross-Defaults.    (i) The Borrower, any Guarantor or any of their respective Subsidiaries shall fail to pay
any principal of or premium or interest on its Debt which is outstanding in a principal amount of at least $1,000,000 individually or when aggregated with all such Debt of the Borrower, any Guarantor
or any of their respective Subsidiaries so in default (but excluding the Obligations) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace or cure period, if any, specified in the agreement or instrument relating to such Debt (including, without limitation, the Senior
Credit Agreement); (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to Debt which is outstanding in a principal amount of at least $1,000,000
individually or when aggregated with all such Debt of the Borrower, such Subsidiary, or such Guarantor so in default, and shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or (iii) any such Debt which is outstanding in a
principal amount of at least $1,000,000 individually or when aggregated all such Debt of the Borrower, such Subsidiary, or such Guarantor so in default, shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; provided that, for purposes of
this paragraph (d), the "principal amount" of the obligations in respect of Hedging Contracts at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that
would be required to be paid if such Hedging Contracts were terminated at such time; 

        (e)    Insolvency.    The Borrower, any Guarantor or any of their respective Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower, any of its Subsidiaries, or any Guarantor seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property and, in the case of any such proceeding instituted against the Borrower, any such
Subsidiary or any such Guarantor either such proceeding shall remain undismissed for a period of 60 days or any of the actions sought in such proceeding shall occur; or the Borrower, any of its
Subsidiaries, or any Guarantor shall take any company action to authorize any of the actions set forth above in this paragraph (e); 

        (f)    Judgments.    Any judgment or order for the payment of money in excess of $1,000,000 shall be rendered against
the Borrower, any Guarantor or any of their respective Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or
(ii) there shall be any period of 45 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; 

        (g)    Termination Events.    Any Termination Event with respect to a Plan shall have occurred, and, 30 days
after notice thereof shall have been given to the Borrower by the Administrative Agent, (i) such Termination Event shall not have been corrected and (ii) the then present value of such
Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $1,000,000 (or in the case of a Termination Event involving the withdrawal of a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such excess shall exceed such amount); 

52

 

        (h)    Plan Withdrawals.    The Borrower or any member of the Controlled Group as employer under a Multiemployer Plan
shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an annual amount exceeding $1,000,000; 

        (i)    Change in Control.    A Change in Control shall have occurred; 

        (j)    [Reserved.];    

        (k)    Loan Documents.    Any material provision of any Loan Document shall for any reason cease to be valid and
binding on the Borrower or a Guarantor or any of their respective Subsidiaries or any such Person shall so state in writing; 

        (l)    Security Instruments.    (i) The Administrative Agent shall fail to have an Acceptable Security Interest in any
portion of the Collateral or (ii) any Security Instrument shall at any time and for any reason cease to create the Lien on the Property purported to be subject to such agreement in accordance
with the terms of such agreement, or cease to be in full force and effect, or shall be contested by the Borrower, any Guarantor or any of their respective Subsidiaries; 

        (m)    Material Adverse Change.    An event resulting in a Material Adverse Change shall have occurred; or 

        (n)    Casualty.    Loss, theft, substantial damage or destruction of a material portion of the Collateral the subject
of any Security Instrument not fully covered by insurance (except for deductibles and allowing for the depreciated value of such Collateral) shall have occurred. 

        Section 7.02    Optional Acceleration of Maturity.    If any Event of Default (other than an Event of Default
pursuant to paragraph (e) of Section 7.01) shall have occurred and be continuing, then, and in any such event, 

        (a)   the
Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation (if any) of
each Lender to make extensions of credit hereunder, including making Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare all principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement, the Notes, and
the other Loan Documents to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable in full, without notice of intent to demand, demand, presentment for
payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly
waived by the Borrower; and 

        (b)   the
Administrative Agent shall at the request of, or may with the consent of, the Required Lenders proceed to enforce its rights and remedies under the Security
Instruments, the Guaranties, and any other Loan Document for the ratable benefit of Secured Parties by appropriate proceedings. 

        Section 7.03    Automatic Acceleration of Maturity.    If any Event of Default pursuant to paragraph (e)
of Section 7.01 shall occur, 

        (a)   (i)
the obligation (if any) of each Lender to make extensions of credit hereunder, including making Advances shall terminate, and (ii) all principal, interest,
fees, reimbursements, indemnifications, and all other amounts payable under this Agreement, the Notes, and the other Loan Documents shall become and be forthwith due and payable in full, without
notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and
all other notices, all of which are hereby expressly waived by the Borrower; and 

53

 

        (b)   the
Administrative Agent shall at the request of, or may with the consent of, the Required Lenders proceed to enforce its rights and remedies under the Security
Instruments, the Guaranties, and any other Loan Document for the ratable benefit of Secured Parties by appropriate proceedings. 

        Section 7.04    Right of Setoff.    If an Event of Default shall have occurred and be continuing, the
Administrative Agent, each Lender, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and
apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the
Administrative Agent, such Lender, or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan
Party now or hereafter existing under this Agreement or any other Loan Document to the Administrative Agent or such
Lender, irrespective of whether or not the Administrative Agent or such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower
or such Loan Party may be contingent or unmatured or are owed to a branch or office of the Administrative Agent or such Lender different from the branch or office holding such deposit or obligated on
such indebtedness. The rights of the Administrative Agent, each Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of
setoff) that the Administrative Agent, such Lender or their respective Affiliates may have. The Administrative Agent and each Lender agrees to notify the Borrower and the Administrative Agent promptly
after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application. 

        Section 7.05    Non-exclusivity of Remedies.    No remedy conferred upon the Administrative Agent
or the Lenders is intended to be exclusive of any other remedy, and each remedy shall be cumulative of all other remedies existing by contract, at law, in equity, by statute or otherwise. 

        Section 7.06    Application of Proceeds.    

        (a)   Prior
to the Payment in Full of Senior Indebtedness (as defined in the Intercreditor Agreement) and other than as otherwise permitted by the Intercreditor Agreement, any
monies or Property actually received by the Administrative Agent pursuant to this Agreement or any other Loan Document, the exercise of any rights or remedies under any Security Instrument or any
other agreement with the Borrower, any Guarantor or any of their respective Subsidiaries which secures any of the Obligations, shall in any event be held in trust by the Adminsitrative Agent for the
benefit of the Senior Agent and the Senior Lenders (as defined in the Intercreditor Agreement) and promptly paid or delivered to the Senior Agent in the form received; and 

        (b)   After
Payment in Full of the Senior Indebtedness and the termination of the Intercreditor Agreement, any monies or Properties actually received by the Administrative
Agent pursuant to this Agreement or any other Loan Document as a result of the exercise of any rights or remedies under any Security Instrument or any other agreement with the Borrower, any Guarantor
or any of their respective Subsidiaries which secures the Obligations shall be applied in the following order: 

          (i)  First,
to the payment of all amounts, including costs and expenses incurred in connection with the collection of such proceeds and the payment of any part of the
Obligations, due to the Administrative Agent under any of the expense reimbursement or indemnity provisions of this Agreement or any other Loan Document, any Security Instrument or other collateral
documents, and any applicable Legal Requirement; 

         (ii)  Second,
ratably, according to the then unpaid amounts thereof, without preference or priority of any kind among them, to the payment of the Obligations then due and
payable, including any Lender Hedging Obligations of any Loan Party; and 

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        (iii)  Third,
the remainder, if any, to the Borrower or its Subsidiaries, or its respective successors or assigns, or such other Person as may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct. 

        Administrative
Agent shall have no responsibility to determine the existence or amount of Lender Hedging Obligations and may reserve from the application of amounts under this Section
amounts distributable in respect of Lender Hedging Obligations until it has received evidence satisfactory to it of the existence and amount of such Lender Hedging Obligations. Subject to
paragraph (b) of the first sentence of this Section, Administrative Agent and Lenders hereby acknowledge and confirm that the Liens in the Collateral secure the Obligations and the Lender
Hedging Obligations on a ratable basis. 

        Section 7.07    Intercreditor Agreement.    All rights of the Administrative Agent and the Lenders in this
Article VII shall be subject to the terms and conditions of the Intercreditor Agreement. In the event of a conflict between the terms of this Agreement and the Intercreditor Agreement, the
Intercreditor Agreement shall control. 

ARTICLE VIII

THE ADMINISTRATIVE AGENT  

        Section 8.01    Appointment and Authority.    Each of the Lenders hereby irrevocably appoints
Société Générale to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the
Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers
as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent and the Lenders, and neither the Borrower nor any other Loan Party shall
have rights as a third party beneficiary of any of such provisions. 

        Section 8.02    Rights as a Lender.    The Person serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may
accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and
generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account
therefor to the Lenders. 

        Section 8.03    Exculpatory Provisions.    The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent: 

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

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

        (c)   shall
not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Borrower 

55

 

or
any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity. 

        The
Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 9.01 and 7.02,
and 7.03 or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice
describing such Default is given to the Administrative Agent by the Borrower or a Lender. The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document
delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein
or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or
document or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the
Administrative Agent. 

        Section 8.04    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 (including any electronic message, Internet or intranet
website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any
statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any
condition hereunder to the making of an Advance that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such
Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Advance. 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. 

        Section 8.05    Delegation of Duties.    The Administrative Agent may perform any and all of its duties and
exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any
such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall
apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities as Administrative Agent. 

        Section 8.06    Successor Administrative Agent.    The Administrative Agent may at any time give notice of its
resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which
shall be a bank with an office in New York City or Houston, Texas or an Affiliate of any such bank with an office in New York City or Houston, Texas. If no such successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 60 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent
may on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above provided that if the Administrative
Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become 

56

 

effective
in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that
in the case of any Collateral held by the Administrative Agent on behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such Collateral until
such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead
be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor's
appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative
Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided
above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such
successor. After the retiring Administrative Agent's resignation hereunder and under the other Loan Documents, the provisions of this Article and Sections 9.04 and 9.05 shall continue in effect
for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the
retiring Administrative Agent was acting as Administrative Agent. 

        Section 8.07    Non-Reliance on Administrative Agent and Other Lenders.    Each Lender acknowledges
that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. 

        Section 8.08    No Other Duties, etc.    Anything herein to the contrary notwithstanding, none of the Persons
indentified as a Syndication Agent, Bookrunner or Arranger on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in
its capacity, as applicable, as the Administrative Agent or a Lender hereunder. 

        Section 8.09    Collateral Matters.    

        (a)   The
Administrative Agent is authorized on behalf of the Secured Parties, without the necessity of any notice to or further consent from such Secured Parties, from time
to time, to take any actions with respect to any Collateral or Security Instruments which may be necessary to perfect and maintain the Liens upon the Collateral granted pursuant to the Security
Instruments. The Administrative Agent is further authorized (but not obligated) on behalf of the Secured Parties, without the necessity of any notice to or further consent from the Secured Parties,
from time to time, to take any action in exigent circumstances as may be reasonably necessary to preserve any rights or privileges of the Secured Parties under the Loan Documents or applicable Legal
Requirements. Persons that are owed any Lender Hedging Obligations by accepting the benefit of the Liens granted pursuant to the Security Instruments hereby agrees to the terms of this
paragraph (a). 

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        (b)   The Lenders, and Persons that are owed any Lender Hedging Obligations by accepting the benefit of the Liens granted pursuant to the Security Instruments, hereby
irrevocably authorize the Administrative Agent to (i) release any Lien granted to or held by the Administrative Agent upon any Collateral (a) upon termination of this Agreement,
termination of all Hedge Contracts with such Persons, and the payment in full of all outstanding Advances and all other Obligations payable under this Agreement and under any other Loan Document;
(b) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted under this Agreement or any other Loan Document; (c) constituting
property in which the Borrower or any Subsidiary owned no interest at the time the Lien was granted or at any time thereafter; or (d) constituting property leased to the Borrower or any
Subsidiary under a lease which has expired or has been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by the Borrower or
such Subsidiary to be, renewed or extended; and (ii) release a Guarantor from its obligations under a Guaranty and any other applicable Loan Document if such Person ceases to be a Subsidiary as
a result of a transaction permitted under this Agreement. Upon the request of the Administrative Agent at any time, the Secured Parties will confirm in writing the Administrative Agent's authority to
release particular types or items of Collateral pursuant to this Section 8.09. 

ARTICLE IX

MISCELLANEOUS  

        Section 9.01    Amendments, Etc.    No amendment or waiver of any provision of this Agreement, the Notes, or
any other Loan Document, nor consent to any departure by the Borrower or any Subsidiary therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required
Lenders and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given;  provided, however, that no amendment, waiver, or
consent shall: 

        (a)   without
the consent of each Lender: (i) waive any of the conditions specified in Article III; (ii) change any provision of this Section or the
definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder; (iii) amend Section 2.11 or any other provision of this Agreement in a manner that would alter the pro rata sharing of payments or the pro
rata allocation of disbursements required thereby; (iv) release any Guarantor from its obligations under any Guaranty unless such Guarantor ceases to be a Subsidiary of the Borrower under a
transaction permitted by the terms hereof; (v) permit the Borrower or any Subsidiary to enter into any merger or consolidation with or into any other Person or amend Section 6.04(a);
(vi) release any Collateral securing the Obligations, except as provided in Section 8.09 above; (vii) change Section 7.06 or any other provision of this Agreement in a
manner that would alter the order of application of proceeds set forth in Section 7.06; (viii) increase the aggregate Commitments; or (ix) amend or waive any provision of, nor
consent to any departure by any party thereto from, the Intercreditor Agreement; 

        (b)   without
the written consent of each Lender directly affected thereby, (i) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 7.02), (ii) reduce the principal of, or interest on, the Obligations or any fees or other amounts payable hereunder or under any other Loan Document, or
(iii) postpone any date fixed for any payment of principal of, or interest on, the Obligations or any fees or other amounts payable hereunder or extend the Maturity Date; 

and,
provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to
the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document and (ii) the Administrative 

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Agent's
Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto. 

        Section 9.02    Notices, Etc.    

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

          (i)  if
to any Borrower or any other Loan Party or the Administrative Agent, to the address, facsimile number, electronic mail address or telephone number specified for such
Person on Schedule I or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party
in a notice to the other parties; and 

         (ii)  if
to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other
address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Administrative Agent. 

        (b)   Notices
sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile
shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next
Business Day for the recipient). Notices delivered through electronic communications to the extent provided in paragraph (c) below, shall be effective as provided in said paragraph (c).
In no event shall a voicemail message be effective as a notice, communication or confirmation hereunder. 

        (c)    Effectiveness of Facsimile Documents and Signatures.    Loan Documents may be transmitted and/or signed by
facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Legal Requirements, have the same force and effect as manually-signed originals and shall be binding on
all Loan Parties, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof;  provided,
however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. 

        (d)    Limited Use of Electronic Mail.    Unless expressly provided otherwise herein, notices and other communications
to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the
Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II, except that, until the
Administrative Agent gives notice to the Borrower to the contrary, Notices of Borrowing and Notices of Conversion or Continuation may be delivered to the Administrative Agent by electronic
communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures
approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent
otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended
recipient (such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgement), provided that
if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the
next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at
its 

59

 

e-mail
address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor. 

        (e)    Reliance by Administrative Agent and Lenders.    The Administrative Agent and the Lenders shall be entitled to
rely and act upon any notices (including telephonic Notices of Borrowing) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein,
were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, EACH LENDER AND THEIR RELATED PARTIES FROM ALL LOSSES, COSTS, EXPENSES AND LIABILITIES RESULTING
FROM THE RELIANCE BY SUCH PERSON ON EACH NOTICE PURPORTEDLY GIVEN BY OR ON BEHALF OF THE BORROWER. All telephonic notices to and other communications with the Administrative
Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 

        Section 9.03    No Waiver; Cumulative Remedies.    No failure on the part of any Lender or the Administrative
Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Agreement are
cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 

        Section 9.04    Costs and Expenses.    The Borrower shall pay (i) all reasonable
out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative
Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan
Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all
out-of-pocket expenses incurred by the Administrative Agent or any Lender (including the fees, charges and disbursements of any counsel for the Administrative Agent or any
Lender), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or
(B) in connection with the Advances made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of
such Advances. The foregoing costs and expenses shall include all search, filing, recording, appraisal charges and fees and taxes related thereto, and other out-of-pocket
expenses incurred by the Administrative Agent or any Lender and the cost of independent public accountants and other outside experts retained by the Administrative Agent or any Lender. All amounts due
under this Section 9.04 shall be payable within thirty days after demand. The agreements in this Section shall survive the termination of the Commitments and repayment
of all other Obligations. 

        Section 9.05    Indemnification.    The Borrower shall
indemnify the Administrative Agent (and any sub-agent thereof), each Lender and each Related Party of any of the foregoing Persons (each such Person being called an
"Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the
fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be
employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Advance or the use or proposed use of the proceeds therefrom,
(iii) 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  

60

 

 Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any
Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee. All amounts due under this Section 9.05 shall be payable within ten Business Days after demand therefor. The agreements in this Section shall survive the resignation of the
Administrative Agent, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations.

        Section 9.06    Reimbursement by Lenders.    To the extent that the Borrower for any reason fails to
indefeasibly pay any amount required under Section 9.04 or Section 9.05 to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of any of
the Administrative Agent, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender's Pro Rata 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 the Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party
of any of the Administrative Agent acting for the Administrative Agent (or any such sub-agent) in connection with such capacity. The failure of any Lender to pay its Pro Rata Share of such
unpaid amounts shall not relieve any other Lender of its obligation, if any, to pay its respective share of such unpaid amounts. No Lender shall be responsible for the failure of any other Lender to
comply with this Section. All amounts due under this Section 9.06 shall be payable within ten Business Days after demand therefor. THE AGREEMENTS IN THIS SECTION SHALL
SURVIVE THE RESIGNATION OF THE ADMINISTRATIVE AGENT, THE REPLACEMENT OF ANY LENDER, THE TERMINATION OF THE COMMITMENTS AND THE REPAYMENT, SATISFACTION OR DISCHARGE OF ALL THE OTHER
OBLIGATIONS

        Section 9.07    Waiver of Damages.    To the fullest extent
permitted by applicable Legal Requirement, each Loan Party 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, the transactions contemplated hereby or thereby, any Advance or the use of the proceeds thereof. No Indemnitee shall be liable for any
damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

        Section 9.08    Successors and Assigns.    

        (a)    Generally.    The terms and provisions of this Agreement and the other Loan Documents shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in
accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section, or
(iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section and any other attempted assignment or transfer by any party
hereto shall be null and void. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their 

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respective
successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Indemnitees) any
legal or equitable right, remedy or claim under or by reason of this Agreement. 

        (b)    Assignments by Lenders.    Any Lender may assign to one or more Eligible Assignees all or any portion of its
rights and obligations under this Agreement; provided, however, that 

          (i)  except
in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Advances being assigned at the time owing to it or in
the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Advances of such Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall not be less than $5,000,000.00; 

         (ii)  each
partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to
the Advances assigned; 

        (iii)  the
parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance; and 

        (iv)  each
Eligible Assignee (other than an Eligible Assignee that is a Lender or an Affiliate of a Lender) shall pay to the Administrative Agent a $3,500 processing and
recording fee and shall, if it is not a Lender, deliver to the Administrative Agent an Administrative Questionnaire. 

        Upon
such execution, delivery, acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified
in each Assignment and Acceptance, (A) the Eligible Assignee thereunder shall be a party hereto for all purposes and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (B) such assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of such Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the
benefits of Sections 2.13, 2.14, 9.04 and 9.05 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights
or obligations under this Agreement that does not comply with this paragraph 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 paragraph (d) of this Section. 

        (c)    Register.    The Administrative Agent shall maintain at its Applicable Lending Office a copy of each Assignment
and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Advances owing to, each
Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and each
of the Loan Parties, the Administrative Agent, and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall
be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 

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        (d)    Participations.    Any Lender may at any time, without the consent of, or notice to, the Borrower or the
Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of any Borrower's Affiliates or Subsidiaries) (each, a
"Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Advances owing to
it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent 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, waiver
or other modification described in the first proviso to Section 9.01 that directly affects such Participant. Subject to the last two sentences of this paragraph (d), Borrower agrees that
each Participant shall be entitled to the benefits of, and be bound by the terms of, Sections 2.12, 2.13, 2.14, 9.04, 9.05 and 9.06 to the same extent as if it were a Lender and had acquired
its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 7.04 as though it
were a Lender, provided such Participant agrees to be subject to Section 2.11 as though it were a Lender. A Participant shall not be entitled to receive any greater payment under
Section 2.13 or 2.14 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 2.14 unless the
Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14 as though it were a Lender. 

        (e)    Pledge to Federal Reserve Bank.    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 any pledge or assignment to secure obligations to a Federal Reserve Bank;  provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee
for such Lender as a party hereto. 

        (f)    Approved Funds.    Notwithstanding anything to the contrary contained herein, any Lender that is a Approved
Fund may create a security interest in all or any portion of the Advances owing to it and the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such
Fund as security for such obligations or securities, provided that unless and until such trustee actually becomes a Lender in compliance with the other
provisions of this Section 9.08, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be
entitled to exercise any of the rights of a Lender under the Loan Documents even though
such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise. 

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

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        Section 9.09    Confidentiality.    Each of the Administrative Agent and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the
National Association of Insurance Commissioners), (c) to the extent required by applicable Legal Requirements or by any subpoena or similar legal process, (d) to any other party hereto,
(e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant
in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available
other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent or any Lender or any of their respective Affiliates on a nonconfidential basis from a
source other than the Borrower. For purposes of this Section, "Information" means all information received from any Loan Party relating to any Loan Party or any of their respective businesses, other
than any such information that is available to the Administrative Agent or any Lender or any of its Affiliates on a nonconfidential basis prior to disclosure by any Loan Party,  provided that, in the
case of information received from a Loan Party after the date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such
Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information in accordance with safe and sound
banking practices. 

        Section 9.10    Counterparts; Effectiveness.    This Agreement may be executed in counterparts (and by
different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Except as provided in
Section 3.01, this
Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear
the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement. 

        Section 9.11    Survival of Representations, etc.    All representations and warranties made hereunder and in
any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations
and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and
notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Advance, and shall continue in full force and effect as long as any
Advance or any other Obligation hereunder shall remain unpaid or unsatisfied. 

        Section 9.12    Severability.    If any provision of this Agreement or the other Loan Documents is held to be
illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as
close as possible 

64

 

to
that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other
jurisdiction. 

        Section 9.13    Interest Rate Limitation.    Notwithstanding anything to the contrary contained in any Loan
Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the Maximum Rate. If the Administrative Agent or any Lender shall receive interest in an amount that exceeds
the Maximum Rate, the excess interest shall be applied to the principal of the Advances or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest
contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Legal Requirement, (a) characterize
any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder. 

        Section 9.14    Governing Law.     his Agreement and each of the other Loan Documents shall be governed by and
construed in accordance with the laws of the State of New York and the applicable laws of the United States of America. 

        Section 9.15    Submission to Jurisdiction; Waiver of Venue; Service of Process.    

        (a)    Submission to Jurisdiction.    The Borrower, the Lenders, and the other parties hereto irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the State of New York sitting in New York City and of the United States District Court for the
Southern District of the State of New York and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and
determined in such New York State court or, to the fullest extent permitted by applicable law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall
affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any
other Loan Party or its properties in the courts of any jurisdiction. 

        (b)    Waiver of Venue.    Each of the Borrower, the Lenders and the
other parties hereto irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or
proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

        (c)    Service of Process.    Each party hereto irrevocably consents to service of process in the manner provided for
notices in Section 9.02 other than by electronic mail. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable law. 

        Section 9.16    Waiver of Jury Trial.    EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED  

65

 

 HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. EACH PARTY HEREBY AGREES AND CONSENTS THAT THIS AGREEMENT MAY FILE
AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

        Section 9.17    USA Patriot Act.    Each Lender that is subject to the Act (as hereinafter defined) and the
Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower
and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act. 

        Section 9.18    Intercreditor Agreement.    The Administrative Agent is hereby authorized on behalf of the
Lenders for the Lenders and its Affiliates that are Swap Counterparties to enter into the Intercreditor Agreement. A copy of such Intercreditor Agreement will be made available to each Secured Party
on the Closing Date and thereafter upon request. Each Lender and each Swap Counterparty (by receiving the benefits thereunder and of the Collateral) acknowledges and agrees to the terms of such
Intercreditor Agreement and agrees that the terms thereof shall be binding on such Secured Party and its successors and assigns, as if it were a party thereto. 

        Section 9.19    Integration.    This Agreement and the other Loan Documents represent the final agreement among
the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements among the parties. 

[Remainder of this page intentionally left blank. Signature page follows.]

66

  
        EXECUTED as of the date first above written. 

	BORROWER:	 	ABRAXAS ENERGY PARTNERS, L.P.
	

 	
 	

By:	
 	

Abraxas General Partner, LLC,

its general partner
	

 	
 	

 	
 	

By:	
 	
/s/ Barbara M. Stuckey
 Barbara M. Stuckey

President and Chief Operating Officer

Signature
page to Subordinated Credit Agreement 

	ADMINISTRATIVE AGENT:	 	SOCIÉTÉ GÉNÉRALE
	

 	
 	

By:	
 	
/s/ Elena Robciuc
 Elena Robciuc

Director

Signature
page to Subordinated Credit Agreement 

	LENDERS:	 	SOCIÉTÉ GÉNÉRALE
	

 	
 	

By:	
 	
/s/ Elena Robciuc
 Elena Robciuc

Director

Signature
page to Subordinated Credit Agreement 

	 	 	COMERICA BANK
	

 	
 	

By:	
 	
/s/ Josh Strong
 Name: Josh Strong

Title: Assistant Vice President

Signature
page to Subordinated Credit Agreement 

	 	 	THE ROYAL BANK OF CANADA
	

 	
 	

By:	
 	
/s/ Don J. McKinnerney
 Name: Don J. McKinnerney

Title: Authorized Signatory

Signature
page to Subordinated Credit Agreement 

QuickLinks

Exhibit 10.11

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