Document:

EXHIBIT 10.1

 

EXECUTION VERSION

 

 

 

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

 

dated as of

 

November 4, 2010

 

among

 

ANTERO RESOURCES CORPORATION,

ANTERO RESOURCES PICEANCE CORPORATION,

ANTERO RESOURCES PIPELINE CORPORATION and

ANTERO RESOURCES APPALACHIAN CORPORATION,

as Borrowers,

 

CERTAIN SUBSIDIARIES OF BORROWERS,

as Guarantors,

 

THE LENDERS PARTY HERETO,

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent,

 

WELLS FARGO BANK, N.A.,

as Syndication Agent,

 

and

 

BANK OF SCOTLAND plc, UNION BANK, N.A., CREDIT AGRICOLE CORPORATE AND

INVESTMENT BANK, BNP PARIBAS

AND DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Co-Documentation Agents

 

 

Senior Secured Credit Facility

 

 

J.P. MORGAN SECURITIES LLC and WELLS FARGO SECURITIES, LLC,

as Joint Lead Arrangers and Joint Bookrunners

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Defined
  Terms

  	
  1

  
	
  Section 1.02

  	
  Types
  of Loans and Borrowings

  	
  27

  
	
  Section 1.03

  	
  Terms
  Generally

  	
  27

  
	
  Section 1.04

  	
  Accounting
  Terms; GAAP

  	
  28

  
	
  Section 1.05

  	
  Oil
  and Gas Definitions

  	
  28

  
	
  Section 1.06

  	
  Time
  of Day

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE
  CREDITS

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Commitments

  	
  28

  
	
  Section 2.02

  	
  Termination
  of the Aggregate Commitment and Reduction of the Maximum Facility Amount

  	
  29

  
	
  Section 2.03

  	
  [Reserved]

  	
  29

  
	
  Section 2.04

  	
  Loans
  and Borrowings

  	
  29

  
	
  Section 2.05

  	
  Requests
  for Borrowings

  	
  30

  
	
  Section 2.06

  	
  Letters
  of Credit

  	
  31

  
	
  Section 2.07

  	
  Funding
  of Borrowings

  	
  35

  
	
  Section 2.08

  	
  Interest
  Elections

  	
  36

  
	
  Section 2.09

  	
  Repayment
  of Loans; Evidence of Debt

  	
  37

  
	
  Section 2.10

  	
  Optional
  Prepayment of Loans

  	
  38

  
	
  Section 2.11

  	
  Mandatory
  Prepayment of Loans

  	
  38

  
	
  Section 2.12

  	
  Fees

  	
  40

  
	
  Section 2.13

  	
  Interest

  	
  41

  
	
  Section 2.14

  	
  Alternate
  Rate of Interest

  	
  42

  
	
  Section 2.15

  	
  Increased
  Costs

  	
  42

  
	
  Section 2.16

  	
  Break
  Funding Payments

  	
  44

  
	
  Section 2.17

  	
  Taxes

  	
  44

  
	
  Section 2.18

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

  	
  46

  
	
  Section 2.19

  	
  Mitigation
  Obligations; Replacement of Lenders

  	
  48

  
	
  Section 2.20

  	
  Borrower
  Representative

  	
  49

  
	
  Section 2.21

  	
  Joint
  and Several Liability

  	
  49

  
	
  Section 2.22

  	
  Defaulting
  Lenders

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  BORROWING
  BASE

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Initial
  Borrowing Base

  	
  51

  
	
  Section 3.02

  	
  Reserve
  Report

  	
  52

  
	
  Section 3.03

  	
  Scheduled
  Redeterminations of the Borrowing Base; Procedures and Standards

  	
  52

  
	
  Section 3.04

  	
  Special
  Redeterminations

  	
  53

  
	
  Section 3.05

  	
  Notice
  of Redetermination

  	
  53

  
	
  Section 3.06

  	
  Additional
  Reductions in Borrowing Base

  	
  53

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  54

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Organization;
  Powers

  	
  54

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 4.02

  	
  Authorization;
  Enforceability

  	
  54

  
	
  Section 4.03

  	
  Governmental
  Approvals; No Conflicts

  	
  54

  
	
  Section 4.04

  	
  Financial
  Condition; No Material Adverse Change

  	
  54

  
	
  Section 4.05

  	
  Intellectual
  Property

  	
  55

  
	
  Section 4.06

  	
  Litigation
  and Environmental Matters

  	
  55

  
	
  Section 4.07

  	
  Compliance
  with Laws and Agreements

  	
  55

  
	
  Section 4.08

  	
  Investment
  Company Status

  	
  55

  
	
  Section 4.09

  	
  Taxes

  	
  55

  
	
  Section 4.10

  	
  ERISA

  	
  56

  
	
  Section 4.11

  	
  Disclosure

  	
  56

  
	
  Section 4.12

  	
  Labor
  Matters

  	
  56

  
	
  Section 4.13

  	
  Capitalization

  	
  56

  
	
  Section 4.14

  	
  Margin
  Stock

  	
  56

  
	
  Section 4.15

  	
  Title
  to Properties; Licenses

  	
  57

  
	
  Section 4.16

  	
  Insurance

  	
  57

  
	
  Section 4.17

  	
  Solvency

  	
  57

  
	
  Section 4.18

  	
  Leases
  and Contracts; Performance of Obligations

  	
  58

  
	
  Section 4.19

  	
  Sale
  of Production

  	
  58

  
	
  Section 4.20

  	
  Operation
  of Oil and Gas Interests

  	
  59

  
	
  Section 4.21

  	
  Ad
  Valorem and Severance Taxes; Title Litigation

  	
  59

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  CONDITIONS

  	
  59

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Effective
  Date

  	
  59

  
	
  Section 5.02

  	
  Each
  Credit Event

  	
  62

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  AFFIRMATIVE
  COVENANTS

  	
  62

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Financial
  Statements; Other Information

  	
  62

  
	
  Section 6.02

  	
  Notices
  of Material Events

  	
  65

  
	
  Section 6.03

  	
  Existence;
  Conduct of Business

  	
  65

  
	
  Section 6.04

  	
  Payment
  of Obligations

  	
  66

  
	
  Section 6.05

  	
  Maintenance
  of Properties; Insurance

  	
  66

  
	
  Section 6.06

  	
  Books
  and Records; Inspection Rights

  	
  66

  
	
  Section 6.07

  	
  Compliance
  with Laws

  	
  67

  
	
  Section 6.08

  	
  Use
  of Proceeds and Letters of Credit

  	
  67

  
	
  Section 6.09

  	
  Security

  	
  67

  
	
  Section 6.10

  	
  Title
  Data

  	
  67

  
	
  Section 6.11

  	
  Operation
  of Oil and Gas Interests

  	
  67

  
	
  Section 6.12

  	
  Restricted
  Subsidiaries

  	
  68

  
	
  Section 6.13

  	
  Pledged
  Equity Interests

  	
  68

  
	
  Section 6.14

  	
  [Reserved]

  	
  69

  
	
  Section 6.15

  	
  Further
  Assurances

  	
  69

  
	
  Section 6.16

  	
  Production
  Proceeds

  	
  69

  
	
  Section 6.17

  	
  Leases
  and Contracts; Performance of Obligations

  	
  69

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  NEGATIVE
  COVENANTS

  	
  70

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Limitation
  on Indebtedness

  	
  70

  
	
  Section 7.02

  	
  Limitation
  on Liens

  	
  71

  
	
  Section 7.03

  	
  Hedging
  Contracts

  	
  71

  
	
  Section 7.04

  	
  Limitation
  on Mergers, Issuances of Securities

  	
  73

  
	
  Section 7.05

  	
  Limitation
  on Dispositions of Property

  	
  73

  
	
  Section 7.06

  	
  Limitation
  on Dividends and Redemptions

  	
  75

  
	
  Section 7.07

  	
  Limitation
  on Investments and New Businesses

  	
  75

  
	
  Section 7.08

  	
  Limitation
  on Credit Extensions

  	
  75

  
	
  Section 7.09

  	
  Transactions
  with Affiliates

  	
  75

  
	
  Section 7.10

  	
  Prohibited
  Contracts; Negative Pledge

  	
  75

  
	
  Section 7.11

  	
  Current
  Ratio

  	
  76

  
	
  Section 7.12

  	
  Leverage
  Ratio

  	
  76

  
	
  Section 7.13

  	
  Senior
  Notes Restrictions

  	
  76

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  GUARANTEE
  OF OBLIGATIONS

  	
  77

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Guarantee
  of Payment

  	
  77

  
	
  Section 8.02

  	
  Guarantee
  Absolute

  	
  77

  
	
  Section 8.03

  	
  Guarantee
  Irrevocable

  	
  77

  
	
  Section 8.04

  	
  Reinstatement

  	
  78

  
	
  Section 8.05

  	
  Subrogation

  	
  78

  
	
  Section 8.06

  	
  Subordination

  	
  78

  
	
  Section 8.07

  	
  Setoff

  	
  78

  
	
  Section 8.08

  	
  Formalities

  	
  79

  
	
  Section 8.09

  	
  Limitations
  on Guarantee

  	
  79

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  EVENTS
  OF DEFAULT

  	
  79

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  THE
  ADMINISTRATIVE AGENT

  	
  82

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  MISCELLANEOUS

  	
  84

  
	
   

  	
   

  	
   

  
	
  Section 11.01

  	
  Notices

  	
  84

  
	
  Section 11.02

  	
  Waivers;
  Amendments

  	
  85

  
	
  Section 11.03

  	
  Expenses;
  Indemnity; Damage Waiver

  	
  86

  
	
  Section 11.04

  	
  Successors
  and Assigns

  	
  88

  
	
  Section 11.05

  	
  Survival

  	
  92

  
	
  Section 11.06

  	
  Counterparts;
  Integration; Effectiveness

  	
  92

  
	
  Section 11.07

  	
  Severability

  	
  92

  
	
  Section 11.08

  	
  Right
  of Setoff

  	
  93

  
	
  Section 11.09

  	
  GOVERNING
  LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

  	
  93

  
	
  Section 11.10

  	
  WAIVER
  OF JURY TRIAL

  	
  94

  
	
  Section 11.11

  	
  Headings

  	
  94

  
	
  Section 11.12

  	
  Confidentiality

  	
  94

  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 11.13

  	
  Interest
  Rate Limitation

  	
  95

  
	
  Section 11.14

  	
  USA
  PATRIOT Act

  	
  95

  
	
  Section 11.15

  	
  Original
  Credit Agreement

  	
  95

  
	
  Section 11.16

  	
  Reaffirmation
  and Grant of Security Interest

  	
  96

  
	
  Section 11.17

  	
  Reallocation
  of Commitments and Loans

  	
  96

  
	
  Section 11.18

  	
  Release
  of Antero Midstream

  	
  96

  

 

iv

 

EXHIBITS:

 

Exhibit A — Form of Assignment and
Assumption

Exhibit B — Form of Opinion of Borrowers’
Counsel

Exhibit C — Form of Counterpart Agreement

Exhibit D — Form of Revolving Note

 

SCHEDULES:

 

Schedule 1.01 — Applicable Percentages, Commitments
and Maximum Facility Amount

Schedule 4.13 — Capitalization

Schedule 4.19 —
Sale of Production

 

v

 

THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of
November 4, 2010, among ANTERO RESOURCES CORPORATION, a Delaware
corporation (“Antero”), ANTERO RESOURCES PICEANCE CORPORATION, a
Delaware corporation (“Antero Piceance”), ANTERO RESOURCES PIPELINE
CORPORATION, a Delaware corporation (“Antero Pipeline”), and ANTERO
RESOURCES APPALACHIAN CORPORATION, a Delaware corporation (“Antero
Appalachian” and, together with Antero, Antero Piceance and Antero
Pipeline, each a “Borrower” and collectively, the “Borrowers”),
CERTAIN SUBSIDIARIES OF BORROWERS, as Guarantors, the LENDERS party hereto,
JPMORGAN CHASE BANK, N.A., as Administrative Agent, WELLS FARGO BANK, N.A., as
Syndication Agent, and BANK OF SCOTLAND plc, UNION BANK, N.A., CREDIT AGRICOLE
CORPORATE AND INVESTMENT BANK, BNP PARIBAS and DEUTSCHE BANK TRUST COMPANY
AMERICAS, as Co-Documentation Agents.

 

The
parties hereto agree as follows:

 

ARTICLE I

Definitions

 

Section 1.01 Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:

 

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

 

“Acquisition”
means, the acquisition by any Credit Party or any Restricted Subsidiary,
whether by purchase, merger (and, in the case of a merger with any such Person,
with such Person being the surviving corporation) or otherwise, of all or
substantially all of the Equity Interest of, or the business, property or fixed
assets of or business line or unit or a division of, any other Person primarily
engaged in the business of exploring for, producing, transporting, processing
and storing Crude Oil or Natural Gas or the acquisition by any Credit Party or
any Restricted Subsidiary of property or assets consisting of Oil and Gas
Interests.

 

“Act”
has the meaning assigned to such term in Section 11.14.

 

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

 

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

 

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

 

1

 

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

 

“Aggregate
Commitment” means the amount equal to the lesser of (a) the Maximum
Facility Amount and (b) the Borrowing Base then in effect, as such amount
may be (i) reduced or increased from time to time as a result of changes
in the Borrowing Base pursuant to Article III, and (ii) reduced from
time to time as a result of changes in the Maximum Facility Amount pursuant to Section 2.02.

 

“Aggregate
Credit Exposure” means, as of any date of determination, the sum of the
outstanding principal amount of the Loans of all Lenders as of such date, plus
the aggregate LC Exposure of all Lenders as of such date.

 

“Aggregate
Unused Commitment” at any time shall equal the sum of the Unused
Commitments of all the Lenders at such time.

 

“Agreement”
means this Fourth Amended and Restated Credit Agreement, dated as of November 4,
2010, as it may be amended, supplemented or otherwise modified from time to
time.

 

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

 

“Antero”
has the meaning assigned to such term in the preamble to this Agreement.

 

“Antero
Appalachian” has the meaning assigned to such term in the preamble to this
Agreement.

 

“Antero
Midstream” means Antero Resources Midstream Corporation, a Delaware
corporation.

 

“Antero
Piceance” has the meaning assigned to such term in the preamble to this
Agreement.

 

“Antero
Pipeline” has the meaning assigned to such term in the preamble to this
Agreement.

 

“Applicable
Hedge Percentage” has the meaning assigned to such term in Section 7.03(a).

 

“Applicable
Percentage” means, with respect to any Lender at any time, the percentage
of the Aggregate Commitment represented by such Lender’s Commitment at such
time; provided that in the case of Section 2.22(c) only, when
a Defaulting Lender exists, “Applicable 

 

2

 

Percentage”
shall mean the percentage of the Aggregate Commitment (disregarding any
Defaulting Lender’s Commitment) represented by such Lender’s Commitment.  The initial amount of each Lender’s
Applicable Percentage is as set forth on Schedule 1.01 or in the Assignment and
Assumption pursuant to which such Lender shall have assumed or agreed to
provide its Commitment, as applicable. 
If the Aggregate Commitment has terminated or expired, the Applicable
Percentages shall be determined based upon the Aggregate Commitment most
recently in effect, giving effect to any assignments.

 

“Applicable
Rate” means, for any day, with respect to any ABR Loan or Eurodollar Loan,
as the case may be, the applicable rate per annum set forth below under the
caption “ABR Spread” or “Eurodollar Spread”, as the case may be, based upon the
Borrowing Base Usage applicable on such date:

 

	
  Borrowing Base Usage:

  	
   

  	
  ABR

  Spread

  	
   

  	
  Eurodollar

  Spread

  	
   

  
	
  Equal to or greater than 90%

  	
   

  	
  1.75

  	
  %

  	
  2.75

  	
  %

  
	
  Equal to or greater than 75% and less than 90%

  	
   

  	
  1.50

  	
  %

  	
  2.50

  	
  %

  
	
  Equal to or greater than 50% and less than 75%

  	
   

  	
  1.25

  	
  %

  	
  2.25

  	
  %

  
	
  Equal to or greater than 25% and less than 50%

  	
   

  	
  1.00

  	
  %

  	
  2.00

  	
  %

  
	
  Less than 25%

  	
   

  	
  0.75

  	
  %

  	
  1.75

  	
  %

  

 

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

 

“Approved
Counterparty” means, at any time and from time to time, (i) any Person
engaged in the business of writing Hedging Contracts for commodity, interest
rate or currency risk that has (or the credit support provider of such Person
has), at the time any Borrower or any Restricted Subsidiary enters into a
Hedging Contract with such Person, a long term senior unsecured debt credit
rating of A or better from S&P or A2 or better from Moody’s and (ii) any
Lender Counterparty.

 

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

 

“Approved
Petroleum Engineer” means Ryder Scott Company, L.P., DeGolyer &
MacNaughton or any other reputable firm of independent petroleum engineers
selected by the Borrower Representative and reasonably acceptable to the
Administrative Agent and the Required Lenders.

 

“Arrangers”
means J.P. Morgan Securities LLC and Wells Fargo Securities, LLC in their
respective capacities as joint lead arrangers and joint bookrunners with
respect to the transactions contemplated hereby.

 

3

 

“Assignment
and Assumption” means an assignment and assumption entered into by a Lender
and an Eligible Assignee (with the consent of any party whose consent is
required by Section 11.04), in the form of Exhibit A or any other
form approved by the Administrative Agent.

 

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

 

“Bankruptcy
Event” means, with respect to any Person, such Person becomes the subject
of a bankruptcy or insolvency proceeding, or has had a receiver, conservator,
trustee, administrator, custodian, assignee for the benefit of creditors or
similar Person charged with the reorganization or liquidation of its business
appointed for it, or, in the good faith determination of the Administrative
Agent, has taken any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any such proceeding or appointment, provided
that a Bankruptcy Event shall not result solely by virtue of any ownership
interest, or the acquisition of any ownership interest, in such Person by a
Governmental Authority, provided, further, that such ownership interest does
not result in or provide such Person with immunity from the jurisdiction of
courts within the United States or from the enforcement of judgments or writs
of attachment on its assets or permit such Person (or such Governmental
Authority) to reject, repudiate, disavow or disaffirm any contracts or
agreements made by such Person.

 

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

 

“Borrower”
and “Borrowers” have the meanings assigned to such terms in the preamble
to this Agreement, together with their respective successors and permitted
assigns.

 

“Borrower
Representative” means, initially, Antero and from time to time after the
Effective Date, any other Borrower that the Borrowers may designate as its
replacement upon written notice to the Administrative Agent.

 

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

 

“Borrowing
Base” means, (a) for the period from the Effective Date until the
first Redetermination after the Effective Date, the Initial Borrowing Base and (b) at
any time thereafter, an amount equal to the amount determined in accordance
with Section 3.02, as the same may be redetermined, adjusted or reduced
from time to time pursuant to Section 3.03, Section 3.04 and Section 3.06.

 

“Borrowing
Base Deficiency” means, as of any date, the amount, if any, by which the
Aggregate Credit Exposure on such date exceeds the Borrowing Base in effect on
such date; provided, that, for purposes of determining the existence and
amount of any Borrowing Base Deficiency, obligations under any Letter of Credit
will not be deemed to be outstanding to the extent such obligations are secured
by cash in the manner contemplated by Section 2.06(j).

 

4

 

“Borrowing
Base Properties” means the Oil and Gas Interests which have been evaluated
by the Lenders and to which Lenders have given value for purposes of
establishing the Borrowing Base.

 

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

 

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

 

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

 

“Capital
Call Amount” means, as of the end of any fiscal quarter, the aggregate
amount of unsatisfied calls by Borrowers for equity capital outstanding as of
such date or otherwise made by Borrowers within fifteen (15) Business Days
after such date, to the extent such capital calls are satisfied and paid in
cash, by wire transfer or otherwise, within thirty (30) days after the end of
such fiscal quarter.

 

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

 

“Cash
Collateral Account” means a deposit account with, and in the name of, the
Administrative Agent, for the benefit of the Lenders, established and
maintained for the deposit of cash collateral required under or in connection
with this Agreement and the other Loan Documents.

 

“Cash
Management Obligations” means, with respect to any Borrower or Restricted
Subsidiary, any obligations of such Person owed to any Lender or Affiliate of
any Lender in respect of treasury management arrangements, depositary or other
cash management services, including any treasury management line of credit, in
each case, to the extent permitted under Section 7.01(d).

 

“Change
in Law” means (a) the adoption of any law, rule or regulation on
the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the
Issuing Bank (or, for purposes of Section 2.15(b), by any lending office
of such Lender or by such Lender’s or the Issuing Bank’s holding company, if
any) with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the date of this
Agreement.

 

5

 

“Change
of Control” means the occurrence of any of the following events: (i) any
Person or two or more Persons (other than the Permitted Holders) acting as a
group shall acquire beneficial ownership (within the meaning of Rule 13d-3
of the Securities and Exchange Commission under the Securities Act of 1934, as
amended, and including holding proxies to vote 
for the election of directors other than proxies held by Holding’s
management or their designees to be voted in favor of Persons nominated by
Holding’s Board of Directors) of thirty percent (30%) or more of the
outstanding voting securities of Holdings, measured by voting power (including
both common stock and any preferred stock or other equity securities entitling
the holders thereof to vote with the holders of common stock in elections for
directors of Holdings), (ii) one-third or more of the directors of
Holdings shall consist of Persons not nominated by Holding’s Board of Directors
(not including as Board nominees any directors which the Board is obligated to
nominate pursuant to shareholders agreements, voting trust arrangements or
similar arrangements), (iii) Paul Rady ceases to be Chairman of the Board
and Chief Executive Officer of Holdings and if such cessation is due to his
death or disability, he is not replaced by a successor approved by Majority
Lenders within 90 days after such death or disability occurs, such approval not
to be unreasonably withheld, (iv) Glen Warren ceases to be President and
Chief Financial Officer of Holdings and if such cessation is due to his death
or disability, he is not replaced by a successor approved by Majority Lenders
within 90 days after such death or disability occurs, such approval not to be
unreasonably withheld, (v) except to the extent otherwise permitted under
the terms of the Credit Agreement, Holdings ceases to own, directly or
indirectly, one hundred percent (100%) of the Equity Interests of any Borrower,
or (vi) the occurrence of a “Change of Control” under and as defined in
the Indenture.

 

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

 

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

 

“Co-Documentation
Agent” means, so long as it is a Lender, each of Bank of Scotland plc,
Union Bank, N.A., Credit Agricole Corporate and Investment Bank, BNP Paribas
and Deutsche Bank Trust Company Americas, each in its capacity as a
Co-Documentation Agent.

 

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

 

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

 

6

 

“Consolidated”
refers to the consolidation of any Person, in accordance with GAAP, with its
properly consolidated Subsidiaries. References herein to a Person’s
consolidated financial statements, financial position, financial condition,
liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person
and its properly consolidated Subsidiaries.

 

“Consolidated
Current Assets” means, as of any date of determination, the total of (i) the
Consolidated current assets of Holdings (excluding assets of any Consolidated
Subsidiaries that are not Credit Parties), determined in accordance with GAAP
as of such date and calculated on a Consolidated basis, plus, the
Aggregate Unused Commitment as of such date, plus the Capital Call
Amount and (ii) less any non-cash assets required to be included in
Consolidated current assets of Holdings as a result of the application of
Accounting Standards Codification Sections 718-10, 815-10 and 410-20 (as
successors to FASB Statement 123, 123R, 133 or 143) as of such date.  For purposes of this definition, the
calculation of the Aggregate Unused Commitment as of such date shall be made
after giving effect to any changes in the Borrowing Base or the Aggregate
Commitment approved by the Lenders (or at least the required percentage
thereof) within fifteen (15) days after the end of such fiscal quarter and
still in effect at the end of such fifteen (15) day period.

 

“Consolidated
Current Liabilities” means, as of any date of determination, the total of (i) Consolidated
current liabilities of Holdings (excluding liabilities of any Consolidated
Subsidiaries that are not Credit Parties), as determined in accordance with
GAAP as of such date and calculated on a Consolidated basis, (ii) less
payments of principal on the Loans required to be repaid within one year from
the time of calculation, (iii) less any non-cash obligations
required to be included in Consolidated current liabilities of Holdings as a
result of the application of Accounting Standards Codification Sections 718-10,
815-10 and 410-20 (as successors to FASB Statement 123, 123R, 133 or 143) as of
such date.

 

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

 

“Consolidated
EBITDAX” means for any period, EBITDAX of Holdings and its Consolidated
Subsidiaries that are Credit Parties on a Consolidated basis for such period.

 

“Consolidated
Funded Indebtedness” means as of any date, the sum of the following
(without duplication): (a) all Indebtedness which is classified as “long-term
indebtedness” on a Consolidated balance sheet of Holdings and its Consolidated
Subsidiaries that are Credit Parties prepared as of such date in accordance
with GAAP and any current maturities and other principal amount in respect of
such Indebtedness due within one year but which was classified as “long-term
indebtedness” at the creation thereof, (b) Indebtedness for borrowed money
of Holdings and its Consolidated Subsidiaries that are Credit Parties
outstanding under a revolving credit or similar agreement providing for
borrowings (and renewals and extensions thereof) over a period of more than one
year, notwithstanding the fact that any such borrowing is made within one year
of the expiration of such agreement, (c) all Indebtedness in respect of
Capital Lease Obligations of Holdings and its Consolidated Subsidiaries that
are Credit Parties, and (d) other Indebtedness of Holdings and its
Consolidated Subsidiaries that are Credit Parties on which interest accrues
(but excluding preferred stock (other than Disqualified Stock)).

 

7

 

“Consolidated
Net Income” means for any period, the Consolidated net income (or loss) of
Holdings and its Consolidated Subsidiaries that are Credit Parties, determined
in accordance with GAAP; provided that there shall be excluded (a) any
gain or loss from the sale of assets other than in the ordinary course of
business, (b) any non-cash income, gains, losses or charges resulting from
the application of Accounting Standards Codification Sections 718-10, 815-10
and 410-20 (as successors to FASB Statement 123, 123R, 133 or 143), (c) the
income (or deficit) of any Person accrued prior to the date it becomes a Credit
Party, or is merged into or consolidated with a Borrower or any of its Restricted
Subsidiaries, as applicable, (d) the income (or deficit) of any Person in
which any other Person (other than Holdings or any Credit Party) has an Equity
Interest, except to the extent of the amount of dividends or other
distributions actually paid to Holdings or any of the Credit Parties during
such period and (e) the undistributed earnings of any Consolidated
Subsidiary of Holdings, to the extent that the declaration or payment of
dividends or similar distributions by such Consolidated Subsidiary is not at
the time permitted by the terms of any contractual obligation (other than under
any Loan Document) or by any law applicable to such Consolidated Subsidiary.

 

“Consolidated
Subsidiaries” means, for any Person, any Subsidiary or other entity the accounts
of which would be Consolidated with those of such Person in its Consolidated
financial statements in accordance with GAAP.

 

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

 

“Counterpart
Agreement” means a Counterpart Agreement substantially in the form of Exhibit C
delivered by a Guarantor pursuant to Section 6.12.

 

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

 

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

 

“Crude
Oil” means all crude oil and condensate.

 

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

 

“Defaulting
Lender” means any Lender that (a) has failed, within two (2) Business
Days of the date required to be funded or paid, to (i) fund any portion of
its Loans, (ii) fund any portion of its participations in Letters of
Credit or (iii) pay over to the Administrative Agent, the Issuing Bank or
any Lender any other amount required to be paid by it hereunder, unless, in the
case of clause (i) above, such Lender notifies the Administrative Agent in writing
that such failure is the result of such Lender’s good faith determination that
a condition precedent to funding (specifically identified and including the
particular default, if any) has not been satisfied, (b) has notified the
Borrowers, the Administrative Agent, the Issuing Bank or any Lender in writing,
or has made a public statement to the effect, that it does not intend or expect
to comply 

 

8

 

with
any of its funding obligations under this Agreement (unless such writing or
public statement indicates that such position is based on such Lender’s good
faith determination that a condition precedent (specifically identified and
including the particular default, if any) to funding a Loan under this Agreement
cannot be satisfied) or generally under other agreements in which it commits to
extend credit, (c) has failed, within three (3) Business Days after
request by the Administrative Agent, the Issuing Bank or any Lender, acting in
good faith, to provide a certification in writing from an authorized officer of
such Lender that it will comply with its obligations (and is financially able
to meet such obligations) to fund prospective Loans and participations in then
outstanding Letters of Credit under this Agreement, provided that such Lender
shall cease to be a Defaulting Lender pursuant to this clause (c) upon
receipt by the Administrative Agent, the Issuing Bank or such Lender of such
certification in form and substance satisfactory to it and the Administrative
Agent, or (d) has become the subject of a Bankruptcy Event.

 

“Disposition”
or “Dispose” means the sale, transfer, license, lease, exchange or other
disposition (including any sale and leaseback transaction and any forfeiture)
of any property by any Person, including any sale, assignment, transfer or
other disposal, with or without recourse, of any notes or accounts receivable
or any rights and claims associated therewith.

 

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

 

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

 

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

 

“EBITDAX”
means, with respect to any Person for any period, Consolidated Net Income for
such period; plus without duplication and to the extent deducted in the
calculation of Consolidated Net Income for such period, the sum of (a) any
provision for (or less any benefit for) income or franchise Taxes; (b) Consolidated
interest expense (as determined in accordance with GAAP and including the
interest component of Capital Lease Obligations); (c) amortization,
depletion, depreciation and exploration expense; and (d) any non-cash
losses, expenses, impairments or charges (including losses arising from ceiling
test writedowns, non-cash losses or charges resulting from the requirements of
SFAS 123, 123R, 133 or 143, but excluding accruals of or reserves for cash
charges for any future period); provided that cash payments made during
such period or in any future period in respect of non-cash charges, 

 

9

 

expenses
or losses, other than any such excluded charge, expense or loss described in
the parenthetical to this clause (d) shall be subtracted from Consolidated
Net Income in calculating EBITDAX for the period in which such payments are
made; minus, to the extent included in the calculation of Consolidated
Net Income, the sum of (i) interest income, (ii) any extraordinary
income or gains; and (iii) any other non-cash income or gain, including
non-cash income or gains resulting from the requirements of SFAS 123, 123R, 133
or 143, but excluding any items that represent the reversal of any accrual of,
or cash reserve for, anticipated cash charges in any prior period that are
described in clause (d) above; provided that, with respect to the
determination of Holdings’ compliance with the Leverage Ratio set forth in Section 7.12
for any period, EBITDAX for such period shall be adjusted to give effect, on a
pro forma basis and consistent with GAAP, to any Acquisitions or Dispositions
made during such period as if such Acquisition or Disposition, as the case may
be, was made at the beginning of such period.

 

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

 

“Eligible
Assignee” means any Person that qualifies as an assignee pursuant to Section 11.04(b)(i);
provided that, notwithstanding the foregoing, “Eligible Assignee” shall
not include (i) Holdings, any Borrower or any of the Borrowers’ Affiliates
or Subsidiaries or (ii) any Person organized outside the United States if
any Borrower would be required to pay withholding taxes on interest or
principal owed to such Person.

 

“Engineered
Value” means, the value attributed to the Borrowing Base Properties for
purposes of the most recent Redetermination of the Borrowing Base pursuant to Article III
(or for purposes of determining the Initial Borrowing Base in the event no such
Redetermination has occurred), based upon the discounted present value of the
estimated net cash flow to be realized from the production of Hydrocarbons from
the Borrowing Base Properties as set forth in the Reserve Report.

 

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

 

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

 

“Equity
Interests” means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or
other equity ownership 

 

10

 

interests
in a Person, and any warrants, options or other rights entitling the holder
thereof to purchase or acquire any such equity interest.

 

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

 

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

 

“ERISA
Event” means (a) any “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30 day notice period is waived); (b) the
failure of any Plan to meet the minimum funding standards under Section 412
of the Code or Section 302 of ERISA; (c) the filing pursuant to Section 412(c) of
the Code or Section 302(c) of ERISA of an application for a waiver of
the minimum funding standard with respect to any Plan; (d) the incurrence
by any Credit Party or any of its ERISA Affiliates of any liability under Title
IV of ERISA with respect to the termination of any Plan; (e) the receipt
by any Credit Party or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence
by any Credit Party or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal from any Plan or Multiemployer
Plan; or (g) the receipt by any Credit Party or any ERISA Affiliate of any
notice, or the receipt by any Multiemployer Plan from any Credit Party or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan to which any Credit
Party or ERISA Affiliate is obligated to contribute is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.

 

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

 

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

 

“Excluded
Taxes” means, with respect to the Administrative Agent, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account
of any obligation of the Borrowers hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income  by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which
its principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed
by the United States of America or any similar tax imposed by any other
jurisdiction in which any Borrower is located, (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
Representative under Section 2.19(b)), any withholding tax that is imposed
on amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party to this Agreement (or designates a new lending office) or is
attributable to such Foreign Lender’s failure to comply with Section 2.17(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 

 

11

 

assignment),
to receive additional amounts from the Borrowers with respect to such
withholding tax pursuant to Section 2.17(a), and (d) any withholding
taxes that are imposed by FACTA.

 

“Existing
Hedging Contracts” means any Hedging Contracts entered into between any
Credit Party and any Lender Counterparty prior to the Effective Date and in
effect on the Effective Date.

 

“Existing
Senior Notes” means the $525,000,000 9.375% Senior Notes due 2017 issued by
Finco pursuant to the Existing Senior Notes Indenture and Guaranteed by
Holdings and the Borrowers.

 

“Existing
Senior Notes Indenture” means that certain Indenture dated as of November 17,
2009, by and between Finco, as issuer, and Wells Fargo Bank, National
Association, as trustee, as amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under Section 7.13.

 

“FACTA”
means Sections 1471 through 1474 of the Code (and any successor sections
thereto) and any regulations or official interpretations thereof.

 

“FASB”
means Financial Accounting Standards Board.

 

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

 

“Fee
Letters” means (a) that certain fee letter, dated October 7,
2010, among the Borrowers, the Administrative Agent and J.P. Morgan Securities
LLC and (b) that certain fee letter, dated October 7, 2010, among the
Borrowers, Wells Fargo Bank, N.A. and Wells Fargo Securities, LLC.

 

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

 

“Finco”
means Antero Resources Finance Corporation, a Delaware corporation, and an
indirect wholly-owned Subsidiary of Holdings.

 

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

 

12

 

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

 

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

 

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

 

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

 

“Guarantor”
means each Borrower (with respect to the Obligations of the other Borrowers),
and each Restricted Subsidiary that is a party hereto or hereafter executes and
delivers to the Administrative Agent and the Lenders, a Counterpart Agreement
pursuant to Section 6.12 or otherwise.

 

“Hazardous
Materials” means any substances regulated under any Environmental Law,
whether as pollutants, contaminants, chemicals, industrial, toxic or hazardous
substances or otherwise.

 

“Hedge
Modification” means any amendment, modification, cancellation, sale,
transfer, assignment, early termination, monetization or other disposition by
any Credit Party of any Hedging Contract (including any Existing Hedging
Contract) for Crude Oil or Natural Gas.

 

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

 

“Holdings”
means Antero Resources LLC, a Delaware limited liability company.

 

13

 

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

 

“Indebtedness”
of any Person means, without duplication, (a) all obligations for borrowed
money or evidenced by a bond, debenture, note or similar instrument, (b) all
accounts payable and all accrued expenses, liabilities or other obligations to
pay the deferred purchase price of property or services, (c) all obligations or
liabilities which (i) would under GAAP be shown on such Person’s balance sheet
as a liability, and (ii) are payable more than one year from the date of
creation or incurrence thereof (other than reserves for taxes and reserves for
contingent obligations); (d) all obligations or liabilities arising under
Hedging Contracts (on a net basis to the extent netting is provided for in the
applicable Hedging Contract), including any deferred premium obligations with
respect to floors; (e) all Capital Lease Obligations; (f) all obligations or
liabilities arising under conditional sales or other title retention
agreements; (g) all obligations or liabilities owing under direct or indirect
guaranties of obligations of any other Person or otherwise constituting
obligations to purchase or acquire or to otherwise protect or insure a creditor
against loss in respect of obligations of any other Person (such as obligations
under working capital maintenance agreements, agreements to keep-well, or
agreements to purchase liabilities, assets, goods, securities or services), but
excluding endorsements in the ordinary course of business of negotiable
instruments in the course of collection; (h) all obligations (for example,
repurchase agreements, mandatorily redeemable preferred stock (but not accrued
dividends on preferred stock), and sale/leaseback agreements) consisting of an
obligation to purchase or redeem securities or other property, if such
obligations arise out of or in connection with the sale or issuance of the same
or similar securities or property; (i) all obligations or liabilities with
respect to letters of credit or applications or reimbursement agreements
therefore; (j) all obligations or liabilities with respect to banker’s
acceptances; (k) all obligations or liabilities with respect to payments
received in consideration of oil, gas or other minerals yet to be acquired or
produced at the time of payment (including obligations under “take-or-pay”
contracts to deliver gas in return for payments already received and the
undischarged balance of any production payment created by such Person or for
the creation of which such Person directly or indirectly received payment) or
(l) all obligations or liabilities with respect to other obligations to deliver
goods or services in consideration of advance payments therefore; provided,
however, that the “Indebtedness” of any Person shall not include obligations or
liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business, unless and until such
obligations or liabilities are outstanding more than ninety (90) days past the
original invoice or billing date therefor.

 

“Indemnified
Taxes” means Taxes other than Excluded Taxes.

 

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

 

“Indenture”
means (a) the Existing Senior Notes Indenture and (b) any indenture by and
among any Credit Party, as issuer, and a trustee, pursuant to which any Senior
Notes are issued, as the same may be amended, restated, modified or otherwise
supplemented from time to time to the extent permitted under Section 7.13.

 

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

 

14

 

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

 

“Interest
Election Request” means a request by the Borrower Representative to convert
or continue a Borrowing in accordance with Section 2.08.

 

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

 

“Interest
Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three, six or, if
available, twelve months thereafter, as the Borrowers may elect; provided,
that (i) if any Interest Period would end on a day other than a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless, in the case of a Eurodollar Borrowing only, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest
Period that commences on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the last calendar month
of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. 
For purposes hereof, the date of a Borrowing initially shall be the date
on which such Borrowing is made and thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.

 

“Issuing
Bank” means JPMorgan Chase Bank, N.A., in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.06(i).  The Issuing Bank may,
in its discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall
include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“Law”
means any statute, law, regulation, ordinance, rule, treaty, judgment, order,
decree, permit, concession, franchise, license, agreement or other governmental
restriction of the United States or any state or political subdivision thereof
or of any foreign country or any department, province or other political
subdivision thereof.  Any reference to a
Law includes any amendment or modification to such Law, and all regulations,
rulings, and other Laws promulgated under such Law.

 

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

 

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

 

15

 

“Lender
Counterparty” means any Lender or any Affiliate of a Lender counterparty to
a Hedging Contract with any Credit Party including any Person that was, but
thereafter ceased to be, a Lender or Affiliate of a Lender but only to the
extent of the obligations of any Credit Party to such Person pursuant to a
Hedge Contract entered into at the time such Person was a Lender or an
Affiliate of a Lender.

 

“Lender
Hedging Obligations” means all obligations arising from time to time under
Hedging Contracts entered into from time to time between any Credit Party and a
Lender Counterparty (including any such obligations under any Existing Hedging
Contracts); provided that if such Lender 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 Lender Counterparty was a Lender
hereunder or an Affiliate of a Lender hereunder.

 

“Lenders”
means the Persons listed on Schedule 1.01 and any other Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.

 

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

 

“Leverage
Ratio” has the meaning assigned to such term in Section 7.12.

 

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

 

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

 

16

 

“LMIR”
means, for any day, a rate per annum equal to the rate for one month U.S.
dollar deposits as reported on Reuters BBA Libor Rates Page 3750  as of 11:00 a.m., London time, on such day, or if such day
is not a Business Day, then the immediately preceding Business Day (or if not
so reported, then any successor to or substitute for such service, providing
rate quotations comparable to those currently provided on such page of such
service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market).

 

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

 

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

 

“Majority
Lenders” means, at any time, Lenders having Credit Exposures and Unused
Commitments representing more than fifty percent (50.0%) of the sum of the
Aggregate Credit Exposure and the Aggregate Unused Commitment at such time or,
if the Aggregate Commitment has been terminated, Lenders having Credit
Exposures representing more than fifty percent (50.0%) of the Aggregate Credit
Exposure of all Lenders at such time.

 

“Material
Adverse Effect” means a material adverse effect on (a) the Borrowers’
combined financial condition, (b) the Borrowers’ combined business, assets, or
operations, considered as a whole, (c) the Borrowers’ ability to timely pay the
Obligations, or (d) the enforceability of the material terms of any Loan
Documents.

 

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

 

“Material
Indebtedness” means the Senior Notes and any other Indebtedness (other than
the Loans and Letters of Credit), or obligations in respect of one or more
Hedging Contracts, of any Borrower or any one or more of the Restricted
Subsidiaries in an aggregate principal amount exceeding $10,000,000.  For purposes of determining Material
Indebtedness, the “principal amount” of the obligations of any Credit Party in
respect of any Hedging Contract at any time shall be the maximum aggregate
amount (giving effect to any netting agreements) that such Credit Party would
be required to pay if such Hedging Contract were terminated at such time.

 

“Maturity
Date” means November 4, 2015.

 

“Maximum
Facility Amount” means the amount of One Billion Dollars ($1,000,000,000),
as such amount may be reduced from time to time pursuant to Section 2.02.

 

“Maximum
Liability” has the meaning assigned to such term in Section 8.09.

 

17

 

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

 

“Measurement
Date” has the meaning assigned in Section 7.03(a).

 

“Minimum
Collateral Amount” means eighty percent (80%) of the Engineered Value of
the Borrowing Base Properties included in (a) for the period from the Effective
Date until the first Redetermination after the Effective Date, the Initial
Borrowing Base and (b) at anytime thereafter, the most recent Borrowing Base
determined pursuant to Article III.

 

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

 

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

 

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

 

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

 

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

 

“Net
Cash Proceeds” means, (a) with respect to any Disposition of any Borrowing
Base Properties (including any Disposition of Equity Interests of a Borrower or
a Restricted Subsidiary) by Holdings or any Credit Party, the cash proceeds
received in connection with such sale net of (i) all federal, state and local
taxes required to be paid or accrued as a liability under GAAP or required to
be paid pursuant to the terms of the Limited Liability Company Agreement of
Holdings dated November 3, 2009 in connection with such Disposition, (ii) the
deduction of appropriate amounts to be provided as a reserve, in accordance
with GAAP, for liabilities associated with such Disposition and retained by the
seller thereof, (iii) any amounts held in escrow pending determination of
purchase price adjustment (such amounts to be become Net Cash Proceeds at the
time such amounts are released to a Borrower or Restricted Subsidiary), (iv)
the net amount paid after giving effect to all Hedge Modifications effected in
connection with such Disposition and corresponding to the notional volumes of
the Borrowing Base Properties so Disposed and (v) brokerage fees, professional
commissions and other costs and expenses associated therewith, including all legal,
title and recording fees and expenses, (b) with respect to any Permitted
Refinancings or issuance of Senior Notes, the cash proceeds received from such
Permitted Refinancing or issuance of Senior Notes, as the case may be, net of
underwriting discounts and commissions and other reasonable costs and expenses
associated therewith, including reasonable legal fees and expenses, and (c)
with respect to any Hedge 

 

18

 

Modification
by any Credit Party, the excess, if any, of (i) the net amount of all cash and
cash equivalents received in connection with all substantially contemporaneous
Hedge Modifications (after giving effect to any netting arrangements), over
(ii) the reasonable and documented out-of-pocket expenses incurred by such
Credit Party in connection with such Hedge Modification.

 

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

 

“Non-Consenting
Lender” has the meaning assigned to such term in Section 2.19(c).

 

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

 

“Obligations”
means (a) any and all obligations of every nature, contingent or otherwise,
whether now existing or hereafter arising, of any Credit Party from time to
time owed to the Administrative Agent, the Issuing Bank, the Lenders or any of
them under any Loan Document, whether for principal, interest, reimbursement of
amounts drawn under any Letter of Credit, funding indemnification amounts, fees,
expenses, indemnification or otherwise, (b) Lender Hedging Obligations and (c)
Cash Management Obligations.

 

“Oil
and Gas Interest(s)” means: (a) direct and indirect interests in and rights
with respect to oil, gas, mineral and related properties and assets of any kind
and nature, direct or indirect, including, without limitation, working, royalty
and overriding royalty interests, mineral interests, leasehold interests,
production payments, operating rights, net profits interests, other non-working
interests, contractual interests, non-operating interests and rights in any
pooled, unitized or communitized acreage by virtue of such interest being a
part thereof; (b) interests in and rights with respect to Hydrocarbons and
other minerals or revenues therefrom and contracts and agreements in connection
therewith and claims and rights thereto (including oil and gas leases,
operating agreements, unitization, communitization and pooling agreements and
orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and
gas sales, exchange and processing contracts and agreements and, in each case,
interests thereunder), and surface interests, fee interests, reversionary
interests, reservations and concessions related to any of the foregoing; (c)
easements, rights-of-way, licenses, permits, leases, and other interests
associated with, appurtenant to, or necessary for the operation of any of the
foregoing; (d) interests in oil, gas, water, disposal and injection wells,
equipment and machinery (including well equipment and machinery), oil and gas
production, gathering, transmission, compression, treating, processing and
storage facilities (including tanks, tank batteries, pipelines and gathering
systems), pumps, water plants, electric plants, gasoline and gas processing
plants, refineries and other tangible or intangible, movable or immovable, real
or personal property and fixtures located on, associated with, appurtenant to,
or necessary for the operation of any of the foregoing; and (e) all seismic,
geological, geophysical and engineering records, data, information, maps,
licenses and interpretations.

 

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

 

19

 

agreement,
as amended, and (d) with respect to any limited liability company, its
certificate of formation or articles of organization, as amended, and its
limited liability company agreement or operating agreement, as amended.

 

“Original
Credit Agreement” means that certain Third Amended and Restated Credit
Agreement dated January 14, 2009, by and among the Borrowers, certain
affiliates of the Borrowers, the lenders party thereto and the Administrative
Agent, as amended, supplemented or otherwise modified prior to the Effective
Date.

 

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

 

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

 

“Parent”
means, with respect to any Lender, any Person as to which such Lender is,
directly or indirectly, a subsidiary.

 

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

 

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

 

“Permitted
Holders” means each of (i) Warburg Pincus & Co.; (ii) Paul M. Rady (“Rady”);
(iii) Glen C. Warren, Jr. (“Warren”); (iv) Rady’s wife or Warren’s wife;
(v) any lineal descendant of either Rady or Warren; (vi) the guardian or other
legal representative of either Rady or Warren; (vii)  the estate of either Rady or Warren; (viii)
any trust of which at least one of the trustees is either Rady or Warren, or
the principal beneficiaries of which are any one or more of the Persons
referred to in the preceding clauses (ii) through (vii); (ix) any Person that
is controlled by any one or more of the Persons in the preceding clauses (i)
through (viii); and (x) any group (within the meaning of the Exchange Act) that
includes one or more of the Persons described in the preceding clauses (i)
through (ix), provided that such Persons described in the preceding clauses (i)
through (ix) control more than 50% of the total voting power of such group.

 

“Permitted
Investments” means:

 

(a)                                  U.S. Government
Securities;

 

(b)                                 investments in
commercial paper maturing within 270 days from the date of acquisition thereof
and having, at such date of acquisition, the highest credit rating obtainable
from S&P or from Moody’s;

 

(c)                                  investments in
certificates of deposit, banker’s acceptances and time deposits maturing within
twelve (12) months from the date of acquisition thereof issued or guaranteed by
or placed with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the United
States of America or any State 

 

20

 

thereof
which has a combined capital and surplus and undivided profits of not less than
$500,000,000 and whose long term certificates of deposit are rated at lest Aa3
by Moody’s or AA- by S&P;

 

(d)                                 fully
collateralized repurchase agreements with a term of not more than thirty (30)
days for securities described in paragraph (a) above and entered into with a
financial institution satisfying the criteria described in paragraph (c) above;
and

 

(e)                                  money market or
other mutual funds substantially all of whose assets comprise securities of the
type described in paragraph (a) through (d) above and that (i) comply with the
criteria set forth in Securities and Exchange Commission Rule 2a-7 under the
Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s
and (iii) have portfolio assets of at least $5,000,000,000.

 

“Permitted
Liens” means:

 

(a)                                  statutory Liens
for taxes, assessments or other governmental charges or levies which are not
yet delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP;

 

(b)                                 landlords’,
operators’, carriers’, warehousemen’s, repairmen’s, mechanics’, materialmen’s
or other like Liens which do not secure Indebtedness, in each case only to the
extent arising in the ordinary course of business and only to the extent
securing obligations which are not delinquent or which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP;

 

(c)                                  minor defects
and irregularities in title to any property, so long as such defects and irregularities
neither secure Indebtedness nor materially impair the value of such property or
the use of such property for the purposes for which such property is held;

 

(d)                                 deposits of
cash or securities to secure the performance of bids, trade contracts, leases,
statutory obligations and other obligations of a like nature (excluding appeal
bonds) incurred in the ordinary course of business;

 

(e)                                  Liens under the
Security Documents;

 

(f)                                    with respect
only to property subject to any particular Security Document, Liens burdening
such property which are expressly allowed by such Security Document;

 

(g)                                 contractual
Liens which arise in the ordinary course of business under operating
agreements, joint venture agreements, oil and gas partnership agreements, oil
and gas leases, farm-out agreements, division orders, contracts for the sale,
transportation or exchange of oil and natural gas, unitization and pooling
declarations and agreements, area of mutual interest agreements, overriding
royalty agreements, marketing agreements, processing agreements, net profits
agreements, development agreements, service agreements, gas balancing or
deferred production agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or other
geophysical permits or agreements, and other agreements which are usual and
customary in the oil and gas business and are for claims which are not 

 

21

 

delinquent
or which are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP, provided
that any such Lien referred to in this clause does not materially impair the
use of the Property covered by such Lien for the purposes for which such
Property is held by any Borrowers or any Restricted Subsidiary or materially
impair the value of such Property subject thereto;

 

(h)                                 Liens on any
property or asset acquired, constructed or improved by any Credit Party,
securing Indebtedness permitted under Section 7.01(g), which (a) are in favor
of the seller of such property or assets, in favor of the Person developing,
constructing, or improving such asset or property, or in favor of the Person
that provided the funding for the acquisition, development, construction,
repair or improvement cost, as the case may be, of such asset or property, (b)
except for any Sale and Leaseback Transaction permitted under Section 7.05(f),
are created within 90 days after the acquisition, development, construction, repair
or improvement, (c) secure the purchase price or development, construction,
repair or improvement cost, as the case may be, of such asset or property in an
amount up to 100% of the fair market value of such acquisition, construction or
improvement of such asset or property, and (d) are limited to the asset or
property so acquired, constructed or improved (including the proceeds thereof,
accessions thereto, upgrades thereof and improvements thereto);

 

(i)                                     Liens reserved
in oil and gas mineral leases for bonus or rental payments and for compliance
with the terms of such leases;

 

(j)                                     Liens arising
from Uniform Commercial Code financing statement filings regarding operating
leases entered into by the Borrowers and the Restricted Subsidiaries in the
ordinary course of business;

 

(k)                                  Liens arising
solely by virtue of any statutory or common law provision relating to banker’s
liens, rights of set-off or similar rights and remedies and burdening only
deposit accounts or other funds maintained with a creditor depository
institution, provided that no such deposit account is a dedicated cash
collateral account or is subject to restrictions against access by the
depositor in excess of those set forth by regulations promulgated by the Board
and no such deposit account is intended by any Borrowers or any Restricted
Subsidiary to provide collateral to the depository institution;

 

(l)                                     easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations in any property of any Borrowers or any Restricted Subsidiary for
the purpose of roads, pipelines, transmission lines, transportation lines,
distribution lines for the removal of gas, oil, coal or other minerals or
timber, and other like purposes, or for the joint or common use of real estate,
rights of way, facilities and equipment, that do not secure any monetary
obligations and which in the aggregate do not materially impair the use of such
property for the purposes of which such property is held by any Borrowers or
any Restricted Subsidiary or materially impair the value of such property
subject thereto; and

 

(m)                               judgment and
attachment Liens not giving rise to an Event of Default, provided that
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall not have expired and no
action to enforce such Lien has been commenced.

 

22

 

“Permitted
Refinancing” means any Indebtedness of any Credit Party, and Indebtedness
constituting Guarantees thereof by any Credit Party, incurred or issued in
exchange for, or the Net Cash Proceeds of which are used solely to extend,
refinance, renew, replace, defease or refund, any Senior Notes, in whole or in
part, from time to time; provided that (i) the principal amount of such
Permitted Refinancing (or if such Permitted Refinancing is issued at a
discount, the initial issuance price of such Permitted Refinancing) does not
exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of any premiums,
accrued and unpaid interest, fees and expenses incurred in connection
therewith), (ii) such Permitted Refinancing does not provide for any scheduled
repayment, mandatory redemption or payment of a sinking fund obligation prior
to the date that is one year after the Maturity Date, (iii)  the covenant, default and remedy provisions of
such Permitted Refinancing are not materially more onerous to the Credit
Parties and their respective Subsidiaries than those imposed by the Existing
Senior Notes, (iv)  the mandatory
prepayment, repurchase and redemption provisions of such Permitted Refinancing
are not materially more onerous to the Credit Parties and their respective
Subsidiaries than those imposed by the Existing Senior Notes, (v) the
non-default cash interest rate on the outstanding principal balance of such
Permitted Refinancing does not exceed the prevailing market rate then in effect
for similarly situated credits at the time such Permitted Refinancing is
incurred, (vi) such Permitted Refinancing is unsecured, (vii) no Subsidiary of
any Borrower is required to Guarantee such Permitted Refinancing unless such
Subsidiary is (or concurrently with any such Guarantee becomes) a Guarantor
hereunder, and (viii) to the extent such Permitted Refinancing is in the form
of senior subordinated notes, the subordination provisions set forth therein
are either (x) at least as favorable, taken as a whole, to the Secured Parties
as the subordination provisions contained in the Senior Notes being refinanced
in such Permitted Refinancing or (y) reasonably satisfactory to the
Administrative Agent and the Majority Lenders.

 

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

 

“Plan”
means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which any Credit Party or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Pledge
Agreement” means that certain Amended and Restated Pledge and Security
Agreement, dated as of the Effective Date, in favor of the Administrative Agent
for the benefit of the Secured Parties covering, among other things, the rights
and interests of the Borrowers or any Restricted Subsidiary in the Equity
Interests of each Restricted Subsidiary and otherwise in form and substance
satisfactory to the Administrative Agent.

 

“Prime
Rate” means the rate of interest per annum publicly announced from time to
time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal
office in New York, New York, each change in the Prime Rate shall be effective
from and including the date such change is publicly announced as being
effective.  THE PRIME RATE IS A REFERENCE
RATE AND MAY NOT BE JPMORGAN CHASE BANK, N.A.’S LOWEST RATE.

 

23

 

“Projected Oil and Gas Production” means the projected
production of oil or gas (measured by volume unit or BTU equivalent, not sales
price) for the term of the contracts or a particular month, as applicable, from
Oil and Gas Interests owned by the Credit Parties that are located in or
offshore, if any, of the United States and that have attributable to them
proved (and for purposes of Section 7.03(a)(ii) only, possible and probable)
Oil and Gas Interests, as such production is projected in the Reserve Report
most recently delivered, after deducting projected production from any Oil and
Gas Interests sold or under contract for sale that had been included in such
report and after adding projected production from any Oil and Gas Interests
that had not been reflected in such report but that are reflected in a separate
or supplemental reports meeting the requirements of such Section 6.01(d) or (f)
and otherwise are reasonably satisfactory to Administrative Agent.

 

“Projections” means Holdings and its Consolidated Subsidiaries’
forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash
flow statements, all prepared on a basis consistent with the historical
financial statements described in Section 4.04 and after giving effect to the
Transactions, together with appropriate supporting details and a statement of
underlying assumptions, and for the period from the Effective Date through
December 31, 2012.

 

“Redetermination” means any Scheduled Redetermination or Special
Redetermination.

 

“Redetermination Date” means each date on which the Borrowing
Base is redetermined pursuant to the terms hereof, which shall be (a) with
respect to any Scheduled Redetermination, on or about April 15 and October 15
of each year, commencing April 15, 2011, (b) with respect to any Special
Redetermination requested by the Borrowers pursuant to Section 3.04, the first
day of the first month which is not less than twenty (20) Business Days
following the date of a request by the Borrowers for a Special Redetermination
and (c) with respect to any Special Redetermination requested by the Required
Lenders, the date notice of such Redetermination is delivered to the Borrowers
pursuant to Section 3.05.

 

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

 

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

 

“Required Lenders” means, at any time, Lenders having Credit Exposures
and Unused Commitments representing at least sixty-six and two-thirds percent
(66-2/3%) of the sum of the Aggregate Credit Exposure and the Aggregate Unused
Commitment at such time or, if the Aggregate Commitment has been terminated,
Lenders having Credit Exposures representing at least sixty-six and two-thirds
percent (66-2/3%) of the Aggregate Credit Exposure of all Lenders at such time.

 

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

 

“Restricted Payment” means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in any Credit Party, or any 

 

24

 

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

 

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

 

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

 

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

 

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

 

“Secured Party” means the Administrative Agent, any Lender and
any Lender Counterparty and any other holder of Obligations including any Cash
Management Obligations and Lender Hedging Obligations, to the extent that such
Lender Hedging Obligations were incurred when such Person was a Lender
Counterparty.

 

“Security Agreement” means that certain Second Amended and
Restated Security Agreement, dated as of the Effective Date, made by the
Borrowers in favor of the Administrative Agent for the benefit of the Secured
Parties covering, among other things, the rights and interests of the Borrowers
in certain personal property, as amended, restated, supplemented or otherwise
modified from time to time.

 

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

 

“Senior Notes” means (a) the Existing Senior Notes and (b) any
senior or senior subordinated notes issued by any Credit Party in one or more
transactions; provided that (i) the terms of such senior notes do not
provide for any scheduled repayment, mandatory redemption (including any
required offer to redeem) or payment of a sinking fund obligation prior to the
date that is one year after the Maturity Date (except for any offer to redeem
such senior notes required as a result of asset sales or the occurrence of a “Change
of Control” under and as defined in the Indenture), (ii) the terms and
conditions of such senior notes are, taken as a whole, substantially the same
as those set forth in the Existing Senior Notes, (iii) the non-default interest
rate on the outstanding principal balance of such senior notes does not exceed
the prevailing market rate then in effect for similarly situated credits at the
time such senior notes are issued, (iv) such senior notes are unsecured, (v) no
Subsidiary of any Borrower is required to Guarantee the Indebtedness evidenced
by such senior notes unless such Subsidiary is (or concurrently with any such
Guarantee becomes) a Guarantor hereunder, and (vi) the subordination provisions
of any 

 

25

 

senior
subordinated notes are reasonably satisfactory to the Administrative Agent and
the Majority Lenders.

 

“Senior Notes Documents” means any Senior Notes, the related
Indenture and any documents or instruments contemplated by or executed in
connection with any of them, in each case, as amended, modified, supplemented
or otherwise restated from time to time to the extent permitted under Section
7.13.

 

“Special Redetermination” means any redetermination of the
Borrowing Base made pursuant to Section 3.04.

 

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

 

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

 

“Super-Majority Lenders” means, at any time, Lenders having
Credit Exposures and Unused Commitments representing at least eighty percent
(80%) of the sum of the Aggregate Credit Exposure and all Unused Commitments at
such time or, if the Aggregate Commitment has been terminated, Lenders having
Credit Exposures representing at least eighty percent (80%) of the Aggregate
Credit Exposure of all Lenders at such time.

 

“Syndication Agent” means, so long as it is a Lender, Wells
Fargo Bank, N.A. in its capacity as Syndication Agent.

 

26

 

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

 

“Transactions” means the execution, delivery and performance by
the Credit Parties of this Agreement and the Loan Documents, the borrowing of
Loans, the use of the proceeds thereof and the issuance of Letters of Credit
hereunder.

 

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

 

“Unrestricted Subsidiary” means (a) any Subsidiary that shall be
designated an Unrestricted Subsidiary by the Board of Directors of any Borrower
in the manner provided below and (b) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors of any Borrower may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries at the time of
such designation or at any time thereafter (i) is a Material Domestic
Subsidiary, (ii) owns or operates any Oil and Gas Interests included in the
Borrowing Base Properties, or (iii) guarantees, or is a primary obligor of, any
indebtedness, liabilities, or other obligations under any now existing or
hereafter outstanding Senior Notes (or any Permitted Refinancing thereof).

 

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

 

“Unused Commitment Fee” has the meaning assigned to such term in
Section 2.12(a).

 

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

 

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

 

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

 

Section 1.03                                Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such 

 

27

 

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

 

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

 

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

 

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

 

ARTICLE II

The Credits

 

Section 2.01                                Commitments.  Subject to the terms and conditions set forth
herein, each Lender that was a Lender under and as defined in the Original
Credit Agreement agrees to continue the Original Loans and each Lender agrees
to make one or more Loans to the Borrowers from time to time on any Business
Day during the Availability Period in an aggregate principal amount that will
not result in (a) such Lender’s Credit Exposure exceeding such Lender’s
Applicable Percentage of the Aggregate Commitment or (b) the Aggregate Credit
Exposure exceeding the Aggregate Commitment. 
Within the foregoing limits and subject to the terms and conditions set
forth herein, the Borrowers may borrow, prepay and reborrow Loans.

 

28

 

Section 2.02                                Termination of
the Aggregate Commitment and Reduction of the Maximum Facility Amount.

 

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

 

(b)                                 The Borrowers
may at any time terminate the Aggregate Commitment, or from time to time
reduce, the Maximum Facility Amount; provided that (i) each reduction of
the Maximum Facility Amount shall be in an amount that is an integral multiple
of $1,000,000 and not less than $5,000,000 and (ii) the Borrowers shall not
terminate the Aggregate Commitment or reduce the Maximum Facility Amount if,
after giving effect to any concurrent prepayment of the Loans in accordance
with Section 2.10 and Section 2.11, the Aggregate Credit Exposure would exceed
the Aggregate Commitment.

 

(c)                                  The Borrowers
shall notify the Administrative Agent of any election to terminate the
Aggregate Commitment or reduce the Maximum Facility Amount under paragraph (b)
of this Section at least three (3) Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof.  Promptly following receipt of
any notice, the Administrative Agent shall advise the Lenders of the contents
thereof.  Each notice delivered by the Borrowers
pursuant to this Section shall be irrevocable; provided that a notice of
termination of the Aggregate Commitments delivered by the Borrowers may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrowers (by
notice to the Administrative Agent on or prior to the specified effective date)
if such condition is not satisfied.  Any
termination of the Aggregate Commitment shall be permanent.  Any reduction of the Aggregate Commitment as
a result of a reduction in the Maximum Facility Amount shall be made ratably
among the Lenders in accordance with each Lender’s Applicable Percentage.

 

Section 2.03                                [Reserved].

 

Section 2.04                                Loans and
Borrowings.

 

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

 

(b)                                 Subject to
Section 2.14, each Borrowing shall be comprised entirely of ABR Loans or
Eurodollar Loans as the Borrowers may request in accordance herewith.  Each Lender at its option may make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option
shall not affect the obligation of the Borrowers to repay such Loan in
accordance with the terms of this Agreement.

 

29

 

(c)                                  At the
commencement of each Interest Period for any Eurodollar Borrowing, such
Borrowing shall be in an aggregate amount that is an integral multiple of
$100,000 and not less than $1,000,000. 
At the time that each ABR Borrowing is made, such Borrowing shall be in
an aggregate amount that is an integral multiple of $100,000 and not less than
$1,000,000; provided that an ABR Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the Aggregate Commitment or that
is required to finance the reimbursement of an LC Disbursement as contemplated
by Section 2.06(e).  Borrowings of more
than one Type may be outstanding at the same time; provided that there
shall not at any time be more than a total of twelve (12) Eurodollar Borrowings
outstanding.

 

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

 

Section 2.05                                Requests for
Borrowings.  To request
a Borrowing, the Borrower Representative shall notify the Administrative Agent
of such request by telephone (a) in the case of a Eurodollar Borrowing, not
later than 12:00 noon three (3) Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon on
the date of the proposed Borrowing (so long as such date is a Business
Day).  Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery
or telecopy to the Administrative Agent of a written Borrowing Request in a
form approved by the Administrative Agent and signed by the Borrower
Representative.  Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.04:

 

(i)                                     the aggregate
amount of the requested Borrowing;

 

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

 

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

 

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

 

(v)                                 the location
and number of the Borrowers’ account to which funds are to be disbursed, which
shall comply with the requirements of Section 2.07.

 

If no election as to the Type of Borrowing is specified, then the
requested Borrowing shall be an ABR Borrowing. 
If no Interest Period is specified with respect to any requested
Eurodollar Borrowing, then the Borrowers shall be deemed to have selected an
Interest Period of one month’s duration. 
Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

 

30

 

Section 2.06                                Letters of
Credit.

 

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

 

(b)                                 Notice of
Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of Credit
(or the amendment, renewal or extension of an outstanding Letter of Credit),
the Borrower Representative shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by
the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably
in advance of the requested date of issuance, amendment, renewal or extension)
a notice requesting the issuance of a Letter of Credit, or identifying the
Letter of Credit to be amended, renewed or extended, and specifying the date of
issuance, amendment, renewal or extension (which shall be a Business Day), the
date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such Letter of Credit.  If requested by the Issuing Bank, the
Borrower Representative also shall submit a letter of credit application on the
Issuing Bank’s standard form in connection with any request for a Letter of
Credit.  A Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit the Borrowers shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the LC Exposure shall not exceed $50,000,000 and (ii)
the Aggregate Credit Exposure shall not exceed the Aggregate Commitment.

 

(c)                                  Expiration Date.  Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after
the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and
(ii) the date that is thirty (30) days prior to the Maturity Date.

 

(d)                                 Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from the Issuing
Bank, a participation in such Letter of Credit equal to such Lender’s
Applicable Percentage of the aggregate amount available to be drawn under such
Letter of Credit.  In consideration and
in furtherance of the foregoing, each Lender hereby absolutely and unconditionally
agrees to pay to the Administrative Agent, for the account of the Issuing Bank,
such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing
Bank and not reimbursed by the Borrowers on the date due as provided in
paragraph (e) of this Section, or of any 

 

31

 

reimbursement payment
required to be refunded to the Borrowers for any reason.  Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including any amendment, renewal or extension of
any Letter of Credit or the occurrence and continuance of a Default or reduction
or termination of the Aggregate Commitment, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.

 

(e)                                  Reimbursement.  If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrowers shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon on the date that such LC
Disbursement is made, if the Borrowers shall have received notice of such LC
Disbursement prior to 10:00 a.m. on such date, or, if such notice has not been
received by the Borrowers prior to such time on such date, then not later than
12:00 noon on the Business Day immediately following the day that the Borrowers
receive such notice; provided that the Borrowers may, subject to the
conditions to borrowing set forth herein, request in accordance with Section
2.05 that such payment be financed with an ABR Borrowing in an equivalent
amount and, to the extent so financed, the Borrowers’ obligation to make such
payment shall be discharged and replaced by the resulting ABR Borrowing.  If the Borrowers fail to make such payment
when due, the Administrative Agent shall notify each Lender of the applicable
LC Disbursement, the payment then due from the Borrowers in respect thereof and
such Lender’s Applicable Percentage thereof. 
Promptly following receipt of such notice, each Lender shall pay to the
Administrative Agent its Applicable Percentage of the payment then due from the
Borrowers, in the same manner as provided in Section 2.07 with respect to Loans
made by such Lender (and Section 2.07 shall apply, mutatis  mutandis,
to the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the Issuing Bank the amounts so received by it from the
Lenders.  Promptly following receipt by
the Administrative Agent of any payment from the Borrowers pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the
Issuing Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing
Bank as their interests may appear.  Any
payment made by a Lender pursuant to this paragraph to reimburse the Issuing
Bank for any LC Disbursement (other than the funding of ABR Loans as
contemplated above) shall not constitute a Loan and shall not relieve the
Borrowers of their obligation to reimburse such LC Disbursement.

 

(f)                                    Obligations
Absolute.  The
Borrowers’ obligation to reimburse LC Disbursements as provided in paragraph
(e) of this Section shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement under any
and all circumstances whatsoever and irrespective of (i) any lack of validity
or enforceability of any Letter of Credit or this Agreement, or any term or
provision therein, (ii) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect, (iii) payment by
the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit, or
(iv) any other event or circumstance 

 

32

 

whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section, constitute a legal or equitable discharge of, or provide a right of setoff
against, the Borrowers’ obligations hereunder. 
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor
any of their Related Parties, shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of
Credit or any payment or failure to make any payment thereunder (irrespective
of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank; provided that the foregoing shall not
be construed to excuse the Issuing Bank from liability to the Borrowers to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrowers to the extent permitted by
applicable law) suffered by the Borrowers that are caused by the Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, in
the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.  In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

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

 

(h)                                 Interim
Interest.  If the
Issuing Bank shall make any LC Disbursement, then, unless the Borrowers shall
reimburse such LC Disbursement in full on the date such LC Disbursement is
made, the unpaid amount thereof shall bear interest, for each day from and
including the date such LC Disbursement is made to but excluding the date that
the Borrowers reimburse such LC Disbursement, at the rate per annum then
applicable to ABR Loans; provided that, if the Borrowers fail to
reimburse such LC Disbursement when due pursuant to paragraph (e) of this
Section, then Section 2.13(c) shall apply. 
Interest accrued pursuant to this paragraph shall be for the account of
the Issuing Bank, except that interest accrued on and after the date of payment
by any Lender pursuant to 

 

33

 

paragraph (e) of this
Section to reimburse the Issuing Bank shall be for the account of such Lender
to the extent of such payment.

 

(i)                                     Replacement of
the Issuing Bank.  The Issuing
Bank may be replaced at any time by written agreement among the Borrowers, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing
Bank.  The Administrative Agent shall
notify the Lenders of any such replacement of the Issuing Bank.  At the time any such replacement shall become
effective, the Borrowers shall pay all unpaid fees accrued for the account of
the replaced Issuing Bank pursuant to Section 2.12(b).  From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of the Issuing Bank under this Agreement with respect to Letters of
Credit to be issued thereafter and (ii) references herein to the term “Issuing
Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require.  After the replacement of an
Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank
under this Agreement with respect to Letters of Credit issued by it prior to
such replacement, but shall not be required to issue additional Letters of
Credit.

 

(j)                                     Cash
Collateralization.

 

(i)                                     If any Event of
Default shall occur and be continuing, on the Business Day that the Borrowers
receive notice from the Administrative Agent or the Required Lenders (or, if
the maturity of the Loans has been accelerated, Lenders with LC Exposure
representing greater than sixty-six and two-thirds percent (662/3%) of the total LC Exposure) demanding the deposit
of cash collateral pursuant to this paragraph, the Borrowers shall deposit in
the Cash Collateral Account an amount in cash equal to the total LC Exposure as
of such date plus any accrued and unpaid interest thereon, if any; provided
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to any Borrower described in paragraph (h) or (i) of Article IX.

 

(ii)                                  All cash
collateral provided by any Borrower or any other Credit Party pursuant to the
request of the Administrative Agent in accordance with Section 2.22(c) shall be
deposited in the Cash Collateral Account.

 

(iii)                               Deposits in the
Cash Collateral Account made pursuant to either the foregoing paragraph (i) of
this Section 2.06(j) or Section 2.22(c) shall be held by the Administrative
Agent as collateral for the payment and performance of the Borrower’s obligations
under this Agreement corresponding to the LC Exposure and each Credit Party
hereby grants a security interest in such cash and each deposit account
(including the Cash Collateral Account) into which such cash is deposited to
secure the Obligations under this Agreement. 
The Administrative Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over the Cash Collateral
Account.  Other than any interest earned
on

 

34

 

the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Administrative Agent and at the Borrowers’ risk and expense, such deposits
shall not bear interest.  Interest or
profits, if any, on such investments shall accumulate in such account.  Moneys in such account shall be applied by
the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for
which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrowers for
the LC Exposure at such time or, if the maturity of the Loans has been
accelerated (but subject to the consent of Lenders with LC Exposure
representing sixty-six and two-thirds percent (662/3%) or more of the total LC Exposure), be applied to satisfy other
Obligations under this Agreement and to the extent any excess remains after
payment in full in cash of all Obligations and the termination of all
Commitments, such excess shall be released to the Borrowers.

 

(iv)                              If the
Borrowers are required to provide an amount of cash collateral pursuant to
either paragraph (i) of this Section 2.06(j) or Section 2.22(c),
such amount (to the extent not applied as aforesaid) shall be returned to the
Borrowers within one Business Day after (x) in the case of cash collateral
provided pursuant to Section 2.22(c), the date on which such cash
collateral is no longer required pursuant to Section 2.22(c) and (y) in
the case of cash collateral provided pursuant to paragraph (i) above, all
Events of Default have been cured or waived.

 

Section 2.07                                Funding of
Borrowings.

 

(a)                                  Each Lender
shall make each Loan to be made by it hereunder on the proposed date thereof by
wire transfer of immediately available funds by 2:00 p.m. to the account
of the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders.  The
Administrative Agent will make such Loans available to the Borrowers by
promptly crediting the amounts so received, in like funds, to a deposit account
of the Borrowers designated by the Borrower Representative in the applicable
Borrowing Request; provided that ABR Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.06(e) shall
be remitted by the Administrative Agent to the Issuing Bank.

 

(b)                                 Unless the
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender’s share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with paragraph (a) of this Section and may, in reliance
upon such assumption, make available to the Borrowers 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 Borrowers 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 Borrowers to but excluding the date of payment
to the Administrative Agent, at (i) in the case of such Lender, the
greater of the Federal Funds Effective Rate and a rate 

 

35

 

determined by the
Administrative Agent in accordance with banking industry rules on
interbank compensation or (ii) in the case of the Borrowers, the interest
rate applicable to ABR Loans.  If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender’s Loan included in such Borrowing.

 

Section 2.08                                Interest
Elections.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

36

 

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

 

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

 

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

 

Section 2.09                                Repayment of
Loans; Evidence of Debt.

 

(a)                                  Each Borrower
hereby jointly and severally and unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Loan on the Maturity Date.

 

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

 

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

 

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

 

(e)                                  Any Lender may
request that Loans made by it be evidenced by a promissory note.  In such event, the Borrowers shall prepare,
execute and deliver to such Lender a promissory note payable to such Lender
(or, if requested by such Lender, to such Lender and its registered assigns)
and in the form attached hereto as Exhibit D.  

 

37

 

Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 11.04) be represented by
one or more promissory notes in such form payable to the payee named therein
(or, if requested by such payee, to such payee and its registered assigns).

 

(f)                                    Each Borrower
and each surety, endorser, guarantor and other party ever liable for payment of
any sums of money payable under this Agreement, jointly and severally waive
presentment and demand for payment, notice of intention to accelerate the
maturity, protest, notice of protest and nonpayment, as to the payments due under
this Agreement or any other Loan Document and as to each and all installments
hereunder and thereunder, and agree that their liability under this Agreement
or any other Loan Document shall not be affected by any renewal or extension in
the time of payment hereof, or in any indulgences, or by any release or change
in any security for the payment of the Obligations, and hereby consent to any
and all such renewals, extensions, indulgences, releases or changes.

 

Section 2.10                                Optional
Prepayment of Loans.

 

(a)                                  The Borrowers
shall have the right at any time and from time to time to prepay, without
premium or penalty, any Borrowing in whole and or in part, in a minimum amount
of $1,000,000 and integral multiples of $1,000,000 subject to prior notice in
accordance with paragraph (b) of this Section 2.10.

 

(b)                                 The Borrower
Representative shall notify the Administrative Agent by telephone (confirmed by
telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 11:00 a.m. three (3) Business
Days before the date of prepayment, or (ii) in the case of prepayment of
an ABR Borrowing, not later than 11:00 a.m. one Business Day before the
date of prepayment.  Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid; provided
that, if a notice of prepayment is given in connection with a conditional
notice of termination or reduction of the Aggregate Commitment as contemplated
by Section 2.02, then such notice of prepayment may be revoked if such
notice of termination or reduction is revoked in accordance with Section 2.02.  Promptly following receipt of any such notice
relating to a Borrowing, the Administrative Agent shall advise the Lenders of
the contents thereof.  Each prepayment of
a Borrowing shall be applied ratably to the Loans included in the prepaid
Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.13.

 

Section 2.11                                Mandatory
Prepayment of Loans.

 

(a)                                  In the event a
Borrowing Base Deficiency exists as a result of a Scheduled Redetermination or
Special Redetermination of the Borrowing Base, the Borrowers shall, within
thirty (30) days after written notice from the Administrative Agent to the
Borrowers of such Borrowing Base Deficiency, take any of the following actions
or a combination thereof to eliminate the Borrowing Base Deficiency:

 

38

 

(i)                                     prepay, without
premium or penalty, the principal amount of the Loans (and after all Loans are
repaid in full, provide cash collateral in accordance with Section 2.06(j))
in an amount sufficient to eliminate such Borrowing Base Deficiency, such
prepayment to be made in full on or before the 30th day after the Borrowers’
receipt of notice of such Borrowing Base Deficiency;

 

(ii)                                  notify the
Administrative Agent that it intends to prepay, without premium or penalty (but
subject to any funding indemnification amounts required by Section 2.16),
the principal amount of such Borrowing Base Deficiency in not more than six (6) equal
monthly installments plus accrued interest thereon and make the first such
monthly payment on the 30th day after the Borrowers’ receipt of notice of such
Borrowing Base Deficiency and the subsequent installments to be due and payable
at one month intervals thereafter until such Borrowing Base Deficiency has been
eliminated; or

 

(iii)                               give notice to
Administrative Agent that Borrowers desire to provide Administrative Agent with
deeds of trust, mortgages, security agreements, financing statements and other
security documents in form and substance satisfactory to Administrative Agent,
granting, confirming, and perfecting first and prior Liens or security
interests in collateral acceptable to Required Lenders, to the extent needed to
cover the Minimum Collateral Amount (as they in their reasonable discretion
deem consistent with prudent oil and gas banking industry lending standards at
the time) to an amount which eliminates such Borrowing Base Deficiency, and
then provide such security documents within thirty (30) days after the
Borrowers’ receipt of notice of such Borrowing Base Deficiency.  If Required Lenders determine that the giving
of such security documents will not serve to eliminate such Borrowing Base
Deficiency, then, within five (5) Business Days after receiving notice of
such determination from Administrative Agent, Borrowers will make the
prepayments specified in paragraph (ii) of this clause (a), including the
payments which would have previously been made but for its election under this
paragraph (iii) on the preceding 30th day.

 

(b)                                 In the event a
Borrowing Base Deficiency occurs as a result of a reduction in the Borrowing
Base pursuant to Section 3.06 upon an issuance of Senior Notes, the
Borrowers shall prepay the Loans (and after all Loans are repaid in full,
provide cash collateral in accordance with Section 2.06(j)) with the Net
Cash Proceeds received as a result of the issuance of such Senior Notes on the
Business Day on which it receives such Net Cash Proceeds to the extent
necessary to eliminate such Borrowing Base Deficiency.

 

(c)                                  If any Borrower
or any Restricted Subsidiary Disposes of any Borrowing Base Properties (whether
pursuant to a Disposition of Equity Interests of a Restricted Subsidiary
permitted pursuant to Section 7.05 or otherwise), the Borrowers shall
prepay the Loans (and after all Loans are repaid in full, provide cash
collateral in accordance with Section 2.06(j)) to the extent necessary to
eliminate any Borrowing Base Deficiency that may exist or that may have
occurred as a result of such Disposition on the next 

 

39

 

Business Day following the
day it or any Restricted Subsidiary receives the Net Cash Proceeds from such
Disposition.

 

(d)                                 If any Borrower
or any Restricted Subsidiary enters into a Hedge Modification, the Borrowers
shall prepay the Loans (and after all Loans are repaid in full, provide cash
collateral in accordance with Section 2.06(j)) to the extent necessary to
eliminate any Borrowing Base Deficiency that may exist or that may have
occurred as a result of such Hedge Modification on the next Business Day
following the day it or any Restricted Subsidiary receives the Net Cash Proceeds
from such Hedge Modification (or in the case of any Hedge Modification entered
into by any Credit Party pursuant to Section 7.03(b)(y), on the next
Business Day following the day the Borrowers receive notice from the
Administrative Agent of the amount of any adjustment to the Borrowing Base made
by the Required Lenders pursuant to Section 7.03(b)(y)(ii)).

 

(e)                                  Each prepayment
of principal under this section shall be accompanied by all interest then
accrued and unpaid on the principal so prepaid. 
Any principal or interest prepaid pursuant to this section shall be in
addition to, and not in lieu of, all payments otherwise required to be paid
under the Loan Documents at the time of such prepayment.

 

Section 2.12                                Fees.

 

(a)                                  The Borrowers
agree to pay to the Administrative Agent, for the account of each Lender, an
unused commitment fee (the “Unused Commitment Fee”) equal to 0.50% of
the daily average of the Aggregate Unused Commitment.  Such Unused Commitment Fee shall be
calculated on the basis of a year consisting of 360 days.  The Unused Commitment Fee shall be payable in
arrears on the last day of March, June, September and December of
each year, commencing with the first such date to occur after the Effective
Date, and on the Maturity Date for any period then ending for which the Unused
Commitment Fee shall not have been theretofore paid.  In the event the Aggregate Commitment
terminates on any date other than the last day of March, June, September or
December of any year, the Borrowers agree to pay to the Administrative
Agent, for the account of each Lender, on the date of such termination, the pro
rata portion of the Unused Commitment Fee due for the period from the last day
of the immediately preceding March, June, September or December, as the
case may be, to the date such termination occurs.

 

(b)                                 The Borrowers
agree to pay (i) to the Administrative Agent for the account of each
Lender a participation fee with respect to its participations in Letters of
Credit, which shall accrue at the same Applicable Rate used to determine the
interest rate applicable to Eurodollar Loans on the average daily amount of
each Lender’s LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue
at the rate equal to one-eighth percent (0.125%) per annum on the average daily
amount of the LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but 

 

40

 

excluding the later of the
date of termination of the Aggregate Commitment and the date on which there
ceases to be any LC Exposure (but in no event less than $150 per annum), as
well as the Issuing Bank’s standard fees with respect to the issuance, amendment,
renewal or extension of any Letter of Credit or processing of drawings
thereunder; provided that no such individual fee shall exceed $500.  Participation fees and fronting fees accrued
through and including the last day of March, June, September and December of
each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date; provided
that all such fees shall be payable on the date on which the Aggregate
Commitment terminates and any such fees accruing after the date on which the
Aggregate Commitment terminates shall be payable on demand.  Any other fees payable to the Issuing Bank
pursuant to this paragraph shall be payable within ten (10) days after
demand.  All participation fees and
fronting fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).

 

(c)                                  The Borrowers
agree to pay to the Administrative Agent and the Arrangers, for their
respective accounts, the fees set forth in the Fee Letters payable to the
Administrative Agent and the Arrangers and such other fees payable in the
amounts and at the times separately agreed upon between the Borrowers, the Administrative
Agent and the Arrangers.

 

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

 

Section 2.13                                Interest.

 

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

 

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

 

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

 

(d)                                 Accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and upon termination of the Aggregate Commitment and on 

 

41

 

the Maturity Date; provided
that (i) interest accrued pursuant to paragraph (c) of this Section shall
be payable on demand, (ii) in the event of any repayment or prepayment of
any Loan (other than a prepayment of an ABR Loan prior to the end of the
Availability Period at a time when no Borrowing Base Deficiency exists),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.

 

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

 

Section 2.14                                Alternate Rate
of Interest.  If prior to
the commencement of any Interest Period for a Eurodollar Borrowing:

 

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

 

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

 

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

 

Section 2.15                                Increased Costs.

 

(a)                                  If any Change
in Law shall:

 

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

 

42

 

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

 

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

 

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

 

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

 

(d)                                 Failure or
delay on the part of any Lender or the Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or
the Issuing Bank’s right to demand such compensation; provided that the
Borrowers shall not be required to compensate a Lender or the Issuing Bank
pursuant to this Section for any increased costs or reductions incurred
more than 270 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower Representative of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or the
Issuing Bank’s intention to claim compensation therefor; provided  further
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 270-day period referred to above shall be extended to
include the period of retroactive effect thereof.

 

43

 

Section 2.16                                Break Funding
Payments.  In the
event of (a) the payment of any principal of any Eurodollar Loan other
than on the last day of an Interest Period applicable thereto (including as a
result of an Event of Default), (b) the conversion of any Eurodollar Loan
other than on the last day of the Interest Period applicable thereto, (c) the
failure to borrow, convert, continue or prepay any Eurodollar Loan on the date
specified in any notice delivered pursuant hereto (regardless of whether such
notice may be revoked under Section 2.10(b) and is revoked in
accordance therewith) or (d) the assignment of any Eurodollar Loan other
than on the last day of the Interest Period applicable thereto as a result of a
request by the Borrower Representative pursuant to Section 2.19, then, in
any such event, the Borrowers shall compensate each Lender for the loss, cost
and expense attributable to such event. 
In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on
the principal amount of such Loan had such event not occurred, at the Adjusted
LIBO Rate that would have been applicable to such Loan, for the period from the
date of such event to the last day of the then current Interest Period therefor
(or, in the case of a failure to borrow, convert or continue, for the period
that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the Eurodollar market.  A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this Section shall
be delivered to the Borrower Representative and shall be conclusive absent
manifest error.  The Borrowers shall pay
such Lender the amount shown as due on any such certificate within ten (10) days
after receipt thereof.

 

Section 2.17                                Taxes.

 

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

 

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

 

(c)                                  The Borrowers
shall indemnify the Administrative Agent, each Lender and the Issuing Bank,
within ten (10) days after written demand therefor, for the full amount of
any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such
Lender or the Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrowers hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with

 

44

 

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 Representative by a Lender or
the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf
of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

 

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

 

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

 

(f)                                    If the
Administrative Agent or a Lender determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrowers or with respect to which the Borrowers have paid
additional amounts pursuant to this Section 2.17, it shall pay over such
refund to the Borrowers (but only to the extent of indemnity payments made, or
additional amounts paid, by the Borrowers under this Section 2.17 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrowers, upon the
request of the Administrative Agent or such Lender, agree to repay the amount
paid over to the Borrowers (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Administrative Agent or
such Lender in the event the Administrative Agent or such Lender is required to
repay such refund to such Governmental Authority. This Section shall not
be construed to require the Administrative Agent or any Lender to make
available its tax returns (or any other information relating to its taxes which
it deems confidential) to the Borrowers or any other Person.

 

(g)                                 In the case of
a Lender that would be subject to withholding tax imposed by FACTA on payments
made on account of any obligation of the Borrowers hereunder if such Lender
fails to comply with the applicable reporting requirements of FACTA (including
those contained in Section 1471(b) or 1472(b) of the Code, as
applicable), such Lender shall provide such documentation prescribed by
applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of
the Code) and such additional documentation reasonably requested by the
Borrower Representative or the Administrative Agent as may 

 

45

 

be necessary for the
Borrowers or the Administrative Agent to comply with their obligations under
FACTA, to determine that such Lender has complied with such Lender’s
obligations under FACTA or to determine the amount to deduct and withhold from
any such payments.

 

Section 2.18                                Payments
Generally; Pro Rata Treatment; Sharing of Set-offs.

 

(a)                                  The Borrowers
shall make each payment required to be made by it hereunder (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts
payable under Section 2.15, Section 2.16 or Section 2.17, or
otherwise) prior to 12:00 noon on the date when due, in immediately available
funds, without set-off or counterclaim. 
Any amounts received after such time on any date may, in the discretion
of the Administrative Agent, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices at Mail Code IL1-0010, 10 South Dearborn,
Chicago, Illinois, 60603-2003, except payments to be made directly to the
Issuing Bank as expressly provided herein and except that payments pursuant to Section 2.15,
Section 2.16, Section 2.17 and Section 11.03 shall be made
directly to the Persons entitled thereto. 
The Administrative Agent shall distribute any such payments received by
it for the account of any other Person to the appropriate recipient promptly
following receipt thereof.  If any
payment hereunder shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for
the period of such extension.  All
payments hereunder shall be made in Dollars.

 

(b)                                 If at any time
insufficient funds are received by and available to the Administrative Agent to
pay fully all amounts of principal, unreimbursed LC Disbursements, interest,
fees and other Obligations then due hereunder, such funds shall be applied (i) first,
towards payment of interest and fees then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed
LC Disbursements then due to such parties; provided that,
notwithstanding anything to the contrary contained in this Agreement or in any
other Loan Document, in the event such funds are received by and available to
the Administrative Agent as a result of the exercise of any rights and remedies
with respect to any collateral under the Security  Documents or as a result of any distribution
made pursuant to a bankruptcy proceeding of any Credit Party or any plan of
reorganization confirmed in any such proceeding, such funds shall be applied (A) first
to any fees and reimbursements due Administrative Agent hereunder or under any
other Loan Document, (B) then ratably to the payment of the Obligations
(other than Cash Management Obligations), including unreimbursed LC
Disbursements (in the manner set forth above) and the Lender Hedging
Obligations until such Obligations are paid in full, and (C) then to the
payment of Cash Management Obligations. 
The Administrative Agent shall have no responsibility to determine the
existence or amount of Lender Hedging Obligations or Cash Management
Obligations and may reserve from the application of amounts under this Section amounts
distributable in respect of Lender 

 

46

 

Hedging Obligations or Cash
Management Obligations until it has received evidence satisfactory to it of the
existence and amount of such Lender Hedging Obligations or Cash Management
Obligations.

 

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

 

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

 

(e)                                  Notwithstanding
anything to the contrary herein, if any Lender shall fail to make any payment
required to be made by it pursuant to Section 2.06(d) or Section 2.06(e),
Section 2.07(b), Section 2.18(d) or Section 11.03(c), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), (i) apply 

 

47

 

any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender’s obligations under such Sections until all such unsatisfied
obligations are fully paid, and/or (ii) hold any such amounts in a
segregated account as cash collateral for, and application to, any funding
obligations of such Lender under any such Section, in the case of each of
clauses (i) and (ii) above, in any order as determined by the
Administrative Agent in its discretion.

 

Section 2.19                                Mitigation
Obligations; Replacement of Lenders.

 

(a)                                  If any Lender
requests compensation under Section 2.15, or if any Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Section 2.17, then such Lender shall
use reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder
to another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.15 or Section 2.17, as the case
may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender.  The Borrowers hereby agree to
pay all reasonable costs and expenses incurred by any Lender in connection with
any such designation or assignment.

 

(b)                                 If any Lender
requests compensation under Section 2.15, or if the Borrowers are required
to pay any additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Section 2.17, then the Borrowers
may, at their sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in Section 11.04),
all its interests, rights and obligations under this Agreement to an assignee
that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment); provided that (i) the Borrowers
shall have received the prior written consent of the Administrative Agent (and
if a Commitment is being assigned, the Issuing Bank), which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of
an amount equal to the outstanding principal of its Loans and participations in
LC Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrowers (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from
a claim for compensation under Section 2.15 or payments required to be
made pursuant to Section 2.17, such assignment will result in a reduction
in such compensation or payments.  A
Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment and delegation
cease to apply.

 

(c)                                  If (i) in
connection with any proposed amendment, modification, termination, waiver or
consent with respect to any of the provisions of this Agreement or any other
Loan Document that requires approval of all of the Lenders, each Lender or each
Lender affected thereby under Section 11.02, the consent of the Required
Lenders 

 

48

 

shall have been obtained but
the consent of one or more such other Lenders (each a “Non-Consenting Lender”)
whose consent is required has not been obtained, (ii) notwithstanding
anything to the contrary contained in Section 3.03, in connection with any
increase in the Borrowing Base, the consent of the Super-Majority Lenders shall
have been obtained but the consent of all of the Lenders has not been obtained
(any non-consenting Lender, a “Non-Consenting Borrowing Base Lender”),
or (iii) any Lender becomes a Defaulting Lender; then the Borrowers may,
at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, elect to replace such Non-Consenting Lender,
Non-Consenting Borrowing Base Lender or Defaulting Lender, as the case may be,
as a Lender party to this Agreement in accordance with and subject to the
restrictions contained in, and consents required by Section 11.04; provided
that (x) the Borrowers shall have received the prior written consent of
the Administrative Agent (and if a Commitment is being assigned, the Issuing
Bank), which consent shall not unreasonably be withheld, and (y) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrowers (in the case of all other amounts).  A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a consent by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply or, in the case of a Defaulting
Lender, such Lender is no longer a Defaulting Lender.

 

Section 2.20                                Borrower
Representative.  Each
Borrower hereby appoints Antero as its contractual representative, hereunder
and under each other Loan Document, for all purposes, including requesting
borrowings and receiving account statements and other notices and
communications to the Borrowers (or any of them) from the Administrative Agent
or any Lender.  The Administrative Agent
and the Lenders may rely, and shall be fully protected in relying, on any
request for borrowing, disbursement instruction, report, information or any
other notice or communication made or given by such Person, whether in its own
name, on behalf of any other Borrower or on behalf of “the Borrowers,” and
neither the Administrative Agent nor any Lender shall have any obligation to
make any inquiry or request any confirmation from or on behalf of any other
Borrower as to the binding effect on it of any such request, instruction,
report, information, notice or communication, nor shall the joint and several
character of the Borrowers’ liability for the Obligations be affected.  The Administrative Agent and the Lenders, and
their respective officers, directors, agents or employees, shall not be liable
to the Borrower Representative or any Borrower for any action taken or omitted
to be taken by the Borrower Representative on behalf of the Borrowers pursuant
to this Section 2.20.

 

Section 2.21                                Joint and
Several Liability.  The
Obligations shall constitute one joint and several direct and general
obligation of the Borrowers. 
Notwithstanding anything to the contrary contained herein, each of the Borrowers
shall be jointly and severally, with each other Borrower, directly and
unconditionally liable to the Administrative Agent and the Lenders for all
Obligations and shall have the obligations of co-maker with respect to the
Loans, any promissory notes issued pursuant to Section 2.09(e), and the
other Obligations, it being agreed that the advances to each Borrower inure to
the benefit of all Borrowers, and that the Administrative 

 

49

 

Agent and the Lenders are relying on such joint and
several liability of the Borrowers as co-makers in extending the Loans
hereunder.

 

Section 2.22                                Defaulting
Lenders.  Notwithstanding any provision
of this Agreement to the contrary, if any Lender becomes a Defaulting Lender,
then the following provisions shall apply for so long as such Lender is a
Defaulting Lender.

 

(a)                                  Fees shall
cease to accrue on the unfunded portion of the Commitment of such Defaulting
Lender pursuant to Section 2.12(a).

 

(b)                                 The Commitment
and Credit Exposure of such Defaulting Lender shall not be included in
determining whether all Lenders, the Super-Majority Lenders, the Required
Lenders or the Majority Lenders have taken or may take any action hereunder
(including any consent to any amendment, waiver or other modification pursuant
to Section 11.02), provided that (i) any waiver, consent,
amendment or modification requiring the consent of such Lender or each affected
Lender shall require the consent of such Defaulting Lender, (ii) any
waiver, consent, amendment or modification requiring the consent of each Lender
shall require the consent of such Defaulting Lender (except in respect of any
increases in the Borrowing Base or the Maximum Facility Amount), and (iii) the
Commitment of such Defaulting Lender may not be increased or extended without
the consent of such Defaulting Lender.

 

(c)                                  If any LC
Exposure exists at the time a Lender becomes a Defaulting Lender then:

 

(i)                                     all or any part
of such LC Exposure of such Defaulting Lender shall be reallocated among the
Non-Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent (x) the sum (without duplication) of
all Non-Defaulting Lenders’ Credit Exposures plus such Defaulting Lender’s LC
Exposure does not exceed the total of all Non-Defaulting Lenders’ Commitments, (y) the
sum of each Non-Defaulting Lender’s Credit Exposure plus its reallocated share
of such Defaulting Lender’s LC Exposure does not exceed such Non-Defaulting
Lender’s Commitment, and (z) the conditions set forth in Section 5.02
are satisfied at that time;

 

(ii)                                  if the
reallocation described in clause (i) above cannot, or can only partially,
be effected, then the Borrowers shall, within one (1) Business Day
following notice by the Administrative Agent, cash collateralize for the
benefit of the Issuing Bank only the Borrowers’ obligations corresponding to
such Defaulting Lender’s LC Exposure (after giving effect to any partial
reallocation pursuant to clause (i) above) in accordance with the
procedures set forth in Section 2.06(j) for so long as such LC
Exposure is outstanding;

 

(iii)                               if the
Borrowers cash collateralize any portion of such Defaulting Lender’s LC
Exposure pursuant to clause (ii) above, then the Borrowers shall not be
required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) 

 

50

 

with respect to such
Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC
Exposure is cash collateralized;

 

(iv)                              if the LC
Exposure of the Non-Defaulting Lenders is reallocated pursuant to clause (i) above,
then the fees payable to the Lenders pursuant to Section 2.12(a) and
2.12(b) shall be adjusted in accordance with such Non-Defaulting Lenders’
Applicable Percentages; and

 

(v)                                 if all or any
portion of such Defaulting Lender’s LC Exposure is neither cash collateralized
nor reallocated pursuant to clause (i) or (ii) above, then, without
prejudice to any rights or remedies of the Issuing Bank or any Lender
hereunder, all letter of credit fees payable under Section 2.12(b) with
respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing
Bank until and to the extent that such LC Exposure is cash collateralized
and/or reallocated.

 

(d)                                 So long as such
Lender is a Defaulting Lender, the Issuing Bank shall not be required to issue,
amend or increase any Letter of Credit, unless it is satisfied that the related
exposure of such Letter of Credit and the Defaulting Lender’s then outstanding
LC Exposure will be 100% covered by the Commitments of the Non-Defaulting
Lenders and/or cash collateral will be provided by the Borrowers in accordance
with Section 2.22(c), and participating interests in any such newly issued
or increased Letter of Credit shall be allocated among Non-Defaulting Lenders
in a manner consistent with Section 2.22(c)(i) (and Defaulting
Lenders shall not participate therein).

 

If (i) a Bankruptcy Event with respect to a Parent of any Lender
shall occur following the date hereof and for so long as such event shall
continue or (ii) the Issuing Bank has a good faith belief that any Lender
has defaulted in fulfilling its obligations under one or more other agreements
in which such Lender commits to extend credit, the Issuing Bank shall not be
required to issue, amend, or increase any Letter of Credit, unless the Issuing
Bank shall have entered into arrangements with the Borrower or such Lender,
satisfactory to the Issuing Bank to defease any risk to it in respect of such
Lender hereunder.

 

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

 

ARTICLE III

Borrowing Base

 

Section 3.01                                Initial
Borrowing Base.  During the
period from the Effective Date until the first Redetermination after the
Effective Date, the Borrowing Base shall be $550,000,000 (the “Initial
Borrowing Base”).  Notwithstanding
the foregoing, the Borrowing Base may be subject to further adjustments from
time to time pursuant to Sections 3.06, 7.03 and 7.05.

 

51

 

Section 3.02                                Reserve Report.  As soon as available and in any event by April 1
and October 1 of each year, commencing April 1, 2011, the Borrowers
shall deliver to the Administrative Agent and each Lender a Reserve Report,
prepared as of the first day of the month immediately preceding the date such
report is due, in form and substance reasonably satisfactory to the
Administrative Agent and prepared by an Approved Petroleum Engineer (or, in the
case of any Reserve Report due on any date other than April 1 of each
year, by petroleum engineers employed by the Borrowers or an Approved Petroleum
Engineer), said Reserve Report to utilize economic and pricing parameters
established from time to time by the Administrative Agent, together with such
other information, reports and data concerning the value of the Borrowing Base
Properties as the Administrative Agent shall deem reasonably necessary to
determine the value of such Borrowing Base Properties.  Simultaneously with the delivery to the
Administrative Agent and the Lenders of each Reserve Report, the Borrowers
shall submit to the Administrative Agent and each Lender the Borrowers’
requested amount of the Borrowing Base as of the next Redetermination
Date.  Promptly after the receipt by the
Administrative Agent of such Reserve Report and the Borrowers’ requested amount
for the Borrowing Base, the Administrative Agent shall submit to the Lenders a
recommended amount of the Borrowing Base to become effective for the period
commencing on the next Redetermination Date.

 

Section 3.03                                Scheduled
Redeterminations of the Borrowing Base; Procedures and Standards.  Based in part on the Reserve Reports made
available to the Administrative Agent and the Lenders pursuant to Section 3.02,
the Lenders shall redetermine the Borrowing Base on or prior to the next
Redetermination Date (or such date promptly thereafter as reasonably possible
based on the engineering and other information available to the Lenders).  Any Borrowing Base which becomes effective as
a result of any Redetermination of the Borrowing Base shall be subject to the
following restrictions: (a) such Borrowing Base shall not exceed the
amount of the Borrowing Base requested by the Borrowers, (b) to the extent
such Borrowing Base represents an increase in the Borrowing Base in effect
prior to such Redetermination, such Borrowing Base must be approved by all
Lenders, and (c) to the extent such Borrowing Base represents a decrease
in the Borrowing Base in effect prior to such Redetermination or a
reaffirmation of such prior Borrowing Base, such Borrowing Base must be
approved by the Administrative Agent and Required Lenders.  If a redetermined Borrowing Base is not
approved by the Administrative Agent and Required Lenders within fifteen (15)
days after the submission to the Lenders by the Administrative Agent of its
recommended Borrowing Base pursuant to Section 3.02, or by all Lenders
within such fifteen (15) day period in the case of any increase in the
Borrowing Base, the Administrative Agent shall notify each Lender that the
recommended Borrowing Base has not been approved and request that each Lender
submit to the Administrative Agent within ten (10) days thereafter its
proposed Borrowing Base.  Promptly
following the tenth day after the Administrative Agent’s request for each
Lender’s proposed Borrowing Base, the Administrative Agent shall determine the
Borrowing Base for such Redetermination by calculating the highest Borrowing
Base then acceptable to the Administrative Agent and a number of Lenders
sufficient to constitute Required Lenders (or all Lenders in the case of an
increase in the Borrowing Base).  Each
Redetermination shall be made by the Lenders in their sole discretion, but
based on the Administrative Agent’s and such Lender’s usual and customary
procedures for evaluating Oil and Gas Interests as such exist at the time of
such Redetermination, and including adjustments to reflect the effect of any
Hedging Contracts of the Borrowers and the Restricted Subsidiaries as such
exist at the time of such Redetermination. 
The Borrowers acknowledge and agree that each Redetermination shall be
based upon the loan collateral value which the Administrative Agent 

 

52

 

and each Lender in its sole discretion (using such
methodology, assumptions and discount rates as the Administrative Agent and
such Lender customarily uses in assigning collateral value to Oil and Gas
Interests) assigns to the Borrowing Base Properties at the time in question and
based upon such other credit factors consistently applied (including, without
limitation, the assets, liabilities, cash flow, interest note changes,
business, properties, prospects, management and ownership of the Credit
Parties) as the Administrative Agent and such Lender customarily considers in
evaluating similar oil and gas credits. 
If the Borrowers do not furnish all information, reports and data
required to be delivered by any date specified in this Article III, unless
such failure is not the fault of the Borrowers, the Administrative Agent and
Lenders may nonetheless designate the Borrowing Base at any amounts which the
Administrative Agent and Lenders in their reasonable discretion determine and
may redesignate the Borrowing Base from time to time thereafter until the
Administrative Agent and Lenders receive all such information, reports and
data, whereupon the Administrative Agent and Lenders shall designate a new
Borrowing Base, as described above.  IT IS EXPRESSLY UNDERSTOOD THAT THE ADMINISTRATIVE AGENT AND LENDERS
HAVE NO OBLIGATION TO DESIGNATE THE BORROWING BASE AT ANY PARTICULAR AMOUNTS,
EXCEPT IN THE EXERCISE OF THEIR DISCRETION, WHETHER IN RELATION TO THE MAXIMUM
FACILITY AMOUNT OR OTHERWISE.

 

Section 3.04                                Special
Redeterminations.  In addition
to Scheduled Redeterminations and any adjustments made by the Required Lenders
to the Borrowing Base pursuant to Section 7.03 and Section 7.05, (a) the
Borrowers may request a Special Redetermination of the Borrowing Base once
between each Scheduled Redetermination and (b) the Required Lenders may
request a Special Redetermination once between each Scheduled
Redetermination.  Any request by
Borrowers pursuant to this Section 3.04 shall be submitted to the
Administrative Agent and each Lender and at the time of such request (or within
fifteen (15) days thereafter in the case of the Reserve Report) Borrowers shall
(1) deliver to the Administrative Agent and each Lender a Reserve Report
prepared as of a date prior to the date of such request that is reasonably
acceptable to the Administrative Agent and such other information which the
Administrative Agent shall reasonably request, and (2) notify the
Administrative Agent and each Lender of the Borrowing Base requested by
Borrowers in connection with such Special Redetermination.  Any request by Required Lenders pursuant to
this Section 3.04 shall be submitted to the Administrative Agent and the
Borrowers. Any Special Redetermination shall be made by the Administrative
Agent and Lenders in accordance with the procedures and standards set forth in Section 3.03;
provided that no Reserve Report is required to be delivered to the
Administrative Agent or the Lenders in connection with any Special
Redetermination requested by the Required Lenders pursuant to this Section 3.04.

 

Section 3.05                                Notice of
Redetermination.  Promptly
following any Redetermination of the Borrowing Base, the Administrative Agent
shall notify the Borrowers of the amount of the redetermined Borrowing Base,
which Borrowing Base shall be effective as of the date specified in such
notice, and such Borrowing Base shall remain in effect for all purposes of this
Agreement until the next Redetermination.

 

Section 3.06                                Additional
Reductions in Borrowing Base.  Unless otherwise waived in writing by the
Required Lenders, upon the issuance of any Senior Notes by any Credit Party in accordance
with Section 7.01(h) (other than any Permitted Refinancing that
extends, refinances, 

 

53

 

renews, replaces, defeases or refunds existing
Senior Notes), the Borrowing Base then in effect shall automatically be reduced
by $250 for each $1,000 in stated principal amount of such Senior Notes on the
date such Senior Notes are issued.

 

ARTICLE IV

Representations and
Warranties

 

Each Borrower represents and warrants to the Lenders that:

 

Section 4.01                                Organization;
Powers.  Each Credit Party and each
Restricted Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has all requisite power
and authority to carry on its business as now conducted and is qualified to do
business in, and is in good standing in, every jurisdiction where the character
of the properties owned or held by it or the nature of the business transacted
by it makes such qualification necessary.

 

Section 4.02                                Authorization;
Enforceability.  The
Transactions are within each Credit Party’s corporate, limited liability
company or partnership powers and have been duly authorized by all necessary
corporate, limited liability company or partnership and, if required,
stockholder action.  This Agreement has
been duly executed and delivered by each Credit Party and this Agreement and
the other Loan Documents, when duly executed are delivered, constitute the
legal, valid and binding obligations of each Credit Party, enforceable in accordance
with their terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

 

Section 4.03                                Governmental
Approvals; No Conflicts.  The
Transactions (a) do not require any consent or approval of, registration
or filing with, or any other action by, any Governmental Authority, except such
as have been obtained or made and are in full force and effect or have been
made or to be made in connection with the filing of the Security Documents to
secure the Obligations, (b) will not violate any applicable law or
regulation or the charter, by-laws or other Organizational Documents of any
Borrower or any Restricted Subsidiary or any order of any Governmental
Authority, (c) will not violate or result in a default under any material
indenture, agreement, instrument, license, order or permit binding upon any
Borrower or any Restricted Subsidiary or any of their respective assets, or
give rise to a right thereunder to require any payment to be made by any
Borrower or any Restricted Subsidiary, and (d) will not result in the
creation or imposition of any Lien on any asset of any Borrower or, any
Restricted Subsidiary other than Permitted Liens.

 

Section 4.04                                Financial
Condition; No Material Adverse Change.

 

(a)                                  The Borrower
Representative has heretofore furnished to the Lenders (i) the audited
Consolidated balance sheet and related statements of income, members’ equity
and cash flows of Holdings and its Consolidated Subsidiaries as of and for the
fiscal year ended December 31, 2009, reported on by KMPG, LLP, independent
public accountants, and (ii) the unaudited Consolidated balance sheet and related
statements of income, members’ equity and cash flows of Holdings and its
Consolidated Subsidiaries

 

54

 

as of and for the fiscal
quarter ended June 30, 2010, certified by its Financial Officer to the
effect that such financial statements present fairly, in all material respects,
the financial position and results of operations and cash flows of Holdings and
its Consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in paragraph (ii) above.

 

(b)                                 Since December 31,
2009, no event or circumstance which has had or could reasonably be expected to
have a Material Adverse Effect has occurred.

 

Section 4.05                                Intellectual
Property.  Each
Borrower and each Restricted Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by such Borrower and such
Restricted Subsidiaries, as the case may be, does not infringe upon the rights
of any other Person, except for any such infringements that, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

Section 4.06                                Litigation and
Environmental Matters.

 

(a)                                  There are no
actions, suits, investigations or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the Borrowers,
threatened against or affecting any Borrower or any Restricted Subsidiary, (i) as
to which there is a reasonable possibility of an adverse determination and
that, if adversely determined, could reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect or (ii) that involve
this Agreement or the Transactions.

 

(b)                                 Except with
respect to any matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, no Borrower nor
any Restricted Subsidiary, to any Borrower’s knowledge, (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
become subject to any Environmental Liability, (iii) has received written
notice of any claim with respect to any Environmental Liability or (iv) knows
of any basis for any claim with respect to any Environmental Liability.

 

Section 4.07                                Compliance with
Laws and Agreements.  Each
Borrower and each Restricted Subsidiary is in compliance with all Laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it
or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

Section 4.08                                Investment
Company Status.  No Borrower
and no Restricted Subsidiary is an “investment company” as defined in, or
subject to regulation under, the Investment Company Act of 1940.

 

Section 4.09                                Taxes.  Each Borrower and each Restricted Subsidiary
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in 

 

55

 

good faith by appropriate proceedings and for which
such Borrower or such Restricted Subsidiary, as applicable, has set aside on
its books adequate reserves or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse Effect.

 

Section 4.10                                ERISA.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.  The present value of all accumulated benefit
obligations under each Plan did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $500,000 the
fair market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans did not, as of the
date of the most recent financial statements reflecting such amounts, exceed by
more than $500,000 the fair market value of the assets of all such underfunded
Plans.

 

Section 4.11                                Disclosure.  Each Borrower has disclosed to the Lenders
all agreements, instruments and corporate or other restrictions to which it or
any Restricted Subsidiary is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.  None of the
other reports, financial statements, certificates or other information
furnished by or on behalf of any Borrower or any Restricted Subsidiary to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) when taken as a whole contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading as of the date made or deemed made; provided that,
with respect to projected financial information, each Borrower represents only
that such information was prepared in good faith based on assumptions believed
to be reasonable at the time.

 

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

 

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

 

Section 4.14                                Margin Stock.  No Borrower and no Restricted Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by 

 

56

 

the Board), and no part of the proceeds of any Loan
will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying margin stock.

 

Section 4.15                                Title to
Properties; Licenses.  Each Credit
Party and each Restricted Subsidiary has good and defensible title to, or valid
leasehold interests in or rights to exploit under farmout agreements, all of
the Collateral owned or leased by such Person. 
All of each Credit Party and each Restricted Subsidiary’s other material
properties and assets necessary or used in the ordinary conduct of its
business, are free and clear of all Liens, encumbrances, or adverse claims
other than Permitted Liens and free of all impediments to the use of such
properties and assets in the ordinary course of such Person’s business, except
that no representation or warranty, express, implied or statutory, is made with
respect to any oil, gas or mineral property which is not a Borrowing Base
Property.  Each Credit Party and each
Restricted Subsidiary owns the net revenue interests in production attributable
to the wells and units evaluated in the most recently delivered Reserve Report.  The ownership of such properties does not in
the aggregate in any material respect obligate such Credit Party or such
Restricted Subsidiary to bear the costs and expenses relating to the
maintenance, development and operations of such properties in an amount
materially in excess of the working interest of such properties set forth in
the most recently delivered Reserve Report. 
Upon delivery of each Reserve Report furnished to the Lenders pursuant
to Section 6.01(f), the statements made in the preceding sentences of this
section and in Section 4.19 shall be true in all material respects with
respect to such Reserve Report.

 

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

 

Section 4.17                                Solvency.

 

(a)                                  Immediately
after the consummation of the Transactions and immediately following the making
of the initial Borrowing, if any, made on the Effective Date and after giving
effect to the application of the proceeds thereof, (1) the fair value of
the assets of the Credit Parties on a combined basis, at a fair valuation, will
exceed the debts and liabilities, subordinated, contingent or otherwise, of the
Credit Parties on a combined basis; (2) the present fair saleable value of
the real and personal property of the Credit Parties on a combined basis will
be greater than the amount that will be required to pay the probable liability
of the Credit Parties on a combined basis on their debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (3) the Credit Parties on a combined basis
will be able to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured; and (4) the
Credit Parties on a combined basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.

 

57

 

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

 

Section 4.18                                Leases and
Contracts; Performance of Obligations.  To the best of each Borrower’s knowledge, the
leases, contracts, servitudes and other agreements forming a part of the
Borrowing Base Properties are in full force and effect.  No Borrower has received a written notice of
default under any such contracts or agreements that remains uncured that could
reasonably be expected to result in a Material Adverse Effect.  Except for any rents, royalties and other
payments that in the aggregate do not exceed $1,000,000 or are being contested
in compliance with Section 6.04,  all rents,
royalties and other payments due and payable under such leases, contracts,
servitudes and other agreements, or under any Permitted Liens, or otherwise
attendant to the ownership or operation of any Oil and Gas Interests, have been
properly and timely paid.  No Credit
Party has received written notice of a default that remains uncured with
respect to its obligations (and no Credit Party has received written notice of
any default by any third party with respect to such third party’s obligations)
under any such leases, contracts, servitudes and other agreements, or under any
Permitted Liens, or otherwise attendant to the ownership or operation of any
part of the Borrowing Base Properties, where such default could reasonably be
expected to materially and adversely affect the ownership or operation of such
Borrowing Base Properties.  No Credit
Party is currently accounting for any royalties, or overriding royalties or
other payments out of production, on a basis (other than delivery in kind) less
favorable to such Credit Party than proceeds received by such Credit Party
(calculated at the well) from sale of production, and no Credit Party has any
liability (or alleged liability) to account for the same on any such less
favorable basis that could reasonably be expected to result in a Material
Adverse Effect.

 

Section 4.19                                Sale of
Production.  Except (a) as
required by law, (b) offsetting, netting and other similar arrangements
entered into in the ordinary course of business and (c) as set forth in
Schedule 4.19, (i) no Oil and Gas Interest is subject to any contractual
or other arrangement whereby payment for production is or can be deferred for a
substantial period after the month in which such production is delivered (in
the case of Crude Oil, not in excess of sixty (60) days, and in the case of
Natural Gas, not in excess of ninety (90) days) and (ii) no Oil and Gas
Interest is subject to any contractual or other arrangement whereby payments
are made to a Credit Party or Restricted Subsidiary other than by checks,
drafts, wire transfer advises or other similar writings, instruments or
communications for the immediate payment of money.  Except for production sales contracts and other
agreements relating to the marketing of production that are listed on Schedule
4.19, no Oil and Gas Interest is subject to any long-term contract or any other
arrangement for the sale of production (or otherwise related to the marketing
of production) which provides for fixed prices which cannot be canceled on 120
days’ (or less) notice without material penalty.  Except as set forth in Schedule 4.19, no
Credit Party, has received prepayments (including payments for gas not taken
pursuant to “take or pay” or other similar arrangements) for any Hydrocarbons
produced or to be produced from any Oil and Gas Interests after the date
hereof.  Except as set forth in Schedule
4.19, no Oil and Gas Interest is subject to any “take or pay” or other similar
arrangement (A) which can be satisfied in whole or in part by the
production or transportation of gas from other properties or (B) as a
result of which production from any Oil and Gas Interest may be required to be
delivered to one or more third 

 

58

 

parties without payment (or without full payment)
therefor as a result of payments made, or other actions taken, with respect to
other properties.  No Oil and Gas
Interest is subject to a gas balancing arrangement under which one or more
third parties may take a portion of the production attributable to such Oil and
Gas Interest without payment (or without full payment) therefor as a result of
production having been taken from, or as a result of other actions or inactions
with respect to, other properties.  No Oil
and Gas Interest is subject at the present time to any regulatory refund
obligation and, to the best of each Credit Party’s knowledge, no facts exist
which might cause the same to be imposed.

 

Section 4.20                                Operation of
Oil and Gas Interests.  The
Oil and Gas Interests (and all properties unitized therewith) are being (and,
to the extent the same could adversely affect the ownership or operation of the
Oil and Gas Interests after the date hereof, have in the past been) maintained,
operated and developed in a good and workmanlike manner, in accordance with
prudent industry standards and in compliance with (a) all applicable Laws,
(b) all oil, gas or other mineral leases and other material contracts and
agreements forming a part of the Oil and Gas Interests and (c) the
Permitted Liens, except with respect to clauses (a), (b) and (c) above,
where the failure to so comply, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.  To the best of each Borrower’s knowledge, no
Oil and Gas Interest is subject to having allowable production after the date
hereof reduced below the full and regular allowable (including the maximum
permissible tolerance) because of any overproduction (whether or not the same
was permissible at the time) prior to the date hereof.  There are no dry holes, or otherwise inactive
wells, located on the Borrowing Base Properties, except for wells that have
been or are in the process of being properly plugged and abandoned.  Each Credit Party and each Restricted
Subsidiary has all governmental licenses and permits necessary or appropriate
to own and operate its material Oil and Gas Interests.  No Credit Party nor any Restricted Subsidiary
has received written notice of any violations in respect of any such licenses
or permits that could reasonably be expected to result in a Material Adverse
Effect.

 

Section 4.21                                Ad Valorem and
Severance Taxes; Title Litigation.  No Credit Party has received a written notice
of a material default with respect to any ad valorem taxes assessed against its
Oil and Gas Interests or any part thereof and all production, severance and
other taxes assessed against, or measured by, the production or the value, or
proceeds, of the production therefrom. 
There are no suits, actions, written claims, investigations, written
inquiries, proceedings or demands pending (or, to any Credit Party’s knowledge,
threatened in writing) which might affect the Oil and Gas Interests, including
any which challenge or otherwise pertain to any Credit Party’s title to any
Borrowing Base Property or rights to produce and sell Crude Oil and Natural Gas
therefrom that could reasonably be expected to result in a Material Adverse
Effect.

 

ARTICLE V

Conditions

 

Section 5.01                                Effective Date.  The obligations of the Lenders and Lender
Counterparties to continue the Original Loans and the obligations of the
Lenders to make Loans and of the Issuing Bank to permit the Letters of Credit
issued under the Original Credit Agreement to remain outstanding and to issue
Letters of Credit hereunder shall not become effective until the 

 

59

 

date on which each of the following conditions is
satisfied (or waived in accordance with Section 11.02):

 

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

 

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

 

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

 

(d)                                 The
Administrative Agent shall have received a certificate, dated the Effective
Date and signed by the President, a Vice President or a Financial Officer of
each Borrower, confirming that the Credit Parties have (i) complied with
the conditions set forth in paragraphs (a), (b) and (d) of Section 5.02,
(ii) complied with the conditions set forth in paragraph (k) of this Section 5.01,
and (iii) complied with the covenants set forth in Section 6.05 (and
demonstrating such compliance by the attachment of an insurance summary and
insurance certificates evidencing the coverage described in such summary).

 

(e)                                  The
Administrative Agent shall have received the Security Agreement and Pledge
Agreement duly executed by all parties thereto and in form and substance
satisfactory to the Administrative Agent.

 

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

 

60

 

(g)                                 The
Administrative Agent shall have received promissory notes duly executed by
Borrowers for each Lender that has requested the delivery of a promissory note
pursuant to and in accordance with Section 2.09(e).

 

(h)                                 In the event
any Loans are made on the Effective Date, the Administrative Agent shall have
received a Borrowing Request acceptable to the Administrative Agent and in
accordance with Section 2.05 setting forth the Loans requested by the
Borrowers on the Effective Date, the Type and amount of each Loan and the
accounts to which such Loans are to be funded; provided that all
Borrowings on the Effective Date shall be ABR Borrowings.

 

(i)                                     If the initial
Borrowing includes the issuance of a Letter of Credit, the Administrative Agent
shall have received a written request in accordance with Section 2.06 of
this Agreement.

 

(j)                                     The
Administrative Agent and the Lenders shall have received the financial
statements described in Section 4.04(a) and the Projections.

 

(k)                                  The
Administrative Agent shall have received evidence reasonably satisfactory to
the Administrative Agent, that effective upon the consummation of the
Transactions, Aggregate Credit Exposure will not exceed the Aggregate
Commitment.

 

(l)                                     The
Administrative Agent shall have received Mortgages and title information, in
each case, reasonably satisfactory to the Administrative Agent with respect to
the Borrowing Base Properties, or the portion thereof, as required by Sections
6.09 and 6.10.

 

(m)                               The
Administrative Agent shall have received such financing statements as
Administrative Agent shall specify to fully evidence and perfect all Liens
contemplated by the Loan Documents, all of which shall be filed of record in
such jurisdictions as the Administrative Agent shall require in its sole
discretion.

 

(n)                                 The
Administrative Agent shall have received a capitalization chart for Holdings
setting forth as of the Effective Date the number of shares of capital stock or
other Equity Interests outstanding and the owner(s) of such shares or
Equity Interests.

 

(o)                                 The
Administrative Agent shall have received such other instruments and documents
incidental and appropriate to the transaction provided for herein as the
Administrative Agent or its special counsel may reasonably request prior to the
Effective Date, and all such documents shall be in form and substance
satisfactory to the Administrative Agent.

 

The
Administrative Agent shall notify the Borrowers and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the
obligations of the Lenders to continue the Original Loans and the obligations
of the Lenders to make Loans and of the Issuing Bank to permit the Letters of
Credit issued under the Original Credit Agreement to remain outstanding and to
issue Letters of Credit hereunder shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to Section 11.02) at
or prior to 

 

61

 

3:00 p.m.
on November 30, 2010 (and, in the event such conditions are not so
satisfied or waived, the Aggregate Commitment shall terminate at such time).

 

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

 

(a)                                  The
representations and warranties of each Credit Party set forth in this Agreement
and the other Loan Documents shall be true and correct in all material respects
(without duplication of any materiality qualifier contained therein) on and as
of the date of such Borrowing or the date of issuance, amendment, renewal or
extension of such Letter of Credit, as applicable except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct as of such earlier date.

 

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

 

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

 

(d)                                 At the time of
and immediately after giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, no
event or circumstance which could reasonably be expected to have a Material
Adverse Effect shall have occurred.

 

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

 

ARTICLE VI

Affirmative Covenants

 

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

 

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

 

(a)                                  within ninety
(90) days after the end of each fiscal year of Holdings, the audited
Consolidated balance sheet and related statements of operations, members’
equity and cash flows of Holdings and its Consolidated Subsidiaries as of the
end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by an independent public
accounting firm reasonably 

 

62

 

acceptable to Administrative
Agent (without a “going concern” or like qualification or exception and without
any qualification or exception as to the scope of such audit) to the effect
that such Consolidated  financial
statements present fairly in all material respects the financial condition and
results of operations of Holdings and its Consolidated Subsidiaries on a
Consolidated basis in accordance with GAAP consistently applied;

 

(b)                                 within
forty-five (45) days after the end of each of the first three fiscal quarters  of each fiscal year of Holdings, (i) the Consolidated
balance sheet and related statements of operations, member’s equity and cash
flows of Holdings and its Consolidated Subsidiaries as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year, such
Consolidated  financial statements shall be
certified by Holdings’ Financial Officer as presenting fairly in all material
respects the financial condition and results of operations of Holdings and its
Consolidated Subsidiaries on a Consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;

 

(c)                                  concurrently with
any delivery of financial statements under paragraph (a) or (b) above,
a certificate in a form reasonably acceptable to Administrative Agent signed by
a Financial Officer of Holdings (i) certifying (A) that he or she has
reviewed the Loan Documents and (B) as to whether a Default has occurred
and, if a Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto and (ii) setting forth
reasonably detailed calculations demonstrating compliance with Section 7.11
and Section 7.12;

 

(d)                                 as soon as
available, and in any event within sixty (60) days after the end of each fiscal
quarter, a report describing by lease or unit the gross volume of production
and sales attributable to production during such previous fiscal quarter from
the properties described in the most recent Reserve Report and describing the
related severance taxes, other taxes, leasehold operating expenses, and capital
costs attributable thereto and incurred during such previous fiscal quarter;

 

(e)                                  if requested by
Administrative Agent, within sixty (60) days after the end of each fiscal
quarter, a list, by name and address, of those Persons who have purchased
production during such fiscal quarter from the Oil and Gas Interests, giving
each such purchaser’s owner number for the Credit Parties and each such
purchaser’s property number for each such Oil and Gas Interest;

 

(f)                                    as soon as
available, and in any event no later than April 1 and October 1 of
each year, and promptly following notice of a Special Redetermination requested
by the Borrowers under Section 3.04, the Reserve Reports required on such
dates pursuant to Section 3.02.  The
Reserve Report shall be reasonably satisfactory to Administrative Agent, shall
take into account any “over-produced” status under gas balancing arrangements,
and shall contain information and analysis comparable in scope to that
contained in the Reserve Report used to determine the Initial Borrowing
Base.  The Reserve Report shall
distinguish (or shall be delivered together with a certificate from an
appropriate officer of each Borrower which distinguishes) those properties
treated in the 

 

63

 

report which are Mortgaged
Properties from those properties treated in the report which are not Mortgaged
Properties;

 

(g)                                 together with
the Reserve Reports required under paragraph (f) above, a report, in
reasonable detail, setting forth the Hedging Contracts then in effect, the
notional volumes of and prices for, on a monthly basis and in the aggregate,
the Crude Oil and Natural Gas for each such Hedging Contract and the term of
and counterparties to each such Hedging Contract;

 

(h)                                 as soon as
available, and in any event within ninety (90) days after the end of each
fiscal year, a business and financial plan for each Borrower, together with a
capital expenditure schedule for each Borrower (in form consistent with
previous business and financial plans previously provided to Administrative
Agent under the Original Credit Agreement), setting forth for the first year
thereof, monthly or quarterly financial projections and budgets for such
Borrower, and thereafter yearly financial projections and budgets during the
Availability Period;

 

(i)                                     if any Borrower
or any of their respective Restricted Subsidiaries makes an Acquisition or
Disposition of assets during any fiscal quarter and such assets are included in
the calculation of Consolidated EBITDAX for such fiscal quarter, the Borrower
Representative shall deliver to Administrative Agent and Lenders, together with
the financial statements described in Section 6.01(a) or (b), as
applicable, pro forma financial statements of Holdings for such period prepared
on a Consolidated basis as if such assets had been acquired or Disposed of, as applicable,
on the first day of such fiscal quarter;

 

(j)                                     [Reserved];

 

(k)                                  [Reserved];

 

(l)                                     concurrently
with the delivery of the Reserve Reports required under paragraph (f) above
and from time to time at the Borrowers’ election; supplements to Schedule 4.19
to the extent necessary to ensure any such representations and warranties
relating to Schedule 4.19 are true and correct in all material respects; provided
that such supplements shall not include disclosure of any contract, agreement,
arrangement, event, occurrence, condition or other information which,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect; provided  further that the delivery or
receipt of such subsequent disclosure shall not constitute a waiver by the
Administrative Agent or any Lender or a cure of any Default or Event of Default
resulting in connection with the matters disclosed on such supplement; and

 

(m)                               promptly
following any request therefor, such other information regarding the operations,
business affairs and financial condition of any Credit Party, or compliance
with the terms of this Agreement, as the Administrative Agent or any Lender may
reasonably request, including, without limitation, the delivery of
consolidating financial statements of Holdings and its Subsidiaries.

 

64

 

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

 

(a)           as soon as possible, but in any event within five (5) days
of obtaining knowledge thereof, the occurrence of any Default;

 

(b)           as soon as possible, but in any event within thirty (30)
days after the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting any Credit
Party or any Affiliate thereof that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect;

 

(c)           as soon as possible, but in any event within thirty (30)
days after becoming aware of the occurrence of any ERISA Event that, alone or
together with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Borrowers and the Restricted
Subsidiaries in an aggregate amount exceeding $5,000,000;

 

(d)           as soon as possible, but in any event within thirty (30)
days after any notice or claim to the effect that any Credit Party is or may be
liable to any Person as a result of the release by any Credit Party, or any
other Person of any Hazardous Material into the environment, which could reasonably
be expected to have a Material Adverse Effect;

 

(e)           as soon as possible, but in any event within thirty (30)
days after any notice alleging any violation of any Environmental Law by any
Credit Party, which could reasonably be expected to result in liability in
excess of $5,000,000;

 

(f)            as soon as possible, but in any event within thirty (30)
days after the receipt by any Borrower or any Restricted Subsidiary of any
management letter or comparable analysis prepared by the auditors for any
Borrower or any such Restricted Subsidiary;

 

(g)           as soon as possible, but in any event within thirty (30)
days after any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect; and

 

(h)           at least twenty (20) Business Days prior to any changes of
any Credit Party’s type of organization or state of formation under the Uniform
Commercial Code.

 

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

 

Section 6.03           Existence;
Conduct of Business.  Each Borrower
will, and will cause each Restricted Subsidiary to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and 

 

65

 

franchises
material to the conduct of its business and will qualify to do business in all
states or jurisdictions where required by law, except where the failure to so
qualify could not reasonably be expected to result in a Material Adverse
Change; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 7.04 or
any sale, conveyance or other transfer permitted under Section 7.05.

 

Section 6.04           Payment
of Obligations.  Each Borrower will,
and will cause each Restricted Subsidiary to, timely pay its obligations,
including Tax liabilities before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) such Borrower or
such Restricted Subsidiary, as applicable, has set aside on its books adequate
reserves with respect thereto in accordance with GAAP or (c) the failure
to make payment pending such contest could not reasonably be expected to result
in a Material Adverse Effect.

 

Section 6.05           Maintenance
of Properties; Insurance.  Each
Borrower will, and will cause each Restricted Subsidiary and use commercially
reasonable efforts to cause each operator of Borrowing Base Properties to, (a) keep
and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted, in accordance
with prudent industry standards in the surrounding area and in compliance in
all material respects with all laws and all applicable contracts, servitudes,
leases and agreements, and from time make all appropriate repairs, renewals and
replacements needed to enable the business and operations carried on in
connection therewith to be promptly and advantageously conducted at all times
consistent with such Person’s past practices and (b) maintain, with
financially sound and reputable insurance companies, insurance in such amounts
and against such risks as are customarily maintained by companies engaged in
the same or similar businesses operating in the same or similar locations. On
or prior to the Effective Date and thereafter, upon request of the
Administrative Agent, the Borrowers will furnish or cause to be furnished to
the Administrative Agent from time to time a summary of the respective
insurance coverage of each Borrower and its Restricted Subsidiaries in form and
substance reasonably satisfactory to the Administrative Agent, and, if
requested, will furnish the Administrative Agent copies of the applicable
policies.  The Borrowers will cause any
insurance policies covering any such property to be endorsed (x) to
provide that such policies may not be cancelled, reduced or affected in any
manner for any reason without ten (10) days prior notice to Administrative
Agent, (y) to name the Administrative Agent as an additional insured (in
the case of all liability insurance policies) and loss payee (in the case of
all casualty and property insurance policies), and (z) to provide for such
other matters as the Lenders may reasonably require.

 

Section 6.06           Books
and Records; Inspection Rights.  Each
Borrower will, and will cause each Restricted Subsidiary to, keep proper books
of record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities.  Each Borrower will, and will cause each
Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.  If no Event of
Default exists at the time of any such visit and inspection, the Administrative
Agent will give 

 

66

 

forty-eight
(48) hours written notice to such Borrower or Restricted Subsidiary prior to
such visit and inspection.

 

Section 6.07           Compliance
with Laws.  Each Borrower will, and
will cause each Restricted Subsidiary to comply in all material respects with
all Laws, rules, regulations and orders of any Governmental Authority
applicable to it or its property.

 

Section 6.08           Use
of Proceeds and Letters of Credit. 
The proceeds of the Loans will be used only to (a) pay the fees,
expenses and transaction costs of the Transactions and (b) finance the
working capital needs of the Borrowers, including capital expenditures, and for
general corporate purposes of the Borrowers and the Guarantors, in the ordinary
course of business, including the exploration, development and/or acquisition
of Oil and Gas Interests, together with ancillary transportation, gathering,
compression and processing assets and the marketing and sale of Hydrocarbons
produced.  No part of the proceeds of any
Loan will be used, whether directly or indirectly, to purchase or carry any
margin stock (as defined in Regulation U issued by the Federal Reserve
Board).  Letters of Credit will be issued
only to support general corporate purposes of the Borrowers and the Restricted
Subsidiaries.

 

Section 6.09           Security.  Each Borrower will, and will cause each
Guarantor to, execute and deliver to the Administrative Agent, for the benefit
of the Secured Parties, (a) Mortgages together with such other
assignments, conveyances, amendments, agreements and other writings, including,
without limitation, UCC-1 financing statements (each duly authorized and
executed, as applicable) as the Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect Liens in Oil and Gas Interests
having an Engineered Value equal to or greater than the Minimum Collateral
Amount and (b) security agreements in form and substance reasonably acceptable
to the Administrative Agent together with such other assignments, conveyances,
amendments, agreements and other writings, including, without limitation, UCC-1
financing statements (each duly authorized and executed, as applicable) and
control agreements as the Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect Liens in certain personal property
of each Borrower or such Restricted Subsidiary, as the case may be, subject
only to Permitted Liens.  Within 45 days
after the Effective Date (or such longer time as acceptable to the
Administrative Agent in its sole discretion), the Borrowers agree to execute
and deliver, or cause to be executed and delivered, such amendments to, or
amendment and restatements of, the Mortgages, in form and substance reasonably
satisfactory to the Administrative Agent, as the Administrative Agent may
reasonably require in connection with the Transactions.

 

Section 6.10           Title
Data.  Each Borrower will, and will
cause each Guarantor to, deliver to the Administrative Agent such existing
opinions of counsel and other evidence of title as the Administrative Agent
shall deem reasonably necessary or appropriate to verify the title of the
Credit Parties to not less than eighty percent (80%) of the Minimum Collateral
Amount.

 

Section 6.11           Operation
of Oil and Gas Interests.

 

(a)           Each Borrower will, and will cause each Restricted
Subsidiary to, maintain, develop and operate its Oil and Gas Interests in a
good and workmanlike manner, and observe and comply in all material respects
with all of the terms and 

 

67

 

provisions, express or implied, of all oil and gas
leases relating to such Oil and Gas Interests so long as such Oil and Gas
Interests are capable of producing Hydrocarbons and accompanying elements in
paying quantities.

 

(b)           Each Borrower will, and will cause each Restricted
Subsidiary to, comply in all material respects with all contracts and
agreements applicable to or relating to its Oil and Gas Interests or the
production and sale of Hydrocarbons and accompanying elements therefrom.

 

Section 6.12           Restricted
Subsidiaries.  In the event any
Person is or becomes a Restricted Subsidiary, the Borrowers will (a) promptly
take all action necessary to comply with Section 6.13, (b) promptly
take all such action and execute and deliver, or cause to be executed and
delivered, to the Administrative Agent all such opinions, documents,
instruments, agreements, and certificates similar to those described in Section 5.01(b) and
Section 5.01(c) that the Administrative Agent may reasonably request,
and (c) promptly cause any such Restricted Subsidiary to (i) become a
party to this Agreement, the Security Agreement and the Pledge Agreement and
Guarantee the Obligations by executing and delivering to the Administrative
Agent a Counterpart Agreement in the form of Exhibit C, (ii) grant to
the Administrative Agent, for the benefit of the Lenders, a Lien on and
security interest in all Oil and Gas Interests of such Restricted Subsidiary,
if any, required to comply with Section 6.09 and (iii) deliver all
title opinions and other information, if any, required to comply with Section 6.10.  Upon delivery of any such Counterpart
Agreement to the Administrative Agent, notice of which is hereby waived by each
Credit Party, such Restricted Subsidiary shall be a Guarantor and shall be as
fully a party hereto as if such Restricted Subsidiary were an original
signatory hereto.  Each Credit Party
expressly agrees that its obligations arising hereunder shall not be affected
or diminished by the addition or release of any other Credit Party
hereunder.  This Agreement shall be fully
effective as to any Credit Party that is or becomes a party hereto regardless
of whether any other Person becomes or fails to become or ceases to be a Credit
Party hereunder.  With respect to each
such Restricted Subsidiary, the Borrowers shall promptly send to the
Administrative Agent written notice setting forth with respect to such Person
the date on which such Person became a Restricted Subsidiary of such Borrower,
and supplement the data required to be set forth in the Schedules to this
Agreement as a result of the acquisition or creation of such Restricted
Subsidiary; provided that such supplemental data must be reasonably
acceptable to the Administrative Agent and Required Lenders.

 

Section 6.13           Pledged
Equity Interests.  On the date hereof
and at the time hereafter that any Restricted Subsidiary of any Borrower is
created or acquired or any Unrestricted Subsidiary becomes a Restricted
Subsidiary, the Borrowers and the Subsidiaries (as applicable) shall execute
and deliver to the Administrative Agent for the benefit of the Secured Parties,
a pledge agreement (or an amendment or amendment and restatement of the
existing Pledge Agreement), in form and substance reasonably acceptable to the
Administrative Agent, from the Borrowers and/or the Subsidiaries (as
applicable) covering all Equity Interests owned by the Borrowers or such
Restricted Subsidiaries in such Restricted Subsidiaries, together with all
certificates (or other evidence acceptable to Administrative Agent) evidencing
the issued and outstanding Equity Interests of each such Restricted Subsidiary
of every class owned by such Credit Party (as applicable) which, if
certificated, shall be duly endorsed or accompanied by stock powers executed in
blank (as applicable), as Administrative Agent shall deem necessary or
appropriate 

 

68

 

to
grant, evidence and perfect a first priority security interest in the issued
and outstanding Equity Interests owned by Borrowers or any Restricted
Subsidiary in each Restricted Subsidiary; provided that in no event
shall any Borrower or any Restricted Subsidiary be required to pledge more than
sixty-five percent (65%) of the voting Equity Interests of any Subsidiary that
is not a Domestic Subsidiary.

 

Section 6.14           [Reserved].

 

Section 6.15           Further
Assurances.  Each Borrower agrees to
deliver and to cause each of its Subsidiaries to deliver, to further secure the
Obligations whenever requested by Administrative Agent in its sole and absolute
discretion, deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other Security Documents in form and substance
satisfactory to Administrative Agent for the purpose of granting, confirming,
and perfecting first and prior liens or security interests in any real or
personal property which is at such time Collateral or which was intended to be
Collateral pursuant to any Security Document previously executed and not then
released by Administrative Agent.

 

Section 6.16           Production
Proceeds.  Notwithstanding that, by
the terms of the various Security Documents, the Credit Parties are and will be
granting a security interest to Administrative Agent in all as-extracted
collateral (referred to as the “Production Proceeds” in the Security Documents)
accruing to the Oil and Gas Interest mortgaged thereby, the Credit Parties may
continue to receive from the purchasers of production all such Production
Proceeds until such time as an Event of Default has occurred and is continuing
and the Administrative Agent gives written notice to operators and/or
purchasers of production to pay the Administrative Agent.  Upon the occurrence of an Event of Default,
Administrative Agent may exercise all rights and remedies granted under the
Security Documents, including the right to obtain possession of all Production
Proceeds then held by the Credit Parties or to receive directly from the purchasers
of production all other Production Proceeds. 
In no case shall any failure, whether purposed or inadvertent, by
Administrative Agent or Lenders to collect directly any such Production
Proceeds constitute in any way a waiver, remission or release of any of their
rights under the Security Documents, nor shall any release of any Production
Proceeds by Administrative Agent or Lenders to the Credit Parties constitute a
waiver, remission, or release of any other Production Proceeds or of any rights
of Administrative Agent or Lenders to collect other Production Proceeds
thereafter.

 

Section 6.17           Leases
and Contracts; Performance of Obligations. 
Each Credit Party will, and will cause each Restricted Subsidiary to,
maintain in full force and effect all oil, gas or mineral leases, contracts,
servitudes and other agreements forming a part of any Oil and Gas Interests, to
the extent the same cover or otherwise relate to such Oil and Gas Interest, and
each Credit Party and each Restricted Subsidiary will timely perform all of its
obligations thereunder.  Each Credit
Party and each Restricted Subsidiary will properly and timely pay all rents,
royalties and other payments due and payable under any such leases, contracts,
servitudes and other agreements, or under the Permitted Liens, or otherwise
attendant to its ownership or operation of any Oil and Gas Interest.  Each Credit Party and each Restricted
Subsidiary will promptly notify Administrative Agent of any material claim (or
any conclusion by such Credit Party or such Restricted Subsidiary) that such
Credit Party or such Restricted Subsidiary is obligated to account for any
royalties, or overriding royalties or other payments out of production, on a
basis 

 

69

 

(other
than delivery in kind) less favorable to such Credit Party or such Restricted
Subsidiary than proceeds received by such Credit Party or such Restricted
Subsidiary (calculated at the well) from sale of production.

 

ARTICLE VII

Negative Covenants

 

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

 

Section 7.01           Limitation
on Indebtedness.  No Credit Party
will, nor will it permit any of its Restricted Subsidiaries to, create, incur,
assume or permit to exist any Indebtedness except:

 

(a)           the Obligations;

 

(b)           unsecured Indebtedness among the Credit Parties arising in
the ordinary course of business;

 

(c)           Indebtedness arising under Hedging Contracts permitted
under Section 7.03;

 

(d)           Cash Management Obligations; provided that (i) the
aggregate outstanding amount of all Cash Management Obligations does not exceed
at any time the lesser of (x) $10,000,000 and (y) the amount of Cash
Management Obligations permitted under the Indenture, and (ii) any and all
documents, agreements and instruments rendering any Cash Management Obligations
shall be in form and substance satisfactory to the Administrative Agent;

 

(e)           Indebtedness arising under a $25,000,000 note due 2013
associated with an acquisition to be completed on or prior to December 31,
2010; provided that such Indebtedness is unsecured and subordinated in
right of payment to the payment in full of the Obligations on terms and
conditions satisfactory to the Administrative Agent and the non-default
interest rate on the principal amount of such Indebtedness does not exceed 9%
per annum;

 

(f)            Guarantees by any Credit Party or any Restricted
Subsidiary of the Indebtedness permitted under paragraph (h) and (i) of
this Section 7.01;

 

(g)           Indebtedness of the Credit Parties incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof; provided that the aggregate principal amount of Indebtedness
permitted by this paragraph (g) shall not exceed $30,000,000 at any time
outstanding;

 

70

 

(h)           subject to any adjustment to the Borrowing Base required
under Section 3.06 and any mandatory prepayment required under Section 2.11(b), Indebtedness
of any Credit Party resulting from the issuance of Senior Notes and any
Permitted Refinancing thereof; provided that at the time of and
immediately after giving effect to each issuance of such Senior Notes or any
Permitted Refinancing thereof, (x) no Default shall have occurred and be
continuing and (y) the Borrowers are in pro forma compliance with the
financial covenants set forth in Sections 7.11 and 7.12 as of the last day of
the most recently ended fiscal quarter for which the financial statements and
compliance certificate required under Section 6.01 have been delivered to
the Administrative Agent and the Lenders as if such issuance (and any
concurrent repayment of Indebtedness) had occurred on such day; and

 

(i)            miscellaneous items of unsecured Indebtedness of the Credit
Parties not described in paragraph (a) through (h), including obligations
to pay the financing for the purchase price or deferred premiums with respect
to certain Hedge Contracts permitted under Section 7.03(a)(ii), which do
not in the aggregate (taking into account all such Indebtedness of the Credit
Parties) exceed $30,000,000 at any one time outstanding.

 

Section 7.02           Limitation
on Liens.  Except for Permitted
Liens, no Credit Party will, nor will it permit any of its Restricted
Subsidiaries to, create, assume or permit to exist any Lien upon any of the
properties or assets which it now owns or hereafter acquires.

 

Section 7.03           Hedging
Contracts.

 

(a)           No Credit Party will, nor will it permit any of its
Restricted Subsidiaries to, be a party to or in any manner be liable on any
Hedging Contract except:

 

(i)            swaps and collars entered into in the ordinary course of
business, and not for speculative purposes, with the purpose and effect of
fixing prices or reducing or fixing basis or transportation price differentials
on Crude Oil or Natural Gas expected to be produced by the Credit Parties; provided
that at all times: (i) no such contract shall have a term of more than
sixty (60) months; (ii) except for the Liens granted under the Security
Documents to secure Lender Hedging Obligations, no such contract requires any
Credit Party to put up money, assets, or other security (other than letters of
credit) against the event of its nonperformance prior to actual default by such
Credit Party in performing its obligations thereunder, (iii) each such
contract is with a counterparty or has a guarantor of the obligation of the
counterparty which at the time the contract is made is an Approved
Counterparty, and (iv) the aggregate monthly production for each of Crude Oil
and Natural Gas, calculated separately, covered by all such contracts (other
than basis or transportation price differential swaps for volumes of Natural
Gas included under other Hedging Contracts permitted under this clause (i)) to
which any Credit Party is a party (determined, in the case of contracts that
are not settled on a monthly basis, by a monthly proration acceptable to
Administrative Agent) for any single month does not in the aggregate exceed the
Applicable Hedge Percentage (as defined below) of the Credit Parties’ aggregate
Projected Oil and Gas Production anticipated to be sold 

 

71

 

during such month in the ordinary course of the
Credit Parties’ businesses for such month.

 

As used in this subsection (a), “Applicable Hedge
Percentage” means on the date that any Credit Party enters into any Hedging
Contract (the “Measurement Date”), the percentage set forth below for
any month during the applicable period of measurement set forth below:

 

	
  Period

  	
   

  	
  Percentage

  	
   

  
	
  First year after the Measurement Date

  	
   

  	
  85

  	
  %

  
	
  Second year after Measurement Date

  	
   

  	
  75

  	
  %

  
	
  Third year after Measurement Date

  	
   

  	
  65

  	
  %

  
	
  Fourth year after Measurement Date

  	
   

  	
  55

  	
  %

  
	
  Fifth year after Measurement Date

  	
   

  	
  45

  	
  %

  

 

(ii)           puts or floors entered into in the ordinary course of
business, and not for speculative purposes, with the purpose and effect of
establishing minimum prices on Crude Oil or Natural Gas expected to be produced
by the Credit Parties; provided that at all times: (i) no such
contract shall have a term of more than sixty (60) months, (ii) except for
the Liens granted under the Security Documents to secure Lender Hedging
Obligations, no such contract requires any Credit Party to put up money,
assets, or other security (other than letters of credit) against the event of
its nonperformance prior to actual default by such Credit Party in performing
its obligations thereunder, (iii) each such contract is with a
counterparty or has a guarantor of the obligation of the counterparty who at
the time the contract is made is an Approved Counterparty, (iv) there
exists no deferred obligation to pay the related premium or other purchase
price for such floor or the only deferred obligation is to pay the financing
for such premium or other purchase price and such deferred obligation is
permitted under Section 7.01(k), and (v) the aggregate monthly
production for each of Crude Oil and Natural Gas, calculated separately,
covered by all such contracts to which any Credit Party is a party (determined,
in the case of contracts that are not settled on a monthly basis, by a monthly
proration acceptable to Administrative Agent) for any single month does not in
the aggregate exceed one hundred percent (100%) of the Credit Parties’
aggregate Projected Oil and Gas Production anticipated to be sold during such
month in the ordinary course of the Credit Parties’ businesses for such month;
and

 

(iii)          contracts entered into by a Credit Party in the ordinary
course of business, and not for speculative purposes, with the purpose and
effect of fixing interest rates on a principal amount of Indebtedness of such
Credit Party that is 

 

72

 

accruing interest at a variable rate, provided
that (i) the aggregate notional amount of such contracts never exceeds one
hundred percent (100%) of the anticipated outstanding principal balance of the
Indebtedness to be hedged by such contracts or an average of such principal
balances calculated using a generally accepted method of matching interest swap
contracts to declining principal balances, (ii) the floating rate index of
each such contract generally matches the index used to determine the floating
rates of interest on the corresponding Indebtedness to be hedged by such
contract and (iii) each such contract is with an Approved Counterparty.

 

(b)           If any Credit Party enters into any Hedge Modification,
the Borrower Representative shall provide the Administrative Agent with written
notice of such Hedge Modification within three (3) Business Days
thereafter, setting forth, in reasonable detail, the terms of such Hedge
Modification; provided that no Hedge Modification may be made by any
Credit Party if the economic effect (as determined by the Administrative Agent)
of all Hedge Modifications entered into since the most recent Scheduled
Redetermination (or at any time during the period from the Effective Date until
the first Scheduled Redetermination after the Effective Date, since the
Effective Date) exceeds, in the aggregate for all Credit Parties, five percent
(5%) of the Borrowing Base then in effect, unless (x) such Credit
Party shall have received the prior written consent of the Required Lenders or
(y)(i) at the time of and after giving effect to any such Hedge
Modification, no Default exists, (ii) the Borrowing Base is adjusted by an
amount equal to the economic effect of all such Hedge Modifications as
determined by the Required Lenders and (iii) the Borrowers prepay the
Loans or provide cash collateral to the extent required by Section 2.11(d) as
a result of such Hedge Modifications.

 

Section 7.04           Limitation
on Mergers, Issuances of Securities. 
No Credit Party will, nor will it permit any of its Restricted
Subsidiaries to, merge or consolidate with or into any other Person, except
that any Restricted Subsidiary or any Borrower may be merged into or
Consolidated with another Restricted Subsidiary or Borrower, so long as a
Borrower or Guarantor, as applicable, is the surviving business entity, and at
least one Borrower exists.  No Restricted
Subsidiary of any Borrower will issue any additional Equity Interests except to
such Borrower or a Restricted Subsidiary of such Borrower and only to the
extent not otherwise forbidden under the terms hereof.

 

Section 7.05           Limitation
on Dispositions of Property.  No
Credit Party will, nor will it permit any of its Restricted Subsidiaries to,
Dispose of any of the Borrowing Base Properties or the Equity Interests of any
Restricted Subsidiary or any material interest therein, or discount, sell,
pledge or assign any notes payable to it, accounts receivable or future income,
or enter into any Sale and Leaseback Transaction except:

 

(a)           equipment which is worthless or obsolete or which is
replaced by equipment of equal suitability and similar value;

 

(b)           inventory (including Crude Oil and Natural Gas sold as
produced and seismic data) which is replaced and/or sold in the ordinary course
of business on ordinary trade terms;

 

73

 

(c)           Equity Interests of any Subsidiary of any Borrower
transferred to any Credit Party;

 

(d)           acreage-swap agreements; provided that (x) such
acreage swap agreement provides for such Credit Party or Restricted Subsidiary,
as the case may be, to receive good and defensible title to acreage having a reasonable
equivalent value to the value of the acreage exchanged by such Credit Party or
Restricted Subsidiary, (y) the Administrative Agent shall have received
from such Credit Party or Restricted Subsidiary at least ten (10) days’
prior notice of the closing of any such acreage swap agreement and (z) such
Credit Party or Restricted Subsidiary and the Administrative Agent shall have
made mutually satisfactory arrangements for the release of the Liens granted
under the Security Documents and for the grant of a Lien on the proved reserves
associated with the properties under the Security Documents upon the closing of
such exchange to the extent required to comply with Section 6.09;

 

(e)           assets of any Credit Party to another Credit Party;

 

(f)            Sale and Leaseback Transactions in which the liability
for any lease incurred by any Credit Party is a Capital Lease Obligation
permitted under Section 7.01(g);

 

(g)           Hedge Modifications to the extent permitted under Section 7.03;

 

(h)           the Disposition of any Borrowing Base Property (whether
pursuant to a Disposition of all, but not less than all, of the Equity
Interests of any Restricted Subsidiary or otherwise) which is Disposed of for
fair consideration to a Person; provided that no Borrowing Base Property
may be Disposed of by any Credit Party (whether pursuant to a Disposition of
all, but not less than all, of the Equity Interests of any Restricted
Subsidiary or otherwise) if the Engineered Value (as determined by the
Administrative Agent) of all Borrowing Base Properties Disposed of since the
most recent Scheduled Redetermination (or at any time during the period from
the Effective Date until the first Scheduled Redetermination after the
Effective Date, since the Effective Date) exceeds, in the aggregate for all
Credit Parties, five percent (5%) of the Borrowing Base then in effect unless
(x) such Credit Party shall have received the prior written consent of the
Required Lenders or (y)(i) at the time of and after giving effect to any
such Disposition, no Default exists, (ii) the Borrower Representative
provides the Administrative Agent with at least fifteen (15) days prior written
notice of such Disposition, setting forth in reasonable detail the Borrowing
Base Properties that are subject to such Disposition, and such Disposition is
consummated prior to the next Redetermination of the Borrowing Base, (iii) the
consideration received from any such Disposition is at least equal to the fair
market value of the Borrowing Base Properties subject to such Disposition, as
reasonably determined in good faith by the board of directors of such Credit
Party and, if requested by the Administrative Agent, the Borrowers shall
deliver to the Administrative Agent a certificate of a Financial Officer of
such Credit Party certifying to that effect; (iv) at least 80% of the
consideration received by the Credit Parties in respect of any such Disposition
is cash or cash equivalents, (v) the Borrowing Base is adjusted by an
amount equal to the Engineered Value of all 

 

74

 

Borrowing Base Properties Disposed of since the most
recent Scheduled Redetermination (or at any time during the period from the
Effective Date until the first Scheduled Redetermination after the Effective
Date, since the Effective Date) as determined by the Required Lenders, and (vi) the
Borrowers prepay the Loans or provide cash collateral to the extent required by
Section 2.11(c) as a result of such Dispositions; or

 

(i)            the Disposition or settlement of notes or accounts
receivable from insolvent account debtors.

 

Section 7.06           Limitation
on Dividends and Redemptions.  No
Credit Party will, nor will it permit any of its Restricted Subsidiaries to,
declare or make any Restricted Payment, other than Restricted Payments payable
to Borrowers or to Guarantors that are Subsidiaries of a Borrower; provided
that (a) in connection with the exchange of all of the Borrowers’ Equity
Interests by the holders thereof for Equity Interests of Holdings, each
Borrower may repurchase employee stock options issued under stock option plans
then being terminated in an aggregate amount not to exceed $4,500,000 during
the thirty day period following the one year anniversary of the termination of
such stock option plans and (b) the Borrowers may make one or more
Restricted Payments in respect of their Equity Interests in an aggregate amount
not to exceed $25,000,000 so long as on the date of and after giving effect to
any such Restricted Payment (i) no Default has occurred and is continuing
and (ii) Borrowing Base Usage is less than 90%.

 

Section 7.07           Limitation
on Investments and New Businesses. 
No Credit Party will, nor will it permit any of its Restricted
Subsidiaries to, (a) make any expenditure or commitment or incur any
obligation or enter into or engage in any transaction except in the ordinary
course of business, (b) engage directly or indirectly in any business or
conduct any operations except in connection with or incidental to its present
businesses and operations, or (c) make any acquisitions of or capital
contributions to or other Investments in any Person, other than (i) Permitted
Investments and (ii) investments in the Equity Interests of any Restricted
Subsidiary.

 

Section 7.08           Limitation
on Credit Extensions.  Except for
Permitted Investments and intercompany Indebtedness permitted under Section 7.01(b),
no Credit Party will, nor will it permit any of its Restricted Subsidiaries to,
extend credit, make advances or make loans to any Person.

 

Section 7.09           Transactions
with Affiliates.  No Credit Party
will, nor will it permit any of its Restricted Subsidiaries to, engage in any
material transaction with any of its Affiliates on terms which are less
favorable to it than those which would have been obtainable at the time in arm’s-length
dealing with Persons other than such Affiliates, provided that such
restriction shall not apply to transactions among Credit Parties.

 

Section 7.10           Prohibited
Contracts; Negative Pledge.  Except
as expressly provided for in the Loan Documents and the Senior Notes Documents
(or any documents evidencing or relating to any Permitted Refinancing), no
Credit Party will, nor will it permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into, create, or otherwise allow to exist any
contract or other consensual restriction on the ability of any Credit Party or
any Restricted Subsidiary to: (a) pay dividends or make other
distributions to another Credit Party or any Restricted Subsidiary, (b) redeem
Equity Interests held in it by another Restricted Subsidiary, (c)

 

75

 

repay
loans and other Indebtedness owing by it to another Credit Party or any
Restricted Subsidiary, (d) transfer any of its assets to another Credit
Party, or (e) grant Liens to Administrative Agent to secure the
Obligations.  Except as otherwise disclosed
on Schedule 4.19, the Credit Parties will not, and will not permit any
Restricted Subsidiary to, enter into any “take-or-pay” contract or other
contract or arrangement for the purchase of goods or services which obligates
it to pay for such goods or service regardless of whether they are delivered or
furnished to it.  The Credit Parties will
not, and will not permit any Restricted Subsidiary to, amend or permit any
amendment to any contract or lease which releases, qualifies, limits, makes
contingent or otherwise detrimentally affects, in any material respect, the
rights and benefits of Administrative Agent or any Lender under or acquired
pursuant to any Security Documents.

 

Section 7.11           Current
Ratio.  At the end of each fiscal
quarter ending on or after December 31, 2010, the Consolidated Current
Ratio will not be less than 1.0 to 1.0.

 

Section 7.12           Leverage
Ratio.

 

(a)           At the end of each fiscal quarter ending on or after December 31,
2010 and on or before September 30, 2011, the Leverage Ratio will not be
greater than 4.25 to 1.00.

 

(b)           At the end of each fiscal quarter ending on or after December 31,
2011, the Leverage Ratio will not be greater than 4.00 to 1.00.

 

As used herein, with respect to any fiscal quarter, “Leverage
Ratio” means the ratio of (i) the sum of the Consolidated Funded
Indebtedness of Holdings as of the end of such fiscal quarter, minus the
Capital Call Amount to (ii) the sum of the Consolidated EBITDAX of
Holdings for the trailing four fiscal quarter period ending on the last day of such
fiscal quarter.

 

Section 7.13           Senior
Notes Restrictions.  No Credit Party
will, nor will any Credit Party permit any Restricted Subsidiary to, (a) except
for the regularly scheduled payments of interest required under the Senior
Notes Documents, directly or indirectly, retire, redeem, defease, repurchase or
prepay prior to the scheduled due date thereof any part of the principal of, or
interest on, the Senior Notes (or any Permitted Refinancing thereof); provided
that so long as no Default has occurred and is continuing or would be caused
thereby, the Borrower may retire, redeem, defease, repurchase or prepay the
Senior Notes (i) with the proceeds of any Permitted Refinancing permitted
pursuant to Section 7.01(h), (ii) with the net cash proceeds of any issuance
of Equity Interests of Holdings or (iii) pursuant to an asset sale tender
offer with the Net Cash Proceeds of any Disposition to the extent required by
the terms of the Indenture, but in any event subject to compliance by the
Credit Parties with (x) any prepayment of the Obligations required by any
consent of the Lenders to such Disposition and (y) any mandatory
prepayment of the Obligations required under Section 2.11 after giving
effect to any adjustments made by the Required Lenders to the Borrowing Base
pursuant to Section 7.05, or (b) enter into or permit any supplement,
modification or amendment of, or waive any right or obligation of any Person
under, any Senior Notes Document or any document governing any Permitted
Refinancing of the Senior Notes if the effect thereof would be to (i) shorten
its average life or maturity, (ii) increase the rate or shorten any period
for payment of interest thereon, (iii) cause any covenant, default or
remedy provisions contained therein to be materially more onerous on any Credit
Party or any 

 

76

 

Restricted
Subsidiary, (iv) cause any mandatory prepayment, repurchase or redemption
provisions contained therein to be materially more onerous on any Credit Party or
any Restricted Subsidiary, (v) alter the subordination provisions, if any,
with respect to any of the Senior Notes Documents, or (vi) result in any
Subsidiary of any Borrower Guaranteeing the Senior Notes unless such Subsidiary
is (or concurrently with any such Guarantee becomes) a Guarantor hereunder.

 

ARTICLE VIII

Guarantee of Obligations

 

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

 

Section 8.02           Guarantee
Absolute.  Each Guarantor guarantees
that the Guaranteed Liabilities shall be paid strictly in accordance with the
terms of this Agreement and the Hedging Contracts.  The liability of each Guarantor hereunder is
absolute and unconditional irrespective of: 
(a) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Loan Documents or the Guaranteed
Liabilities, or any other amendment or waiver of or any consent to departure
from any of the terms of any Loan Document or Guaranteed Liability, including
any increase or decrease in the rate of interest thereon; (b) any release
or amendment or waiver of, or consent to departure from, any other guaranty or
support document, or any exchange, release or non-perfection of any collateral,
for all or any of the Loan Documents or Guaranteed Liabilities; (c) any
present or future law, regulation or order of any jurisdiction (whether of
right or in fact) or of any agency thereof purporting to reduce, amend,
restructure or otherwise affect any term of any Loan Document or Guaranteed
Liability; (d) without being limited by the foregoing, any lack of
validity or enforceability of any Loan Document or Guaranteed Liability; and (e) any
other setoff, defense or counterclaim whatsoever (in any case, whether based on
contract, tort or any other theory) with respect to the Loan Documents or the
transactions contemplated thereby which might constitute a legal or equitable
defense available to, or discharge of, the Borrowers or a Guarantor.

 

Section 8.03           Guarantee
Irrevocable.  This Guarantee is a
continuing guaranty of the payment of all Guaranteed Liabilities now or
hereafter existing under this Agreement and the 

 

77

 

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

 

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

 

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

 

Section 8.06           Subordination.  Without limiting the rights of the Secured
Parties under any other agreement, any liabilities owed by any Borrower to any
Guarantor in connection with any extension of credit or financial accommodation
by any Guarantor to or for the account of the Borrowers, including but not
limited to interest accruing at the agreed contract rate after the commencement
of a bankruptcy or similar proceeding, are hereby subordinated to the
Guaranteed Liabilities, and such liabilities of the Borrowers to such
Guarantor, if the Administrative Agent so requests, shall be collected,
enforced and received by any Guarantor as trustee for the Administrative Agent
and shall be paid over to the Administrative Agent on account of the Guaranteed
Liabilities but without reducing or affecting in any manner the liability of
the Guarantor under the other provisions of this Guarantee.

 

Section 8.07           Setoff.  Each Guarantor agrees that, in addition to
(and without limitation of) any right of setoff, banker’s lien or counterclaim
the Administrative Agent, any Lender or any Lender Counterparty may otherwise
have, the Administrative Agent, such Lender or such Lender Counterparty shall
be entitled, at its option, to offset balances (general or special, time or
demand, provisional or final) held by it for the account of any Guarantor at
any office of the 

 

78

 

Administrative
Agent, such Lender or such Lender Counterparty, in Dollars or in any other
currency, against any amount payable by such Guarantor under this Guarantee
which is not paid when due (regardless of whether such balances are then due to
such Guarantor), in which case it shall promptly notify such Guarantor thereof;
provided that the failure of the Administrative Agent, such Lender, or
such Lender Counterparty to give such notice shall not affect the validity
thereof.

 

Section 8.08           Formalities.  Each Guarantor waives presentment, notice of
dishonor, protest, notice of acceptance of this Guarantee or incurrence of any
Guaranteed Liability and any other formality with respect to any of the
Guaranteed Liabilities or this Guarantee.

 

Section 8.09           Limitations
on Guarantee.  The provisions of the
Guarantee under this Article VIII are severable, and in any action or
proceeding involving any state corporate law, or any state, federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under this Guarantee
would otherwise be held or determined to be avoidable, invalid or unenforceable
on account of the amount of such 
Guarantor’s liability under this Guarantee, then, notwithstanding any
other provision of this Guarantee to the contrary, the amount of such liability
shall, without any further action by the Guarantors, the Administrative Agent,
any Lender or any Lender Counterparty, be automatically limited and reduced to
the highest amount that is valid and enforceable as determined in such action
or proceeding (such highest amount determined hereunder being the relevant
Guarantor’s “Maximum Liability”). This Section 8.09 with respect to
the Maximum Liability of the Guarantors is intended solely to preserve the
rights of the Administrative Agent, Lenders and Lender Counterparties hereunder
to the maximum extent not subject to avoidance under applicable law, and no
Guarantor nor any other Person shall have any right or claim under this Section 8.09
with respect to the Maximum Liability, except to the extent necessary so that
none of  the obligations of any Guarantor
hereunder shall not be rendered voidable under applicable law.

 

ARTICLE IX

Events of Default

 

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

 

(a)           the Borrowers shall fail to pay any principal of any Loan
(including any payments required under Section 2.11) or any reimbursement
obligation in respect of any LC Disbursement when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;

 

(b)           the Borrowers shall fail to pay any interest on any Loan
or any fee or any other amount (other than an amount referred to in paragraph (a) of
this Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of
three (3) Business Days;

 

(c)           any representation or warranty made or deemed made by or
on behalf of any Borrower, any Restricted Subsidiary in or in connection with
this Agreement or any amendment or modification hereof or waiver hereunder, or
in any report, certificate, 

 

79

 

financial statement or other document furnished
pursuant to or in connection with this Agreement or any amendment or
modification hereof or waiver hereunder or in any Loan Document furnished
pursuant to or in connection with this Agreement or any amendment or
modification thereof or waiver hereunder, shall prove to have been incorrect in
any material respect (without duplication of any materiality qualifier
contained therein) when made or deemed made;

 

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

 

(e)           any Borrower or any Restricted Subsidiary shall fail to
observe or perform any covenant, condition or agreement contained in (i) this
Agreement (other than those specified in paragraph (a), (b) or (d) of
this Article) and such failure shall continue unremedied for a period of thirty
(30) days after receipt of written notice thereof from the Administrative Agent
to the Borrowers (which notice will be given at the request of any Lender) or (ii) any
other Loan Document and such failure continues beyond the applicable period of
grace (if any) provided in such Loan Document;

 

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

 

(g)           any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its
or their behalf to cause such Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its
scheduled maturity; provided that this paragraph (g) shall not
apply to (i) Indebtedness that becomes due as a result of the voluntary
sale or transfer of the property or assets securing such Indebtedness and (ii) Indebtedness
that becomes due as a result of a change in law, tax regulation or accounting
treatment so long as such Indebtedness is paid when due;

 

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

 

80

 

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

 

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

 

(k)           one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 (not covered by insurance reasonably
expected to provide payment therefor) shall be rendered against any Borrower or
any Restricted Subsidiary or any combination thereof and the same shall remain
undischarged or unsatisfied for a period of thirty (30) consecutive days during
which execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of any Borrower
or any Restricted Subsidiary to enforce any such judgment;

 

(l)            an ERISA Event shall have occurred that, in the opinion
of the Majority Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in a liability of any
Borrower or any Restricted Subsidiary in excess of $10,000,000;

 

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

 

(n)           the Liens granted by any Credit Party under the Security
Documents shall become invalid in any material respect or any obligation of any
Credit Party under any Loan Document shall become invalid in any material
respect and, with respect to both of the foregoing, the same remains unremedied
for thirty (30) days after an executive officer of such Credit Party has actual
knowledge thereof, or the validity of such Liens or obligation shall be
challenged by any Credit Party in writing;

 

(o)           a Change of Control shall occur; or

 

(p)           Holdings or any Subsidiary of Holdings that, directly or
indirectly, owns Equity Interests of any Borrower shall (i) conduct,
transact or otherwise engage in any business or operations other than those
incidental to its direct or indirect ownership of the Equity Interests of the
Borrowers, the issuance and registration under federal securities laws of
securities and other matters incidental thereto, (ii) incur, create,
assume or suffer to exist any Indebtedness except (x) nonconsensual
obligations imposed by operation of 

 

81

 

law, (y) obligations with respect to its
Guarantee of the Senior Notes (or any Permitted Refinancing thereof) and (z) obligations
with respect to its Equity Interests and, so long as no Credit Party is a party
thereto or an obligor with respect to such securities, other securities, (iii) create,
assume or permit to exist any Lien to secure Indebtedness upon the Equity
Interests of the Borrowers or any of its other properties or assets, or (iv) own,
lease, manage or otherwise operate any properties or assets other than the
direct or indirect ownership of the Equity Interests of the Borrowers and other
interests incidental thereto;

 

then,
and in every such event (other than an event with respect to any Borrower or
any Restricted Subsidiary described in paragraph (h) or (i) of this
Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Majority Lenders shall, by
notice to the Borrowers, take either or both of the following actions, at the
same or different times:  (i) terminate
the Aggregate Commitment, and thereupon the Aggregate Commitment shall
terminate immediately, and (ii) declare the Loans then outstanding to be
due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall become  due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers; and in case of any event with respect to the
Borrowers described in paragraph (h) or (i) of this Article, the
Aggregate Commitment shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrowers accrued hereunder, shall automatically
become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrowers.  Without limiting the foregoing, upon the
occurrence and during the continuance of an Event of Default, the
Administrative Agent, the Issuing Bank and each Lender may protect and enforce
its rights under this Agreement and the other Loan Documents by any appropriate
proceedings, including proceedings for specific performance of any covenant or
agreement contained in this Agreement or any other Loan Document, and the
Administrative Agent, the Issuing Bank and each Lender may enforce payment of
any Obligations due and payable hereunder or enforce any other legal or
equitable right which it may have under this Agreement, any other Loan
Document, or under applicable law or in equity.

 

ARTICLE X

The Administrative Agent

 

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

 

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

 

82

 

The
Administrative Agent shall not have any duties or obligations except those
expressly set forth herein.  Without
limiting the generality of the foregoing, (a) the Administrative Agent
shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing, (b) the Administrative
Agent shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Administrative Agent is required to exercise in
writing as directed by the Majority Lenders or Required Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 11.02), and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to any Credit Party that is communicated to or obtained by the bank
serving as Administrative Agent or any of its Affiliates in any capacity.  The Administrative Agent shall not be liable
for any action taken or not taken by it with the consent or at the request of
the Majority Lenders or the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 11.02) or in the absence of its own gross negligence
or willful misconduct.  The
Administrative Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to the Administrative Agent by
a Borrower or a Lender, and the Administrative Agent shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement, (ii) the
contents of any certificate, report or other document delivered hereunder or in
connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article V or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the
Administrative Agent.  No Person
identified as a Syndication Agent, Co-Documentation Agent or an Arranger, in
each case, in its respective capacity as such, shall have any responsibilities
or duties, or incur any liability, under this Agreement or the other Loan
Documents.

 

The
Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person.  The Administrative Agent also may rely upon
any statement made to it orally or by telephone and believed by it to be made
by the proper Person, and shall not incur any liability for relying
thereon.  The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrowers), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

 

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

 

83

 

Subject
to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time
upon notice to the Lenders, the Issuing Bank and the Borrower
Representative.  Upon any such
resignation, the Majority Lenders shall have the right, with the consent of the
Borrowers (which consent shall not be unreasonably withheld or delayed), to
appoint a successor; provided that no consent of the Borrowers shall be
required if any Default has occurred and is continuing.  If no successor shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within thirty
(30) days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York.  Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder.  The fees payable by the Borrowers to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrowers and such successor.  After the Administrative Agent’s resignation
hereunder, the provisions of this Article and Section 11.03 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.

 

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

 

Each
Lender and the Issuing Bank hereby authorize the Administrative Agent to
release any Collateral that is permitted to be sold or released pursuant to the
terms of the Loan Documents.  Each Lender
and the Issuing Bank hereby authorize the Administrative Agent to execute and
deliver to the Borrower, at the Borrower’s sole cost and expense, any and all
releases of Liens, termination statements, assignments or other documents
reasonably requested by the Borrower in connection with any sale or other
disposition of Collateral to the extent such sale or other disposition is
permitted by the terms of Section 7.05 or is otherwise authorized by the
terms of the Loan Documents.

 

ARTICLE XI

Miscellaneous

 

Section 11.01         Notices.

 

(a)           Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to paragraph (b) below),
all notices and other communications provided for herein shall be in writing
and shall be delivered by 

 

84

 

hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy, as follows:

 

(i)            if to the Borrowers or any other Credit Party, to Antero
Resources Corporation, 1625 17th Street, 3rd Floor, Denver, Colorado 80202,
Attention: Glen Warren, President and Chief Financial Officer, Telecopy No. (303)
357-7315;

 

(ii)           if to the Administrative Agent or Issuing Bank, to
JPMorgan Chase Bank, N.A., Mail Code IL1-0010, 10 South Dearborn, Chicago, Illinois,
60603-2003, Telecopy No.: (312) 385-1544, Attention: Lillian Arroyo, with a
copy to JPMorgan Chase Bank, N.A., Mail Code TX2-S038, 712 Main Street, 8th
Floor, Houston, Texas 77002, Telecopy No. (713) 216-7770, Attention:  Ryan Fuessel;

 

(iii)          if to a Syndication Agent or Co-Documentation Agent, to it
at its address (or telecopy number) set forth in its Administrative
Questionnaire; and

 

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

 

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

 

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

 

Section 11.02         Waivers;
Amendments.

 

(a)           No failure or delay by the Administrative Agent, the
Issuing Bank or any Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. 
The rights and remedies of the Administrative Agent, the Issuing Bank
and the Lenders hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. 
No waiver of any provision of this Agreement or consent to any departure
by the Borrowers therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) of this Section, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given.  Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as 

 

85

 

a waiver of any Default, regardless of whether the
Administrative Agent, any Lender or the Issuing Bank may have had notice or
knowledge of such Default at the time.

 

(b)           Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Credit Parties and the Majority Lenders or by the
Credit Parties and the Administrative Agent with the consent of the Majority
Lenders; provided that no such agreement shall (1) amend or waive
any of the conditions specified in Article V without the written consent
of each Lender (provided that the Administrative Agent may in its discretion
withdraw any request it has made under Section 5.01(o)), (2) increase
the Borrowing Base without the written consent of each Lender, (3) increase
the Applicable Percentage of any Lender or increase the Commitment of any
Lender without the written consent of such Lender, (4) increase the
Maximum Facility Amount without the written consent of each Lender, (5) reduce
the principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (6) postpone the scheduled date
of payment of the principal amount of any Loan or LC Disbursement, or any
interest thereon, or any fees payable hereunder, or reduce the amount of, waive
or excuse any such payment, or postpone the scheduled date of expiration of the
Aggregate Commitment, without the written consent of each Lender affected
thereby (it being understood that any waiver of a mandatory prepayment of the
Loans or a mandatory reduction of the Commitments shall not constitute a
postponement or waiver of a scheduled payment or date of expiration), (7) change
Section 2.18(b) or Section 2.18(c) in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (8) except in connection with any Dispositions
permitted in Section 7.05, release any Credit Party from its obligations
under the Loan Documents or release any of the Collateral without the written
consent of each Lender, (9) change any of the provisions of this Section or
the definition of “Majority Lenders”, “Super-Majority Lenders” or “Required
Lenders” or any other provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender, or (10) amend this Section 11.02 without the consent of
each Lender; provided  further that no such agreement shall (x) amend,
modify or otherwise affect the rights or duties of the Administrative Agent or
the Issuing Bank hereunder without the prior written consent of the
Administrative Agent or the Issuing Bank, as the case may be or (y) change
any of the provisions of Section 2.22 without the prior written consent of
the Administrative Agent and the Issuing Bank.

 

(c)           Notwithstanding anything to the contrary contained in this
Section 11.02, the Administrative Agent may, with the consent of the
Borrowers only, amend, modify or supplement this Agreement or any of the other
Loan Documents to correct any clerical errors or cure any ambiguity, omission,
mistake, defect or inconsistency.

 

Section 11.03         Expenses;
Indemnity; Damage Waiver.

 

(a)           The Borrowers shall pay (i) all reasonable
out-of-pocket expenses incurred by the Administrative Agent, the Arrangers and
their Affiliates, including the reasonable

 

86

 

fees, charges and
disbursements of counsel for the Administrative Agent, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of this Agreement and the other Loan Documents or any
amendments, modifications or waivers of the provisions hereof (whether or not
the transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (iii) all reasonable out-of-pocket
expenses incurred by the Administrative Agent, the Issuing Bank or any Lender,
including the fees, charges and disbursements of any counsel for the
Administrative Agent, the Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with the Loan Documents,
including its rights under this Section, or in connection with the Loans made
or Letters of Credit issued hereunder, including all such out-of-pocket
expenses incurred during  any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.

 

(b)           THE CREDIT PARTIES SHALL
INDEMNIFY THE ADMINISTRATIVE AGENT, THE ISSUING BANK AND EACH LENDER, AND EACH
RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN
“INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND
ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING
THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED
BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH,
OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE PERFORMANCE BY THE PARTIES
HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THE CONSUMMATION OF THE
TRANSACTIONS OR ANY OTHER TRANSACTIONS CONTEMPLATED HEREBY, (II) ANY LOAN
OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL
BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF
THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY
WITH THE TERMS OF SUCH LETTER OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE
OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY
THE BORROWER OR ANY SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY
WAY TO THE BORROWER OR ANY SUBSIDIARY, OR (IV) ANY ACTUAL OR PROSPECTIVE
CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE
FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS
OF WHETHER ANY INDEMNITEE IS A PARTY THERETO. 
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LOSSES,
CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE IN ANY WAY OR TO ANY
EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT
LIABILITY OR CAUSED, IN WHOLE OR IN 

 

87

 

PART BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY ANY INDEMNITEE; 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.  FOR THE AVOIDANCE OF DOUBT, WITH RESPECT TO
THE FOREGOING PROVISO “ANY INDEMNITEE” MEANS ONLY THE INDEMNITEE OR
INDEMNITEES, AS THE CASE MAY BE, THAT ARE DETERMINED BY SUCH COURT TO HAVE
BEEN GROSSLY NEGLIGENT OR TO HAVE ENGAGED IN WILLFUL MISCONDUCT AND NOT ANY
OTHER INDEMNITEE.

 

(c)           To the extent that any Credit Party fails to pay any
amount required to be paid by it to the Administrative Agent or the Issuing
Bank under paragraph (a) or (b) of this Section, each Lender
severally agrees to pay to the Administrative Agent or the Issuing Bank, as the
case may be, such Lender’s Applicable Percentage of such unpaid amount with
respect to amounts to be paid to the Issuing Bank and such Lender’s Applicable
Percentage of such unpaid amount with respect to amounts to be paid to the
Administrative Agent (in each case, determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought); 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 the Issuing Bank in its capacity as such.

 

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

 

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

 

Section 11.04         Successors and Assigns.

 

(a)           The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit), except that (i) no Credit Party may assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of each Lender (and any attempted assignment or transfer
by such Credit Party without such consent shall be null and void) and (ii) no
Lender may assign or otherwise transfer its rights or obligations hereunder 

 

88

 

except in accordance with
this Section.  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
(including any Affiliate of the Issuing Bank that issues any Letter of Credit),
Participants (to the extent provided in paragraph (c) of this Section)
and, to the extent expressly contemplated hereby, the Related Parties of each
of the Administrative Agent, the Issuing Bank and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

 

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

 

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

 

(B)           the Administrative Agent; and

 

(C)           the Issuing Bank.

 

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

 

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

 

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

 

(C)           the parties to each assignment shall execute and deliver
to the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500; provided that no such
processing and recordation fee shall be required for an assignment by a Lender
to an Affiliate of such Lender; and

 

89

 

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

 

For
the purposes of this Section 11.04(b), the term “Approved Fund” has
the following meaning:

 

“Approved
Fund” means any Person (other than a natural person) that is engaged in
making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.

 

(iii)          Subject to acceptance and recording thereof pursuant to
paragraph (b)(iv) of this Section, from and after the effective date
specified in each Assignment and Assumption the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to
the benefits of Section 2.15, Section 2.16, Section 2.17 and Section 11.03).  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this Section 11.04
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c) of
this Section except that any attempted assignment or transfer by any
Lender that does not comply with clause (C) of Section 11.04(b)(ii) shall
be null and void.

 

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

 

(v)           Upon its receipt of a duly completed Assignment and
Assumption executed by an assigning Lender and an assignee, the assignee’s
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section, and any written consent to such assignment required by paragraph (b) of

 

90

 

this Section, the
Administrative Agent shall accept such Assignment and Assumption and record the
information contained therein in the Register; provided that if either
the assigning Lender or the assignee shall have failed to make any payment
required to be made by it pursuant to Section 2.06(d) or Section 2.06(e),
Section 2.07, Section 2.18(d) or Section 11.03(c), the
Administrative Agent shall have no obligation to accept such Assignment and
Assumption and record the information therein in the Register unless and until
such payment shall have been made in full, together with all accrued interest
thereon.  No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.

 

(c)           (i)  Any Lender may, without the consent of the
Borrowers, the Administrative Agent or the Issuing Bank, sell participations to
one or more banks or other entities (a “Participant”) in all or a
portion of such Lender’s rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans owing to it); provided
that (A) such Lender’s obligations under this Agreement shall remain
unchanged, (B) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (C) the Borrowers,
the Administrative Agent, the Issuing Bank and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement. 
Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 11.02(b) that affects such Participant.  Subject to paragraph (c)(ii) of this
Section, the Borrowers agree that each Participant shall be entitled to the
benefits of Section 2.15, Section 2.16 and Section 2.17 to the
same extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (b) of this Section. 
To the extent permitted by law, each Participant also shall be entitled
to the benefits of Section 11.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.18(c) as though it
were a Lender.

 

(i)            A Participant shall not be entitled to receive any
greater payment under Section 2.15 or Section 2.17 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the prior written consent of the Borrowers.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.17
unless the Borrower Representative is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrowers,
to comply with Section 2.17(e) as though it were a Lender.

 

(d)           Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including without limitation any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section shall
not apply to any such pledge or assignment of a 

 

91

 

security interest; provided
that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

 

Section 11.05         Survival.  All covenants, agreements, representations
and warranties made by the Credit Parties herein and in the certificates or
other instruments  delivered in
connection with or pursuant to this Agreement shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, the Issuing
Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Aggregate Commitment has not expired or terminated.  The provisions of Section 2.15, Section 2.16,
Section 2.17, Section 11.03, Section 11.12 and Article X
shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the Aggregate
Commitment or the termination of this Agreement or any provision hereof.

 

Section 11.06         Counterparts; Integration;
Effectiveness.  This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which
when taken together shall constitute a single contract.  This Agreement and any separate letter
agreements with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter hereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.  Except as provided in Section 5.01, this
Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy or other electronic means
shall be effective as delivery of a manually executed counterpart of this
Agreement.

 

Section 11.07         Severability.  Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

92

 

Section 11.08         Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the
Borrowers against any of and all the obligations of any Credit Party now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. 
The rights of each Lender under this Section and Section 8.07
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.

 

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

 

(a)           THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES THEREOF.

 

(b)           EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN,
CITY OF NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,
AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT.  EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT SHALL AFFECT ANY
RIGHT THAT THE ADMINISTRATIVE AGENT, THE ISSUING BANK OR ANY LENDER MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY
CREDIT PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

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

 

93

 

TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)           EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.01.  NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.

 

Section 11.10         WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section 11.11         Headings.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.

 

Section 11.12         Confidentiality.  Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its
and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority
having jurisdiction over any Lender or any self-regulatory authority or agency
possessing investigative powers and the ability to sanction members for
non-compliance, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other
party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Agreement or (ii) any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Credit Parties and their obligations, (g) with
the consent of the Borrowers or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than a Credit Party.  For the purposes of this Section, “Information”
means all information received from any Credit Party relating to any Credit
Party 

 

94

 

or its business, other than any such information
that is available to the Administrative Agent, the Issuing Bank or any Lender
on a nonconfidential basis prior to disclosure by any Credit Party; provided
that, in the case of information received from any Credit Party after the date
hereof, such information is clearly identified at the time of delivery as
confidential.  Any Person required to
maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

Section 11.13         Interest Rate Limitation.  Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which are treated as interest on such
Loan under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.

 

Section 11.14         USA PATRIOT Act.  Each Lender that is subject to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”) hereby notifies each Credit
Party that pursuant to the requirements of the Act, it is required to obtain,
verify and record information that identifies each Credit Party, which
information includes the name and address of each Credit Party and other
information that will allow such Lender to identify each Credit Party in
accordance with the Act.  The Borrowers
shall, upon the request of the Administrative Agent or any Lender, provide all
documentation and other information that the Administrative Agent or such
Lender reasonably requires to comply with its ongoing obligations under
applicable “know your customer” and anti-money laundering rules and
regulations, including the Act.

 

Section 11.15         Original Credit Agreement.  Except as provided in Section 11.18,
upon the Effective Date: (i) all loans, letters of credit, and other
Indebtedness, obligations and liabilities outstanding under the Original Credit
Agreement on such date shall continue to constitute Loans, Letters of Credit
and other Indebtedness, obligations and liabilities under this Agreement, (ii) the
execution and delivery of this Agreement or any of the Loan Documents hereunder
shall not constitute a novation, refinancing or any other fundamental change in
the relationship among the parties and (iii) the Loans, Letters of Credit,
and other Indebtedness, obligations and liabilities outstanding hereunder, to
the extent outstanding under the Original Credit Agreement immediately prior to
the date hereof, shall constitute the same loans, letters of credit, and other
Indebtedness, obligations and liabilities as were outstanding under the
Original Credit Agreement. 
Notwithstanding the foregoing and notwithstanding the release of Antero
Midstream pursuant to Section 11.18, each of the Credit Parties hereby
acknowledges that any Indebtedness, obligations and liabilities of Antero
Midstream which by the terms of the Original 

 

95

 

Credit Agreement expressly survive the termination,
cancellation or replacement of the Original Credit Agreement constitute
Indebtedness, obligations and liabilities of the Credit Parties under this
Agreement.

 

Section 11.16         Reaffirmation and Grant of Security
Interest.  Except as provided in Section 11.18,
each Credit Party hereby (i) confirms that each Security Document (as
defined in the Original Credit Agreement) to which it is a party or is
otherwise bound and all assets, property and interests encumbered thereby will
continue to guarantee or secure, as the case may be, to the fullest extent
possible in accordance with the Loan Documents, the payment and performance of
all Obligations and Guaranteed Liabilities under this Agreement and the Secured
Obligations and Secured Indebtedness (as each such term is defined in the
Security Documents) under the Security Documents, and (ii) grants to the
Administrative Agent for the benefit of the Secured Parties a continuing Lien
on and security interest in and to such Credit Party’s right, title and
interest in, to and under all Collateral as collateral security for the prompt
payment and performance in full when due of the Obligations and Guaranteed
Liabilities under this Agreement and the Secured Obligations and Secured
Indebtedness under the Security Documents (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms thereof.

 

Section 11.17         Reallocation of Commitments and
Loans.  The Lenders party to the
Original Credit Agreement have agreed among themselves to reallocate their
respective Commitments (as defined in the Original Credit Agreement) as
contemplated by this Agreement.  On the
Effective Date and after giving effect to such reallocation and adjustment of
the Aggregate Commitment, the Commitment and Applicable Percentage of each
Lender shall be as set forth on Schedule 1.01 and each Lender shall own its
Applicable Percentage of the outstanding Loans. 
The reallocation and adjustment to the Commitments of each Lender as
contemplated by this Section 11.17 shall be deemed to have been consummated
pursuant to the terms of the Assignment and Assumption attached as Exhibit A
hereto as if each of the Lenders had executed an Assignment and Assumption with
respect to such reallocation and adjustment. 
Each Borrower and the Administrative Agent hereby consent to such
reallocation and adjustment of the Commitments. 
The Administrative Agent hereby waives the $3,500 processing and
recordation fee set forth in Section 11.04(b)(ii)(C) with respect to
the assignments and reallocations of the Commitments contemplated by this Section 11.17.  To the extent requested by any Lender, and in
accordance with Section 2.16, the Borrowers shall pay to such Lender,
within the time period prescribed by Section 2.16, any amounts required to
be paid by the Borrowers under Section 2.16 in the event the payment of
any principal of any Eurodollar Loan or the conversion of any Eurodollar Loan
other than on the last day of an Interest Period applicable thereto is required
in connection with the reallocation contemplated by this Section 11.17.

 

Section 11.18         Release of Antero Midstream.  On the Effective Date, the Administrative
Agent and the Lenders hereby (a) release and discharge Antero Midstream,
from any and all loans, letters of credit, and other Indebtedness, obligations
and liabilities outstanding under the Original Credit Agreement and any
security document or loan document executed in connection therewith, whether as
a primary obligor or as a guarantor, accommodation party, surety or otherwise, (b) terminate
the Midstream Pledge Agreement (as defined in the Original Credit Agreement), (c) terminate
and release any and all Liens granted by Antero Midstream under the 

 

96

 

Original Credit Agreement and any Security Document
(as defined in the Original Credit Agreement) executed in connection therewith,
and (d) agree to execute and deliver to Antero Midstream, at the expense
of Antero Midstream, any instruments or agreements reasonably requested by
Antero Midstream to effectuate the foregoing.

 

[Signature Pages Follow]

 

97

 

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

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ANTERO
  RESOURCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Alvyn A. Schopp

  
	
   

  	
  Name:

  	
  Alvyn
  A. Schopp

  
	
   

  	
  Title:

  	
  Treasurer
  and Vice President,

  
	
   

  	
   

  	
  Administration
  and Accounting

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ANTERO
  RESOURCES PICEANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Alvyn A. Schopp

  
	
   

  	
  Name:

  	
  Alvyn
  A. Schopp

  
	
   

  	
  Title:

  	
  Treasurer
  and Vice President,

  
	
   

  	
   

  	
  Administration
  and Accounting

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ANTERO
  RESOURCES PIPELINE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Alvyn A. Schopp

  
	
   

  	
  Name:

  	
  Alvyn
  A. Schopp

  
	
   

  	
  Title:

  	
  Treasurer
  and Vice President,

  
	
   

  	
   

  	
  Administration
  and Accounting

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ANTERO
  RESOURCES APPALACHIAN CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Alvyn A. Schopp

  
	
   

  	
  Name:

  	
  Alvyn
  A. Schopp

  
	
   

  	
  Title:

  	
  Treasurer
  and Vice President,

  
	
   

  	
   

  	
  Administration
  and Accounting

  

 

SIGNATURE PAGE

 

 

	
   

  	
  RESTRICTED
  SUBSIDIARIES:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ANTERO
  RESOURCES FINANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Alvyn A. Schopp

  
	
   

  	
  Name:

  	
  Alvyn
  A. Schopp

  
	
   

  	
  Title:

  	
  Treasurer
  and Vice President,

  
	
   

  	
   

  	
  Administration
  and Accounting

  

 

SIGNATURE PAGE

 

 

	
   

  	
  JPMORGAN
  CHASE BANK, N.A.,

  
	
   

  	
  as
  Administrative Agent, Issuing Bank and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ryan Fuessel

  
	
   

  	
  Name:

  	
  Ryan
  Fuessel

  
	
   

  	
  Title:

  	
  Authorized
  Officer

  

 

SIGNATURE PAGE

 

 

	
   

  	
  WELLS
  FARGO BANK, N.A.,

  
	
   

  	
  as
  Syndication Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Oleg Kogan

  
	
   

  	
  Name:

  	
  Oleg
  Kogan

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

SIGNATURE PAGE

 

 

	
   

  	
  BANK
  OF SCOTLAND PLC,

  
	
   

  	
  as
  Co-Documentation Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Julia R. Franklin

  
	
   

  	
  Name:

  	
  Julia
  R. Franklin

  
	
   

  	
  Title:

  	
  Assistant
  Vice President

  

 

SIGNATURE PAGE

 

 

	
   

  	
  BNP
  PARIBAS,

  
	
   

  	
  as
  Co-Documentation Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Russel Otts

  
	
   

  	
  Name:

  	
  Russel
  Otts

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Matthew A. Turner

  
	
   

  	
  Name:

  	
  Matthew
  A. Turner

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

SIGNATURE PAGE

 

 

	
   

  	
  CREDIT
  AGRICOLE CORPORATE AND INVESTMENT BANK,

  
	
   

  	
  as
  Co-Documentation Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Byargeon

  
	
   

  	
  Name:

  	
  Tom
  Byargeon

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael Willis

  
	
   

  	
  Name:

  	
  Michael
  Willis

  
	
   

  	
  Title:

  	
  Managing
  Director

  

 

SIGNATURE PAGE

 

 

	
   

  	
  DEUTSCHE
  BANK TRUST COMPANY AMERICAS,

  
	
   

  	
  as
  Co-Documentation Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Carin Keegan

  
	
   

  	
  Name:

  	
  Carin
  Keegan

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Enrique Landaeta

  
	
   

  	
  Name:

  	
  Enrique
  Landaeta

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

SIGNATURE PAGE

 

 

	
   

  	
  UNION
  BANK, N.A.,

  
	
   

  	
  as
  Co-Documentation Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jarrod Bourgeois

  
	
   

  	
  Name:

  	
  Jarrod
  Bourgeois

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

SIGNATURE PAGE

 

 

	
   

  	
  BARCLAYS
  BANK PLC,

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ann E. Sutton

  
	
   

  	
  Name:

  	
  Ann
  E. Sutton

  
	
   

  	
  Title:

  	
  Director

  

 

SIGNATURE PAGE

 

 

	
   

  	
  COMERICA
  BANK,

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Greg Smith

  
	
   

  	
  Name:
  

  	
  Greg
  Smith

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  

 

SIGNATURE PAGE

 

 

	
   

  	
  CREDIT
  SUISSE AG, CAYMAN ISLANDS BRANCH,

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nupur Kumar

  
	
   

  	
  Name:
  

  	
  Nupur
  Kumar

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Chris Day

  
	
   

  	
  Name:

  	
  Chris
  Day

  
	
   

  	
  Title:

  	
  Associate

  

 

SIGNATURE PAGE

 

 

	
   

  	
  KEYBANK
  NATIONAL ASSOCIATION,

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Todd Coker

  
	
   

  	
  Name:
  

  	
  Todd
  Coker

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

SIGNATURE PAGE

 

 

	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Daria Mahoney

  
	
   

  	
  Name:
  

  	
  Daria
  Mahoney

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

SIGNATURE PAGE

 

 

	
   

  	
  GUARANTY
  BANK AND TRUST COMPANY, 

  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gail J. Nosfinger

  
	
   

  	
  Name:
  

  	
  Gail
  J. Nosfinger

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  

 

SIGNATURE PAGEExhibit 10.1

 

TRUE RELIGION APPAREL, INC.

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is entered into as of                  
   ,     , by and between True Religion
Apparel, Inc., a Delaware corporation (the “Company”),
and                ,
a [director/officer] of the Company (the “Indemnitee”).  This Agreement shall be effective as of the
date set forth above, and shall apply to any indemnifiable event that occurred
prior to or after such date if Indemnitee was an officer or director of the
Company, or was serving at the request of Company as an officer or director of
another corporation, partnership, joint venture, trust or other enterprise, at
the time such indemnifiable event occurred.

 

B A C K G R O U N D

 

A.            In light of the litigation costs and risks to directors
and officers resulting from their service to companies, and the desire of the
Company to attract and retain qualified individuals to serve as directors and
officers, it is prudent and necessary for the Company to indemnify and advance
expenses on behalf of its directors and officers to the extent permitted by
applicable law so that they will continue to serve the Company free from undue
concern regarding such risks.

 

B.            The Indemnitee is a member of the Board of Directors or
an officer of the Company and, in that capacity, performs a valuable service
for the Company.

 

C.            In order to induce the Indemnitee to continue to serve as
a member of the Board of Directors or as an officer of the Company, as
applicable, and to establish a specific procedure for addressing
indemnification matters if and as they arise, the Company has agreed to a
contractual indemnification arrangement on the terms set forth in this
Agreement.

 

THE PARTIES AGREE AS FOLLOWS:

 

1.             Definitions.  For purposes of this Agreement,
the following terms have the following meanings:

 

(a)           “Beneficial Owner” or “Beneficial Ownership”
shall have the meanings set forth in Rule 13d-3 promulgated under the Exchange
Act as in effect on the date hereof.

 

(b)           “Certificate of Incorporation”
means, with respect to any entity, its certificate of incorporation, articles
of incorporation or similar governing document.

 

(c)           “Change in Control” means any of the following
events:

 

(i)            The
acquisition in one or more transactions by any “person” (as the term person is
used for purposes of Section 13(d) or 14(d) of the Exchange Act) of Beneficial
Ownership of shares representing at least a majority of the total voting power
of the Voting Stock (as hereinafter defined); or

 

1

 

(ii)           Consummation
by the Company, in a single transaction or series of related transactions, of
(A) a merger or consolidation involving the Company if the stockholders of the
Company immediately prior to such merger or consolidation do not own, directly
or indirectly, immediately following such merger or consolidation, at least a
majority of the total voting power of the outstanding voting securities of the
entity resulting from such merger or consolidation or (B) a sale, conveyance,
lease, license, exchange or transfer (for cash, shares of stock, securities or
other consideration) of a majority or more of the assets or earning power of
the Company.

 

Notwithstanding the foregoing, a “Change in
Control” shall not be deemed to occur solely because a majority or more of
the total voting power of the Voting Stock is acquired by (A) a trustee or
other fiduciary holding securities under one or more employee benefit plans
maintained by the Company or any of its subsidiaries or (B) any corporation
that, immediately prior to such acquisition, is owned directly or indirectly by
the stockholders of the Company in the same proportion as their ownership of
stock in the Company immediately prior to such acquisition.

 

(d)           “Company Entity” means the Company, any of its
subsidiaries and any other corporation, partnership, limited liability company,
joint venture, trust, employee benefit plan or other enterprise with respect to
which Indemnitee serves as a director, officer, employee, partner,
representative, fiduciary or agent, or in any similar capacity, at the request
of the Company.

 

(e)           “Corporate Status” describes the status of a
person in his or her capacity as a director or officer of the Company
(including, without limitation, one who serves at the request of the Company as
a director, officer, employee, fiduciary or agent of any Company Entity).

 

(f)            “Disinterested Director” means a director
of the Company who is not (at the time of the vote) and was not a party to the
Proceeding in respect of which indemnification is sought under this Agreement
or otherwise.

 

(g)           “Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

(h)           “Expenses” shall mean all reasonable direct
and indirect costs, fees and expenses and shall specifically include all
reasonable attorneys’ fees and disbursements, retainers, court costs,
transcript costs, fees and costs of experts, witnesses, professional advisers
and private investigators, arbitration expenses, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness, in, or otherwise
participating in, a Proceeding, including, but not limited to, the premium for
appeal bonds, attachment bonds or similar bonds and all interest, assessments
and other charges paid or payable in connection with or in respect of any such
Expenses; provided, however, that “Expenses” shall not include any judgments,
fines or amounts paid in settlement. 
Should any payment by the Company under this Agreement be determined to
be subject to any federal, state or local income 

 

2

 

or excise tax, “Expenses”
shall also include such amounts as are necessary to place Indemnitee in the
same after-tax position (after giving effect to all applicable taxes) as
Indemnitee would have been in had no such tax been determined to apply to such
payments.

 

(i)            “Independent Counsel” means a law firm or
attorney that neither is presently nor in the past two years has been retained
to represent: (i) the Company or Indemnitee in any matter material to the
Company or Indemnitee (other than as Independent Counsel under this Agreement
or similar agreements), (ii) any other party to the Proceeding in respect
of which indemnification is sought under this Agreement or otherwise; or (iii)
the Beneficial Owner directly or indirectly, of securities of the Company
representing five percent (5%) or more of the combined voting power of the
Company’s then outstanding shares.  In
addition, the term “Independent Counsel” does not include any law firm or
attorney who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee’s right to
indemnification under this Agreement or otherwise.

 

(j)            “Liabilities” means liabilities and
losses of any type whatsoever, including, without limitation, judgments, fines,
excise taxes and penalties (including ERISA excise taxes and penalties) and
amounts paid in settlement (including all interest, assessments and other
charges paid or payable in connection with or in respect of such liabilities
and losses), actually incurred by Indemnitee in connection with or as a result
of a Proceeding.

 

(k)            “Non-Affiliate Director” means a director
of the Company who is not also (i) an officer or employee of the Company; or
(ii) a director, officer or employee of any Company Entity.

 

(l)            “Proceeding” includes any actual,
threatened, pending or completed action, suit, arbitration, alternate dispute
resolution mechanism, investigation, inquiry, administrative hearing or any
other actual, threatened, pending or completed proceeding, whether formal or
informal, whether brought by or in the right of the Company or otherwise and
whether civil, criminal, administrative or investigative in nature, in which
Indemnitee was, is, may be or will be involved as a party, witness or
otherwise, by reason of Indemnitee’s Corporate Status or by reason of any
action taken by Indemnitee or of any inaction on the Indemnitee’s part while
acting as director or officer of any Company Entity (in each case whether or
not Indemnitee is acting or serving in any such capacity or has such status at
the time any liability or expense is incurred for which indemnification or
advancement of Expenses can be provided under this Agreement).

 

2.             Indemnification
- General.  On the terms and subject to the conditions
of, and in accordance with the procedures set forth in, this Agreement, the
Company shall indemnify Indemnitee with respect to, and hold Indemnitee
harmless from and against, all Liabilities, Expenses and other matters that may
result from or arise in connection with Indemnitee’s Corporate Status and shall
advance Expenses to Indemnitee, in each case to the fullest extent permitted by
the Delaware General Corporation Law (the “DGCL”) or any other applicable law in effect on the date
hereof, and to such greater extent as the DGCL or any other applicable law may
hereafter from time to time permit, notwithstanding that such indemnification
or advances are not specifically authorized by other provisions of this
Agreement.  The indemnification 

 

3

 

obligations of the Company under this Agreement (a) shall
continue after such time as Indemnitee ceases to serve as a director of the
Company or in any other Corporate Status and (b) include, without limitation,
claims for monetary damages against Indemnitee in respect of any alleged breach
of fiduciary duty, to the fullest extent permitted under applicable law
(including, if applicable, Section 145 of the Delaware General Corporation Law)
as in existence on the date hereof and as amended from time to time.

 

3.             Proceedings
Other Than Proceedings by or in the Right of the Company.  If by reason of Indemnitee’s
Corporate Status Indemnitee is, or is threatened to be made, a party to or a
participant in any Proceeding (as hereinafter defined) other than a Proceeding
by or in the right of the Company to procure a judgment in its favor, the
Company shall indemnify Indemnitee with respect to, and hold Indemnitee
harmless from and against, all Expenses and Liabilities reasonably incurred by
Indemnitee or on behalf of Indemnitee in connection with such Proceeding or any
claim, issue or matter therein, if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the Company and, with respect to any criminal Proceeding, had no
reasonable cause to believe Indemnitee’s conduct was unlawful.

 

4.             Proceedings
by or in the Right of the Company.  If by reason of Indemnitee’s Corporate Status
Indemnitee is, or is threatened to be made, a party to or a participant in any
Proceeding by or in the right of the Company to procure a judgment in its
favor, the Company shall indemnify Indemnitee with respect to, and hold
Indemnitee harmless from and against, all Expenses reasonably incurred by
Indemnitee or on behalf of Indemnitee in connection with such Proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in, or
not opposed to, the best interests of the Company; provided, however,
that indemnification against such Expenses shall be made in respect of any
claim, issue or matter in such Proceeding as to which Indemnitee shall have
been adjudged by a court of competent jurisdiction to be liable to the Company
only if (and only to the extent that) the Court of Chancery of the State of
Delaware or the court in which such Proceeding shall have been brought or is
pending shall determine that despite such adjudication of liability and in
light of all circumstances such indemnification may be made.

 

5.             Mandatory
Indemnification in Case of Successful Defense.  Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s
Corporate Status, a party to (or a participant in) and is successful, on the
merits or otherwise, in defense of any Proceeding (including, without
limitation, any Proceeding brought by or in the right of the Company), the
Company shall indemnify Indemnitee with respect to, and hold Indemnitee
harmless from and against, all Expenses reasonably incurred by Indemnitee or on
behalf of Indemnitee in connection therewith. 
If Indemnitee is not wholly successful in defense of such Proceeding but
is successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Company will indemnify
Indemnitee against all Expenses reasonably incurred by Indemnitee or on behalf
of Indemnitee in connection with each successfully resolved claim, issue or
matter.  For purposes of this Section 5
and without limitation, the termination of any claim, issue or matter in such a
Proceeding by dismissal, with or without prejudice, on substantive or
procedural grounds, including, but not limited to, a successful prosecution of
a motion to dismiss, a motion for summary judgment, or 

 

4

 

by settlement (with or without court approval) shall
be deemed to be a successful result as to such claim, issue or matter.

 

The
Company acknowledges that a settlement or other disposition short of final
judgment may be successful if it permits a party to avoid expense, delay,
distraction, disruption and uncertainty.  In the event that any action, claim or
proceeding to which Indemnitee is a party is resolved in any manner other than
by adverse judgment against Indemnitee (including, without limitation
settlement of such action, claim or proceeding with or without payment of money
or other consideration) it shall be presumed that Indemnitee has been
successful on the merits or otherwise in such action, suit or proceeding.  Anyone seeking to overcome this presumption
shall have the burden of proof and the burden of persuasion, by clear and
convincing evidence.

 

6.             Partial
Indemnification.  If Indemnitee is entitled to indemnification
by the Company for some or a portion of Expenses or Liabilities but not for the
total amount, the Company shall nevertheless indemnify Indemnitee for the
portion of such Expenses and Liabilities to which Indemnitee is entitled to be
indemnified.

 

7.             Indemnification
for Additional Expenses Incurred to Secure Recovery or as Witness.

 

(a)           The
Company will indemnify Indemnitee with respect to, and hold Indemnitee harmless
from and against, any and all Expenses and, if requested by Indemnitee, will
(within twenty (20) calendar days of such request) advance such Expenses to
Indemnitee, which are reasonably incurred by Indemnitee in connection with any
action concerning (i) indemnification or advance payment of Expenses by the
Company under this Agreement, any other agreement, the Certificate of
Incorporation or By-laws of the Company as now or hereafter in effect; or (ii)
recovery under any director and officer liability insurance policies maintained
by any the Company or any other Company Entity to the fullest extent permitted
by law.

 

(b)           To
the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a
witness in any Proceeding to which Indemnitee is not a party, the Company will
indemnify Indemnitee with respect to, and hold Indemnitee harmless from and
against, and the Company will advance, all Expenses reasonably incurred by
Indemnitee or on behalf of Indemnitee in connection therewith.

 

8.             Advancement
of Expenses.

 

(a)           The
Company shall advance, to the fullest extent permitted by law, all Expenses
reasonably incurred by or on behalf of Indemnitee in connection with the
investigation, defense, settlement or appeal of any Proceeding within ten (10)
calendar days after the receipt by the Company of a statement or statements
from Indemnitee requesting such advance or advances from time to time, whether
prior to or after final disposition of such Proceeding.  Such advances shall, in all events, be (i)
unsecured and interest free; and (ii) made without regard to Indemnitee’s
ultimate entitlement to be indemnified, held harmless or exonerated under the
other provisions of this Agreement, or Indemnitee’s ability to repay the
advances.

 

(b)           To
obtain advancement of Expenses under this Agreement, Indemnitee shall submit to
the Company a written request for advancement of Expenses accompanied by 

 

5

 

appropriate
supporting documentation and, to the extent required by applicable law, an
unsecured written undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses.  Upon submission of such request for
advancement of Expenses and unsecured written undertaking, Indemnitee shall be
entitled to advancement of Expenses as provided in this Section 8,
and such advancement of Expenses shall continue until such time (if any) as
there is a final adjudication, not subject to further appeal, that Indemnitee
is not entitled to indemnification.

 

(c)           At
the request of the Indemnitee, any dispute concerning the advancement of
Expenses shall be resolved by arbitration before an arbitrator selected by
Indemnitee and approved by the Company. 
If the parties cannot agree on a single arbitrator, then the claim shall
be heard by a panel of three arbitrators, with one selected by Indemnitee, one
selected by the Company and one selected jointly by the foregoing two
arbitrators.  Each of the arbitrators
shall be a litigation or corporate attorney with experience in the field of
officer and director indemnification. 
The arbitrators shall be selected within fifteen (15) days after demand
for arbitration and shall render a decision within thirty (30) days after
selection, unless good cause is shown for requiring a longer decision
period.  The Company shall act in utmost
good faith to provide timely information to the arbitrators and to insure
Indemnitee a full opportunity to defend against the Company’s claim that
Indemnitee is not entitled to an advance of Expenses. The Company shall
indemnify Indemnitee against all Expenses incurred by Indemnitee under the
dispute resolutions proceedings set forth in this Section 8(c), unless a
court of competent jurisdiction finds that each of the claims and/or defenses
by Indemnitee in the action or proceeding for which an advance is sought was
frivolous or made in bad faith.

 

9.             Establishment
of a Trust.  The Company shall, upon written request of a
majority of Non-Affiliate Directors (as hereinafter defined), create a trust
for the benefit of Indemnitee (the “Trust”) following initiation of a
Proceeding for which Indemnitee reasonably believes that he or she may be
entitled to indemnification by the Company under this Agreement.  From time to time upon written request of
Indemnitee, the Company shall fund such Trust in an amount sufficient to
satisfy any and all Expenses reasonably anticipated at the time of each such
request to be incurred by or on behalf of Indemnitee in connection with such
Proceeding within ten (10) days of such request.  The trustee of the Trust (the “Trustee”)
shall be a bank or trust company or other individual or entity chosen by
Indemnitee and reasonably acceptable to the Company.  The amount or amounts to be deposited in the
Trust pursuant to the foregoing funding obligation shall be determined by
mutual agreement of Indemnitee and the Company or, if the Company and
Indemnitee are unable to reach an agreement, by Independent Counsel selected in
accordance with this Agreement.  The
terms of the Trust shall provide that (a) the Trust shall not be revoked or the
principal thereof invaded, without the written consent of Indemnitee; (b) the
Trustee shall advance, within ten (10) calendar days of a request by
Indemnitee, any and all Expenses reasonably incurred by or on behalf of
Indemnitee in connection with the investigation, defense, settlement or appeal
of any Proceeding, any required determination concerning the reasonableness of
the Expenses to be made by the Independent Counsel (and Indemnitee hereby
agrees to reimburse the Trust under the circumstances in which Indemnitee would
be required to reimburse the Company for Expenses advanced under this
Agreement); (c) the Trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above; (d) the Trustee shall
promptly pay to Indemnitee all amounts 

 

6

 

for which Indemnitee shall be entitled to
indemnification pursuant to this Agreement; and (e) all unexpended funds in the
Trust shall revert to the Company upon a final determination by Independent
Counsel or the mutual agreement by the Company and Indemnitee that Indemnitee
has been fully indemnified and held harmless under the terms of this
Agreement.  The Trust shall be governed
by Delaware law (without regard to its conflicts of laws rules) and the Trustee
shall consent to the exclusive jurisdiction of the Delaware Court in accordance
with this Agreement.  Nothing in this Section
9 shall relieve the Company of any of its obligations under this Agreement.

 

10.          Specific
Limitations on Indemnification.  Notwithstanding anything in this Agreement to
the contrary, the Company shall not be obligated under this Agreement to make
any payment to Indemnitee with respect to any Proceeding:

 

(a)           if and to the extent that Indemnitee
has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise; provided, however, that the
Company hereby agrees it is the indemnitor of first resort to provide
advancement or indemnification;

 

(b)           for Liabilities in connection with a
Proceeding settled without the Corporation’s consent, which consent, however,
shall not be unreasonably withheld;

 

(c)           for an accounting of profits made
from the purchase or sale by Indemnitee of securities of the Corporation within
the meaning of section 16(b) of the Exchange Act, or similar provisions of any
state statutory or common law. 
Notwithstanding anything to the contrary stated or implied in Section
10(c) above, indemnification pursuant to this Agreement relating to any
Proceeding against Indemnitee for an accounting of profits made from the
purchase or sale by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Exchange Act or similar provisions of any
federal, state or local laws shall not be prohibited if Indemnitee ultimately
establishes in any Proceeding that no recovery of such profits from Indemnitee
is permitted under Section 16(b) of the Exchange Act or similar provisions of
any federal, state or local laws;

 

(d)           to the extent it would be otherwise
prohibited by law, if so established by a judgment or other final adjudication
adverse to Indemnitee; or

 

(e)           commenced by Indemnitee (other than a
Proceeding commenced by Indemnitee to enforce Indemnitee’s rights under this
Agreement) unless the commencement of such Proceeding was authorized by the
Board of Directors.

 

11.          Procedural
Matters.

 

(a)           To obtain indemnification under this
Agreement, Indemnitee shall submit to CEO a written request for indemnification
at such time as determined by Indemnitee in Indemnitee’s sole discretion.

 

(b)           Upon written request by Indemnitee
for indemnification pursuant to this Agreement, a determination, if required by
applicable law, with respect to Indemnitee’s entitlement to indemnification
shall be made as follows: (i) upon Indemnitee’s request, by 

 

7

 

Independent Counsel
selected by the Company in a written opinion to the board of directors of the
Company, a copy of which shall be delivered to Indemnitee; or (ii) if no such
request is made by Indemnitee for a determination by Independent Counsel, (A)
by a majority vote of a quorum of the Disinterested Directors; or (B) if a
quorum of Disinterested Directors is not obtainable or, even if obtainable, if
a majority of such quorum of Disinterested Directors so directs, by Independent
Counsel selected (x) if a quorum of Disinterested Directors is obtainable, by a
majority vote of a quorum of Disinterested Directors or (y) if a quorum of
Disinterested Directors is not obtainable, by the board of directors of the Company,
in each case in a written opinion to the board of directors of the Company, a
copy of which shall be delivered to Indemnitee; or (C) if a majority of a
quorum of Disinterested Directors so directs, by the stockholders of the
Company.  If it is so determined that
Indemnitee is entitled to indemnification, payment to Indemnitee shall be made
within ten (10) calendar days after such determination.

 

(c)           If the person, persons or entity
empowered or selected to determine Indemnitee’s entitlement to indemnification
has not made a determination within sixty (60) calendar days after receipt by
the Company of the request by Indemnitee for indemnification, the requisite
determination of entitlement to indemnification will be deemed to have been
made, and Indemnitee, to the fullest extent not prohibited by law, shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact by Indemnitee necessary to
make Indemnitee’s statement not materially misleading, in connection with the
request for indemnification; or (ii) a final judicial determination that any or
all such indemnification is expressly prohibited under applicable law; provided,
however, that such sixty (60) calendar day period may be extended for a
reasonable time, not to exceed an additional thirty (30) calendar days, if the
person, persons or entity making the determination with respect to entitlement
to indemnification in good faith requires such additional time to obtain or
evaluate documentation and/or information relating to such determination.

 

(d)           The Company will promptly advise
Indemnitee in writing with respect to any determination that Indemnitee is or
is not entitled to indemnification, including a description of any reason or a
basis for which indemnification has been denied.  Indemnitee shall reasonably cooperate with
the person, persons or entity making such determination with respect to
Indemnitee’s entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation or
information that is not privileged or otherwise protected from disclosure and
that is reasonably available to Indemnitee and reasonably necessary to such
determination.  Any costs or Expenses (including
attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating
with the person, persons or entity making such determination shall be borne by
the Company (irrespective of the determination as to Indemnitee’s entitlement
to indemnification), and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.

 

(e)           If (i) a determination is made
pursuant to this Agreement that Indemnitee is not entitled to indemnification
under this Agreement or (ii) there has been any failure by the Company to make
timely payment or advancement of any amounts due hereunder, Indemnitee may
petition the Court of Chancery of the State of Delaware to adjudicate
Indemnitee’s entitlement to such indemnification or advancements due
hereunder.  The Company will pay any and
all Expenses reasonably incurred by or on behalf of Indemnitee in connection
with the 

 

8

 

investigation and
resolution of such issues.  If
determination is made pursuant to this Agreement that Indemnitee is entitled to
indemnification under this Agreement, then the Company shall be bound by such
determination, including in any Proceeding.

 

(f)            The parties intend and agree that,
to the extent permitted by law, in connection with any determination with
respect to entitlement to indemnification hereunder: (i) it will be presumed
that Indemnitee is entitled to indemnification under this Agreement, and that
the Company or any other person or entity challenging such right will have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that
presumption; (ii) the termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that Indemnitee did not act in good faith
and in a manner which Indemnitee reasonably believed to be in or not opposed to
the best interests of the applicable Company Entity, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee’s
conduct was unlawful; (iii) Indemnitee will be deemed to have acted in good
faith if Indemnitee’s action is based on the records or books of account of the
applicable Company Entity, including financial statements, or on information
supplied to Indemnitee by the officers, employees, or committees of the board
of directors of the applicable Company Entity, or on the advice of legal counsel
for the applicable Company Entity or for Indemnitee or on information or
records given in reports made to the applicable Company Entity by an
independent certified public accountant or by an appraiser or other expert or
advisor selected by the applicable Company Entity or Indemnitee; and (iv) the
knowledge and/or actions, or failure to act, of any director, officer, agent or
employee of any of the Company Entities or relevant enterprises will not be
imputed to Indemnitee in a manner that limits or otherwise adversely affects
Indemnitee’s rights hereunder.  The
provisions of this clause (f) shall not be deemed to be exclusive or to limit
in any way the other circumstances in which Indemnitee may be deemed to have
met the applicable standard of conduct set forth in this Agreement.

 

12.          Notice
by Indemnitee and Defense of Proceedings.  Indemnitee shall promptly notify the Company
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any matter which may give
rise to a claim for indemnification under this Agreement or otherwise;
provided, however, that a failure of Indemnitee to provide that notice shall
relieve the Company from liability only if and to the extent that the failure
materially prejudices the Company’s ability to adequately defend Indemnitee in
the Proceeding. With respect to any Proceeding as to which Indemnitee so
notifies the Company:

 

(a)           The Company shall be entitled to
participate at its own expense.

 

(b)           Except as otherwise provided below,
the Company, jointly with any other indemnifying party similarly notified,
shall be entitled to assume the defense of such Proceeding, with counsel
reasonably satisfactory to Indemnitee. 
After notice from the Company to Indemnitee of the Company’s election to
assume the defense, the Company shall not be liable to Indemnitee under this
Agreement for any Expenses subsequently incurred by Indemnitee, other than as
provided below. Indemnitee shall have the right to employ his own counsel in
that Proceeding, but the fees and expenses of such counsel incurred after
notice from the Company of its election so to assume the defense shall be borne
by Indemnitee, except to the extent that 

 

9

 

(A) the employment
of counsel by Indemnitee has been authorized by the Company,
(B) Indemnitee has reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of the defense of
such Proceeding or that counsel selected by the Company may not be adequately
representing Indemnitee, or (C) the Company has not in fact employed
counsel to assume the defense of such Proceeding. In those cases, the fees and
expenses of Indemnitee’s own counsel shall be paid by the Company.

 

(c)           The Company shall not unreasonably
withhold its consent to any proposed settlement.  The Company has no obligation to indemnify
and hold Indemnitee harmless under this Agreement for any amounts paid in
settlement of any Proceeding affected without its written consent.  The Company shall not settle any Proceeding
in any manner which would impose any penalty or limitation or Liability (other
than Liabilities actually paid by the Company pursuant to this Agreement) on
Indemnitee without Indemnitee’s written consent.  The Company shall promptly notify Indemnitee
once the Company has received an offer or intends to make an offer to settle
any Proceeding and the Company shall provide Indemnitee a reasonably practicable
amount of time to consider such offer.

 

13.          Non-exclusivity;
Subrogation, etc.

 

(a)           The indemnification provided by this
Agreement is not exclusive of or inconsistent with any rights to which
Indemnitee may be entitled under the Company’s Certificate of Incorporation or
Bylaws, any other agreement, any vote of stockholders or directors, the DGCL,
or otherwise, both as to action in Indemnitee’s official capacity and
otherwise.  Indemnitee’s rights under
this Agreement are present contractual rights that fully vest upon Indemnitee’s
first service or continued service as a director or officer of the
Company.  No amendment, alteration or
repeal of this Agreement or of any provision hereof shall limit or restrict any
right of Indemnitee under this Agreement in respect of any action taken or omitted
by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment,
alteration or repeal.  If and to the
extent that a change in the DGCL (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under the Company’s Bylaws or under this Agreement, it is the intent of the
parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.  No
right or remedy herein conferred is intended to be exclusive of any other right
or remedy, and every other right and remedy shall be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise.  The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other right or
remedy.

 

(b)           In the event of any payment by the
Company under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee against any other
Company Entity, and Indemnitee hereby agrees, as a condition to obtaining any
advancement or indemnification from the Company, to assign all of Indemnitee’s
rights to obtain from such other Company Entity such amounts to the extent that
they have been paid to or for the benefit of Indemnitee as advancement or
indemnification under this Agreement and are adequate to indemnify Indemnitee
with respect to the costs, Expenses or other items to the full extent that
Indemnitee is entitled to indemnification or other payment hereunder; and
Indemnitee will (upon request by the Company) execute all papers required and
take all action 

 

10

 

necessary to secure such
rights, including execution of such documents as are necessary to enable the
Company to bring suit or enforce such rights.

 

(c)           The Company’s obligation to indemnify
or advance Expenses hereunder to Indemnitee in respect of or relating to Indemnitee’s
service at the request of the Company as a director, officer, employee,
fiduciary, representative, partner or agent of any other Company Entity shall
be reduced by any amount Indemnitee has actually received as payment of
indemnification or advancement of Expenses from such other Company Entity,
except to the extent that such indemnification payments and advance payment of
Expenses when taken together with any such amount actually received from other
Company Entities or under director and officer insurance policies maintained by
one or more Company Entities are inadequate to fully pay all costs, Expenses or
other items to the full extent that Indemnitee is entitled to indemnification
or other payment hereunder.

 

14.          Liability
Insurance.  To the extent the Company maintains an
insurance policy or policies providing directors’ and/or officers’ liability
insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available.   If Indemnitee serves as a
fiduciary of any employee benefit plan of the Company or any of its subsidiary
or affiliated corporations, then to the extent that the Company maintains an
insurance policy or policies providing fiduciaries’ liability insurance,
Indemnitee shall be covered by such policy or policies in accordance with its
or their terms, to the maximum extent of the coverage available for any
fiduciary.

 

Upon notice to the Company, either from Indemnitee
or from any other source, of the commencement or threat of commencement of any
Proceeding or matter which may give rise to a claim for indemnification of
Indemnitee and which may be covered by any insurance policy maintained by the
Company, the Company shall promptly give notice to the insurer in accordance
with the procedures prescribed by such policy and shall thereafter take all
necessary or appropriate action to cause such insurer to pay, to or on behalf
of Indemnitee all Liabilities and Expenses payable under such policy with
respect to such Proceeding or matter. The Company shall indemnify Indemnitee
for Expenses incurred by Indemnitee in connection with any successful action
brought by Indemnitee for recovery under any insurance policy referred to in
this Section 14 and shall advance to Indemnitee the Expenses of
such action in the manner provided in Section 8 above.

 

15.          Other
Sources.  Indemnitee shall not be required to exercise
any rights Indemnitee may have against any other parties (for example, under an
insurance policy purchased by Indemnitee, the Company or any other person or
entity) before Indemnitee exercises or enforces Indemnitee’s rights under this
Agreement. However, to the extent the Company actually indemnifies Indemnitee
or advances Indemnitee funds in respect of Expenses, the Company shall be
entitled to enforce any such rights which Indemnitee may have against third
parties. Indemnitee shall assist the Company in enforcing those rights if it
pays Indemnitee’s costs and expenses of doing so. If Indemnitee is actually
indemnified or advanced Expenses by any such third party, then, for so long as
Indemnitee is not required to disgorge the amounts so received, to that extent
the Company shall be relieved of its obligation to indemnify Indemnitee or to
advance Expenses.

 

11

 

16.          Certain
Relationships.  The obligations and rights created under this
Agreement shall not be affected by any amendment to the Company’s Certificate
of Incorporation or Bylaws or any other agreement or instrument to which
Indemnitee is not a party, and shall not diminish any other rights which
Indemnitee now or in the future has against the Company or any other person or
entity.

 

17.          Severability.  If any provision of this
Agreement is determined to be unenforceable for any reason, it shall be
adjusted rather than voided, if possible, in order to achieve the intent of the
Company and Indemnitee.  In any event,
the remaining provisions of this Agreement shall remain enforceable to the
maximum extent possible.

 

18.          Contribution.  If the indemnification provided
in this Agreement is unavailable, then, in respect of any Proceeding in which
the Company is jointly liable with Indemnitee (or would be if joined in the
Proceeding), the Company shall contribute to the amount of Expenses and
Liabilities as appropriate to reflect: (i) the relative benefits received
by the Company, on the one hand, and Indemnitee, on the other hand, from the
transaction from which the Proceeding arose, and (ii) the relative fault
of the Company, on the one hand, and of Indemnitee, on the other, in connection
with the events which resulted in such Expenses and Liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company, on
the one hand, and of Indemnitee, on the other, shall be determined by reference
to, among other things, the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting
in such Expenses and Liabilities. The Company agrees that it would not be just
and equitable if contribution pursuant to this Section 18 were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations described in this Section 18.

 

19.          Governing
Law; Submission to Jurisdiction; Appointment of Agent for Service of Process.  This Agreement and the legal
relations among the parties shall, to the fullest extent permitted by law, be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware, without regard to its conflict of laws rules.  The Company and Indemnitee hereby irrevocably
and unconditionally (a) agree that any action or proceeding arising out of or
in connection with this Agreement shall be brought only in the Chancery Court
of the State of Delaware (the “Delaware Court”), and not in any other
state or federal court in the United States of America or any court in any
other country, (b) consent to submit to the exclusive jurisdiction of the
Delaware Court for purposes of any action or proceeding arising out of or in
connection with this Agreement, (c) waive any objection to the laying of venue
of any such action or proceeding in the Delaware Court, and (d) waive, and
agree not to plead or to make, any claim that any such action or proceeding
brought in the Delaware Court has been brought in an improper or otherwise
inconvenient forum.

 

20.          Notices.  All notices and other
communications under this Agreement shall be in writing and shall be given by
personal or courier delivery, confirmed facsimile or electronic mail
transmission or first class mail, and shall be deemed to have been duly given
upon receipt if personally delivered or delivered by courier, on the date of
transmission if transmitted by facsimile or electronic mail transmission, or
three days after mailing if mailed, to the addresses set forth below each party’s
name on the signature page hereto, or to such other address as such party may
designate by notice to the other from time to time.

 

12

 

21.          Counterparts.  This Agreement may be executed
in one or more counterparts, each of which shall constitute an original.

 

22.          Employment
Rights; Successors; Third Party Beneficiaries.  This Agreement shall not be
deemed an employment contract between the Company and Indemnitee.  This Agreement shall continue in force as
provided above after Indemnitee has ceased to serve as a director of Company.  This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee’s spouse, estate, heirs, executors, administrators,
personal or legal representatives and assigns.

 

23.          Amendment
and Waiver.  This Agreement may not be amended except by a
writing executed by both the Company and Indemnitee. No waiver of any provision
of this Agreement shall be effective unless in writing and signed by the party
to be charged therewith. A waiver of, or a failure to insist on, complete
compliance with any provision of this Agreement shall not be construed as a
waiver of a subsequent or different non-compliance, breach or default of that
or any other provision of this Agreement.

 

24.          Acknowledgment.  The Company expressly
acknowledges that it has entered into this Agreement and assumed the
obligations imposed on the Company under this Agreement in order to induce
Indemnitee to serve or to continue to serve as a director or executive officer
and acknowledges that Indemnitee is relying on this Agreement in serving or
continuing to serve in such capacity. The Company further agrees to stipulate
in any court proceeding that the Company is bound by all of the provisions of
this Agreement.

 

25.          Entire
Agreement.  This document contains the final, complete
and exclusive statement of the agreement between the Company and Indemnitee
with respect to the subject matter of this Agreement and supersedes any prior
or contemporaneous understandings, agreements, communications, correspondence
or representations by or between the parties, whether written or oral, relating
to the subject matter of this Agreement.

 

[Remainder
of Page Intentionally Left Blank]

 

13

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date set forth in its
first paragraph.

 

 

	
   

  	
  TRUE RELIGION APPAREL,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  JEFFREY L. LUBELL

  
	
   

  	
  Title:

  	
  CEO, Chairman of the Board
  and Chief Merchant

  
	
   

  	
   

  	
   

  
	
   

  	
  Address: 

  	
  2263 East Vernon Avenue

  
	
   

  	
   

  	
  Vernon, California 900

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Name of indemnitee]

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile:

  
	
   

  	
  Email:

  

 

14

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