Document:

Exhibit 10.1

 

SENIOR REVOLVING
CREDIT AGREEMENT

dated as of

October 2, 2006

among

EXCO PARTNERS OPERATING PARTNERSHIP, LP,

as Borrower

CERTAIN SUBSIDIARIES OF BORROWER,

as Guarantors

The Lenders Party Hereto

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

J.P. MORGAN
SECURITIES INC.,

as Sole Bookrunner and Lead Arranger

 

$750,000,000 Senior Secured Revolving Credit Facility

 

 

 

 

 

TABLE OF CONTENTS

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Article I

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Defined Terms

  	
  1

  
	
  Section 1.02.

  	
  Classification of Loans and Borrowings

  	
  28

  
	
  Section 1.03.

  	
  Terms Generally

  	
  28

  
	
  Section 1.04.

  	
  Accounting Terms; GAAP

  	
  29

  
	
  Section 1.05.

  	
  Oil and Gas Definitions

  	
  29

  
	
  Section 1.06.

  	
  Time of Day

  	
  29

  
	
  Section 1.07.

  	
  First Priority Creditors

  	
  29

  
	
   

  	
   

  	
   

  
	
  Article II

  	
  The Credits

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Commitments

  	
  29

  
	
  Section 2.02.

  	
  Termination and Reduction of the Aggregate
  Commitment

  	
  29

  
	
  Section 2.03.

  	
  Reserved

  	
  30

  
	
  Section 2.04.

  	
  Loans and Borrowings

  	
  30

  
	
  Section 2.05.

  	
  Requests for Revolving Borrowings

  	
  31

  
	
  Section 2.06.

  	
  Swingline Loans

  	
  32

  
	
  Section 2.07.

  	
  Letters of Credit

  	
  33

  
	
  Section 2.08.

  	
  Funding of Borrowings

  	
  37

  
	
  Section 2.09.

  	
  Interest Elections

  	
  38

  
	
  Section 2.10.

  	
  Repayment of Loans; Evidence of Debt

  	
  39

  
	
  Section 2.11.

  	
  Optional Prepayment of Loans

  	
  40

  
	
  Section 2.12.

  	
  Mandatory Prepayment of Loans

  	
  40

  
	
  Section 2.13.

  	
  Fees

  	
  42

  
	
  Section 2.14.

  	
  Interest

  	
  43

  
	
  Section 2.15.

  	
  Alternate Rate of Interest

  	
  44

  
	
  Section 2.16.

  	
  Increased Costs

  	
  44

  
	
  Section 2.17.

  	
  Break Funding Payments

  	
  45

  
	
  Section 2.18.

  	
  Taxes

  	
  46

  
	
  Section 2.19.

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

  	
  47

  
	
  Section 2.20.

  	
  Mitigation Obligations; Replacement of Lenders

  	
  49

  
	
   

  	
   

  	
   

  
	
  Article III

  	
  Borrowing Base

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Reserve Report; Proposed Borrowing Base; Conforming
  Borrowing Base

  	
  50

  
	
  Section 3.02.

  	
  Scheduled Redeterminations of the Borrowing Base;
  Procedures and Standards

  	
  51

  
	
  Section 3.03.

  	
  Special Redeterminations

  	
  52

  
	
  Section 3.04.

  	
  Notice of Redetermination

  	
  52

  
	
   

  	
   

  	
   

  
	
  Article IV

  	
  Representations and Warranties

  	
  53

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Organization; Powers

  	
  53

  
	
  Section 4.02.

  	
  Authorization; Enforceability

  	
  53

  
	
  Section 4.03.

  	
  Governmental Approvals; No Conflicts

  	
  53

  
				

 

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 4.04.

  	
  No Material Adverse Change

  	
  53

  
	
  Section 4.05.

  	
  Properties

  	
  54

  
	
  Section 4.06.

  	
  Litigation and Environmental Matters

  	
  54

  
	
  Section 4.07.

  	
  Compliance with Laws and Agreements

  	
  54

  
	
  Section 4.08.

  	
  Investment Company Status

  	
  55

  
	
  Section 4.09.

  	
  Taxes

  	
  55

  
	
  Section 4.10.

  	
  ERISA

  	
  55

  
	
  Section 4.11.

  	
  Disclosure

  	
  55

  
	
  Section 4.12.

  	
  Labor Matters

  	
  55

  
	
  Section 4.13.

  	
  Capitalization and Credit Party Information

  	
  56

  
	
  Section 4.14.

  	
  Margin Stock

  	
  56

  
	
  Section 4.15.

  	
  Oil and Gas Interests

  	
  56

  
	
  Section 4.16.

  	
  Insurance

  	
  56

  
	
  Section 4.17.

  	
  Solvency

  	
  57

  
	
  Section 4.18.

  	
  Deposit Accounts

  	
  57

  
	
   

  	
   

  	
   

  
	
  Article V

  	
  Conditions

  	
  57

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Effective Date

  	
  57

  
	
  Section 5.02.

  	
  Each Credit Event

  	
  61

  
	
   

  	
   

  	
   

  
	
  Article VI

  	
  Affirmative Covenants

  	
  62

  
	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Financial Statements; Other Information

  	
  62

  
	
  Section 6.02.

  	
  Notices of Material Events

  	
  64

  
	
  Section 6.03.

  	
  Existence; Conduct of Business

  	
  65

  
	
  Section 6.04.

  	
  Payment of Obligations

  	
  65

  
	
  Section 6.05.

  	
  Maintenance of Properties; Insurance

  	
  66

  
	
  Section 6.06.

  	
  Books and Records; Inspection Rights

  	
  66

  
	
  Section 6.07.

  	
  Compliance with Laws

  	
  66

  
	
  Section 6.08.

  	
  Use of Proceeds and Letters of Credit

  	
  66

  
	
  Section 6.09.

  	
  Mortgages

  	
  67

  
	
  Section 6.10.

  	
  Title Data

  	
  67

  
	
  Section 6.11.

  	
  Swap Agreements

  	
  67

  
	
  Section 6.12.

  	
  Operation of Oil and Gas Interests

  	
  68

  
	
  Section 6.13.

  	
  Restricted Subsidiaries

  	
  68

  
	
  Section 6.14.

  	
  Pledged Equity Interests

  	
  68

  
	
  Section 6.15.

  	
  Production Proceeds and Bank Accounts

  	
  69

  
	
  Section 6.16.

  	
  Mandatory Prepayment of the Term Facility

  	
  69

  
	
   

  	
   

  	
   

  
	
  Article VII

  	
  Negative Covenants

  	
  69

  
	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
  Indebtedness

  	
  69

  
	
  Section 7.02.

  	
  Liens

  	
  70

  
	
  Section 7.03.

  	
  Fundamental Changes

  	
  71

  
	
  Section 7.04.

  	
  Investments, Loans, Advances, Guarantees and
  Acquisitions

  	
  72

  
	
  Section 7.05.

  	
  Swap Agreements

  	
  73

  
	
  Section 7.06.

  	
  Restricted Payments

  	
  74

  
	
  Section 7.07.

  	
  Transactions with Affiliates

  	
  74

  
	
  Section 7.08.

  	
  Restrictive Agreements

  	
  74

  
					

 

 ii
 

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 7.09.

  	
  Disqualified Stock

  	
  75

  
	
  Section 7.10.

  	
  Amendments to Organizational Documents and Certain
  Liens and Guarantees

  	
  75

  
	
  Section 7.11.

  	
  Financial Covenants

  	
  75

  
	
  Section 7.12.

  	
  Sale and Leaseback Transactions and other
  Off-Balance Sheet Liabilities

  	
  76

  
	
  Section 7.13.

  	
  Term Facility Restrictions

  	
  76

  
	
   

  	
   

  	
   

  
	
  Article VIII

  	
  Guarantee of Obligations

  	
  77

  
	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
  Guarantee of Payment

  	
  77

  
	
  Section 8.02.

  	
  Guarantee Absolute

  	
  78

  
	
  Section 8.03.

  	
  Guarantee Irrevocable

  	
  78

  
	
  Section 8.04.

  	
  Reinstatement

  	
  78

  
	
  Section 8.05.

  	
  Subrogation

  	
  78

  
	
  Section 8.06.

  	
  Subordination

  	
  79

  
	
  Section 8.07.

  	
  Payments Generally

  	
  79

  
	
  Section 8.08.

  	
  Setoff

  	
  79

  
	
  Section 8.09.

  	
  Formalities

  	
  80

  
	
  Section 8.10.

  	
  Limitations on Guarantee

  	
  80

  
	
   

  	
   

  	
   

  
	
  Article IX

  	
  Events of Default

  	
  80

  
	
   

  	
   

  	
   

  
	
  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

  	
  91

  
	
  Section 11.06.

  	
  Counterparts; Integration; Effectiveness

  	
  92

  
	
  Section 11.07.

  	
  Severability

  	
  92

  
	
  Section 11.08.

  	
  Right of Setoff

  	
  92

  
	
  Section 11.09.

  	
  GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
  PROCESS

  	
  93

  
	
  Section 11.10.

  	
  WAIVER OF JURY TRIAL

  	
  93

  
	
  Section 11.11.

  	
  Headings

  	
  94

  
	
  Section 11.12.

  	
  Confidentiality

  	
  94

  
	
  Section 11.13.

  	
  Interest Rate Limitation

  	
  94

  
	
  Section 11.14.

  	
  USA PATRIOT Act

  	
  95

  
				

 

 iii
 

 

 

	
  SCHEDULES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.01(a) - Existing Swap Agreements

  	
   

  
	
  Schedule 2.01 – Applicable Percentages and Initial
  Commitments

  	
   

  
	
  Schedule 4.06 – Disclosed Matters

  	
   

  
	
  Schedule 4.13 – Capitalization and Credit Party
  Information

  	
   

  
	
  Schedule 4.18 – Deposit and Investment Accounts

  	
   

  
	
  Schedule 7.01 – Existing Indebtedness

  	
   

  
	
  Schedule 7.02 – Existing Liens

  	
   

  
	
  Schedule 7.07 – Transactions with Affiliates

  	
   

  
	
  Schedule 7.08 – Existing Restrictions

  	
   

  
	
   

  	
   

  
	
  EXHIBITS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A – Form of Assignment and Assumption

  
	
  Exhibit B – Form of Opinion of Borrower’s Counsel

  	
   

  
	
  Exhibit C – Form of Counterpart Agreement

  	
   

  
	
  Exhibit D – Form of Solvency Certificate

  	
   

  
	
  Exhibit E – Form of Note

  	
   

  

 

 iv

 

SENIOR REVOLVING CREDIT AGREEMENT dated as of October
2, 2006, among EXCO PARTNERS OPERATING PARTNERSHIP, LP, as Borrower, CERTAIN
SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party hereto, and JPMORGAN
CHASE BANK, N.A., as Administrative Agent.

The parties hereto agree as follows:

Article I

Definitions

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

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

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

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

“Administrative Agent” means JPMorgan Chase
Bank, 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.

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

 1
 

 

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

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

“Aggregate Commitment” means the amount equal
to the lesser of (i) the Maximum Facility Amount and (ii) the Borrowing Base,
as such Aggregate Commitment may be reduced or increased pursuant to Section
2.02 and Article III; provided that in no event shall the Aggregate Commitment
exceed the Borrowing Base and if at any time the Borrowing Base is reduced
below the Aggregate Commitment in effect prior to such reduction, the Aggregate
Commitment shall be reduced automatically to the amount of the Borrowing Base
in effect at such time.

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

“Agreed Pricing”
means:

(i)            for
anticipated sales of Hydrocarbons that are fixed in a firm fixed price sales
contract with an Approved Counterparty (or another counterparty approved by the
Administrative Agent), the fixed price or prices provided for in such sales
contract during the term thereof; and

(ii)           for
anticipated sales of Hydrocarbons that are hedged by a fixed price Swap
Agreement with an Approved Counterparty, the fixed price or prices provided for
in such Swap Agreement during the term thereof, as modified by any necessary
adjustment specified by the Administrative Agent for quality and geographical
differentials; and

(iii)          for
anticipated sales of Hydrocarbons that are hedged by a Swap Agreement with an
Approved Counterparty which Swap Agreement provides for a range of prices
between a floor and a ceiling, the prices provided for in subsection (iv)
below, provided that during the term of such Swap Agreement such prices shall
in no event be less than such floor or exceed such ceiling, as such floor and
ceiling are modified by any necessary adjustment specified by the
Administrative Agent for quality and geographical differentials; and

(iv)          for
anticipated sales of Hydrocarbons, if such sales are not hedged by a Swap
Agreement or sales contract that is described in paragraphs (i), (ii), or (iii)
above, for the date of calculation (or, if such date is not a Business Day, for
the first Business Day thereafter), and with any necessary adjustment specified
by the Administrative Agent for quality and geographical differentials, the “strip”
price under Henry Hub Natural Gas futures contracts and Light, Sweet Crude Oil
futures contracts for the five year period following such calculation date, in
each case as published by New York Mercantile Exchange (NYMEX) on its website
currently

 2
 

 

located at www.nymex.com,
or any successor thereto (as such price may be corrected or revised from time
to time by the NYMEX in accordance with its rules and regulations), as of the
settlement of the last trading day for the contract month coincident with the
effective date of the then most recent Reserve Report, and thereafter the price
in effect at the end of such five year period.

“Agreement” means this Senior Revolving Credit
Agreement, dated as of October 2, 2006 as it may be amended, supplemented or
otherwise modified from time to time.

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

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

“Applicable Rate” means, for any day, with
respect to any ABR Loan or Eurodollar Loan, or with respect to the Unused
Commitment Fees payable hereunder, as the case may be, the applicable rate per
annum set forth below under the caption “ABR Spread”, “Eurodollar Spread” or “Unused
Commitment Fee Rate”, as the case may be, based upon the Conforming Borrowing
Base Usage applicable on such date; provided that if Conforming Borrowing Base
Usage exceeds 100%, the Applicable Rate referenced for such usage that exceeds
100% shall apply only to that portion of the Conforming Borrowing Base Usage
that exceeds 100% and the Applicable Rate referenced for Conforming Borrowing
Base Usage equal to 100% shall apply to all other portions of the Conforming
Borrowing Base Usage:

	
  Conforming

  Borrowing Base

  Usage

  	
   

  	
  Eurodollar

  Spread

  	
   

  	
  ABR Spread

  	
   

  	
  Unused

  Commitment

  Fee Rate

  	
   

  
	
  > 100%

  	
   

  	
  250 b.p.

  	
   

  	
  150 b.p.

  	
   

  	
  50 b.p.

  	
   

  
	
  > 90% and £ 100%

  	
   

  	
  175 b.p.

  	
   

  	
  75 b.p.

  	
   

  	
  37.5 b.p.

  	
   

  
	
  3
  75% and < 90%

  	
   

  	
  150 b.p.

  	
   

  	
  50 b.p.

  	
   

  	
  37.5 b.p.

  	
   

  
	
  3
  50% and < 75%

  	
   

  	
  125 b.p.

  	
   

  	
  25 b.p.

  	
   

  	
  30 b.p.

  	
   

  
	
  < 50%

  	
   

  	
  100 b.p.

  	
   

  	
  0 b.p.

  	
   

  	
  25 b.p.

  	
   

  

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

“Approved Counterparty” means, at any time and
from time to time, (i) any Person engaged in the business of writing Swap
Agreements for commodity, interest rate or

 3
 

 

currency risk that is
acceptable to the Administrative Agent and has (or the credit support provider
of such Person has), at the time Borrower or any Restricted Subsidiary enters
into a Swap Agreement with such Person, a long term senior unsecured debt
credit rating of BBB+ or better from S&P or Baa1 or better from Moody’s or
(ii) any Lender Counterparty.

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

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

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

“Assessment Rate” means, for any day, the
annual assessment rate in effect on such day that is payable by a member of the
Bank Insurance Fund classified as “well-capitalized” and within
supervisory subgroup “B” (or a comparable successor risk classification) within
the meaning of 12 C.F.R. Part 327 (or any successor provision) to the
Federal Deposit Insurance Corporation for insurance by such Corporation of time
deposits made in Dollars at the offices of such member in the United States; provided
that if, as a result of any change in any law, rule or regulation, it is no
longer possible to determine the Assessment Rate as aforesaid, then the
Assessment Rate shall be such annual rate as shall be determined by the
Administrative Agent to be representative of the cost of such insurance to the
Lenders.

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

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

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

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

“Board of Directors” means (1) with respect to
a corporation, the Board of Directors of the corporation or any committee
thereof duly authorized to act on behalf of such board; (2) with respect to a
partnership, the Board of Directors of the general partner of the partnership;
(3) with respect to a limited liability company, the managing member or members
or any controlling committee of managing members thereof; and (4) with respect
to any other Person, the board or committee of such Person serving a similar
function.

“Borrower” means EXCO Partners Operating
Partnership, LP, a Delaware limited partnership, and its successors and
permitted assigns.

 4
 

 

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

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

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

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

“Borrowing Base
Properties” means all Oil and Gas Interests of the Borrower and the
Restricted Subsidiaries evaluated by the Lenders for purposes of establishing
the Borrowing Base, including the Midstream Assets but excluding the Excluded
Properties.

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

“Capex Reimbursement Obligation” means the
obligation of the MLP to pay to EXCO up to $150,000,000 of the proceeds of the
initial funding of the Term Loans as a reimbursement of certain capital
expenditures incurred by EXCO and its Subsidiaries to acquire, develop and
operate the Oil and Gas Interests owned by the Transferred Subsidiaries and the
Texas Properties.

“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 Management Obligations” means, with
respect to any Credit Party, any obligations of such Credit Party owed to JPMorgan
Chase Bank, N.A. (or any of its affiliates) in respect of treasury management
arrangements, depositary or other cash management services.

“Change in Law” means (a) the adoption of any
law, rule or regulation after the date of this Agreement, (b) any change in any
law, rule or regulation or in the interpretation or

 5
 

 

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

“Change of Control” means (a) the acquisition
of greater than 50% of the voting or economic interest in the General Partner
by any Person other than the MLP; (b) the General Partner shall cease to own
and control, of record, beneficially and directly, 100% of the general
partnership interest of the Borrower or cease to be the sole managing partner
of the Borrower; (c) any “person” or “group” (as such terms are used in
Sections 13(d) and 14(d) under the Exchange Act), other than EXCO, shall
become, or obtain rights (whether by means or warrants, options or otherwise)
to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5
under the Exchange Act) directly or indirectly, of Equity Interests of the MLP
that would entitle such person or group entitled to vote such Equity Interests
representing, in the aggregate, more than 35% of the total amount of
outstanding Equity Interests of the MLP at any annual meeting of the partners
of the MLP or otherwise in the election of the Board of Directors of the General
Partner or the MLP General Partner; (d) the failure, for any reason, of EXCO to
own and control, directly or indirectly more than 50% of the voting and
economic interests of the MLP General Partner; (e) the MLP General Partner
shall cease to own and control, of record, beneficially and directly, 100% of
the general partnership interest in the MLP or to be the sole managing partner
of the MLP; or (f) the occurrence of a “Change of Control” as such term is
defined in the EXCO Credit Agreement.

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

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

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

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

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

 6
 

 

“Conforming Borrowing Base” means, at any time
prior to April 1, 2007, an amount equal to the amount determined in accordance
with Section 3.01, as the same may be redetermined, adjusted or reduced from
time to time pursuant to Section 3.02 and Section 3.03 and at any time on or
after April 1, 2007, an amount equal to the Borrowing Base.

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

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

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

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

“Consolidated
EBITDAX” means, with respect to the Borrower and its Restricted
Subsidiaries for any period, Consolidated Net Income for such period; plus,
without duplication and to the extent deducted in the calculation of
Consolidated Net Income for such period, the sum of (a) income or
franchise Taxes paid or accrued; (b) Consolidated Interest Expense;
(c) amortization, depletion and depreciation expense; (d) any non-cash
losses or charges on any Swap Agreement resulting from the requirements of FASB
Statement 133 for that period; (e) oil and gas exploration expenses (including
all drilling, completion, geological and geophysical costs) for such period;
(f) losses from sales or other dispositions of assets (other than
Hydrocarbons produced in the ordinary course of business) and other
extraordinary or non-recurring losses; (g) workover expenses for such period,
(h) cash payments made during such period as a result of the early termination
of any Swap Agreement (giving effect to any netting agreements), and (i) other
non-cash charges (excluding accruals for cash expenses made in the ordinary
course of business); minus, to the extent included in the calculation of
Consolidated Net Income for such period; (j) the sum of (1) any
non-cash gains on any Swap Agreements resulting from the requirements of FASB
Statement 133 for that period; (2) extraordinary or non-recurring gains;
and (3) gains from sales or other dispositions of assets (other than Hydrocarbons
produced in the ordinary course of business); provided that, with
respect to the determination of Borrower’s compliance with the leverage ratio
set forth in Section 7.11(b) for any period, Consolidated EBITDAX shall be
adjusted to give effect, on a pro forma basis, to any Acquisitions made during
such period as if such Acquisitions were made at the beginning of such period.

 7
 

 

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

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

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

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

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

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

“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 and its Swingline Exposure at such time.

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

“Crude Oil” means all crude oil and condensate.

 8
 

 

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

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

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

“Disqualified Stock” means any Equity Interest,
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof, in whole or in part, on or prior to the Maturity Date.

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

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

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

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

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

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

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

 9
 

 

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

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

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

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

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

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

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

“Excess Cash Flow” has the meaning assigned to
such term in the Term Facility Documents.

 10

 

“Excluded Properties” means certain Oil and Gas
Interests acquired by the Borrower or its Restricted Subsidiaries in connection
with the Winchester Acquisition and located in Adams County, Mississippi and
Montague, Foard, Runnels, Garza and Nacogdoches Counties, Texas.

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

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

“EXCO Agreements” means, collectively, (i) that
certain Administrative Services Agreement, dated as of October 2, 2006, by and
among the Borrower, the MLP General Partner and certain of the MLP
Subsidiaries, (ii) that certain Omnibus Agreement, dated as of October 2, 2006,
by and among the Borrower and certain of the MLP Subsidiaries, and (iii) the
other agreements, certificates and instruments executed and delivered in
connection with the agreements described in the foregoing clauses (i) and (ii),
all as amended, supplemented or modified 
from time to time as permitted by this Agreement.

“EXCO Contribution Agreement” means that
certain Contribution, Conveyance and Assumption Agreement dated October 2, 2006
by and among EXCO and certain of its Subsidiaries and the Borrower and certain
of its Subsidiaries, together with the additional conveyance documents and instruments
contemplated or referenced thereunder.

“EXCO Contribution Documents” means,
collectively, (i) the EXCO Contribution Agreement, (ii) the EXCO Agreements and
(iii) the other agreements, certificates and instruments executed and delivered
in connection with the agreements described in the foregoing clauses (i) and
(ii), all as amended, supplemented or modified 
from time to time as permitted by this Agreement.

“EXCO Credit Agreement” means that certain
Amended and Restated Credit Agreement, dated March 17, 2006, among EXCO, as
borrower, certain subsidiaries of EXCO as guarantors, the financial
institutions from time to time a party thereto as lenders and JPMorgan

 11
 

 

Chase Bank, N.A., as
administrative agent, as amended, modified, supplemented or restated from time
to time.

“EXCO Operating” means EXCO Operating, LP, a
Delaware limited partnership and its successors and assigns.

 “EXCO
Transfers and Conversions” means, collectively, (a) the conveyance by EXCO
and its Subsidiaries of the Texas Properties and the Equity Interests of Merger
Sub to the Borrower as a capital contribution to the Borrower, (b) the
conveyance by EXCO of the Equity Interests of ROJO Pipeline to the Borrower and
the General Partner as a capital contribution, (c) the conversion of ROJO
Pipeline from a Delaware limited liability company to a Delaware limited
partnership, (d) the conveyance by EXCO of all of the Equity Interests of the
Borrower, the General Partner and TXOK Resources Holdings to the MLP, in
exchange for Equity Interests of the MLP representing 100% of the outstanding
Equity Interests of the MLP on the Effective Date, the incurrence by the MLP of
the CapEx Reimbursement Obligation and the MLP Rights, (e) the conveyance by
the MLP of all of the Equity Interests of TXOK Resources Holdings to the
Borrower as a capital contribution, (f) the conveyance by the General Partner
of all of the general partnership interests of ROJO Pipeline to TXOK Resources
Holdings and the conveyance by TXOK Resources Holdings of such general partnership
interests to TXOK Texas Holdings, (g) the conveyance by the Borrower of all of
the limited partnership interests of ROJO Pipeline to TXOK Resources Holdings
as a capital contribution.

“Existing Swap Agreements” means, collectively,
(i)  the existing Swap Agreements between
one or more of the  Persons acquired by
the Borrower on the Effective Date pursuant to the Winchester Acquisition and
any Lender Counterparty and defined as the “Winchester Hedges” in the
Winchester Merger Agreement, (ii) the existing Swap Agreements between one or
more of the Persons that became Restricted Subsidiaries of the Borrower on the
Effective Date pursuant to the EXCO Transfers and Conversions and any Lender
Counterparty and described on Schedule 1.01(a) and (iii) the existing Swap
Agreements to which a Lender Counterparty is a party that will be assigned to
Borrower and its Subsidiaries on the Effective Date and described on Schedule
1.01(a).

“FASB” means Financial Accounting Standards
Board.

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

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

 12
 

 

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

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

“General Partner” means EXCO Partners OLP GP,
LLC, a Delaware limited liability company, and its successors and permitted
assigns.

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

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

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

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

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

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

 13
 

 

“Indebtedness” of any Person means, without
duplication, (a) all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments,
(c) all obligations of such Person upon which interest charges are paid,
(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property acquired by such Person, (e) all
obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the ordinary
course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed,
(g) all Guarantees by such Person of Indebtedness of others, (h) all
Capital Lease Obligations of such Person, (i) all obligations, contingent
or otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty and (j) all obligations, contingent or otherwise, of
such Person in respect of bankers’ acceptances. 
The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person’s ownership interest in or other relationship with such entity, except
to the extent the terms of such Indebtedness provide that such Person is not
liable therefor.

“Indemnified Taxes” means Taxes other than
Excluded Taxes.

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

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

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

“Initial Public Offering” means a sale by the
MLP of its Equity Interests in an underwritten (firm commitment) initial public
offering registered under the Securities Act of 1933 resulting in the listing
of such Equity Interests on a nationally recognized stock exchange, including
without limitation, the NASDAQ National Market System or the New York Stock
Exchange.

“Intercreditor Agreement” means an
Intercreditor Agreement by and among the Administrative Agent, the Term Agent, and
the Credit Parties, dated the date hereof and in form and substance
satisfactory to the Lenders, as amended, modified, supplemented or restated
from time to time.

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

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

 14
 

 

“Interest Period” means with respect to any
Eurodollar Borrowing, the period commencing on the date of such Borrowing and
ending on the numerically corresponding day in the calendar month that is one,
two, three or six months thereafter, as the Borrower may elect; provided,
that (i) if any Interest Period would end on a day other than a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day
and (ii) any Interest Period 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, in the case of
a Revolving Borrowing, thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.

“IPO Date” means the date the Initial Public
Offering and the Rights Offering are consummated.

“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 2.07(i).  The Issuing Bank may, in its discretion,
arrange for one or more Letters of Credit to be issued by Affiliates of the
Issuing Bank, in which case the term “Issuing Bank” shall include any such
Affiliate with respect to Letters of Credit issued by such Affiliate.

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

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

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

“Lenders” means the Persons listed on
Schedule 2.01 and any other Person that shall have become a party hereto
pursuant to an Assignment and Assumption, other than any such Person that
ceases to be a party hereto pursuant to an Assignment and Assumption.  Unless the context otherwise requires, the
term “Lenders” includes the Swingline Lender.

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

“LIBO Rate” means, with respect to any
Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750
of the Moneyline Telerate Service (or on any successor or substitute page of
such Service, or any successor to or substitute for such Service, providing
rate quotations comparable to those currently provided on such page of such
Service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) at approximately

 15
 

 

11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period, as the
rate for dollar deposits with a maturity comparable to such Interest
Period.  In the event that such rate is
not available at such time for any reason, then the “LIBO Rate” with
respect to such Eurodollar Borrowing for such Interest Period shall be the rate
at which dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior
to the commencement of such Interest Period.

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

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

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

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

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

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

“Material Indebtedness” means Indebtedness
under the Term Loans and any other Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Swap Agreements,
of the Borrower or any one or more of the Restricted Subsidiaries in an

 16
 

 

aggregate principal
amount exceeding $5,000,000.  For purposes of determining Material
Indebtedness, the “principal amount” of the obligations of the Borrower or any
Guarantor in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Guarantor would be required to pay if such Swap Agreement were terminated
at such time.

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

“Maturity Date” means October 2, 2010.

“Maximum Facility Amount” means $750,000,000.

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

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

“Merger Sub” means Winchester Acquisition, LLC,
a Delaware limited liability company, and its successors.

“Midstream Assets” has the meaning assigned to
such term in the Winchester Merger Agreement.

“MLP” means EXCO Partners, LP, a Delaware
limited partnership.

“MLP General Partner” means EXCO GP Partners,
LP, a Delaware limited partnership, and its successors and permitted assigns.

“MLP Rights” means the rights to buy Equity
Interests of the MLP issued by the MLP to EXCO as part of the consideration for
the assets and properties contributed to the MLP by EXCO and its Subsidiaries
pursuant to the EXCO Contribution Agreement.

“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 Lien prior and superior in right to any other Person in favor of
the Administrative Agent for the benefit of the Secured Parties and subject
only to the Liens permitted pursuant to Section 7.02.

“Mortgages” 
means all mortgages, deeds of trust, amendments to mortgages, security
agreements, assignments of production, pledge agreements, collateral mortgages,
collateral chattel mortgages, collateral assignments, financing statements and
other documents, instruments and agreements evidencing, creating, perfecting or
otherwise establishing the Liens

 17
 

 

required by Section
6.09.  All Mortgages shall be in form and
substance satisfactory to Administrative Agent in its sole discretion

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

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

“Net Cash Proceeds” means, with respect to the
sale of Borrowing Base Properties by the Borrower or any Restricted Subsidiary,
the excess, if any, of (a) the sum of cash and cash equivalents received in
connection with such sale, but only as and when so received, over (b) the sum
of (i) the principal amount of any Indebtedness that is secured by such asset
and that is required to be repaid in connection with the sale thereof (other
than the Loans and the Term Loans), (ii) the out-of-pocket expenses incurred by
the Borrower or such Restricted Subsidiary in connection with such sale, (iii)
all legal, title and recording tax expense and all federal, state, provincial,
foreign and local taxes required to be accrued as a liability under GAAP as a
consequence of such sale, (iv) all distributions and other payments required to
be made to minority interest holders in Restricted Subsidiaries as a result of
such sale, (v) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the property
or other assets disposed of in such sale and retained by the Borrower or any
Restricted Subsidiary after such sale, (vi) cash payments made to satisfy
obligations resulting from early terminations of Swap Agreements in connection
with or as a result of any such sale of Borrowing Base Properties, and (vii)
any portion of the purchase price from such sale placed in escrow, whether as a
reserve for adjustment of the purchase price, for satisfaction of indemnities
in respect of such sale or otherwise in connection with such sale; provided
however, that upon the termination of that escrow, Net Cash Proceeds
will be increased by any portion of funds in the escrow that are released to
the Borrower or any Restricted Subsidiary.

“Net Working Capital” means, on any date of
determination, the sum of (a) Consolidated Current Assets as of such date
(calculated without including Unused Commitments as of such date) minus (b)
Consolidated Current Liabilities as of such date.

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

“NPV” means, as of any date of the
determination, the sum of (i) with respect to any proved and probable reserves
expected to be produced from any undivided interests in Borrowing Base
Properties, the net present value, discounted at 10% per annum, of the future
net revenues expected to accrue to any Credit Party’s interests in such
reserves (after deducting all existing burdens) during the remaining expected
economic lives of such reserves plus (ii) Pipeline EBITDA for the trailing 12
month period ending on the date of the determination multiplied by ten.  Each calculation of such expected future net
revenues with respect to the proved and probable reserves shall be made in
accordance with the then existing guidelines

 18
 

 

established by the
Securities and Exchange Commission for valuing Oil and Gas Interests or, in the
case of probable reserves, the Society of Petroleum Engineers; provided that in
any event (a) appropriate deductions shall be made for severance and ad valorem
taxes, and for operating (including purchasing and injecting water), gathering,
transportation and marketing costs required for the production and sale of such
reserves including annual increases in such costs of 3% per year, (b) the
pricing assumptions and escalations used in determining the net present value
of proved and probable reserves for any particular reserves shall be the Agreed
Pricing (or any other pricing assumptions to which the Borrower and the
Required Lenders may agree) and (c) appropriate deductions shall be made for
capital expenditures (including plugging and abandonment costs and annual
increases in the cost of such capital expenditures of at least 3% per year)
approved in writing by the Administrative Agent in which internal cash flow is
available to support such expenditures. 
For each date of determination, net present value shall be calculated
hereunder based on the then most recent Reserve Report, either by the Borrower,
by the Administrative Agent, or by the engineering firm who prepares such
Reserve Report; in the event of any conflict, the Administrative Agent’s
calculation shall be conclusive and final.

“Obligations” means 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 or any Lender Counterparty arising
under or in connection with any Loan Document or Swap Agreement (including, any
and all Cash Management Obligations and any and all obligations, contingent or
otherwise, whether now existing or hereafter arising, of any Credit Party under
any Existing Swap Agreement and any and all obligations, contingent or
otherwise, whether now existing or hereafter arising, of any Credit Party with
respect to any transactions under any Swap Agreement with any Person that was a
Lender Counterparty at the time such Credit Party entered into such
transactions regardless of whether such Person is no longer a Lender Counterparty),
whether for principal, interest, reimbursement of amounts drawn under any
Letter of Credit, payments for early termination of Swap Agreements, funding
indemnification amounts, fees, expenses, indemnification or otherwise.

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

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

 19
 

 

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 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.

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

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

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

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

“Permitted Encumbrances” means:

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

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

 20
 

 

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

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

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

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

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

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

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

provided that the term “Permitted
Encumbrances” shall not include any Lien securing Indebtedness (other than
contractual Liens described in the foregoing clause (b) granted to operators
and non-operators under oil and gas operating agreements to the extent the
obligations secured by such Liens constitute Indebtedness).

“Permitted Investments” means:

(a)           U.S.
Government Securities;

(b)           investments
in demand and time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by
a bank or trust company which is organized under the laws of the United States
of America, any State thereof or any foreign country recognized by the United
States of America, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated “A” (or such

 21
 

 

similar equivalent
rating) or higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act of 1933, as amended) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor;

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

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

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

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

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

“Permitted Term Loan Payments” means, collectively,
(a) regularly scheduled payments of principal and interest required under the
Term Facility Documents and (b) payments of Excess Cash Flow; provided that,
with respect to this clause (b) (i) the Scheduled Redetermination required to
be made on or about April 1 of each year that such payment of Excess Cash Flow
is due has been made (ii) any mandatory prepayment required under Section
2.12(a) as a result of such Redetermination has been made and (iii) no Default
has occurred and is continuing or would result from the making of such payment.

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

“PFC” means Progress Fuels Corporation, a
Florida corporation, and its successors.

“Pipeline Assets” means the Borrower’s and its
Restricted Subsidiaries’ pipelines and natural gas gathering lines used to
transport Natural Gas produced by any Person.

“Pipeline EBITDA” means for any period, and to
the extent it relates to the Pipeline Assets of the Borrower and its Restricted
Subsidiaries, the Consolidated Net Income of

 22
 

 

such Pipeline Assets for
such period; plus, without duplication and to the extent deducted in the
calculation of such Consolidated Net Income for such period, the sum of
(a) income or franchise Taxes paid or accrued; (b) amortization,
depletion and depreciation expense; (c) losses from sales or other
dispositions and other extraordinary or non-recurring losses; and (d) other
non-cash charges (excluding accruals for cash expenses made in the ordinary
course of business); minus, to the extent included in the calculation of such
Consolidated Net Income for such period, (e) the sum of
(1) extraordinary or non-recurring gains and (2) gains from sales or
other dispositions.

“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.

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

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

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

“Projections” means the Borrower’s forecasted
(a) balance sheets, (b) profit and loss statements, and (c) cash flow
statements, all prepared on a basis consistent with the historical financial
information provided pursuant to the Winchester Merger Agreement and historical
financial information regarding the Transferred Subsidiaries and the Texas
Properties and after giving effect to the Transactions, together with
appropriate supporting details and a statement of underlying assumptions, in
each case in form and substance satisfactory to the Lenders.

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

“Redetermination” means any Scheduled
Redetermination or Special Redetermination.

“Redetermination Date” means (a) with respect
to any Scheduled Redetermination, each April 1 and October 1 of each year,
commencing April 1, 2007, and (b) with respect to any Special
Redetermination, the first day of the first month which is not less than twenty
(20) Business Days following the date of a request for a Special
Redetermination.

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

 23
 

 

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

“Required Lenders” means, at any time, Lenders
having Credit Exposures and Unused Commitments representing at least 66-2/3%
(or if there are less than four Lenders, at least 75%) of the sum of the
Aggregate Credit Exposure and all Unused Commitments of all Lenders at such
time or, if the Aggregate Commitment has been terminated, Lenders having Credit
Exposures representing at least 66-2/3% (or if there are less than four
Lenders, at least 75%) of the Aggregate Credit Exposure of all Lenders at such
time; provided that the Commitment of and the Credit Exposures held or deemed
held by any Defaulting Lender shall be excluded for purposes of making a
determination of the Required Lenders.

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

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

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

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

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

“Rights Offering” means the exercise of the MLP
Rights by the holders thereof and the payment of the consideration for such
Equity Interests.

“ROJO Pipeline” means ROJO Pipeline, Inc., a
Texas corporation, and following its conversion to a partnership, ROJO
Pipeline, LP, a Delaware limited partnership.

“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.

 

 24

 

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

“Secured Party”
means the Administrative Agent, any Lender and any Lender Counterparty and
shall include any Lender Counterparty to the extent that any Obligations owing
to such Lender Counterparty arise under hedging transactions entered into at
the time such Person was a Lender or Lender Counterparty.

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

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

“Statutory Reserve
Rate” means a fraction (expressed as a decimal), the numerator of which is
the number one and the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves) expressed as a decimal established by the
Board to which the Administrative Agent is subject (a) with respect to the Base
CD Rate, for new negotiable nonpersonal time deposits in Dollars over $100,000
with maturities approximately equal to three months and (b) with respect to the
Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D. 
Eurodollar Loans shall be deemed to constitute eurocurrency funding and
to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

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

 25
 

 

“Surplus Cash”
means the lesser of (i) cash and cash equivalents of the Borrower and its
Restricted Subsidiaries, on a consolidated basis that constitute Permitted
Investments and (ii) the amount by which Net Working Capital exceeds zero
($0.00).

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

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

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

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

“Target” means
Winchester Energy Company, Ltd., a Texas limited partnership.

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

“Term Agent” means,
JPMorgan Chase Bank, N.A. in its capacity as contractual representative of the
financial institutions and other Persons from time to time a party to the Term
Facility and any successor agent appointed pursuant to the terms of the Term
Facility Documents.

“Term Facility”
means the second lien term loan facility evidenced by the Term Facility
Documents.

“Term Facility
Documents” means that certain Senior Term Credit Agreement of even date
herewith by and among Borrower, certain Subsidiaries of Borrower and JPMorgan
Chase Bank, N.A., as Administrative Agent and any promissory notes executed in
connection therewith, security instruments and any other agreements executed in
connection with such Senior Term Credit Agreement as the same may be amended,
modified, supplemented or restated from time to time to the extent permitted
under this Agreement.

“Term Loans” means
the term loans made under the Term Facility.

“Texas Properties”
means certain Oil and Gas Interests owned by EXCO or EXCO Operating and located
in Cherokee, Houston, Polk, Limestone, Rusk and Smith Counties, Texas.

 26
 

 

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

“Transactions”
means the (i) the execution, delivery and performance by the Credit Parties of
this Agreement and the Loan Documents, (ii) the borrowing of Loans, (iii) the
use of the proceeds thereof, (iv) the issuance of Letters of Credit hereunder,
(v) the execution, delivery and performance of the Term Facility Documents,
(vi) the funding of the Term Loans, (vii) the consummation of the Winchester
Acquisition and (viii) the consummation of the EXCO Transfers and Conversions.

“Transferred
Subsidiaries” means any Subsidiary of the Borrower (or any such Subsidiary’s
predecessor) that was a “Restricted Subsidiary” under and as defined in the
EXCO Credit Agreement prior to the consummation of the EXCO Transfers and
Conversions.

“TXOK Resources
Holdings” means TXOK Energy Resources Holdings L.L.C., a Delaware limited
liability company, and its successors.

“TXOK Texas Holdings”
means TXOK Texas Energy Holdings LLC, a Delaware limited liability company, and
its successors.

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

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

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

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

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

“WGC Holdco” means
WGC Holdco, LLC, a Texas limited liability company and the general partner of
the Target.

“Winchester Acquisition” means the acquisition
of all of the issued and outstanding Equity Interests of Target from PFC
pursuant to the Winchester Merger Agreement.

“Winchester Acquisition Documents” means the
Winchester Merger Agreement and all other certificates and other documents and
instruments now or hereafter executed and delivered by, between or among the
Borrower, Merger Sub, Target, WGC Holdco and PFC pursuant to the Winchester
Merger Agreement or in connection with the Winchester Acquisition.

“Winchester Merger
Agreement” means, collectively, that certain Agreement and Plan of Merger
by and among PFC, Target, WGC Holdco and Merger Sub dated as of July 22, 2006
as amended by the First Amendment to Agreement and Plan of Merger, dated
September 28, 2006.

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

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

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

 28
 

 

meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.

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

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

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

Section 1.07.          First Priority Creditors.  The Secured Parties are hereby designated “First
Priority Creditors” for all purposes under and as defined in the Intercreditor
Agreement and the Security Instruments are hereby designated “First Priority
Security Instruments” for all purposes under and as defined in the
Intercreditor Agreement.

Article II

The Credits

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

Section 2.02.          Termination and Reduction of the
Aggregate Commitment.

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

(b)           The
Borrower may at any time terminate, or from time to time reduce, the Aggregate
Commitment; provided that (i) each reduction of the Aggregate Commitment

 29
 

 

shall be in an amount that is an integral
multiple of $1,000,000 and not less than $1,000,000, and (ii) the Borrower
shall not terminate or reduce the Aggregate Commitment if, after giving effect
to any concurrent prepayment of the Loans in accordance with Section 2.11 and
Section 2.12, the Aggregate Credit Exposure would exceed the Aggregate
Commitment.

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

(d)           With
respect to any sale, transfer or disposition of Borrowing Base Properties
(other than sales, transfers or dispositions permitted under Section
7.03(a)(vii)), the Borrowing Base and with respect to any such sale, transfer
or disposition prior to April 1, 2007, the Conforming Borrowing Base,
shall be automatically reduced by an amount equal to the value assigned to such
Borrowing Base Properties by the Administrative Agent in connection with the
most recent Redetermination of the Borrowing Base and the Conforming Borrowing
Base (if applicable) preceding the date of such sale (or in connection with the
determination of the Initial Borrowing Base with respect to any sale occurring
prior to the first Redetermination of the Borrowing Base and the Conforming
Borrowing Base).

Section 2.03.          Reserved.

Section 2.04.          Loans and Borrowings.

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

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

 30
 

 

obligation of the Borrower to repay such Loan
in accordance with the terms of this Agreement.

(c)           At
the commencement of each Interest Period for any Eurodollar Revolving
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $1,000,000.  At the time that each ABR Revolving Borrowing
is made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $500,000 and not less than $1,000,000; provided that an ABR
Revolving Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the Aggregate Commitment or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.07(e).  Each Swingline Loan shall be in an amount
that is not less than $500,000. 
Borrowings of more than one Type may be outstanding at the same time; provided
that there shall not at any time be more than a total of four (4) Eurodollar
Revolving Borrowings outstanding.

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

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

(i)            the
aggregate amount of the requested Borrowing;

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

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

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

(v)           the
location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.08.

 31
 

 

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

Section 2.06.          Swingline Loans.

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

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

(c) 
The Swingline Lender may by written notice given to the Administrative
Agent not later than 10:00 a.m., on any Business Day require the Lenders to
acquire participations on such Business Day in all or a portion of the
Swingline Loans outstanding.  Such notice
shall specify the aggregate amount of Swingline Loans in which Lenders will
participate.  Promptly upon receipt of
such notice, the Administrative Agent will give notice thereof to each Lender,
specifying in such notice such Lender’s Applicable Percentage of such Swingline
Loan or Loans.  Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided
above, to pay to the Administrative Agent, for the account of the Swingline
Lender, such Lender’s Applicable Percentage of such Swingline Loan or
Loans.  Each Lender acknowledges and
agrees that its obligation to acquire participations in Swingline Loans
pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.  Each Lender
shall comply with its obligation

 32
 

 

under this paragraph by wire transfer of immediately available funds,
in the same manner as provided in Section 2.08 with respect to Loans made by
such Lender (and Section 2.08 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to
the Swingline Lender the amounts so received by it from the Lenders.  The Administrative Agent shall notify the
Borrower of any participations in any Swingline Loan acquired pursuant to this
paragraph, and thereafter payments in respect of such Swingline Loan shall be
made to the Administrative Agent and not to the Swingline Lender.  Any amounts received by the Swingline Lender
from the Borrower (or other party on behalf of the Borrower) in respect of a
Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale
of participations therein shall be promptly remitted to the Administrative
Agent; any such amounts received by the Administrative Agent shall be promptly
remitted by the Administrative Agent to the Lenders that shall have made their
payments pursuant to this paragraph and to the Swingline Lender, as their
interests may appear; provided that any such payment so remitted shall be
repaid to the Swingline Lender or to the Administrative Agent, as applicable,
if and to the extent such payment is required to be refunded to the Borrower
for any reason.  The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.

Section 2.07.          Letters of Credit.

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

(b)           Notice
of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of Credit
(or the amendment, renewal or extension of an outstanding Letter of Credit),
the Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance
of the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the
name and address of the beneficiary thereof and such other information as shall
be necessary to prepare, amend, renew or extend such Letter of Credit.  If requested by the Issuing Bank, the
Borrower also shall submit a letter of credit application on the Issuing Bank’s
standard form in connection with any request for a Letter of Credit.  A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon

 33
 

 

issuance, amendment, renewal or extension of
each Letter of Credit the Borrower shall be deemed to represent and warrant
that), after giving effect to such issuance, amendment, renewal or extension
(i) the LC Exposure shall not exceed $15,000,000 and (ii) the Aggregate
Credit Exposure shall not exceed the Aggregate Commitment.

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

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

(e)           Reimbursement.  If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m. on such date, or, if such notice has not been
received by the Borrower prior to such time on such date, then not later than
12:00 noon on (i) the Business Day that the Borrower receives such notice, if
such notice is received prior to 10:00 a.m. on the day of receipt, or (ii) the
Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of
receipt; provided that the Borrower may, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.05 that such
payment be financed with an ABR Revolving Borrowing or Swingline Loan in an
equivalent amount and, to the extent so financed, the Borrower’s obligation to
make such payment shall be discharged and replaced by the resulting ABR
Revolving Borrowing or Swingline Loan. 
If the Borrower fails to make such payment when due, the Administrative
Agent shall notify each Lender of the applicable LC Disbursement, the payment
then due from the Borrower in respect thereof and such Lender’s Applicable
Percentage thereof.  Promptly following
receipt of such notice, each Lender shall pay to

 34
 

 

the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.08 with respect to Loans made by such Lender (and Section
2.08 shall apply, mutatis  mutandis, to the payment obligations of
the Lenders), and the Administrative Agent shall promptly pay to the Issuing
Bank the amounts so received by it from the Lenders.  Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the
Issuing Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing
Bank as their interests may appear.  Any
payment made by a Lender pursuant to this paragraph to reimburse the Issuing
Bank for any LC Disbursement (other than the funding of ABR Loans or Swingline
Loans as contemplated above) shall not constitute a Loan and shall not relieve
the Borrower of its obligation to reimburse such LC Disbursement.

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

 35
 

 

and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

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

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

(i)            Replacement
of the Issuing Bank.  The Issuing
Bank may be replaced at any time by written agreement among the Borrower, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing
Bank.  The Administrative Agent shall
notify the Lenders of any such replacement of the Issuing Bank.  At the time any such replacement shall become
effective, the Borrower shall pay all unpaid fees accrued for the account of
the replaced Issuing Bank pursuant to Section 2.13(b).  From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of the Issuing Bank under this Agreement with respect to Letters of
Credit to be issued thereafter and (ii) references herein to the term “Issuing
Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require.  After the replacement of an
Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank
under this Agreement with respect to Letters of Credit issued by it prior to
such replacement, but shall not be required to issue additional Letters of
Credit.

(j)            Cash
Collateralization.  If any Event of
Default shall occur and be continuing, on the Business Day that the Borrower
receives notice from the Administrative Agent or the Required Lenders (or, if
the maturity of the Loans has been accelerated, Lenders with LC Exposure
representing greater than 66-2/3% of the total LC Exposure) demanding the
deposit of cash collateral pursuant to this paragraph, the

 36
 

 

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

Section 2.08.          Funding of Borrowings.

(a)           Each
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds by 12:00 noon to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders; provided that Swingline Loans shall be made
as provided in Section 2.06.  The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an Eligible Account of the
Borrower designated by the Borrower in the applicable Borrowing Request; provided
that ABR Loans made to finance the reimbursement of an LC Disbursement as
provided in Section 2.07(e) shall be remitted by the Administrative Agent to
the Issuing Bank.

(b)           Unless
the Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender’s share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with paragraph (a) of this Section and may, in reliance upon such
assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to
the

 37
 

 

Administrative Agent forthwith on demand such
corresponding amount with interest thereon, for each day from and including the
date such amount is made available to the Borrower to but excluding the date of
payment to the Administrative Agent, at (i) in the case of such Lender, the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation or (ii) in the case of the Borrower, the interest rate applicable
to ABR Loans.  If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.

Section 2.09.          Interest Elections.

(a)           Each
Revolving Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request;
provided that unless the Borrower complies with Section 2.05 with respect to
any Eurodollar Borrowings requested for the Effective Date, all Borrowings on
the Effective Date shall be ABR Borrowings. 
Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurodollar
Revolving Borrowing, may elect Interest Periods therefor, all as provided in
this Section.  The Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Revolving Borrowing.  This Section shall not apply to Swingline
Borrowings, which may not be converted or continued.

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

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

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

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

 38
 

 

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

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

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

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

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

Section 2.10.          Repayment of Loans; Evidence
of Debt.

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

 39

 

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

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

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

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

Section 2.11.          Optional Prepayment of Loans.

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

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

 40
 

 

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

Section 2.12.          Mandatory Prepayment of Loans.

(a)           Except
as otherwise provided in Section 2.12(b), in the event a Borrowing Base
Deficiency exists, the Borrower shall either (a) within fifteen (15) days after
written notice from the Administrative Agent to the Borrower of such Borrowing
Base Deficiency, by instruments satisfactory in form and substance to the
Required Lenders, provide the Lenders with additional security consisting of
Oil and Gas Interests with value and quality satisfactory to the Lenders in
their sole discretion to eliminate such Borrowing Base Deficiency, or  prepay, without premium or penalty, the
principal amount of the Loans in an amount sufficient to eliminate such
Borrowing Base Deficiency (or by a combination of such additional security and such
prepayment eliminate such Borrowing Base Deficiency), or (b) provided the IPO
Date has occurred, within fifteen (15) days after written notice from the
Administrative Agent to the Borrower of such Borrowing Base Deficiency, elect
to prepay, subject to the payment of any funding indemnification amounts
required by Section 2.17 but without premium or penalty, the principal amount
of such Borrowing Base Deficiency in not more than six (6) equal monthly
installments plus accrued interest thereon with the first such monthly payment
being due upon the 30th day after the Borrower’s receipt of notice of such
Borrowing Base Deficiency.  In the event
Aggregate Credit Exposure exceeds the Aggregate Commitment at any time, the
Borrower shall, subject to the payment of any funding indemnification amounts
required by Section 2.17 but without premium or penalty, immediately prepay the
principal amount of the Loans in an amount sufficient to eliminate such excess.

(b)           If
the Borrower or any Restricted Subsidiary sells, transfers or otherwise
disposes of any Borrowing Base Properties at any time a Borrowing Base
Deficiency exists or would exist after giving effect to such sale, transfer or
disposition, the Borrower shall prepay the Borrowings in an amount equal to the
Net Cash Proceeds received from such sale, transfer or other disposition on the
date it or any Restricted Subsidiary receives such Net Cash Proceeds; provided,
however that amounts applied to the payment of Borrowings pursuant to this
Section may be reborrowed subject to and in accordance with the terms of this
Agreement.  Amounts applied to the
prepayment of Borrowings pursuant to this Section shall be first applied to
Swingline Borrowings then outstanding and upon payment in full of all
outstanding Swingline Borrowings, second, ratably to ABR Revolving Borrowings
then outstanding and, upon payment in full of all outstanding ABR Revolving
Borrowings, third, to Eurodollar Revolving Borrowings then outstanding, and if
more than one Eurodollar Revolving Borrowing is then outstanding, to each such
Eurodollar Revolving Borrowing beginning with the Eurodollar Revolving
Borrowing with the least number of days remaining in the Interest Period
applicable

 41
 

 

thereto and ending with the Eurodollar
Revolving Borrowing with the most number of days remaining in the Interest
Period applicable thereto, subject to the payment of any funding
indemnification amounts required by Section 2.17 but without penalty or
premium.

(c)           Upon
receipt by the MLP of the proceeds of the Initial Public Offering, the Borrower
shall prepay the Borrowings in an amount equal to the total proceeds to the MLP
of the Initial Public Offering remaining after payment in full of the
Indebtedness under the Term Facility Documents and the payment or accrual of all
out-of-pocket fees, expenses and transaction costs incurred in connection with
the Initial Public Offering; provided, however that amounts applied to
the payment of Borrowings pursuant to this Section may be reborrowed subject to
and in accordance with the terms of this Agreement.  Amounts applied to the prepayment of
Borrowings pursuant to this Section shall be first applied to Swingline
Borrowings then outstanding and of all outstanding Swingline Borrowings, second
ratably to ABR Revolving Borrowings then outstanding and, upon payment in full
of all outstanding ABR Revolving Borrowings, third, to Eurodollar Revolving
Borrowings then outstanding, and if more than one Eurodollar Revolving
Borrowing is then outstanding, to each such Eurodollar Revolving Borrowing
beginning with the Eurodollar Revolving Borrowing with the least number of days
remaining in the Interest Period applicable thereto and ending with the
Eurodollar Revolving Borrowing with the most number of days remaining in the
Interest Period applicable thereto, subject to the payment of any funding
indemnification amounts required by Section 2.17 but without penalty or
premium.

Section 2.13.          Fees.

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

(b)           The
Borrower agrees to pay (i) to the Administrative Agent for the account of each
Lender a participation fee with respect to its participations in Letters of
Credit, which shall accrue at the same Applicable Rate used to determine the
interest rate applicable to Eurodollar Loans on the average daily amount of
such Lender’s LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the

 42
 

 

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

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

(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. 
Subject to Section 11.13, fees paid shall not be refundable under any
circumstances.

Section 2.14.          Interest.

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

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

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

 43
 

 

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

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

Section 2.15.          Alternate Rate of Interest.  If prior to the commencement of any Interest
Period for a Eurodollar Borrowing:

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

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

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

Section 2.16.          Increased Costs.

(a)           If
any Change in Law shall:

(i)            impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit

 44
 

 

extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank;
or

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

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

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

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

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

 45
 

 

Bank’s intention to claim compensation
therefor; provided  further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 180-day period
referred to above shall be extended to include the period of retroactive effect
thereof.

Section 2.17.          Break Funding Payments.  In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Eurodollar Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.11(b) and is revoked in accordance therewith), (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.20, then, in any such event, the Borrower shall compensate each
Lender for the loss, cost and expense attributable to such event.  In the case of a Eurodollar Loan, such loss,
cost or expense to any Lender shall be deemed to include an amount determined
by such Lender to be the excess, if any, of (i) the amount of interest which
would have accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate that would have been applicable to such
Loan, for the period from the date of such event to the last day of the then current
Interest Period therefor (or, in the case of a failure to borrow, convert or
continue, for the period that would have been the Interest Period for such
Loan), over (ii) the amount of interest which would accrue on such principal
amount for such period at the interest rate which such Lender would bid were it
to bid, at the commencement of such period, for dollar deposits of a comparable
amount and period from other banks in the eurodollar market.  A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

Section 2.18.          Taxes.

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

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

(c)           The
Borrower shall indemnify the Administrative Agent, each Lender and the Issuing
Bank, within 10 days after written demand therefor, for the full amount of any

 46
 

 

Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on
or with respect to any payment by or on account of any obligation of the
Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority.  A certificate delivered to the Borrower by a
Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or
on behalf of a Lender or the Issuing Bank, setting forth (i) the  amount of such payment or liability
reasonably necessary to compensate the Administrative Agent, such Lender or the
Issuing Bank, as the case may be, (ii) the factual basis for such compensation
and (iii) the manner in which such amount or amounts were calculated, shall be
conclusive absent manifest error.

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

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

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

 47
 

 

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

(a)           The
Borrower shall make each payment required to be made by it hereunder (whether
of principal, interest, fees or reimbursement of LC Disbursements, or of
amounts payable under Section 2.16, Section 2.17 or Section 2.18, or otherwise)
prior to 12:00 noon on the date when due, in immediately available funds,
without set-off or counterclaim. 
Any amounts received after such time on any date may, in the discretion
of the Administrative Agent, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices at JPMorgan Loan Services, 21 South Clark
St., 19th Floor, Chicago, Illinois 60603-2003, except payments to be made
directly to the Issuing Bank or Swingline Lender as expressly provided herein
and except that payments pursuant to Section 2.16, Section 2.17, Section 2.18
and Section 11.03 shall be made directly to the Persons entitled thereto.  The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.  All payments hereunder shall be made in
Dollars.

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

(c)           If
any Lender shall, by exercising any right of set-off or counterclaim or
otherwise (including any right of set-off exercised with respect to a Swap
Agreement), obtain payment in respect of any principal of or interest on any of
its Loans, participations in LC Disbursements or Swingline Loans resulting in
such Lender receiving payment of a greater proportion of the aggregate amount
of its Loans and participations in LC Disbursements or Swingline Loans and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans and

 48
 

 

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

(d)           Unless
the Administrative Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Administrative Agent for the
account of the Lenders or the Issuing Bank hereunder that the Borrower will not
make such payment, the Administrative Agent may assume that the Borrower has
made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders or the Issuing Bank, as the case may
be, the amount due.  In such event, if
the Borrower 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)           If
any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.07(d) or Section 2.07(e), Section 2.08(b), Section 2.19(d) or Section
11.03(c), then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are
fully paid.

Section 2.20.          Mitigation Obligations; Replacement
of Lenders.

(a)           If
any Lender requests compensation under Section 2.16, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.18, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or Affiliates, if, in the
judgment of such Lender, such designation or assignment

 49
 

 

(i) would eliminate or reduce amounts payable
pursuant to Section 2.16 or Section 2.18, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

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

(c)           If
in connection with any proposed amendment, modification, termination, waiver or
consent with respect to any of the provisions of this Agreement or any other
Loan Document as contemplated by Section 11.02, the consent of Required Lenders
shall have been obtained but the consent of one or more of such other Lenders
(each a “Non-Consenting Lender”) whose consent is required has not been
obtained or if Lender is a Defaulting Lender; then, the Borrower may elect to
replace such Non-Consenting Lender or Defaulting Lender, as the case may be, as
a Lender party to this Agreement in accordance with and subject to the
restrictions contained in, and consents required by Section 11.04; provided
that (i) the Borrower shall have received the prior written consent of the
Administrative Agent (and if a 
Commitment is being assigned, the Issuing Bank), which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an amount
equal to the outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from
a claim for compensation under Section 2.16 or payments required to be made
pursuant to Section 2.18, such assignment will result in a reduction in such
compensation or payments.  A Lender shall

 50
 

 

not be required to make any such assignment
and delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such  assignment and delegation cease to apply or,
in the case of a Defaulting Lender, such Lender is no longer a Defaulting
Lender.

Article III

Borrowing Base

Section 3.01.          Reserve Report; Proposed Borrowing
Base; Conforming Borrowing Base. 
During the period from the Effective Date until the first Redetermination
after the Effective Date, the Borrowing Base shall be $750,000,000 (the “Initial
Borrowing Base”) and the Conforming Borrowing Base shall be
$650,000,000.  As soon as available and
in any event by March  1 and September 1
of  each year, beginning March 1, 2007,
the Borrower shall deliver to the Administrative Agent and each Lender a
Reserve Report, prepared as of the immediately preceding December 31 and June
30, respectively, in form and substance reasonably satisfactory to the
Administrative Agent and prepared by an Approved Petroleum Engineer (or, in the
case of the Reserve Report due on September 1 of each year, by petroleum
engineers employed by the Borrower), said Reserve Report to utilize economic
and pricing parameters established from time to time by the Administrative
Agent, together with such other information, reports and data concerning the
value of the Borrowing Base Properties as the Administrative Agent shall deem
reasonably necessary to determine the value of such Borrowing Base
Properties.  Simultaneously with the
delivery to the Administrative Agent and the Lenders of each Reserve Report,
the Borrower shall submit to the Administrative Agent and each Lender the
Borrower’s requested amount of the Borrowing Base as of the next Redetermination
Date.  Promptly after the receipt by the
Administrative Agent of such Reserve Report and Borrower’s requested amount for
the Borrowing Base, the Administrative Agent shall submit to the Lenders a
recommended amount of the Borrowing Base and, with respect to any
Redetermination prior to April 1, 2007, the Conforming Borrowing Base to become
effective for the period commencing on the next Redetermination Date; provided
that no Redetermination of the Conforming Borrowing Base shall be required on
or after April 1, 2007.

Section 3.02.          Scheduled Redeterminations of the
Borrowing Base; Procedures and Standards. 
Based in part on the Reserve Reports made available to the
Administrative Agent and the Lenders pursuant to Section 3.01, the Lenders shall
redetermine the Borrowing Base on or prior to the next Redetermination Date
and, if such Redetermination Date is prior to April 1, 2007, the
Conforming Borrowing Base (or such date promptly thereafter as reasonably
possible based on the engineering and other information available to the
Lenders).  Any Borrowing Base or
Conforming Borrowing Base which becomes effective as a result of any
Redetermination shall be subject to the following restrictions: (a) such
Borrowing Base shall not exceed the Maximum Facility Amount, (b) such
Conforming Borrowing Base shall not exceed such Borrowing Base, (c) to the
extent such Borrowing Base or Conforming Borrowing Base represents an increase
in the Borrowing Base or Conforming Borrowing Base in effect prior to such Redetermination,
such Borrowing Base or Conforming Borrowing Base, as the case may be, must be
approved by all Lenders, and (d) to the extent such Borrowing Base or
Conforming Borrowing Base represents a decrease in the Borrowing Base or
Conforming Borrowing Base in effect prior to such Redetermination or a
reaffirmation of such prior Borrowing Base or

 51
 

 

Conforming Borrowing Base, such
Borrowing Base or Conforming Borrowing Base, as the case may be, must be
approved by the Administrative Agent and Required Lenders.  If a redetermined Borrowing Base or
Conforming Borrowing Base is not approved by the Administrative Agent and
Required Lenders within twenty (20) days after the submission to the Lenders by
the Administrative Agent of its recommended Borrowing Base or Conforming
Borrowing Base pursuant to Section 3.01, or by all Lenders within such twenty
(20) day period in the case of any increase in the Borrowing Base or Conforming
Borrowing Base, the Administrative Agent shall notify each Lender that the
recommended Borrowing Base or Conforming Borrowing Base, as the case may be,
has not been approved and request that each Lender submit to the Administrative
Agent within ten (10) days thereafter its proposed Borrowing Base or proposed
Conforming Borrowing Base.  Promptly
following the 10th day after the Administrative Agent’s request
for each Lender’s proposed Borrowing Base and proposed Conforming Borrowing
Base, the Administrative Agent shall determine the Borrowing Base and
Conforming Borrowing Base for such Redetermination by calculating the highest
Borrowing Base and Conforming 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 or the
Conforming Borrowing Base).  Each
Redetermination shall be made by the Lenders in their sole discretion, but
based on the Administrative Agent’s and such Lender’s usual and customary
procedures for evaluating Oil and Gas Interests as such exist at the time of
such Redetermination, and including adjustments to reflect the effect of any
Swap Agreements of the Borrower and the Restricted Subsidiaries as such exist
at the time of such Redetermination.  The
Borrower acknowledges and agrees that each Redetermination shall be based upon
the loan collateral value which the Administrative Agent and each Lender in its
sole discretion (using such methodology, assumptions and discount rates as the
Administrative Agent and such Lender customarily uses in assigning collateral
value to Oil and Gas Interests) assigns to the Borrowing Base Properties at the
time in question and based upon such other credit factors consistently applied
(including, without limitation, the assets, liabilities, cash flow, business,
properties, prospects, management and ownership of the Credit Parties) as the
Administrative Agent and such Lender customarily considers in evaluating
similar oil and gas credits.  It is
expressly understood that the Administrative Agent and Lenders have no obligation
to designate the Borrowing Base or the Conforming Borrowing Base at any
particular amounts, except in the exercise of their discretion, whether in
relation to the Aggregate Commitment or otherwise.  If the Borrower does not furnish all
information, reports and data required to be delivered by any date specified in
this Article III, unless such failure is not the fault of the Borrower, the
Administrative Agent and Lenders may nonetheless designate the Borrowing Base
and the Conforming Borrowing Base at any amounts which the Administrative Agent
and Lenders in their reasonable discretion determine and may redesignate the
Borrowing Base and the Conforming 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 and a new Conforming Borrowing Base, as
described above.

Section 3.03.          Special Redeterminations.  In addition to Scheduled Redeterminations,
the Borrower shall  be permitted to
request a Special Redetermination of the Borrowing Base and Conforming
Borrowing Base once between each Scheduled Redetermination and the Required
Lenders shall be permitted to request a Special Redetermination at any
time.  Any request by Borrower pursuant
to this Section 3.03 shall be submitted to the Administrative Agent and each
Lender and at the time of such request (or within twenty (20) days thereafter
in the case of the

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

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

Article IV

Representations and
Warranties

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

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

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

Section 4.03.          Governmental Approvals; No
Conflicts.  The Transactions (a) do
not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained
or made and are in full force and effect and, after the Effective Date, in the
case of EXCO, and after the IPO Date in the case of

 53
 

 

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

Section 4.04.          No Material Adverse Change.  Since December 31, 2005, there has been no
material adverse change in the business, assets, operations, prospects or
condition, financial or otherwise, of the Borrower and its Subsidiaries, taken
as a whole (it being understood that none of (i) the Winchester Acquisition,
(ii) the EXCO Transfers and Conversions, nor (iii) changes in commodity prices
for Hydrocarbons affecting the oil and gas industry as a whole constitute a
material adverse change).

Section 4.05.          Properties.

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

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

Section 4.06.          Litigation and Environmental
Matters.

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

(b)           Except
for the Disclosed Matters and except with respect to any other matters that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, neither the Borrower nor any Restricted Subsidiary
to the

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Borrower’s knowledge (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law,
(ii) has become subject to any Environmental Liability, (iii) has
received notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental Liability.

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

Section 4.07.          Compliance with Laws and
Agreements.  The Borrower and each
Restricted Subsidiary is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.  No Default has occurred and is continuing.

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

Section 4.09.          Taxes.  The Borrower and each Restricted Subsidiary
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which the Borrower or such Restricted
Subsidiary, as applicable, has set aside on its books adequate reserves or
(b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.

Section 4.10.          ERISA.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.  The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of FASB
Statement 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $1,000,000 the fair market value
of the assets of such Plan, and the present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for
purposes of FASB Statement 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $1,000,000
the fair market value of the assets of all such underfunded Plans.

Section 4.11.          Disclosure.  The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
Restricted Subsidiary is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.  None of the
other reports, financial statements, certificates or other information
furnished by or on behalf of the Borrower or any Restricted Subsidiary to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits
to state any material fact

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necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to the Projections,
the Borrower represents only that such information was prepared in good faith
based on assumptions believed to be reasonable at the time.

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

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

Section 4.14.          Margin Stock.  Neither the Borrower nor any Restricted
Subsidiary is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U issued by the 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.          Oil and Gas Interests.  Each Credit Party has good and defensible
title to all proved reserves included in the Oil and Gas Interests (for
purposes of this Section 4.15, “proved Oil and Gas Interests”) described in the
most recent Reserve Report provided to the Administrative Agent, free and clear
of all Liens except Liens permitted pursuant to Section 7.02.  All such proved Oil and Gas Interests are
valid, subsisting, and in full force and effect, and all rentals, royalties,
and other amounts due and payable in respect thereof have been duly paid.  Without regard to any consent or non-consent
provisions of any joint operating agreement covering any Credit Party’s proved
Oil and Gas Interests, such Credit Party’s share of (a) the costs for each
proved Oil and Gas Interest described in the Reserve Report is not materially
greater than the decimal fraction set forth in the Reserve Report, before and
after payout, as the case may be, and described therein by the respective
designations “working interests,” “WI,” “gross working interest,” “GWI,” or
similar terms (except in such cases where there is a corresponding increase in
the net revenue interest), and (b) production from, allocated to, or
attributed to each such proved Oil and Gas Interest is not materially less than
the decimal fraction set forth in the Reserve Report, before and after payout,
as the case may be, and described therein by the designations “net revenue
interest,” “NRI,” or similar terms.  Each
well drilled in respect of proved producing Oil and Gas Interests described in
the Reserve Report (1) is capable of, and is presently, either producing
Hydrocarbons in commercially profitable quantities or in the process of being
worked over or enhanced, and the Credit Party that owns such proved producing
Oil and Gas Interests is currently receiving payments for its share of
production, with no funds in respect of any thereof being presently held in
suspense, other than any such funds being held in suspense pending delivery of
appropriate division orders, and (2) 

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has been drilled, bottomed,
completed, and operated in compliance with all applicable laws, in the case of
clauses (1) and (2), except where any failure to satisfy clause (1) or to
comply with clause (2) would not have a Material Adverse Effect, and no such
well which is currently producing Hydrocarbons is subject to any penalty in production
by reason of such well having produced in excess of its allowable production.

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

Section 4.17.          Solvency.

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

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

Section 4.18.          Deposit Accounts.  Except as set forth on Schedule 4.18 and
other deposit accounts maintained at financial institutions other than the
Administrative Agent (the aggregate balance of which does not exceed $50,000 at
any time after December 31, 2006, for all such other deposit accounts taken as
a whole), no Credit Party has any deposit or investment accounts and no
Affiliate of any Credit Party has any deposit or investment account into which
proceeds of Hydrocarbon production from the Oil and Gas Interests included in
the Borrowing Base Properties are deposited. 
All proceeds of Hydrocarbon production from the Oil and Gas Interests
included in the Borrowing Base Properties and all distributions and dividends
on any Equity Interests owned by any Credit Party are deposited and maintained,
from the date of receipt by any Credit Party, in an Eligible Account.

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Article V

Conditions

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

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

(b)           The
Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
Haynes and Boone, L.L.P., counsel for the Credit Parties, substantially in the
form of Exhibit B, and covering such other matters relating to the Credit
Parties, and this Agreement as the Required Lenders shall reasonably request
and (ii) if agreed by opining counsel, opinions delivered pursuant to the Term
Facility Documents, the Winchester Acquisition Documents and the EXCO
Contribution Documents, if any, addressed to the Lenders or accompanied by
reliance letters in favor of the Lenders stating that the Lenders may rely on
such opinions as though they were addressed to them.  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 a Responsible Officer of the Borrower, confirming that the
Borrower has (i) complied with the conditions set forth in paragraphs (a)
and (b) of Section 5.02, (ii) complied with the covenants set forth in Section
6.05 (and demonstrating such compliance by the attachment of an insurance
summary and insurance certificates evidencing the coverage described in such
summary), (iii) complied with the requirements of Section 6.09 and Section 6.10,
(iv) simultaneously with the initial Borrowing under this Agreement and in
accordance with applicable law, consummated the Winchester Acquisition without
waiver or amendment of any material term or condition of any of the Winchester
Acquisition Documents (not otherwise consented to by the Administrative Agent),
and (v) prior to or simultaneously with the initial Borrowing under this
Agreement and in accordance with applicable law, consummated the EXCO Transfers
and Conversions, without waiver or amendment of any material term or condition
of the EXCO Contribution Documents.

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

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

(g)           The Administrative Agent shall have
received the title information or opinions with respect to the Mortgaged
Properties, or the portion thereof, required by Section 6.10 on the Effective
Date;

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

(i)            On
or prior to the Effective Date (or three Business Days prior to the Effective
Date with respect to Eurodollar Borrowings requested for the Effective Date),
the Administrative Agent shall have received a Borrowing Request acceptable to
the Administrative Agent setting forth the Loans requested by the Borrower on
the Effective Date, the Type and amount of each Loan and the accounts to which
such Loans are to be funded; provided that all Borrowings on the Effective Date
shall be ABR Borrowings.

(j)            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 2.07 of this Agreement.

(k)           The
Administrative Agent shall have received such financing statements (including,
without limitation, the financing statements referenced in subclause (f)
and

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(h) above) 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.

(l)            The
Administrative Agent shall have received reasonably satisfactory evidence that
the Borrower has received assets and properties from EXCO with a value of not
less than $425,178,000 pursuant to the EXCO Contribution Agreement and
otherwise on terms and conditions satisfactory to the Lenders.

(m)          The
Administrative Agent shall have received reasonably satisfactory evidence that
after giving effect to the Transactions, (i) Revolving Credit Exposure shall
not exceed $651,000,000, and (ii) the MLP shall own all of the issued and
outstanding Equity Interests of the Borrower.

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

(o)           The
Lenders shall have received from the Borrower (i) a pro forma consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of the
Effective Date, and reflecting the consummation of the Transactions, the
related financings and other transactions contemplated by the Loan Documents to
occur on or prior to the Effective Date, which pro forma balance sheet shall be
prepared consistent in all respects with the information previously provided by
the Borrower to the Administrative Agent and the Lenders and otherwise in form
and substance satisfactory to the Administrative Agent, (ii) a pro forma
statement of operations of the Borrower and its Consolidated Subsidiaries for
the twelve month period ending as of the date of the pro forma balance sheet
described in the immediately preceding clause (i) and (iii) the Projections.

(p)           The
Administrative Agent, the Term Agent and the Credit Parties shall have executed
and delivered the Intercreditor Agreement.

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

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

(s)           All
partnership, corporate and other proceedings taken or to be taken in connection
with the Transactions and all documents incidental thereto shall be reasonably
satisfactory in form and substance to Administrative Agent and its counsel, and
Administrative Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Administrative Agent may
reasonably request.

(t)            The
Borrower shall have delivered to the Administrative Agent a description of the
sources and uses of funding for the Transactions that is consistent with the
terms of the Loan Documents, the EXCO Contribution Documents, the Term Facility
Documents and the Winchester Acquisition Documents and otherwise satisfactory
to the Administrative Agent and the Arranger and the capitalization, structure
and equity ownership of the Borrower after the Transactions shall be
satisfactory to the Lenders in all respects.

(u)           The
Administrative Agent shall have received evidence or assurances satisfactory to
it that (i) each of the Transferred Subsidiaries has been (or concurrently with
the effectiveness of this Agreement and the funding of the initial Loans hereunder,
will be) released from all liabilities, obligations and Indebtedness under the
EXCO Credit Agreement and all Swap Agreements with any “Lender Counterparty”
under and as defined in the EXCO Credit Agreement (other than the Existing Swap
Agreements to which any Transferred Subsidiary is a party) and that all Liens
on assets and properties of such Transferred Subsidiaries securing such
liabilities, obligations and Indebtedness and the Texas Properties have been
released and terminated, and original executed instruments releasing and
terminating any and all such Liens in a form suitable for filing in the
applicable jurisdiction have been delivered to the Administrative Agent, (ii)
the Borrower has received (or concurrently with the effectiveness of this
Agreement and the funding of the initial Loans hereunder, will receive)  $650,000,000 in cash proceeds from the
incurrence of the Indebtedness evidenced by the Term Facility Documents and
otherwise on terms and conditions satisfactory to the Lenders and (iii) the
CapEx Reimbursement Obligation incurred by the MLP in connection with the EXCO
Transfers and Conversions shall have been (or concurrently with the
effectiveness of this Agreement and the initial funding of the Term Loans, will
be) paid in full.

The Administrative Agent
shall notify the Borrower and the Lenders of the Effective Date, and such
notice shall be conclusive and binding. 
Notwithstanding the foregoing, the obligations of the Lenders to make
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or
waived pursuant to Section 11.02) at or prior to 3:00 p.m. on October 15, 2006
(and, in the event such conditions are not so satisfied or waived, the Aggregate
Commitment shall terminate at such time).

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

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

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

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

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

Article VI

Affirmative Covenants

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

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

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

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

(c)           concurrently
with any delivery of financial statements under clause (a) or (b) above, a
certificate in a form reasonably acceptable to Administrative Agent signed by a
Responsible Officer of the Borrower (i) certifying as to whether a Default
has occurred and, if a Default has occurred, specifying the details thereof and
any action taken or proposed to be taken with respect thereto, and
(ii) setting forth reasonably detailed calculations demonstrating
compliance with clauses (a), (b) and (c) of Section 7.11;

(d)           promptly
after the same become publicly available, copies of all periodic and other
reports, proxy statements and other materials filed by the Borrower or any
Subsidiary with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any or all of the functions of said Commission, or with
any national securities exchange, or distributed by the Borrower to its
shareholders generally, as the case may be;

(e)           as
soon as available, and in any event no later than March 1 and
September 1 of each year, the Reserve Reports required on such dates
pursuant to Section 3.01 together with a certificate in a form reasonably
acceptable to Administrative Agent signed by a Responsible Officer of the
Borrower (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, and (ii) setting forth
reasonably detailed calculations demonstrating compliance with clause (d) of
Section 7.01;

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

(g)           if
requested by Required Lenders and within thirty (30) days of such request, a
monthly report, in form and substance satisfactory to the Administrative Agent,
indicating the next preceding month’s sales volumes, sales revenues, production
taxes,

 63
 

 

operating expenses and net operating income
from the Borrowing Base Properties, with detail, calculations and worksheets,
all in form and substance reasonably satisfactory to the Administrative Agent;
and

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

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

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

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be entitled to treat
Borrower’s Materials that are not marked “PUBLIC” as being suitable only for
posting on a portion of the Platform not designated “Public Investor.”

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

(a)           the
occurrence of any Default;

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

(c)           the
occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to result in liability
of the Borrower and the Restricted Subsidiaries in an aggregate amount
exceeding $5,000,000;

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

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

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

(g)           the
occurrence of any material breach or default under, or repudiation or
termination of, any EXCO Agreement.

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

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

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

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

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franchises material to the
conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section
7.03.

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

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

Section 6.06.          Books and Records; Inspection
Rights.  The Borrower will, and will
cause each Restricted Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. 
The Borrower will, and will cause each Restricted Subsidiary to, permit
any representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and, provided an officer of the Borrower has
the reasonable opportunity to participate, its independent accountants, all at
such reasonable times and as often as reasonably requested.

Section 6.07.          Compliance with Laws.  The Borrower will, and will cause each
Restricted Subsidiary to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

Section 6.08.          Use of Proceeds and Letters of
Credit.  The proceeds of the Loans
will be used only to (a) finance the Winchester Acquisition, including a cash
equity contribution by the Borrower to, or a loan from the Borrower to, the
Merger Sub to facilitate the payment of the

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merger consideration required
under the Winchester Merger Agreement, (b) pay the fees, expenses and
transaction costs of the Transactions, (c) satisfy reimbursement obligations
with respect to Letters of Credit, (d) make Restricted Payments permitted under
Section 7.06 after the IPO Date, and (e) finance the working capital needs of
the Borrower, including capital expenditures, and for general corporate
purposes of the Borrower and the Guarantors, in the ordinary course of
business, including the exploration, acquisition and development of Oil and Gas
Interests.  No part of the proceeds of
any Loan will be used, whether directly or indirectly, to purchase or carry any
margin stock (as defined in Regulation U issued by the Board).  Letters of Credit will be issued only to
support general corporate purposes of the Borrower and the Restricted
Subsidiaries.

Section 6.09.          Mortgages.  Each Borrower will, and will cause each
Guarantor to, execute and deliver to the Administrative Agent, for the benefit
of the Secured Parties, Mortgages in form and substance acceptable to the
Administrative Agent together with such other assignments, conveyances,
amendments, agreements and other writings, including, without limitation, UCC-1
financing statements (each duly authorized and executed, as applicable) as the
Administrative Agent shall deem necessary or appropriate to grant, evidence,
perfect and maintain Liens in (a) not less than ninety percent (90%) of the
Engineered Value of the Borrowing Base Properties and (b) the Midstream Assets.

Section 6.10.          Title Data.  The Borrower will, and will cause each
Guarantor to, deliver to the Administrative Agent such opinions of counsel or
other evidence of title as the Administrative Agent shall deem reasonably
necessary or appropriate to verify at all times from and after the Effective
Date, not less than eighty percent (80%) of the Engineered Value of the
Mortgaged Properties of the Borrower and the Guarantors, taken as a whole, and
the validity, perfection and priority of the Liens created by such Mortgages
and such other matters regarding such Mortgages as Administrative Agent shall
reasonably request.

Section 6.11.          Swap Agreements.  The Borrower will, and will cause each
Restricted Subsidiary to, maintain the Existing Swap Agreements and none of the
Existing Swap Agreements may be amended, modified or cancelled without the
prior written consent of the Required Lenders. 
On or within ten (10) Business Days after the Effective Date, the
Borrower will enter into and thereafter maintain one or more hedge, collar or
swap transactions pursuant to Swap Agreements with Approved Counterparties to
hedge (together with the Existing Swap Agreements) not less than seventy-five
percent (75%) of the forecasted production of Crude Oil and Natural Gas from
the total proved developed producing Oil and Gas Interests of the Borrower and
its Restricted Subsidiaries, taken as a whole, through December 31, 2010, as
reflected in the Reserve Report used by the Lenders to determine the Initial
Borrowing Base and at or above prices specified by the Administrative Agent on
or prior to the Effective Date or otherwise acceptable to the Administrative
Agent. Once confirmed, no such hedge, collar or swap transaction nor any Swap
Agreement may be amended or modified, or cancelled without the prior written consent
of Required Lenders.  Upon the request of
the Required Lenders, the Borrower and each Restricted Subsidiary shall use
their commercially reasonable efforts to cause each Swap Agreement to which the
Borrower or any Restricted Subsidiary is a party to (a) be collaterally
assigned to the Administrative Agent, for the benefit of the Secured Parties
and (b) upon the occurrence of any default or event of default under such
agreement or contract, (i) to permit the Lenders to cure such default or event
of default and assume the obligations of such

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Credit Party under such
agreement or contract and (ii) to prohibit the termination of such
agreement or contract by the counterparty thereto if the Lenders assume the
obligations of such Credit Party under such agreement or contract and the
Lenders take the actions required under the foregoing clause (i).  Upon the request of the Administrative Agent,
the Borrower shall, within thirty (30) days of such request, provide to the
Administrative Agent and each Lender copies of all agreements, documents and
instruments evidencing the Swap Agreements not previously delivered to the
Administrative Agent and Lenders, certified as true and correct by a
Responsible Officer of the Borrower, and such other information regarding such
Swap Agreements as the Administrative Agent and Lenders may reasonably request.

Section 6.12.          Operation of Oil and Gas Interests.

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

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

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

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Borrower, and supplement the
data required to be set forth in the Schedules to this Agreement as a result of
the acquisition or creation of such Restricted Subsidiary; provided that such
supplemental data must be reasonably acceptable to the Administrative Agent and
Required Lenders.

Section 6.14.          Pledged Equity Interests.  On the date hereof and at the time hereafter
that any Restricted Subsidiary of the Borrower is created or acquired or any
Unrestricted Subsidiary becomes a Restricted Subsidiary, the Borrower and the
Subsidiaries (as applicable) shall execute and deliver to the Administrative
Agent for the benefit of the Secured Parties, a Pledge Agreement, in form and
substance acceptable to the Administrative Agent, from the Borrower and/or the
Subsidiaries (as applicable) covering all Equity Interests owned by the
Borrower or such Restricted Subsidiaries in such Restricted Subsidiaries,
together with all certificates (or other evidence acceptable to Administrative
Agent) evidencing the issued and outstanding Equity Interests of each such
Restricted Subsidiary of every class owned by such Credit Party (as applicable)
which, if certificated, shall be duly endorsed or accompanied by stock powers
executed in blank (as applicable), as Administrative Agent shall deem necessary
or appropriate to grant, evidence and perfect a security interest in the issued
and outstanding Equity Interests owned by Borrower or any Restricted Subsidiary
in each Restricted Subsidiary prior and superior in right to any other Person.

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

Section 6.16.          Mandatory Prepayment of the Term
Facility.  On or within five (5) days
after the IPO Date, the Borrower shall prepay in full all of the Indebtedness
under the Term Facility Documents and promptly thereafter cause all of the
Liens securing such Indebtedness to be released and terminated.

Article VII

Negative Covenants

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

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

(a)           The
Obligations;

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

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

(d)           Guarantees
of the Obligations;

(e)           Indebtedness
of the Borrower and the Restricted Subsidiaries incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof; provided that (i) such Indebtedness is incurred prior to or
within 90 days after such acquisition or the completion of such construction or
improvement and (ii) the aggregate principal amount of Indebtedness permitted
by this clause (e) shall not exceed $5,000,000 at any time outstanding;

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

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

(h)           Indebtedness
under the Term Facility in an aggregate principal amount not exceeding
$650,000,000 at any time outstanding; and

(i)            Other
unsecured Indebtedness of the Credit Parties in an aggregate principal amount
not exceeding $1,000,000 at any time outstanding.

Section 7.02.          Liens. The Borrower will not,
nor will it permit any of its Restricted Subsidiaries to, create, incur, assume
or permit to exist any Lien on any property or asset now 

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owned or hereafter acquired by it, or assign
or sell any income or revenues (including accounts receivable) or rights in
respect of any thereof, except:

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

(b)           Permitted
Encumbrances;

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

(d)           any
Lien existing on any property or asset prior to the acquisition thereof by the
Borrower or any Restricted Subsidiary or existing on any property or asset of
any Person that becomes a Restricted Subsidiary after the date hereof prior to
the time such Person becomes a Restricted Subsidiary; provided that (i)
such Lien secures Indebtedness permitted by Section 7.01(e), (ii) such
Lien is not created in contemplation of or in connection with such acquisition
or such Person becoming a Restricted Subsidiary, as the case may be,
(iii) such Lien shall not apply to any other property or assets of the
Borrower or any other Restricted Subsidiary and (iv) such Lien shall secure
only those obligations which it secures on the date of such acquisition or the
date such Person becomes a Restricted Subsidiary, as the case may be and
extensions, renewals and replacements thereof that do not increase the outstanding
principal amount thereof; and

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

(f)            Subject
to the Intercreditor Agreement, Liens securing Indebtedness permitted by clause
(h) of Section 7.01.

Section 7.03.          Fundamental Changes.

(a)           The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or any
substantial part of its assets, or any of its Borrowing Base Properties or any
of the Equity Interests of any Restricted Subsidiary (in each case, whether now
owned or hereafter acquired), or liquidate or dissolve, except that, the
Borrower or any Restricted Subsidiary may sell Hydrocarbons produced from its
Oil and Gas Interests in the ordinary course of business, and if at the time thereof
and 

 71
 

 

immediately after giving effect thereto no Default shall have occurred
and be continuing, (i) any Restricted Subsidiary may merge into the
Borrower in a transaction in which the Borrower is the surviving entity,
(ii) any Restricted Subsidiary may merge into any other Restricted
Subsidiary in a transaction in which the surviving entity is a Restricted
Subsidiary, (iii) any Restricted Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Borrower or to another Restricted Subsidiary,
(iv) any Restricted Subsidiary may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of the Borrower and is not materially disadvantageous to the Lenders,
(v) the Borrower or any Restricted Subsidiary may sell, transfer, lease or
otherwise dispose of equipment and related items in the ordinary course of
business, that are obsolete or no longer necessary in the business of the
Borrower or any of its Restricted Subsidiaries or that is being replaced by
equipment of comparable value and utility, (vi) the Borrower or any Restricted
Subsidiary may sell, transfer or otherwise dispose of the Excluded Properties,
(vii) subject to Section 2.12(b), the Borrower or any Restricted Subsidiary
may sell, transfer, lease, exchange, abandon or otherwise dispose of Borrowing
Base Properties with a value not exceeding, in the aggregate for the Borrower
and its Restricted Subsidiaries taken as a whole, 5% of the Borrowing Base
between Scheduled Redeterminations and (viii) with the prior written consent of
Required Lenders and subject to Section 2.02(d) and Section 2.12(b), the
Borrower or any Restricted Subsidiary may sell, transfer, lease, exchange,
abandon  or otherwise dispose of
Borrowing Base Properties not otherwise permitted pursuant to the foregoing
clause (ix). For purposes of the foregoing clause (vi), the value of any Oil
and Gas Interests included in the Borrowing Base Properties shall be the
Engineered Value of such Oil and Gas Interests and the value of all other Oil
and Gas Interests shall be the value which would be assigned to such Oil and
Gas Interests using the same methodology, assumptions and discount rates used
to determine the Engineered Value of the Borrowing Base Properties as of the
most recent Redetermination. In addition, for purposes of determining
compliance with clause (vi) of this Section with respect to any exchange of Oil
and Gas Interests, the value of such exchange shall be the net reduction, if
any, in Engineered Value realized or resulting from such exchange.

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

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

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(a)           Permitted
Investments;

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

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

(d)           Guarantees
constituting Indebtedness permitted by Section 7.01;

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

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

(g)           other
investments by the Borrower and the Restricted Subsidiaries; provided
that, on the date any such other investment is made, the amount of such
investment, together with all other investments made pursuant to this clause
(g) of Section 7.04 (in each case determined based on the cost of such
investment) since the Effective Date, does not exceed in the aggregate,
$1,000,000.

Section 7.05.          Swap Agreements. The Borrower
will not, nor will it permit any of its Restricted Subsidiaries to, enter into
or maintain any Swap Agreement, except the Existing Swap Agreements, the Swap
Agreements required under Section 6.11 and Swap Agreements entered into in the
ordinary course of business with Approved Counterparties and not for
speculative purposes to (a) hedge or mitigate Crude Oil and Natural Gas price
risks to which the Borrower or any Restricted Subsidiary has actual exposure,
and (b) effectively cap, collar or exchange interest rates (from fixed to
floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or investment of any Credit
Party; provided that such Swap Agreements (at the time each transaction
under such Swap Agreement is entered into) would not cause the aggregate
notional amount of Hydrocarbons under all Swap Agreements then in effect
(including the Existing Swap Agreements and the Swap Agreements required under
Section 6.11) to exceed at any time (i) ninety percent (90%) of the “forecasted
production from proved producing reserves” (as defined below) of the Borrower
and the Restricted Subsidiaries for each of the first two years of the
forthcoming five year period and (ii) eighty percent (80%) of the forecasted
production from proved producing reserves of the Borrower and the Restricted
Subsidiaries for each of the third, fourth and fifth years of the  forthcoming five year period. As used in this
Section, “forecasted production from proved producing reserves” means the
forecasted production of Crude Oil and Natural Gas as reflected in the most
recent Reserve Report delivered to the Administrative Agent pursuant to Section
6.01, after giving effect to any pro forma adjustments for the consummation of
any acquisitions or dispositions 

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since the effective date of such Reserve
Report. Once the Borrower or any Restricted Subsidiaries enters into a Swap
Agreement or any hedge transaction pursuant to any Swap Agreement, the terms
and conditions of such Swap Agreement and such hedge transaction may not be
amended or modified, nor may such Swap Agreement or hedge transaction be
cancelled without the prior written consent of Required Lenders. Each Credit
Party and each Lender agrees and acknowledges that (i) the Existing Swap
Agreements are Swap Agreements permitted under this Section 7.05, (ii) as of
the Effective Date, the counterparty to each Existing Swap Agreement is a
Lender Counterparty, and (iii) the obligations of the Credit Parties under the
Existing Swap Agreements are included in the defined term “Obligations” and
such obligations are entitled to the benefits of, and are secured by the Liens
granted under, the Security Instruments.

Section 7.06.          Restricted Payments. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, except that (a) the Borrower may declare and pay dividends
with respect to its Equity Interests payable solely in additional partnership
interests, (b) the Borrower may make Restricted Payments pursuant to and in
accordance with stock option plans or other benefit plans for management or
employees of the Borrower and its Restricted Subsidiaries in an aggregate
amount not to exceed $1,000,000 in any fiscal year, (c) any Restricted
Subsidiary may make Restricted Payments to the Borrower or any Guarantor, (d) on the Effective Date, the Borrower may
declare and pay a dividend to the holders of its Equity Interests in an
aggregate amount not to exceed $150,000,000; provided that the proceeds of such
dividend are used by such holders to pay in full  the CapEx Reimbursement Obligation incurred
by the MLP in connection with the EXCO Transfers and Conversions, and (e) after
the IPO Date, Restricted Payments by the Borrower to the holders of its Equity
Interests; provided that (i)  no Default
has  occurred and is continuing or would
result from the making of such Restricted Payment, (ii) after giving effect to
the application of the proceeds of the Initial Public Offering on or about the
IPO Date, Aggregate Credit Exposure is less than 50% of the Borrowing Base as
of such date and (iii) after giving effect to such Restricted Payment, the
Aggregate Commitment exceeds Aggregate Credit Exposure by an amount equal to or
greater than 20% of the Aggregate Commitment.

Section 7.07.          Transactions with Affiliates. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
sell, lease or otherwise transfer any property or assets to, or purchase, lease
or otherwise acquire any property or assets from, or otherwise engage in any
other transactions with, any of its Affiliates, except (a) in the ordinary
course of business at prices and on terms and conditions not less favorable to
the Borrower or such Restricted Subsidiary than could be obtained on an arm’s-length
basis from unrelated third parties, (b) transactions between or among the
Borrower and its Restricted Subsidiaries not involving any other Affiliate, (c)
transactions described on Schedule 7.07, (d) any Restricted Payment permitted
by Section 7.06, and (e) the sales, transfers or other dispositions permitted
under Section 7.03(a)(vi), and (f) the transactions contemplated by the EXCO
Contribution Documents.

Section 7.08.          Restrictive Agreements. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into, incur or permit to exist any agreement or
other arrangement that prohibits, restricts or imposes any condition upon (a)
the ability of the Borrower or any Restricted Subsidiary to create, incur or
permit to exist any Lien upon any of its property or assets, or (b) the ability
of any Restricted Subsidiary to pay dividends 

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or other distributions with respect to any of
its Equity Interests or to make or repay loans or advances to the Borrower or
any Restricted Subsidiary or to Guarantee Indebtedness of the Borrower or any
Restricted Subsidiary; provided that (i) the foregoing shall not apply
to restrictions and conditions imposed by law or by this Agreement, (ii) the
foregoing shall not apply to restrictions and conditions set forth in the Term
Facility Documents, (iii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 7.08 (but shall
apply to any extension or renewal of, or any amendment or modification
expanding the scope of, any such restriction or condition), (iv) clause (a) of
the foregoing shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement (other
than the Term Facility) if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (v) clause (a) of the
foregoing shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.

Section 7.09.          Disqualified Stock and Fiscal Year.
The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, issue any Disqualified Stock nor will it change its fiscal
year.

Section 7.10.          Amendments to Organizational
Documents and Certain Liens and Guarantees. The Borrower will not, nor will
it permit any of its Restricted Subsidiaries to, enter into or permit any
material modification or amendment of, or waive any material right or
obligation of any Person under its Organizational Documents. The Borrower will
not, nor will it permit any of its Restricted Subsidiaries to grant any Liens
in any assets of the Borrower or any of its Subsidiaries to secure the
Indebtedness under the Term Facility Documents unless each Credit Party
granting such Lien also grants a Lien on such assets to the Administrative
Agent for the benefit of the Secured Parties. The Borrower will not permit any
Subsidiary to Guarantee all or any part of the Indebtedness under the Term
Facility Documents unless such Subsidiary is (or concurrently with any such
Guarantee becomes) a Guarantor.

Section 7.11.          Financial Covenants.

(a)           Consolidated
Current Ratio. The Borrower will not permit the Consolidated Current Ratio
as of the end of any fiscal quarter ending on or after September 30, 2006
to be less than 1.00 to 1.00.

(b)           Leverage
Ratio.

(i)            The
Borrower will not permit the ratio, determined as of the end of the fiscal
quarter ending December 31, 2006, of (A) Consolidated Funded Indebtedness as of
the end of such fiscal quarter, to (B) Consolidated EBITDAX for such fiscal
quarter multiplied by four (4) to be greater than 5.00 to 1.0.

(ii)           The
Borrower will not permit the ratio, determined as of the end of any fiscal
quarter ending after December 31, 2006 and 
on or before June 30, 2007, of (A) Consolidated Funded Indebtedness
as of the end of such fiscal quarter, to (B) Consolidated EBITDAX for the
period from October 1, 2006 to the end of such fiscal quarter multiplied
by a fraction, the numerator of which is four 

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(4) and the denominator of which is the number of fiscal quarters ended
since October 1, 2006, including the then ending fiscal quarter, to be greater
than 4.00 to 1.00.

(iii)          The
Borrower will not permit the ratio, determined as of the end of any fiscal
quarter ending on or after September 30, 2007, of (A) Consolidated Funded
Indebtedness as of the end of such fiscal quarter to (B) Consolidated EBITDAX
for the trailing four fiscal quarter period ending on such date, to be greater
than 4.00 to 1.00.

(c)           Interest
Coverage Ratio.

(i)            The
Borrower will not permit the ratio, determined as of December 31, 2006, of
(A) Consolidated EBITDAX for such fiscal quarter multiplied by four (4) to (B)
Consolidated Interest Expense for such fiscal quarter multiplied by four (4) to
be less than 2.50 to 1.00.

(ii)           The
Borrower will not permit the ratio, determined as of the end of any fiscal
quarter ending after December 31, 2006 and 
on or before June 30, 2007, of (A) Consolidated EBITDAX for the
period from October 1, 2006 to the end of such fiscal quarter multiplied
by a fraction, the numerator of which is four (4) and the denominator of which
is the number of fiscal quarters ended since October 1, 2006, including the
then ending fiscal quarter, to (B) Consolidated Interest Expense for the period
from October 1, 2006 to the end of such fiscal quarter multiplied by a
fraction, the numerator of which is four (4) and the denominator of which is
the number of fiscal quarters ended since October 1, 2006, including the then
ending fiscal quarter, to be less than 2.50 to 1.00.

(iii)          The
Borrower will not permit the ratio, determined as of the end of any fiscal
quarter ending on or after September 30, 2007, of (A) Consolidated EBITDAX
for the trailing four fiscal quarter period ending on such date, to (B)
Consolidated Interest Expense for such four fiscal quarter period to be less
than 2.50 to 1.00.

(d)           NPV.

(i)            The
Borrower will not permit the ratio, determined on March 1, 2007, but as of the
immediately preceding December 31 of (i) NPV to (ii) Consolidated Funded
Indebtedness to be less than 1.15 to 1.00.

(ii)           The
Borrower will not permit the ratio, determined on March 1 and September 1 of
each year, but as of the immediately preceding December 31 and June 30,
respectively (beginning September 1, 2007) of (i) NPV to (ii) Consolidated
Funded Indebtedness to be less than 1.25 to 1.00.

Section 7.12.          Sale and Leaseback Transactions and
other Off-Balance Sheet Liabilities. The Borrower will not, nor will it
permit any Restricted Subsidiary to, enter into or suffer to exist any (i) Sale
and Leaseback Transaction or (ii) any other transaction pursuant to which it
incurs or 

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has incurred Off-Balance Sheet Liabilities,
except for Swap Agreements permitted under the terms of Section 7.05 and
Advance Payment Contracts; provided, that the aggregate amount of
all Advance Payments received by any Credit Party that have not been satisfied
by delivery of production at any time does not exceed, in the aggregate
$1,000,000.

Section 7.13.          Term Facility Restrictions.
Prior to the termination of all Commitments and the payment and performance in
full of the Obligations, the Borrower will not, nor will it permit any
Restricted Subsidiary to, (a) except for Permitted Term Loan Payments, 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
Term Loans, or (b) enter into or permit any modification or amendment of, or
waive any material right or obligation of any Person under any Term
Facility Document if the effect of any such modification or amendment is to (i)
increase the maximum principal amount of the Indebtedness evidenced by the Term
Facility Documents or the rate of interest on any such Indebtedness (other than
as a result of the imposition of a default rate of interest in accordance with
the terms of the Term Facility Documents), (ii) change or add any event of
default or any covenant with respect to the Indebtedness evidenced by the Term
Facility Documents if the effect of such change or addition is to cause any one
or more of the Term Facility Documents to be more restrictive on any Credit
Party than such Term Facility Documents were prior to such change or addition
(unless such change or addition is deemed to have been made to the Term
Facility Documents pursuant to the Intercreditor Agreement), (iii) change the
dates upon which payments of principal or interest on the Indebtedness evidenced
by the Term Facility Documents are due including payments of Excess Cash Flow,
or the definition of “Excess Cash Flow” or “Excess Cash Flow Application Date”,
(iv) change any redemption or prepayment provisions of the  Indebtedness evidenced by the Term Facility
Documents, or (v) grant any Liens in any assets or properties of any Credit
Party, other than the Liens permitted under the Intercreditor Agreement.
Notwithstanding the foregoing, so long as no Default shall have occurred and be
continuing or would result from the making of such payment, the Borrower may
retire, redeem, defease, repurchase or prepay the Indebtedness evidenced by the
Term Facility Documents (including any premium on the prepaid principal amount
of such Indebtedness), on or within five (5) Business Days following the
receipt thereof, with the proceeds of cash equity contributions received by the
Borrower in exchange for Equity Interests of the Borrower including any such
cash equity contributions made with the proceeds of the Initial Public
Offering.

Article VIII

Guarantee of Obligations

Section 8.01.          Guarantee of Payment. Each
Guarantor unconditionally and irrevocably guarantees to the Administrative
Agent for the benefit of the Secured Parties, the punctual payment of all
Obligations now or which may in the future be owing by the Borrower under the
Loan Documents and all Obligations which may now or which may in the future be
owing by the Borrower or any other Guarantor to any Secured Party under any
Swap Agreement (the “Guaranteed Liabilities”). This Guarantee is a
guaranty of payment and not of collection only. The Administrative Agent shall
not be required to exhaust any right or remedy or take any action against the
Borrower or any other Person or any collateral. The Guaranteed Liabilities
include interest accruing after the commencement of a proceeding under
bankruptcy, insolvency or 

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similar laws of any jurisdiction at the rate
or rates provided in the Loan Documents, or the Swap Agreements between any
Credit Party and any Secured Party, as the case may be, regardless of whether
such interest is an allowed claim. Each Guarantor agrees that, as between the
Guarantor and the Administrative Agent, the Guaranteed Liabilities may be
declared to be due and payable for the purposes of this Guarantee
notwithstanding any stay, injunction or other prohibition which may prevent,
delay or vitiate any declaration as regards the Borrower or any other Guarantor
and that in the event of a declaration or attempted declaration, the Guaranteed
Liabilities shall immediately become due and payable by each Guarantor for the
purposes of this Guarantee.

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

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

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

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

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

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

 79
 

 

where such Guaranteed Liability is payable,
to apply such Payment Currency to such Guaranteed Liability.

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

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

Section 8.10.          Limitations on Guarantee. The
provisions of the Guarantee under this Article VIII are severable, and in any
action or proceeding involving any state corporate law, or any state, federal
or foreign bankruptcy, insolvency, reorganization or other law affecting the
rights of creditors generally, if the obligations of any Guarantor under this
Guarantee would otherwise be held or determined to be avoidable, invalid or
unenforceable on account of the amount of such 
Guarantor’s liability under this Guarantee, then, notwithstanding any
other provision of this Guarantee to the contrary, the amount of such liability
shall, without any further action by the Guarantors, the Administrative Agent,
any Lender or any Lender Counterparty, be automatically limited and reduced to
the highest amount that is valid and enforceable as determined in such action
or proceeding (such highest amount determined hereunder being the relevant
Guarantor’s “Maximum Liability”). This Section 8.10 with respect to the Maximum
Liability of the Guarantors is intended solely to preserve the rights of the
Administrative Agent, Lenders and Lender Counterparties hereunder to the
maximum extent not subject to avoidance under applicable law, and no Guarantor
nor any other Person shall have any right or claim under this Section 8.10 with
respect to the Maximum Liability, except to the extent necessary so that none
of  the obligations of any Guarantor
hereunder shall not be rendered voidable under applicable law.

Article IX

Events of Default

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

(a)           the
Borrower shall fail to pay any principal of any Loan (including any payments
required under Section 2.12) 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;

 80

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

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

(d)           the Borrower or any
Restricted Subsidiary shall fail to observe or perform any covenant, condition
or agreement contained in Section 2.12, Section 6.01, Section 6.02, Section 6.03 (with respect to the Borrower or
any Restricted Subsidiary’s existence), Section 6.05 (with respect to
insurance), Section 6.08, Section 6.16 or in Article VII;

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

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

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

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

 81
 

shall continue
undismissed for 60 days or an order or decree approving or ordering any of
the foregoing shall be entered;

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

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

(k)           one or more judgments
for the payment of money in an aggregate amount in excess of $5,000,000 shall
be rendered against the Borrower or any Restricted Subsidiary or any
combination thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach
or levy upon any assets of the Borrower or any Restricted Subsidiary to enforce
any such judgment;

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

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

(n)           a Change of Control
shall occur;

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

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in clause (h) or
(i) of this Article, the Aggregate Commitment shall automatically terminate and
the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall automatically become due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower.

Article X

The Administrative Agent

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

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

The Administrative
Agent shall not have any duties or obligations except those expressly set forth
herein. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing,
(b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent
is required to exercise in writing as directed by the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 11.02), and (c) except as expressly set
forth herein, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
any Credit Party that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity. The Administrative
Agent shall not be liable for any action taken or not taken by it with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 11.02) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to
the Administrative Agent by the Borrower or a Lender, and the Administrative
Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in
connection with this Agreement, (ii) the contents of any certificate,
report or other document delivered hereunder or in connection herewith,
(iii) the performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article V or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.
None of the Syndication Agents, Documentation Agents or Managing Agents shall
have any responsibility or liabilities as an agent hereunder.

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

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

Subject to the
appointment and acceptance of a successor Administrative Agent as provided in
this paragraph, the Administrative Agent may resign at any time by notifying
the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the
Required Lenders shall have the right, in consultation with the Borrower, to
appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Bank, appoint a successor Administrative Agent which shall be a bank with an
office in Chicago, Illinois or New York, New York, or an Affiliate of any such
bank. Upon the acceptance of its appointment as Administrative Agent hereunder
by a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the Borrower and such successor. After the
Administrative Agent’s resignation hereunder, the provisions of this Article
and Section 11.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.

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

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Article XI

Miscellaneous

Section 11.01.        Notices.

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

(i)            if to the Borrower,
to EXCO Partners Operating Partnership, LP, c/o EXCO Resources, Inc., 12377
Merit Drive, Suite 1700, Dallas, Texas 75251, Attention:  Douglas H. Miller, Chief Executive Officer
and Attention:  J. Douglas Ramsey, Chief
Financial Officer, Telecopy No. (214) 368-2087;

(ii)           if to the Administrative
Agent or Issuing Bank, to JPMorgan Chase Bank, N.A., JPMorgan Loan Services, 21
South Clark St., 19th Floor, Chicago, Illinois 60603-2003, Telecopy No.: (312)
385-7096, Attention: Jose Rodriguez, with a copy to JPMorgan Chase Bank, N.A.,
1717 Main Street, TX1-2448, Dallas, Texas 75201, Telecopy No. (214) 290-2332,
Attention:  Wm. Mark Cranmer, Senior Vice
President;

(iii)          if to the Swingline
Lender, JPMorgan Chase Bank, N.A., JPMorgan Loan Services, 21 South Clark St.,
19th Floor, Chicago, Illinois 60603-2003, Telecopy No.: (312) 385-7096,
Attention:  Jose Rodriguez, with a copy to JPMorgan Chase Bank, N.A., 1717
Main Street, Mail Code TX1-2448, Dallas, Texas 75201, Telecopy No. (214)
290-2332, Attention:  Wm. Mark Cranmer,
Senior Vice President; and

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

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

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

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Section 11.02.        Waivers; Amendments.

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

(b)           Neither this
Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Credit
Parties and the Required Lenders or by the Credit Parties and the
Administrative Agent with the consent of the Required Lenders; provided
that no such agreement shall (1) increase the Borrowing Base or at any time
prior to April 1, 2007, the Conforming Borrowing Base without the written
consent of each Lender, (2) increase the Applicable Percentage of any Lender
without the written consent of such Lender or increase the Aggregate Commitment
above the Maximum Facility Amount without the written consent of all Lenders,
(3) reduce the principal amount of any Loan or LC Disbursement or reduce the
rate of interest thereon, or reduce any fees payable hereunder, without the
written consent of each Lender affected thereby, (4) postpone the scheduled
date of payment of the principal amount of any Loan or LC Disbursement, or any
interest thereon, or any fees payable hereunder, or reduce the amount of, waive
or excuse any such payment, or postpone the scheduled date of expiration of any
of the Aggregate Commitment, without the written consent of each Lender
affected thereby, (5) change Section 2.19(b) or Section 2.19(c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (6) release any Credit Party from its
obligations under the Loan Documents or, except in connection with any sales,
transfers, leases or other dispositions permitted in Section 7.03, release any
of the Collateral without the written consent of each Lender, or (7) change any
of the provisions of this Section or the definition of “Required Lenders” or
any other provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; provided  further that no such agreement shall amend,
modify or otherwise affect the rights or duties of the Administrative Agent,
the Issuing Bank or the Swingline Lender hereunder without the prior written
consent of the Administrative Agent, the Issuing Bank or the Swingline Lender,
as the case may be. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder, except that 

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the Commitment
of such Lender may not be increased or extended without the consent of such
Lender.

Section 11.03.        Expenses; Indemnity; Damage Waiver.

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

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

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THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO; PROVIDED THAT
SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT
SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY
A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE
RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

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

(d)           TO THE MAXIMUM
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 10 days after written demand
therefor.

Section 11.04.        Successors and Assigns.

(a)           The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby (including
any Affiliate of the Issuing Bank that issues any Letter of Credit), except
that (i) no Credit Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by such Credit Party without such consent
shall be null and void) and (ii) no Lender may assign or otherwise transfer its
rights or obligations hereunder except in accordance with this Section. Nothing
in this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), Participants (to the extent provided in paragraph (c) of
this Section) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the Issuing Bank and the Lenders)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.

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(b)

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

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

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

(C)           the Issuing Bank; or

(D)          the Swingline Lender.

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

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

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

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

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

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

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

(iii)          Subject to
acceptance and recording thereof pursuant to paragraph (b)(iv) of this
Section, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 2.16,
Section 2.17, Section 2.18 and Section 11.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 11.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance
with paragraph (c) of this Section except that any attempted assignment or
transfer by any Lender that does not comply with clause (C) of Section
11.04(b)(ii) shall be null and void.

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

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

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either the
assigning Lender or the assignee shall have failed to make any payment required
to be made by it pursuant to Section 2.07(d) or Section 2.07(e), Section 2.08,
Section 2.19(d) or Section 11.03(c), the Administrative Agent shall have no
obligation to accept such Assignment and Assumption and record the information
therein in the Register unless and until such payment shall have been made in
full, together with all accrued interest thereon. No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.

(c)

(i)            Any Lender may,
without the consent of the Borrower, the Administrative Agent or the Issuing
Bank, sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided that (A) such Lender’s obligations under this
Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent, the Issuing Bank and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant,
agree to any amendment, modification or waiver described in the first proviso
to Section 11.02(b) that affects such Participant. Subject to paragraph (c)(ii)
of this Section, the Borrower agrees that each Participant shall be entitled to
the benefits of Section 2.16, Section 2.17 and Section 2.18 to the same extent
as if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 11.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 2.19(c) as
though it were a Lender.

(ii)           A Participant shall
not be entitled to receive any greater payment under Section 2.16 or Section
2.18 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the prior written consent of the
Borrower. A Participant that would be a Foreign Lender if it were a Lender
shall not be entitled to the benefits of Section 2.18 unless the Borrower is
notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.18(e) as
though it were a Lender.

(d)           Any Lender may at
any time pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Lender, 

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including
without limitation any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a
security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.

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

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

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

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Section 11.08.        Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted
by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any
time owing by such Lender or Affiliate to or for the credit or the account of
the Borrower against any of and all the obligations of any Credit Party now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section and Section 8.08 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.

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

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

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

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

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(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,
(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, or otherwise consistent with, those of this Section, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Agreement or (ii)  any actual or prospective counterparty (or
its advisors) to any swap or derivative transaction relating to the Credit
Parties and their obligations, (g) with the consent of the Borrower or
(h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than a Credit Party. For the purposes
of this Section, “Information” means all information received from any
Credit Party relating to any Credit Party or its business, other than any such
information that is available to the Administrative Agent, the Issuing Bank or
any Lender on a nonconfidential basis prior to disclosure by any Credit Party; provided
that, in the case of information received from any Credit Party after the date
hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied 

 94
 

 

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

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

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

 95

 

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

	
  

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
  EXCO PARTNERS OPERATING PARTNERSHIP, LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  EXCO Partners OLP GP, LLC

  
	
   

  	
   

  	
  its sole general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /

  	
  S/ J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title:

  	
   Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  WINCHESTER
  ACQUISITION , LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
        /S/ J. Douglas
  Ramsey, Ph.D.

  
	
   

  	
  Name:

  	
   J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
   Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  TXOK
  ENERGY RESOURCES HOLDINGS,

  
	
   

  	
  L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /S/  J. Douglas
  Ramsey, Ph.D.

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  TXOK
  TEXAS ENERGY HOLDINGS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/

  	
   J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
							

 

 

 

	
  

  	
  TXOK TEXAS ENERGY RESOURCES, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  TXOK Texas Energy Holdings, LLC,

  
	
   

  	
   

  	
  as general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
       /S/ J. Douglas Ramsey,
  Ph.D.

  
	
   

  	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial 

  
	
   

  	
   

  	
   

  	
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ROJO
  PIPELINE, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  TXOK Texas Energy Holdings, LLC,

  
	
   

  	
   

  	
  Its sole general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
       /S/ J. Douglas Ramsey,
  Ph.D.

  
	
   

  	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial 

  
	
   

  	
   

  	
   

  	
  Officer

  
					

 

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  as a Lender and
  as Administrative Agent,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
      /S/ Wm. Mark Cranmer

  
	
   

  	
  Name:

  	
  Wm. Mark Cranmer

  
	
   

  	
  Title:

  	
  Senior Vice President

  
						

 

 

 

	
   

  	
  CITIBANK, N.A.,

  
	
   

  	
  as a Lender and
  as a Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Angela McCracken

  
	
   

  	
  Name: Angela
  McCracken

  
	
   

  	
  Title: Vice
  President

  

 

 

 

	
   

  	
  BNP PARIBAS,

  
	
   

  	
  as a Lender and
  as a Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ David Dodd

  
	
   

  	
  Name:

  	
  David Dodd

  
	
   

  	
  Title: Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Polly Schott

  
	
   

  	
  Name:

  	
  Polly Schott

  
	
   

  	
  Title: Vice President

  
				

 

 

 

	
   

  	
  FORTIS CAPITAL CORP.,

  
	
   

  	
  as a Lender and
  as a Documentation Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Michele Jones

  
	
   

  	
  Name:

  	
  Michele Jones

  
	
   

  	
  Title: Senior
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Darrell Holley

  
	
   

  	
  Name:

  	
  Darrell Holley

  
	
   

  	
  Title: Managing Director

  
				

 

 

 

	
   

  	
  UNION BANK OF CALIFORNIA, N.A.,

  
	
   

  	
  as a Lender and
  as a Documentation Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Randall L.
  Osterborg

  
	
   

  	
  Name:

  	
  Randall L. Osterborg

  
	
   

  	
  Title: Sr. Vice President – US Marketing Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Alison Fuqua

  
	
   

  	
  Name:

  	
  Alison Fuqua

  
	
   

  	
  Title: Investment Banking Officer

  
				

 

 

 

	
   

  	
  COMERICA BANK,

  
	
   

  	
  as a Lender and
  as a Managing Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Rebecca L. Harper

  
	
   

  	
  Name:

  	
  Rebecca L. Harper

  
	
   

  	
  Title: Corporate Banking Officer

  
				

 

 

 

	
  

  	
  KEY
  BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as a Lender and
  as a Managing Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Thomas Rajan

  
	
   

  	
  Name:

  	
  Thomas Rajan

  
	
   

  	
  Title: Vice President

  
					

 

 

 

	
  

  	
  MORGAN
  STANLEY SENIOR FUNDING, INC.

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
       /S/ Daniel Twenge

  
	
   

  	
  Name:  Daniel Twenge

  
	
   

  	
  Title: Vice President

  
					

 

 

 

	
  

  	
  CREDIT SUISSE, Cayman Islands Branch

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /S/ Vanessa Gomez

  
	
   

  	
  Name:  Vanessa
  Gomez

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /S/ Mikhail Faybusovich

  
	
   

  	
  Name:  Mikhail Faybusovich

  
	
   

  	
  Title: Associate

  
					

 

 

	
   

  	
  UBS LOAN FINANCE LLC,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /S/ Richard L. Tavrow

  
	
   

  	
  Name:

  	
  Richard L. Tavrow

  
	
   

  	
  Title:

  	
  Director Banking Products Services, US

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /S/ Irja R. Otsa

  
	
   

  	
  Name:

  	
  Irja R. Otsa

  
	
   

  	
  Title:

  	
  Associate Director Banking Products Services, US

  

 

 

 

	
   

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /S/ Paul Riddle

  
	
   

  	
  Name:  Paul Riddle

  
	
   

  	
  Title: Managing Director

  
					

 

 

	
   

  	
  GOLDMAN SACHS CREDIT PARTNERS L.P.,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /S/ Walter A. Jackson

  
	
   

  	
  Name:  Walter A. Jackson

  
	
   

  	
  Title: Authorized Signatory

  
					

 

 

	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /S/ Jeffrey H. Rathkamp

  
	
   

  	
  Name:  Jeffrey H. Rathkamp

  
	
   

  	
  Title: Principal

  
					

 

EXHIBIT A

ASSIGNMENT AND ASSUMPTION

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

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

	
  1.

  	
   

  	
  Assignor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Assignee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Borrower(s):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Administrative Agent:

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Credit Agreement:

  	
   

  	
  Senior Revolving Credit Agreement dated as of
  October 2, 2006 among EXCO Partners Operating Partnership, LP, as Borrower,
  Certain Subsidiaries of Borrower, as Guarantors, the Lenders parties thereto,
  and JPMorgan Chase Bank, N.A., as Administrative Agent

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 1
 

 

	
  6.

  	
   

  	
  Assigned Interest:

  	
   

  	
   

  

 

	
  Facility Assigned

  	
   

  	
  Aggregate

  Commitment/Loans

  for all Lenders

  	
   

  	
  Amount of

  Commitment/Loans

  Assigned

  	
   

  	
  Applicable

  Percentage of

  Commitment/Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Commitment

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
  %

  	
   

  	
  %

  
	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
  %

  	
   

  	
  %

  

 

 

Effective
Date:                        
    , 20     

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

	
  

  	
  ASSIGNOR

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 2
 

 

	
  [Consented to and] Accepted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  JPMORGAN CHASE BANK, N.A.,

  	
   

  	
   

  
	
  as Administrative Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [Consented to:]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXCO PARTNERS OPERATING PARTNERSHIP, LP

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  EXCO Partners OLP GP, LLC

  	
   

  	
   

  
	
   

  	
  Its sole general partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 3

EXHIBIT A

Senior Revolving
Credit Agreement dated October 2, 2006 among EXCO Partners Operating
Partnership, LP, as Borrower, Certain Subsidiaries of Borrower, as Guarantors,
the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative
Agent.

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.             Representations and Warranties.

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

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

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

 

 1

Effective Date and to the Assignee for amounts which
have accrued from and after the Effective Date.

3.             General Provisions. This
Assignment and Assumption shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns. This Assignment
and Assumption may be executed in any number of counterparts, which together
shall constitute one instrument. Delivery of an executed counterpart of a
signature page of this Assignment and Assumption by telecopy shall be effective
as delivery of a manually executed counterpart of this Assignment and
Assumption. This Assignment and Assumption shall be governed by, and construed
in accordance with, the law of the State of Texas.Exhibit 10.2

EXECUTION VERSION

 

SENIOR TERM CREDIT AGREEMENT

dated as of

October 2, 2006

among

EXCO PARTNERS OPERATING PARTNERSHIP, LP,

as Borrower

CERTAIN SUBSIDIARIES OF BORROWER,

as Guarantors

The Lenders Party Hereto

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

CREDIT SUISSE, CAYMAN ISLANDS BRANCH,

as Syndication Agent

J.P. MORGAN SECURITIES INC.,

CREDIT SUISSE SECURITIES (USA) LLC,

as Joint Bookrunners and Co-Lead Arrangers

$650,000,000 Credit Facility

 

 

 

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

  
	
  Section 1.07.

  	
  Second Priority Creditors

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II THE CREDITS

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Commitments

  	
   

  	
  28

  
	
  Section 2.02.

  	
  Repayment of Loans

  	
   

  	
  28

  
	
  Section 2.03.

  	
  Reserved

  	
   

  	
  28

  
	
  Section 2.04.

  	
  Requests for Borrowings

  	
   

  	
  28

  
	
  Section 2.05.

  	
  [Reserved]

  	
   

  	
  29

  
	
  Section 2.06.

  	
  Funding of Borrowings

  	
   

  	
  29

  
	
  Section 2.07.

  	
  Interest Elections

  	
   

  	
  29

  
	
  Section 2.08.

  	
  Repayment of Loans; Evidence of Debt

  	
   

  	
  31

  
	
  Section 2.09.

  	
  Optional Prepayment of Loans

  	
   

  	
  32

  
	
  Section 2.10.

  	
  Mandatory Prepayment of Loans

  	
   

  	
  32

  
	
  Section 2.11.

  	
  Fees

  	
   

  	
  33

  
	
  Section 2.12.

  	
  Interest

  	
   

  	
  33

  
	
  Section 2.13.

  	
  Alternate Rate of Interest

  	
   

  	
  34

  
	
  Section 2.14.

  	
  Increased Costs

  	
   

  	
  34

  
	
  Section 2.15.

  	
  Break Funding Payments

  	
   

  	
  35

  
	
  Section 2.16.

  	
  Taxes

  	
   

  	
  36

  
	
  Section 2.17.

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

  	
   

  	
  37

  
	
  Section 2.18.

  	
  Mitigation Obligations; Replacement of Lenders

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III [RESERVED]

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Organization; Powers

  	
   

  	
  40

  
	
  Section 4.02.

  	
  Authorization; Enforceability

  	
   

  	
  40

  
	
  Section 4.03.

  	
  Governmental Approvals; No Conflicts

  	
   

  	
  41

  
	
  Section 4.04.

  	
  No Material Adverse Change

  	
   

  	
  41

  
	
  Section 4.05.

  	
  Properties

  	
   

  	
  41

  
	
  Section 4.06.

  	
  Litigation and Environmental Matters

  	
   

  	
  41

  
	
  Section 4.07.

  	
  Compliance with Laws and Agreements

  	
   

  	
  42

  
	
  Section 4.08.

  	
  Investment Company Status

  	
   

  	
  42

  

 

 

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 4.09.

  	
  Taxes

  	
   

  	
  42

  
	
  Section 4.10.

  	
  ERISA

  	
   

  	
  42

  
	
  Section 4.11.

  	
  Disclosure

  	
   

  	
  43

  
	
  Section 4.12.

  	
  Labor Matters

  	
   

  	
  43

  
	
  Section 4.13.

  	
  Capitalization and Credit Party Information 

  	
   

  	
  43

  
	
  Section 4.14.

  	
  Margin Stock

  	
   

  	
  43

  
	
  Section 4.15.

  	
  Oil and Gas Interests

  	
   

  	
  43

  
	
  Section 4.16.

  	
  Insurance

  	
   

  	
  44

  
	
  Section 4.17.

  	
  Solvency

  	
   

  	
  44

  
	
  Section 4.18.

  	
  Deposit Accounts

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V CONDITIONS

  	
   

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Effective Date

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI AFFIRMATIVE
  COVENANTS

  	
   

  	
  49

  
	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Financial Statements; Other Information

  	
   

  	
  49

  
	
  Section 6.02.

  	
  Notices of Material Events

  	
   

  	
  52

  
	
  Section 6.03.

  	
  Existence; Conduct of Business

  	
   

  	
  52

  
	
  Section 6.04.

  	
  Payment of Obligations

  	
   

  	
  53

  
	
  Section 6.05.

  	
  Maintenance of Properties; Insurance

  	
   

  	
  53

  
	
  Section 6.06.

  	
  Books and Records; Inspection Rights

  	
   

  	
  53

  
	
  Section 6.07.

  	
  Compliance with Laws

  	
   

  	
  53

  
	
  Section 6.08.

  	
  Use of Proceeds

  	
   

  	
  53

  
	
  Section 6.09.

  	
  Mortgages

  	
   

  	
  54

  
	
  Section 6.10.

  	
  Title Data

  	
   

  	
  54

  
	
  Section 6.11.

  	
  Swap Agreements

  	
   

  	
  54

  
	
  Section 6.12.

  	
  Operation of Oil and Gas Interests

  	
   

  	
  55

  
	
  Section 6.13.

  	
  Restricted Subsidiaries

  	
   

  	
  55

  
	
  Section 6.14.

  	
  Pledged Equity Interests

  	
   

  	
  56

  
	
  Section 6.15.

  	
  Production Proceeds and Bank Accounts

  	
   

  	
  56

  
	
  Section 6.16.

  	
  Mandatory Prepayment of the Loans

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII NEGATIVE COVENANTS

  	
   

  	
  56

  
	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
  Indebtedness

  	
   

  	
  56

  
	
  Section 7.02.

  	
  Liens

  	
   

  	
  58

  
	
  Section 7.03.

  	
  Fundamental Changes

  	
   

  	
  58

  
	
  Section 7.04.

  	
  Investments, Loans, Advances, Guarantees and
  Acquisitions

  	
   

  	
  60

  
	
  Section 7.05.

  	
  Swap Agreements

  	
   

  	
  61

  
	
  Section 7.06.

  	
  Restricted Payments

  	
   

  	
  61

  
	
  Section 7.07.

  	
  Transactions with Affiliates

  	
   

  	
  62

  
	
  Section 7.08.

  	
  Restrictive Agreements

  	
   

  	
  62

  
	
  Section 7.09.

  	
  Disqualified Stock

  	
   

  	
  62

  
	
  Section 7.10.

  	
  Amendments to Organizational Documents and Certain
  Liens and Guarantees

  	
   

  	
  62

  
	
  Section 7.11.

  	
  Financial Covenants

  	
   

  	
  63

  

 

 ii
 

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 7.12.

  	
  Sale and Leaseback Transactions and other
  Off-Balance Sheet Liabilities

  	
   

  	
  64

  
	
  Section 7.13.

  	
  Capital Expenditures

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII GUARANTEE OF
  OBLIGATIONS

  	
   

  	
  64

  
	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
  Guarantee of Payment

  	
   

  	
  64

  
	
  Section 8.02.

  	
  Guarantee Absolute

  	
   

  	
  64

  
	
  Section 8.03.

  	
  Guarantee Irrevocable

  	
   

  	
  65

  
	
  Section 8.04.

  	
  Reinstatement

  	
   

  	
  65

  
	
  Section 8.05.

  	
  Subrogation

  	
   

  	
  65

  
	
  Section 8.06.

  	
  Subordination

  	
   

  	
  66

  
	
  Section 8.07.

  	
  Payments Generally

  	
   

  	
  66

  
	
  Section 8.08.

  	
  Setoff

  	
   

  	
  66

  
	
  Section 8.09.

  	
  Formalities

  	
   

  	
  67

  
	
  Section 8.10.

  	
  Limitations on Guarantee

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX EVENTS OF DEFAULT

  	
   

  	
  67

  
	
   

  	
   

  	
   

  
	
  ARTICLE X THE ADMINISTRATIVE
  AGENT

  	
   

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI MISCELLANEOUS

  	
   

  	
  72

  
	
   

  	
   

  	
   

  
	
  Section 11.01.

  	
  Notices

  	
   

  	
  72

  
	
  Section 11.02.

  	
  Waivers; Amendments

  	
   

  	
  72

  
	
  Section 11.03.

  	
  Expenses; Indemnity; Damage Waiver

  	
   

  	
  73

  
	
  Section 11.04.

  	
  Successors and Assigns

  	
   

  	
  75

  
	
  Section 11.05.

  	
  Survival

  	
   

  	
  78

  
	
  Section 11.06.

  	
  Counterparts; Integration; Effectiveness

  	
   

  	
  78

  
	
  Section 11.07.

  	
  Severability

  	
   

  	
  79

  
	
  Section 11.08.

  	
  Right of Setoff

  	
   

  	
  79

  
	
  Section 11.09.

  	
  GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
  PROCESS

  	
   

  	
  79

  
	
  Section 11.10.

  	
  WAIVER OF JURY TRIAL

  	
   

  	
  80

  
	
  Section 11.11.

  	
  Headings

  	
   

  	
  80

  
	
  Section 11.12.

  	
  Confidentiality

  	
   

  	
  81

  
	
  Section 11.13.

  	
  Interest Rate Limitation

  	
   

  	
  81

  
	
  Section 11.14.

  	
  USA PATRIOT Act

  	
   

  	
  81

  

 

 iii
 

 

SCHEDULES:

Schedule 1.01(a) -
Existing Swap Agreements

Schedule 2.01 –
Applicable Percentages and Commitments

Schedule 4.06 – Disclosed
Matters

Schedule 4.13 –
Capitalization and Credit Party Information

Schedule 4.18 – Deposit
and Investment Accounts

Schedule 7.01 – Existing
Indebtedness

Schedule 7.02 – Existing
Liens

Schedule 7.07 –
Transactions with Affiliates

Schedule 7.08 –
Existing Restrictions

EXHIBITS:

Exhibit A – Form of Assignment and Assumption

Exhibit B – Form
of Opinion of Borrower’s Counsel

Exhibit C – Form
of Counterpart Agreement

Exhibit D – Form of Solvency Certificate

 iv

SENIOR TERM CREDIT AGREEMENT dated as of October 2,
2006, among EXCO PARTNERS OPERATING PARTNERSHIP, LP, as Borrower, CERTAIN
SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party hereto, and JPMORGAN
CHASE BANK, N.A., as Administrative Agent.

The parties hereto agree as follows:

Article
I

Definitions

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

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

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

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

“Administrative Agent” means JPMorgan Chase
Bank, 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.

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

 

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

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

“Agreed Pricing”
means:

(i)            for
anticipated sales of Hydrocarbons that are fixed in a firm fixed price sales
contract with an Approved Counterparty (or another counterparty approved by the
Administrative Agent), the fixed price or prices provided for in such sales
contract during the term thereof; and 

(ii)           for
anticipated sales of Hydrocarbons that are hedged by a fixed price Swap
Agreement with an Approved Counterparty, the fixed price or prices provided for
in such Swap Agreement during the term thereof, as modified by any necessary
adjustment specified by the Administrative Agent for quality and geographical
differentials; and 

(iii)          for
anticipated sales of Hydrocarbons that are hedged by a Swap Agreement with an
Approved Counterparty which Swap Agreement provides for a range of prices
between a floor and a ceiling, the prices provided for in subsection (iv)
below, provided that during the term of such Swap Agreement such prices shall
in no event be less than such floor or exceed such ceiling, as such floor and
ceiling are modified by any necessary adjustment specified by the
Administrative Agent for quality and geographical differentials; and 

(iv)          for
anticipated sales of Hydrocarbons, if such sales are not hedged by a Swap
Agreement or sales contract that is described in paragraphs (i), (ii), or (iii)
above, for the date of calculation (or, if such date is not a Business Day, for
the first Business Day thereafter), and with any necessary adjustment specified
by the Administrative Agent for quality and geographical differentials, the “strip”
price under Henry Hub Natural Gas futures contracts and Light, Sweet Crude Oil
futures contracts for the five year period following such calculation date, in
each case as published by New York Mercantile Exchange (NYMEX) on its website
currently located at www.nymex.com, or any successor thereto (as such
price may be corrected or revised from time to time by the NYMEX in accordance
with its rules and regulations), as of the settlement of the last trading day
for the contract month coincident with the effective date of the then most
recent Reserve Report, and thereafter the price in effect at the end of such
five year period.

 “Agreement”
means this Senior Term Credit Agreement, dated as of October 2, 2006 as it may
be amended, supplemented or otherwise modified from time to time.

 2
 

 

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

“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 or, from and after the Effective Date,
of the aggregate Loans represented by such Lender’s Loans.  The initial amount of each Lender’s
Applicable Percentage is as set forth on Schedule 2.01.  

“Applicable Rate” means, for any day, Effective
Date, a percentage determined in accordance with the table set forth below:

	
  On and after

  	
   

  	
  Applicable Rate for

  Eurocurrency Loans

  	
   

  	
  Applicable Rate for

  ABR Loans

  	
   

  
	
  October 2, 2006

  	
   

  	
  5.50

  	
  %

  	
  4.50

  	
  %

  
	
  October 2, 2007

  	
   

  	
  5.75

  	
  %

  	
  4.75

  	
  %

  
	
  January 2, 2008

  	
   

  	
  6.00

  	
  %

  	
  5.00

  	
  %

  
	
  April 2, 2008

  	
   

  	
  6.25

  	
  %

  	
  5.25

  	
  %

  
	
  July 2, 2008

  	
   

  	
  6.50

  	
  %

  	
  5.50

  	
  %

  

 

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

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

“Arrangers” means J.P. Morgan Securities Inc. and
Credit Suisse Securities (USA) LLC, in their capacity as joint bookrunners and
co-lead arrangers.

“Assessment Rate” means, for any day, the
annual assessment rate in effect on such day that is payable by a member of the
Bank Insurance Fund classified as “well-capitalized” and within
supervisory subgroup “B” (or a comparable successor risk classification) within
the meaning of 12 C.F.R. Part 327 (or any successor provision) to the
Federal Deposit Insurance Corporation for insurance by such Corporation of time
deposits made in Dollars at the offices of such member in the United States; provided
that if, as a result of any change in any law, rule or regulation, it is no
longer possible to determine the Assessment Rate as aforesaid, then the
Assessment Rate shall be such annual rate as shall be determined by the
Administrative Agent to be representative of the cost of such insurance to the
Lenders.

 3
 

 

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

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

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

“Board of Directors” means (1) with respect to
a corporation, the Board of Directors of the corporation or any committee
thereof duly authorized to act on behalf of such board; (2) with respect to a
partnership, the Board of Directors of the general partner of the partnership;
(3) with respect to a limited liability company, the managing member or members
or any controlling committee of managing members thereof; and (4) with respect
to any other Person, the board or committee of such Person serving a similar
function.

“Borrower” means EXCO Partners Operating
Partnership, LP, a Delaware limited partnership, and its successors and
permitted assigns.

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

“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 the borrowing base
determined in accordance with the Revolving Facility Documents.

“Borrowing Base Properties” means all Oil and
Gas Interests of the Borrower and the Restricted Subsidiaries evaluated by the
lenders under the Revolving Facility for purposes of establishing the Borrowing
Base, including the Midstream Assets, under the Revolving Facility (or, if the
Revolving Facility has terminated, the Oil and Gas Interests of the Borrower
and its Restricted Subsidiaries evaluated by the Lenders in a manner
substantially similar to that used by the lenders under the Revolving Facility)
but excluding the Excluded Properties.

“Borrowing Request” means a request by the
Borrower for a Borrowing in accordance with Section 2.04.

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

“Capex Reimbursement Obligation” means the
obligation of the MLP to pay to EXCO up to $150,000,000 of the proceeds of the
initial funding under this Agreement as a reimbursement of certain capital
expenditures incurred by EXCO and its Subsidiaries to acquire,

 4
 

 

develop and operate the Oil and Gas Interests owned by
the Transferred Subsidiaries and the Texas Properties.

“Capital Expenditures” means, for any period,
with respect to any Person, the aggregate of all expenditures that should be
capitalized under GAAP on a consolidated balance sheet of such Person and its
Subsidiaries for the acquisition or leasing (pursuant to a capital lease) of
fixed or capital assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period) and for all other
expenditures that are capitalized under full cost accounting methods, including
land acquisition, seismic data, drill site preparatory work, drilling wells,
completing wells, equipment and production facilities and other operations
associated with connecting producing wells to gatherings systems and pipeline
systems or processing facilities.

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

“Change in Law” means (a) the adoption of any
law, rule or regulation after the date of this Agreement, (b) any change in any
law, rule or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by
any Lender (or, for purposes of Section 2.14(b), by any lending office of such
Lender or by such Lender’s holding company, if any) with any request, guideline
or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement.

“Change of Control” means (a) the acquisition
of greater than 50% of the voting or economic interest in the General Partner
by any Person other than the MLP; (b) the General Partner shall cease to own
and control, of record, beneficially and directly, 100% of the general
partnership interest of the Borrower or cease to be the sole managing partner
of the Borrower; (c) any “person” or “group” (as such terms are used in
Sections 13(d) and 14(d) under the Exchange Act), other than EXCO, shall
become, or obtain rights (whether by means or warrants, options or otherwise)
to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5
under the Exchange Act) directly or indirectly, of Equity Interests of the MLP
that would entitle such person or group entitled to vote such Equity Interests
representing, in the aggregate, more than 35% of the total amount of
outstanding Equity Interests of the MLP at any annual meeting of the partners
of the MLP or otherwise in the election of the Board of Directors of the
General Partner or the MLP General Partner; (d) the failure, for any reason, of
EXCO to own and control, directly or indirectly more than 50% of the voting and
economic interests of the MLP General Partner; (e) the MLP General Partner
shall cease to own and control, of record, beneficially and directly, 100% of
the general partnership interest in the MLP or to be the sole managing partner
of the MLP; or (f) the occurrence of a “Change of Control” as such term is
defined in the EXCO Credit Agreement.

 5
 

 

“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.

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

“Commitment” means, with respect to each
Lender, the commitment of such Lender to make Loans on the Effective Date.  The amount of each Lender’s Commitment (which
amount is such Lender’s Applicable Percentage of the aggregate Commitment) is
set forth in Schedule 2.01.  The original
aggregate amount of the Commitments is $650,000,000.

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

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

“Consolidated EBITDAX” means, with respect to
the Borrower and its Restricted Subsidiaries for any period, Consolidated Net
Income for such period; plus, without duplication and to the extent
deducted in the calculation of Consolidated Net Income for such period, the sum
of (a) income or franchise Taxes paid or accrued; (b) Consolidated
Interest Expense; (c) amortization, depletion and depreciation expense;
(d) any non-cash losses or charges on any Swap Agreement resulting from
the requirements of FASB Statement 133 for that period; (e) oil and gas
exploration expenses (including all drilling, completion, geological and
geophysical costs) for such period; (f) losses from sales or other
dispositions of assets (other than Hydrocarbons produced in the ordinary course
of business) and other extraordinary or non-recurring losses; (g) workover
expenses for such period, (h) cash payments made during such period as a result
of the early termination of any Swap Agreement (giving effect to any netting
agreements), and (i) other non-cash charges (excluding accruals for cash
expenses made in the ordinary course of business); minus, to the extent
included in the calculation of Consolidated Net Income for such period;
(j) the sum of (1) any non-cash gains on any Swap Agreements
resulting from the requirements of FASB Statement 133 for that period;
(2) extraordinary or non-recurring gains; and (3) gains from sales or
other dispositions of assets (other than Hydrocarbons produced in the ordinary
course of business); provided that, with respect to the determination of
Borrower’s compliance with the leverage ratio set forth in Section 7.11(b) for
any period, Consolidated EBITDAX shall be adjusted to give effect, on a pro
forma basis, to any

 6
 

 

Acquisitions made during such period as if such
Acquisitions were made at the beginning of such period.

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

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

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

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

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

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

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

“Crude Oil” means all crude oil and condensate.

 7
 

 

“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.

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

“Disposition” means, with respect to any
property, any sale, lease, sale and leaseback, assignment, conveyance, transfer
or other disposition thereof.  The terms “Dispose”
and “Disposed of” shall have correlative meanings.

“Disqualified Stock” means any Equity Interest,
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof, in whole or in part, on or prior to the Maturity Date.

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

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

“ECF Consolidated Current Assets” means, at any
date, all amounts (other than cash and Permitted Investments) that would, in
conformity with GAAP, be set forth opposite the caption “total current assets”
(or any like caption) on a consolidated balance sheet of the Borrower and its
Restricted Subsidiaries at such date.

“ECF Consolidated Current Liabilities” means,
at any date, all amounts that would, in conformity with GAAP, be set forth
opposite the caption “total current liabilities” (or any like caption) on a
consolidated balance sheet of the Borrower and its Restricted Subsidiaries at
such date, but excluding (a) the current portion of any Funded Debt of the
Borrower and its Restricted Subsidiaries and (b) without duplication of clause
(a) above, all Indebtedness consisting of Revolving Loans to the extent
otherwise included therein.

“ECF Consolidated Working Capital” means, at
any date, the excess of ECF Consolidated Current Assets on such date over
ECF Consolidated Current Liabilities on such date.

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

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

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

 8
 

 

“Engineered Value” means, the value attributed
to the Borrowing Base Properties pursuant to the terms of the Revolving
Facility Documents (or, if the Revolving Facility has terminated, on terms
substantially similar to those provided for in the Revolving Facility
Documents), based upon the discounted present value of the estimated net cash
flow to be realized from the production of Hydrocarbons from the Borrowing Base
Properties as set forth in the Reserve Report.

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

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

“Equity Contribution Agreement” means the
Equity Contribution Agreement, dated as of October 2, 2006, among the Equity
Contributor, the Borrower and the Administrative Agent.

“Equity Contributor” means EXCO Resources,
Inc., a Texas corporation.

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

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

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

“ERISA Event” means (a) any “reportable
event”, as defined in Section 4043 of ERISA or the regulations issued
thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an
“accumulated funding deficiency” (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (c) the filing pursuant
to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with

 9

 

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 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 Properties” means certain Oil and Gas
Interests acquired by the Borrower or its Restricted Subsidiaries in connection
with the Winchester Acquisition and located in Adams County, Mississippi and
Montague, Foard, Runnels, Garza and Nacogdoches Counties, Texas.

“Excluded Taxes” means, with respect to the
Administrative Agent, any Lender or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) income
or franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which the Borrower is located and (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by
the Borrower under Section 2.18(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 2.16(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from the Borrower with respect to such
withholding tax pursuant to Section 2.16(a).

‘‘Excess Cash Flow”:  for any fiscal year of the Borrower, the
excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net
Income for such fiscal year, (ii) the amount of all non-cash charges (including
depletion, depreciation and amortization) deducted in arriving at such
Consolidated Net Income, (iii) decreases in ECF Consolidated Working Capital
for such fiscal year, and (iv) the aggregate net amount of non-cash loss on the
Disposition of property by the Borrower and its Restricted Subsidiaries during
such fiscal year (other than sales of inventory in the ordinary course of
business), to the extent deducted in arriving at such Consolidated Net Income
over (b) the sum, without duplication, of (i) the amount of all non-cash
credits included in arriving at such Consolidated Net Income, (ii) the
aggregate amount actually

 10
 

 

paid by the Borrower and its Restricted Subsidiaries
in cash during such fiscal year on account of Capital Expenditures (excluding
the principal amount of Indebtedness incurred in connection with such
expenditures and any such expenditures financed with the proceeds of any
Reinvestment Deferred Amount), (iii) the aggregate amount of all optional
prepayments of the Loans during such fiscal year, (iv) the aggregate amount of
all regularly scheduled principal payments of Consolidated Funded Indebtedness
(including the Loans) of the Borrower and its Restricted Subsidiaries made
during such fiscal year (other than in respect of any revolving credit facility
to the extent there is not an equivalent permanent reduction in commitments
thereunder), (v) increases in ECF Consolidated Working Capital for such fiscal
year, (vi) the aggregate net amount of non-cash gain on the Disposition of
property by the Borrower and its Restricted Subsidiaries during such fiscal
year (other than sales of inventory in the ordinary course of business), to the
extent included in arriving at such Consolidated Net Income and (vii)
prepayments of Revolving Loans made pursuant to Section 2.12(a) of the
Revolving Credit Agreement in connection with any Scheduled Redetermination (as
such term is defined in the Revolving Credit Agreement) made on the
Redetermination Date (as such term is defined in the Revolving Credit
Agreement) occurring on the April 1 immediately preceding the relevant Excess
Cash Flow Application Date.

“Excess Cash Flow Application Date” has the
meaning assigned to such term in Section 2.10(b).

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

“EXCO Agreements” means, collectively, (i) that
certain Administrative Services Agreement, dated as of October 2, 2006, by and
among the Borrower, the MLP General Partner and certain of the MLP
Subsidiaries, (ii) that certain Omnibus Agreement, dated as of October 2, 2006,
by and among the Borrower and certain of the MLP Subsidiaries, and (iii) the
other agreements, certificates and instruments executed and delivered in
connection with the agreements described in the foregoing clauses (i) and (ii),
all as amended, supplemented or modified from time to time as permitted by this
Agreement.

“EXCO Contribution Agreement” means that
certain Contribution, Conveyance and Assumption Agreement dated October 2, 2006
by and among EXCO and certain of its Subsidiaries and the Borrower and certain
of its Subsidiaries, together with the additional conveyance documents and
instruments contemplated or referenced thereunder.

“EXCO Contribution Documents” means,
collectively, (i) the EXCO Contribution Agreement, (ii) the EXCO Agreements and
(iii) the other agreements, certificates and instruments executed and delivered
in connection with the agreements described in the foregoing clauses (i) and
(ii), all as amended, supplemented or modified from time to time as permitted
by this Agreement.

 “EXCO Credit
Agreement” means that certain Amended and Restated Credit Agreement, dated
March 17, 2006, among EXCO, as borrower, certain subsidiaries of EXCO as
guarantors, the financial institutions from time to time a party thereto as
lenders and JPMorgan

 11
 

 

Chase Bank, N.A., as administrative agent, as amended,
modified, supplemented or restated from time to time.

“EXCO Operating” means EXCO Operating, LP, a
Delaware limited partnership and its successors and assigns.

“EXCO Transfers and Conversions” means,
collectively, (a) the conveyance by EXCO and its Subsidiaries of the Texas
Properties and the Equity Interests of Merger Sub to the Borrower as a capital
contribution to the Borrower, (b) the conveyance by EXCO of the Equity
Interests of ROJO Pipeline to the Borrower and the General Partner as a capital
contribution, (c) the conversion of ROJO Pipeline from a Delaware limited
liability company to a Delaware limited partnership, (d) the conveyance by EXCO
of all of the Equity Interests of the Borrower, the General Partner and TXOK
Resources Holdings to the MLP, in exchange for Equity Interests of the MLP
representing 100% of the outstanding Equity Interests of the MLP on the
Effective Date the incurrence by the MLP of the CapEx Reimbursement Obligation
and the MLP Rights, (e) the conveyance by the MLP of all of the Equity
Interests of TXOK Resources Holdings to the Borrower as a capital contribution,
(f) the conveyance by the General Partner of all of the general partnership
interests of ROJO Pipeline to TXOK Resources Holdings and the conveyance by
TXOK Resources Holdings of such general partnership interests to TXOK Texas
Holdings, (g) the conveyance by the Borrower of all of the limited partnership
interests of ROJO Pipeline to TXOK Resources Holdings as a capital contribution.

“Existing Swap Agreements” means, collectively,
(i)  the existing Swap Agreements between
one or more of the Persons acquired by the Borrower on the Effective Date
pursuant to the Winchester Acquisition and any Lender Counterparty and defined
as the “Winchester Hedges” in the Winchester Merger Agreement, (ii) the
existing Swap Agreements between one or more of the Persons that became
Restricted Subsidiaries of the Borrower on the Effective Date pursuant to the
EXCO Transfers and Conversions and any Lender Counterparty and described on
Schedule 1.01(a) and (iii) the existing Swap Agreements to which a Lender
Counterparty is a party that will be assigned to Borrower and its Subsidiaries
on the Effective Date and described on Schedule 1.01(a).

“FASB” means Financial Accounting Standards
Board.

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

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

 12
 

 

“Funded Debt” means, as to any Person, all
Indebtedness of such Person that matures more than one year from the date of
its creation or matures within one year from such date but is renewable or
extendible, at the option of such Person, to a date more than one year from
such date or arises under a revolving credit or similar agreement that
obligates the lender or lenders to extend credit during a period of more than
one year from such date, including all current maturities and current sinking
fund payments in respect of such Indebtedness whether or not required to be
paid within one year from the date of its creation and, in the case of the
Borrower, Indebtedness in respect of the Loans.

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

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

“General Partner” means EXCO Partners OLP GP,
LLC, a Delaware limited liability company, and its successors and permitted
assigns.

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

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

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

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

 13
 

 

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

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

“Indebtedness” of any Person means, without
duplication, (a) all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments,
(c) all obligations of such Person upon which interest charges are paid,
(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property acquired by such Person, (e) all
obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the ordinary
course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed,
(g) all Guarantees by such Person of Indebtedness of others, (h) all
Capital Lease Obligations of such Person, (i) all obligations, contingent
or otherwise, of such Person as an account party in respect of letters of
credit and letters of guaranty and (j) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances.  The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.

“Indemnified Taxes” means Taxes other than
Excluded Taxes.

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

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

“Initial Public Offering” means a sale by the
MLP of its Equity Interests in an underwritten (firm commitment) initial public
offering registered under the Securities Act of 1933 resulting in the listing
of such Equity Interests on a nationally recognized stock exchange, including
without limitation, the NASDAQ National Market System or the New York Stock
Exchange.

“Intercreditor Agreement” means an
Intercreditor Agreement by and among the Administrative Agent, the Revolving
Agent, and the Credit Parties, dated the date hereof and in form and substance
satisfactory to the Lenders, as amended, modified, supplemented or restated
from time to time.

“Interest Election Request” means a request by
the Borrower to convert or continue a Borrowing in accordance with Section
2.07.

 14
 

 

“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
or six months thereafter, as the Borrower may elect; provided, that
(i) if any Interest Period would end on a day other than a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day
and (ii) any Interest Period 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.

“IPO Date” means the date the Initial Public
Offering and the Rights Offering are consummated.

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

“Lenders” means the Persons listed on
Schedule 2.01 and any other Person that shall have become a party hereto
pursuant to an Assignment and Assumption, other than any such Person that
ceases to be a party hereto pursuant to an Assignment and Assumption.

“LIBO Rate” means, with respect to any
Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750
of the Moneyline Telerate Service (or on any successor or substitute page of
such Service, or any successor to or substitute for such Service, providing
rate quotations comparable to those currently provided on such page of such
Service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 a.m., London
time, two 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 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

 15
 

 

retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to
such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

“Loan Documents” means this Agreement, any
promissory notes executed in connection herewith, Security Instruments, the Fee
Letter, the Intercreditor Agreement and any other agreements executed in
connection with this Agreement.

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

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

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

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

“Material Indebtedness” means Indebtedness
permitted under Section 7.01(h) and any other Indebtedness (other than the
Loans), or obligations in respect of one or more Swap Agreements, of the
Borrower or any one or more of the Restricted Subsidiaries in an aggregate
principal amount exceeding $5,000,000. 
For purposes of determining Material Indebtedness, the “principal amount”
of the obligations of the Borrower or any Guarantor in respect of any Swap
Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that the Borrower or such Guarantor would be required
to pay if such Swap Agreement were terminated at such time.

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

 16
 

 

“Maturity Date” means October 2, 2011.

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

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

“Merger Sub” means Winchester Acquisition, LLC,
a Delaware limited liability company, and its successors.

“Midstream Assets” has the meaning assigned to
such term in the Winchester Merger Agreement.

“MLP” means EXCO Partners, LP, a Delaware limited
partnership.

“MLP General Partner” means EXCO GP Partners,
LP, a Delaware limited partnership, and its successors and permitted assigns.

“MLP Rights” means the rights to buy Equity
Interests of the MLP issued by the MLP to EXCO as part of the consideration for
the assets and properties contributed to the MLP by EXCO and its Subsidiaries
pursuant to the EXCO Contribution Agreement.

“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 Lien prior and superior in right to any other Person (except Liens
created pursuant to the Revolving Facility Documents) in favor of the
Administrative Agent for the benefit of the Secured Parties and subject only to
the Liens permitted pursuant to Section 7.02.

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

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

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

“Net Cash Proceeds” means, with respect to the
sale of Borrowing Base Properties by the Borrower or any Restricted Subsidiary,
the excess, if any, of (a) the sum of cash and cash equivalents received in
connection with such sale, but only as and when so

 17
 

 

received, over (b) the sum of (i) the principal amount
of any Indebtedness that is secured by such asset and that is required to be
repaid in connection with the sale thereof (other than the Loans and the
Revolving Loans), (ii) the out-of-pocket expenses incurred by the Borrower or
such Restricted Subsidiary in connection with such sale, (iii) all legal, title
and recording tax expense and all federal, state, provincial, foreign and local
taxes required to be accrued as a liability under GAAP as a consequence of such
sale, (iv) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries as a result of such sale, (v) the
deduction of appropriate amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or
other assets disposed of in such sale and retained by the Borrower or any
Restricted Subsidiary after such sale, (vi) cash payments made to satisfy
obligations resulting from early terminations of Swap Agreements in connection
with or as a result of any such sale of Borrowing Base Properties, and (vii)
any portion of the purchase price from such sale placed in escrow, whether as a
reserve for adjustment of the purchase price, for satisfaction of indemnities
in respect of such sale or otherwise in connection with such sale; provided  however, that
upon the termination of that escrow, Net Cash Proceeds will be increased by any
portion of funds in the escrow that are released to the Borrower or any
Restricted Subsidiary.

“Net Working Capital” means, on any date of
determination, the sum of (a) Consolidated Current Assets as of such date
(calculated without including Unused Commitments (as defined in the Revolving
Credit Agreement) as of such date) minus (b) Consolidated Current Liabilities
as of such date.

“Non-Consenting Lender” has the meaning
assigned to such term in Section 2.18(c).

“NPV” means, as of any date of the
determination, the sum of (i) with respect to any proved and probable reserves
expected to be produced from any undivided interests in Borrowing Base
Properties, the net present value, discounted at 10% per annum, of the future
net revenues expected to accrue to any Credit Party’s interests in such
reserves (after deducting all existing burdens) during the remaining expected
economic lives of such reserves plus (ii) Pipeline EBITDA for the trailing 12
month period ending on the date of the determination multiplied by ten.  Each calculation of such expected future net
revenues with respect to the proved and probable reserves shall be made in
accordance with the then existing guidelines established by the Securities and
Exchange Commission for valuing Oil and Gas Interests or, in the case of
probable reserves, the Society of Petroleum Engineers; provided that in any
event (a) appropriate deductions shall be made for severance and ad valorem
taxes, and for operating (including purchasing and injecting water), gathering,
transportation and marketing costs required for the production and sale of such
reserves including annual increases in such costs of 3% per year, (b) the
pricing assumptions and escalations used in determining the net present value
of proved and probable reserves for any particular reserves shall be the Agreed
Pricing (or any other pricing assumptions to which the Borrower and the
Required Lenders may agree) and (c) appropriate deductions shall be made for
capital expenditures (including plugging and abandonment costs and annual
increases in the cost of such capital expenditures of at least 3% per year)
approved in writing by the Administrative Agent in which internal cash flow is
available to support such expenditures. 
For each date of determination, net present value shall be

 18
 

 

calculated hereunder based on the then most recent
Reserve Report, either by the Borrower, by the Administrative Agent, or by the
engineering firm who prepares such Reserve Report; in the event of any
conflict, the Administrative Agent’s calculation shall be conclusive and final.

“Obligations” means 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 Lenders or any of them or any Lender Counterparty arising under or
in connection with any Loan Document or Swap Agreement (including, any and all
obligations, contingent or otherwise, whether now existing or hereafter
arising, of any Credit Party under any Existing Swap Agreement and any and all
obligations, contingent or otherwise, whether now existing or hereafter
arising, of any Credit Party with respect to any transactions under any Swap
Agreement with any Person that was a Lender Counterparty at the time such
Credit Party entered into such transactions regardless of whether such Person
is no longer a Lender Counterparty), whether for principal, interest, payments
for early termination of Swap Agreements, funding indemnification amounts,
fees, expenses, indemnification or otherwise.

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

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

 19
 

 

geological, geophysical and engineering records, data,
information, maps, licenses and interpretations.

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

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

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

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

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

“Permitted Encumbrances” means:

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

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

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

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

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

 20
 

 

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

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

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

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

provided that the term “Permitted
Encumbrances” shall not include any Lien securing Indebtedness (other than
contractual Liens described in the foregoing clause (b) granted to operators
and non-operators under oil and gas operating agreements to the extent the
obligations secured by such Liens constitute Indebtedness).

“Permitted Investments” means:

(a)           U.S.
Government Securities;

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

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

 21
 

 

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

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

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

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

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

“PFC” means Progress Fuels Corporation, a
Florida corporation, and its successors.

“Pipeline Assets” means the Borrower’s and its
Restricted Subsidiaries’ pipelines and natural gas gathering lines used to
transport Natural Gas produced by any Person.

“Pipeline EBITDA” means for any period, and to
the extent it relates to the Pipeline Assets of the Borrower and its Restricted
Subsidiaries, the Consolidated Net Income of such Pipeline Assets for such
period; plus, without duplication and to the extent deducted in the
calculation of such Consolidated Net Income for such period, the sum of
(a) income or franchise Taxes paid or accrued; (b) amortization,
depletion and depreciation expense; (c) losses from sales or other
dispositions and other extraordinary or non-recurring losses; and (d) other
non-cash charges (excluding accruals for cash expenses made in the ordinary
course of business); minus, to the extent included in the calculation of such
Consolidated Net Income for such period, (e) the sum of
(1) extraordinary or non-recurring gains and (2) gains from sales or
other dispositions.

“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.

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

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

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

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

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

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

“Reinvestment Deferred Amount” has the meaning
assigned to such term in Section 7.03(a).

“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 at least 51% of the aggregate unpaid principal amount of the Loans then
outstanding.

“Reserve Report” means an unsuperseded
engineering analysis of the Borrowing Base Properties, in form and substance
reasonably acceptable to the Revolving Agent (or, if the Revolving Facility has
been terminated, the Administrative Agent), prepared in accordance with
customary and prudent practices in the petroleum engineering industry.

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

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

 23

 

deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any such Equity
Interests in any Credit Party or any option, warrant or other right to acquire
any such Equity Interests in any Credit Party.

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

“Revolving Agent” means JPMorgan Chase Bank,
N.A. in its capacity as contractual representative of the financial
institutions and other Persons from time to time a party to the Revolving
Facility and any successor agent appointed pursuant to the terms of the
Revolving Facility Documents.

“Revolving Credit Agreement” means that certain
Senior Revolving Credit Agreement dated October 2, 2006, by and among
Borrower, certain Subsidiaries of Borrower and JPMorgan Chase Bank, N.A., as
administrative agent.

“Revolving Facility” means the revolving loan
facility evidenced by the Revolving Facility Documents.

“Revolving Facility Documents” means the
Revolving Credit Agreement and any promissory notes executed in connection
therewith, security instruments and any other agreements executed in connection
with such Senior Revolving Credit Agreement as the same may be amended,
modified, supplemented or restated from time to time to the extent permitted
under this Agreement.

“Revolving Loans” means the revolving loans
made under the Revolving Facility.

“Rights Offering” means the exercise of the MLP
Rights by the holders thereof and the payment of the consideration for such
Equity Interests.

“ROJO Pipeline” means ROJO Pipeline, Inc., a
Texas corporation, and following its conversion to a partnership, ROJO
Pipeline, LP, a Delaware limited partnership.

“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.

“Secured Party” means the Administrative Agent,
any Lender and any Lender Counterparty and shall include any Lender Counterparty
to the extent that any Obligations owing to such Lender Counterparty arise
under hedging transactions entered into at the time such Person was a Lender or
Lender Counterparty.

“Security Instruments” means collectively, all
Guarantees of the Obligations evidenced by the Loan Documents and all
mortgages, security agreements, pledge agreements, collateral assignments and
other collateral documents covering the Oil and Gas Interests of the

 24
 

 

Borrower and the Restricted Subsidiaries and the
Equity Interests of the Restricted Subsidiaries and other personal property,
equipment, oil and gas inventory and proceeds of the foregoing, all such
documents to be in form and substance reasonably satisfactory to the
Administrative Agent.

“Statutory Reserve Rate” means a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the maximum
reserve percentages (including any marginal, special, emergency or supplemental
reserves) expressed as a decimal established by the Board to which the
Administrative Agent is subject (a) with respect to the Base CD Rate, for new
negotiable nonpersonal time deposits in Dollars over $100,000 with maturities
approximately equal to three months and (b) with respect to the Adjusted LIBO
Rate, for eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D. 
Eurodollar Loans shall be deemed to constitute eurocurrency funding and
to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

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

“Surplus Cash” means the lesser of (i) cash and
cash equivalents of the Borrower and its Restricted Subsidiaries, on a
consolidated basis that constitute Permitted Investments and (ii) the amount by
which Net Working Capital exceeds zero ($0.00).

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

“Target” means Winchester Energy Company, Ltd.,
a Texas limited partnership.

 25
 

 

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

“Texas Properties” means certain Oil and Gas
Interests owned by EXCO or EXCO Operating and located in Cherokee, Houston,
Polk, Limestone, Rusk and Smith Counties, Texas.

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

“Transactions” means the (i) the execution,
delivery and performance by the Credit Parties of this Agreement and the Loan
Documents, (ii) the borrowing of Loans, (iii) the use of the proceeds thereof,
(iv) the execution, delivery and performance of the Revolving Facility
Documents, (v) the funding of the Revolving Loans, (vi) the consummation of the
Winchester Acquisition and (vii) the consummation of the EXCO Transfers and
Conversions.

“Transferred Subsidiaries” means any Subsidiary
of the Borrower (or any such Subsidiary’s predecessor) that was a “Restricted
Subsidiary” under and as defined in the EXCO Credit Agreement prior to the
consummation of the EXCO Transfers and Conversions.

“TXOK Resources Holdings” means TXOK Energy
Resources Holdings L.L.C., a Delaware limited liability company, and its
successors.

“TXOK Texas Holdings” means TXOK Texas Energy
Holdings LLC, a Delaware limited liability company, and its successors.

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

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

 26
 

 

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

“WGC Holdco” means WGC Holdco, LLC, a Texas
limited liability company and the general partner of the Target.

“Winchester Acquisition” means the acquisition
of all of the issued and outstanding Equity Interests of Target from PFC
pursuant to the Winchester Merger Agreement.

“Winchester Acquisition Documents” means the
Winchester Merger Agreement and all other certificates and other documents and
instruments now or hereafter executed and delivered by, between or among the
Borrower, Merger Sub, Target, WGC Holdco and PFC pursuant to the Winchester
Merger Agreement or in connection with the Winchester Acquisition.

“Winchester Merger Agreement” means,
collectively, that certain Agreement and Plan of Merger by and among PFC,
Target, WGC Holdco and Merger Sub dated as of July 22, 2006 as amended by the
First Amendment to Agreement and Plan of Merger, dated September 28, 2006.

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

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

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

 27
 

 

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

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

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

Section 1.07.          Second
Priority Creditors.  The Secured
Parties are hereby designated “Second Priority Creditors” for all purposes
under and as defined in the Intercreditor Agreement and the Security
Instruments are hereby designated “Second Priority Security Instruments” for
all purposes under and as defined in the Intercreditor Agreement.

Article
II

The Credits

Section 2.01.          Commitments.  Subject to the terms and conditions set forth
herein, each Lender agrees to make Loans to the Borrower on the Effective Date
in an aggregate principal amount not to exceed the amount of the Commitment of
such Lender.  The Loans may from time to
time be Eurodollar Loans or ABR Loans, as determined by the Borrower and
notified to the Administrative Agent in accordance with Sections 2.04 and 2.07.

Section 2.02.          Repayment
of Loans.  On the 2nd day of each
October prior to the Maturity Date, commencing October 2, 2007, the Borrower
shall repay the Loans in the principal amount equal to one percent (1%) of the
aggregate original outstanding principal balance of the Loans; and on the
Maturity Date, the Borrower shall repay the outstanding principal balance of
the Loans in full.

Section 2.03.          Reserved.

Section 2.04.          Requests
for Borrowings.  To request that the
Lenders make Loans on the Effective Date, the Borrower shall notify the
Administrative Agent of such request by telephone

 28
 

 

(a) in the case of a Eurodollar Borrowing, not later
than 11:00 a.m., three Business Days before the date of the proposed Eurodollar
Borrowing or (ii) in the case of an ABR Borrowing, not later than 11:00 a.m.,
one Business Day before the proposed Effective Date.  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.  Such telephonic and written Borrowing Request
shall specify the following information:

(i)            the
aggregate amount of the requested Borrowing;

(ii)           the
date of the proposed Effective Date, 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 terms “Interest Period”; and

(v)           the
location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.06.

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

Section 2.05.          [Reserved]

Section 2.06.          Funding
of Borrowings.  Each Lender shall
make each Loan to be made by it hereunder on the proposed Effective Date by
wire transfer of immediately available funds by 12:00 noon to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders.  The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an Eligible Account of the
Borrower designated by the Borrower in the Borrowing Request.

Section 2.07.          Interest
Elections.

(a)           The
Loans made on the Effective Date shall be either ABR Borrowings or Eurodollar
Borrowings.  Thereafter, the Borrower may
elect to convert such Loans to a different Type or to continue such Loans and,
in the case of Eurodollar Loans, may elect Interest Periods therefor, all as
provided in this Section.  The Borrower
may elect different options with respect to different portions of the Loans, in
which case each such portion shall be allocated ratably among the Lenders
holding the Loans.

(b)           To
make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone (a) in the case of a
conversion into or

 29
 

 

a continuation
as a Eurodollar Loan, not later than 11:00 a.m., three Business Days before the
date of the proposed election or (b) in the case of a conversion into or a
continuation as an ABR Loan, not later than 11:00 a.m., one Business Day before
the date of the proposed election.  Each
such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of
a written Interest Election Request in a form approved by the Administrative
Agent and signed by the Borrower.

(c)           Each
telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.03:

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

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

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

(iv)          if
the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”; except
that the Interest Period for any Eurodollar Borrowing requested during the 30
day period following the Effective Date shall be of one month’s duration,
unless otherwise agreed by the Borrower and the Administrative Agent.

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

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

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

 30
 

 

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

(f)            All
conversions and continuations of Eurodollar Loans shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than
$1,000,000.  All conversions and
continuations of ABR Loans shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $100,000.  Loans 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 four (4) Eurodollar Borrowings outstanding.

Section 2.08.          Repayment of
Loans; Evidence of Debt.

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

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

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

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

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

 31
 

 

Section 2.09.          Optional
Prepayment of Loans.

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

(b)           The
Borrower shall notify the Administrative Agent by telephone (confirmed by
telecopy) of any prepayment hereunder (i) in the case of prepayment of
Eurodollar Loans, not later than 11:00 a.m. three Business Days before the date
of prepayment or (ii) in the case of prepayment of an ABR Loan, 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 the Loans or
portion thereof to be prepaid.  Promptly
following receipt of any such notice relating to the Loans, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each partial prepayment of the Loans shall be
in an amount that would be permitted in the case of conversion or continuation
of the same Type as provided in Section 2.07(f).  Each prepayment of the Loans shall be applied
ratably to the Loans outstanding. 
Prepayments shall be accompanied by accrued interest to the extent required
by Section 2.12.

(c)           Optional
prepayments of Loans shall be at par plus a premium.  During the period from the Effective Date to
and including the first anniversary thereof, the premium shall be 1% of the
aggregate principal amount prepaid and, after the first anniversary of the
Effective Date, shall be 0%.

Section 2.10.          Mandatory
Prepayment of Loans.

(a)           On
or within five (5) days after the IPO Date, the Borrower shall prepay in full
all of the Loans and promptly thereafter cause all of the Liens securing such
Loans to be released and terminated.

(b)           If,
for any fiscal year of the Borrower commencing with the fiscal year ending
December 31, 2007, there shall be Excess Cash Flow, the Borrower shall, on the
relevant Excess Cash Flow Application Date, apply 100% of such Excess Cash Flow
toward the prepayment of the Loans as set forth in Section 2.10(e).  Each such prepayment shall be made on a date
(an “Excess Cash Flow Application Date”) no later than the later of (i)
April 15 of the current fiscal year and (ii) five Business Days after the date
on which the financial statements of the Borrower referred in Section 6.01(a)
for the fiscal year with respect to which such prepayment is made are actually
delivered.

(c)           The
Borrower shall prepay the Loans as provided in Section 7.03(a).

(d)           The
Borrower shall prepay the Loans with the proceeds of any Equity Contribution
(as defined in the Equity Contribution Agreement) on the date of receipt of
such proceeds.

(e)           Amounts
applied to the prepayment of the Loans pursuant to this Section shall be first
applied ratably to ABR Loans then outstanding and, upon payment in full of

 32
 

 

all
outstanding ABR Loans, second, to Eurodollar Loans then outstanding, and if
more than one Eurodollar Borrowing is then outstanding, to each such Eurodollar
Borrowing beginning with the Eurodollar Borrowing with the least number of days
remaining in the Interest Period applicable thereto and ending with the
Eurodollar Borrowing with the most number of days remaining in the Interest
Period applicable thereto, subject to the payment of any funding
indemnification amounts required by Section 2.15 but without penalty or
premium.

(f)            Mandatory
prepayments of Loans shall be at par plus a premium.  During the period from the Effective Date to
and including the first anniversary thereof, the premium shall be 1% of the
aggregate principal amount prepaid and, after the first anniversary of the
Effective Date, shall be 0%.

Section 2.11.          Fees.

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

(b)           All
fees payable hereunder shall be paid on the dates due, in immediately available
funds, to the Administrative Agent.  Fees
paid shall not be refundable under any circumstances.

Section 2.12.          Interest.

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

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

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

(d)           Accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and on the Maturity Date; provided that (i) interest
accrued pursuant to paragraph (c) of this Section shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan, 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

 33
 

 

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 2.13.          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 and the Lenders by telephone or telecopy as promptly as
practicable thereafter and, until the Administrative Agent notifies the
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, any Interest Election Request that requests the conversion of any
Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall
be ineffective.

Section 2.14.          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

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

and the result of any of
the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any
such Loan) or to reduce the amount of any sum received or receivable by such
Lender

 34
 

 

hereunder (whether of
principal, interest or otherwise), then the Borrower will pay to such Lender
such additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered.

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

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

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

Section 2.15.          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 2.09(b) and is revoked in accordance therewith),
(d) the assignment of any Eurodollar Loan other than on the last day of
the Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.18, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event.  In the case of a Eurodollar Loan,
such loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable
to such Loan, for the period from the date of such event to the last day of the
then current Interest

 35
 

 

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 and shall be
conclusive absent manifest error.  The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.

Section 2.16.          Taxes.

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

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

(c)           The
Borrower shall indemnify the Administrative Agent and each Lender, within 10
days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the
case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate delivered to
the Borrower by a Lender or by the Administrative Agent on its own behalf or on
behalf of a Lender, setting forth (i) the amount of such payment or liability
reasonably necessary to compensate the Administrative Agent or such Lender, as
the case may be, (ii) the factual basis for such compensation and (iii) the
manner in which such amount or amounts were calculated, shall be conclusive
absent manifest error.

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

 36
 

 

payment or
other evidence of such payment reasonably satisfactory to the Administrative
Agent.

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

(f)            If the Administrative Agent or a Lender
determines, in its sole discretion, that it has received a refund of any Taxes
or Other Taxes as to which it has been indemnified by the Borrower or with
respect to which the Borrower have paid additional amounts pursuant to this
Section 2.16, it shall pay over such refund to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section 2.16 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Administrative Agent or
such Lender and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided, that the
Borrower, upon the request of the Administrative Agent or such Lender, agrees
to repay the amount paid over to the Borrower (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority.
This Section shall not be construed to require the Administrative Agent or any
Lender to make available its tax returns (or any other information relating to
its taxes which it deems confidential) to the Borrower or any other Person.

Section 2.17.          Payments
Generally; Pro Rata Treatment; Sharing of Set-offs.

(a)           The
Borrower shall make each payment required to be made by it hereunder (whether
of principal, interest or fees or of amounts payable under Section 2.14,
Section 2.15 or Section 2.16, or otherwise) prior to 12:00 noon on the date
when due, in immediately available funds, without set-off or counterclaim.  Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon.  All such payments
shall be made to the Administrative Agent at its offices at JPMorgan Loan
Services, 21 South Clark St., 19th Floor, Chicago, Illinois 60603-2003, except
as expressly provided herein and except that payments pursuant to Section 2.14,
Section 2.15, Section 2.16 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

 37

 

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

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

(d)           Unless
the Administrative Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Administrative Agent for the
account of the Lenders hereunder that the Borrower will not make such payment,
the Administrative Agent may assume that the Borrower have made such payment on
such date in accordance herewith and may, in reliance upon such assumption, distribute
to the 

 38
 

 

Lenders the amount due.  In such
event, if the Borrower have not in fact made such payment, then each of the
Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation.

(e)           If
any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.06(d) or Section 2.16(d) or Section 11.03(c), then the Administrative
Agent may, in its discretion (notwithstanding any contrary provision hereof),
apply any amounts thereafter received by the Administrative Agent for the
account of such Lender to satisfy such Lender’s obligations under such Sections
until all such unsatisfied obligations are fully paid.

Section 2.18.          Mitigation
Obligations; Replacement of Lenders.

(a)           If
any Lender requests compensation under Section 2.14, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, 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 2.14 or Section 2.16, as the case
may be, in the future and (ii) would not subject such Lender to any unreimbursed
cost or expense and would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

(b)           If
any Lender requests compensation under Section 2.14, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrower
may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 11.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment); provided that (i)
the Borrower shall have received the prior written consent of the
Administrative Agent, 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, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from
a claim for compensation under Section 2.14 or payments required to be made
pursuant to Section 2.16, such assignment will result in a reduction in such
compensation or payments.  A 

 39
 

 

Lender shall not be required to make any such assignment and delegation
if, prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.

(c)           If
in connection with any proposed amendment, modification, termination, waiver or
consent with respect to any of the provisions of this Agreement or any other
Loan Document as contemplated by Section 11.02, the consent of Required Lenders
shall have been obtained but the consent of one or more of such other Lenders
(each a “Non-Consenting Lender”) whose consent is required has not been
obtained; then, the Borrower may elect to replace such Non-Consenting Lender as
a Lender party to this Agreement in accordance with and subject to the
restrictions contained in, and consents required by Section 11.04; provided
that (i) the Borrower shall have received the prior written consent of the
Administrative Agent, 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, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.14 or payments required
to be made pursuant to Section 2.16, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.

Article III

[Reserved]

Article IV

Representations
and Warranties

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

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

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

 40
 

 

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

Section 4.03.          Governmental
Approvals; No Conflicts.  The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect and, after the
Effective Date, in the case of EXCO, and after the IPO Date in the case of the
MLP, the filing of this Agreement and related Loan Documents by EXCO and the
MLP with the Securities and Exchange Commission pursuant to the requirements of
the Securities Exchange Act of 1934, as amended, (b) will not violate any
applicable law or regulation or the charter, by-laws or other Organizational
Documents of the Borrower or any Restricted Subsidiary or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument evidencing Material Indebtedness or a
Material Sales Contract binding upon the Borrower or any Restricted Subsidiary
or any of their respective assets, or give rise to a right thereunder to
require any payment to be made by the Borrower or any Restricted Subsidiary,
and (d) will not result in the creation or imposition of any Lien on any asset
of the Borrower or any Restricted Subsidiary not otherwise permitted under
Section 7.02.

Section 4.04.          No
Material Adverse Change.  Since
December 31, 2005, there has been no material adverse change in the business,
assets, operations, prospects or condition, financial or otherwise, of the
Borrower and its Subsidiaries, taken as a whole (it being understood that none
of (i) the Winchester Acquisition, (ii) the EXCO Transfers and Conversions, nor
(iii) changes in commodity prices for Hydrocarbons affecting the oil and gas
industry as a whole constitute a material adverse change).

Section 4.05.          Properties.

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

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

Section 4.06.          Litigation
and Environmental Matters.

(a)           There
are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the Borrower, 

 41
 

 

threatened against or affecting the Borrower or any Restricted
Subsidiary, (i) as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect (other than the Disclosed Matters) or (ii) that involve this
Agreement or the Transactions.

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

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

Section 4.07.          Compliance
with Laws and Agreements.  The
Borrower and each Restricted Subsidiary is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it
or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.  No Default has occurred and is
continuing.

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

Section 4.09.          Taxes.  The Borrower and each Restricted Subsidiary
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which the Borrower or such Restricted
Subsidiary, as applicable, has set aside on its books adequate reserves or
(b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.

Section 4.10.          ERISA.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.  The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of FASB
Statement 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $1,000,000 the fair market value
of the assets of such Plan, and the present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for
purposes of FASB Statement 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $1,000,000
the fair market value of the assets of all such underfunded Plans.

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

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

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

Section 4.14.          Margin
Stock.  Neither the Borrower nor any
Restricted Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation U issued by the
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.          Oil
and Gas Interests.  Each Credit Party
has good and defensible title to all proved reserves included in the Oil and
Gas Interests (for purposes of this Section 4.15, “proved Oil and Gas Interests”)
described in the most recent Reserve Report provided to the Administrative
Agent, free and clear of all Liens except Liens permitted pursuant to Section
7.02.  All such proved Oil and Gas
Interests are valid, subsisting, and in full force and effect, and all rentals,
royalties, and other amounts due and payable in respect thereof have been duly
paid.  Without regard to any consent or
non-consent provisions of any joint operating agreement covering any Credit
Party’s proved Oil and Gas Interests, such Credit Party’s share of (a) the
costs for each proved Oil and Gas Interest described in the Reserve Report is
not materially greater than the decimal fraction set forth in the Reserve
Report, before and after payout, as the case may be, and described therein by
the respective designations “working interests,” “WI,” “gross working interest,”
“GWI,” or similar terms (except in such cases where there is a corresponding
increase in the net revenue interest), and (b) production from, allocated
to, or 

 43
 

 

attributed to each such
proved Oil and Gas Interest is not materially less than the decimal fraction
set forth in the Reserve Report, before and after payout, as the case may be,
and described therein by the designations “net revenue interest,” “NRI,” or
similar terms.  Each well drilled in
respect of proved producing Oil and Gas Interests described in the Reserve
Report (1) is capable of, and is presently, either producing Hydrocarbons in
commercially profitable quantities or in the process of being worked over or
enhanced, and the Credit Party that owns such proved producing Oil and Gas
Interests is currently receiving payments for its share of production, with no
funds in respect of any thereof being presently held in suspense, other than
any such funds being held in suspense pending delivery of appropriate division
orders, and (2) has been drilled, bottomed, completed, and operated in
compliance with all applicable laws, in the case of clauses (1) and (2), except
where any failure to satisfy clause (1) or to comply with clause (2) would not
have a Material Adverse Effect, and no such well which is currently producing Hydrocarbons
is subject to any penalty in production by reason of such well having produced
in excess of its allowable production.

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

Section 4.17.          Solvency.

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

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

 44
 

 

Section 4.18.          Deposit
Accounts.  Except as set forth on
Schedule 4.18 and other deposit accounts maintained at financial institutions
other than the Administrative Agent (the aggregate balance of which does not
exceed $50,000 at any time after December 31, 2006, for all such other deposit
accounts taken as a whole), no Credit Party has any deposit or investment
accounts and no Affiliate of any Credit Party has any deposit or investment
account into which proceeds of Hydrocarbon production from the Oil and Gas
Interests included in the Borrowing Base Properties are deposited.  All proceeds of Hydrocarbon production from
the Oil and Gas Interests included in the Borrowing Base Properties and all
distributions and dividends on any Equity Interests owned by any Credit Party
are deposited and maintained, from the date of receipt by any Credit Party, in
an Eligible Account.

Article V

Conditions

Section 5.01.          Effective
Date.  The obligations of the Lenders
to make Loans hereunder shall not become effective until the date on which each
of the following conditions is satisfied (or waived in accordance with Section
11.02):

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

(b)           The
Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
Haynes and Boone, L.L.P., counsel for the Credit Parties, substantially in the
form of Exhibit B, and covering such other matters relating to the Credit
Parties, and this Agreement as the Required Lenders shall reasonably request and (ii) if agreed by opining counsel,
opinions delivered pursuant to the Revolving Facility Documents, the Winchester
Acquisition Documents and the EXCO Contribution Documents, if any, addressed to
the Lenders or accompanied by reliance letters in favor of the Lenders stating
that the Lenders may rely on such opinions as though they were addressed to
them.  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 a Responsible Officer of the Borrower, confirming that the
Borrower has (i) complied with the conditions set forth in paragraphs (a)
and (b) of Section 5.02, (ii) complied with the covenants set forth in Section
6.05 (and 

 45
 

 

demonstrating such compliance by the attachment of an insurance summary
and insurance certificates evidencing the coverage described in such summary),
(iii) complied with the requirements of Section 6.09 and Section 6.10, (iv)
simultaneously with the making of the Loans under this Agreement and in
accordance with applicable law, consummated the Winchester Acquisition without
waiver or amendment of any material term or condition of any of the Winchester
Acquisition Documents (not otherwise consented to by the Administrative Agent), and (v) prior to or simultaneously with the Borrowing
under this Agreement and in accordance with applicable law, consummated the
EXCO Transfers and Conversions, without waiver or amendment of any material
term or condition of the EXCO Contribution Documents.

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

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

(g)           The
Administrative Agent shall have received the title information or opinions with
respect to the Mortgaged Properties, or the portion thereof, required by
Section 6.10 on the Effective Date

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

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(i)            On
or prior to the Effective Date, the Administrative Agent shall have received a
Borrowing Request acceptable to the Administrative Agent setting forth the
Loans requested by the Borrower on the Effective Date, the Type and amount of
each Loan and the accounts to which such Loans are to be funded; provided that
all Loans to be made on the Effective Date shall be ABR Loans.

(j)            [Reserved].

(k)           The
Administrative Agent shall have received such financing statements (including,
without limitation, the financing statements referenced in subclause (f)
and (h) above) 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.

(l)            The
Administrative Agent shall have received reasonably satisfactory evidence that the
Borrower has received assets and properties from EXCO with a value of not less
than $425,178,000 pursuant to the EXCO Contribution Agreement and otherwise on
terms and conditions satisfactory to the Lenders.

(m)          The
Administrative Agent shall have received reasonably satisfactory evidence that
after giving effect to the Transactions, the MLP shall own all of the issued
and outstanding Equity Interests of the Borrower.

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

(o)           The
Lenders shall have received from the Borrower a pro forma consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of the Effective
Date, and reflecting the consummation of the Transactions, the related
financings and other transactions contemplated by the Loan Documents to occur
on or prior to the Effective Date, which pro forma balance sheet shall be
prepared consistent in all respects with the information previously provided by
the Borrower to the Administrative Agent and the Lenders and otherwise in form
and substance satisfactory to the Administrative Agent, (iii) a pro forma
statement of operations of the Borrower and its Consolidated Subsidiaries for
the twelve month period ending as of the date of the pro forma balance sheet
described in the immediately preceding clause (ii) and (iv) the Projections.

(p)           The
Administrative Agent, the Term Agent and the Credit Parties shall have executed
and delivered the Intercreditor Agreement.

(q)           Each
Credit Party shall have obtained all approvals required from any Governmental
Authority and all consents of other Persons, in each case that are necessary or
advisable in connection with the Transactions and each of the foregoing shall
be in full force and effect and in form and substance reasonably satisfactory
to the Administrative Agent.  All
applicable waiting periods shall have expired without any action being taken 

 47
 

 

or threatened by any competent authority which would restrain, prevent
or otherwise impose adverse conditions on the transactions contemplated by the
Loan Documents, the EXCO Contribution Documents, the Revolving Facility
Documents or the Winchester Acquisition Documents or the financing thereof and
no action, request for stay, petition for review or rehearing, reconsideration,
or appeal with respect to any of the foregoing shall be pending, and the time
for any applicable agency to take action to set aside its consent on its own
motion shall have expired.

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

(s)           All
partnership, corporate and other proceedings taken or to be taken in connection
with the Transactions and all documents incidental thereto shall be reasonably
satisfactory in form and substance to Administrative Agent and its counsel, and
Administrative Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Administrative Agent may reasonably
request.

(t)            The
Borrower shall have delivered to the Administrative Agent with a description of
the sources and uses of funding for the Transactions that is consistent with
the terms of the Loan Documents, the EXCO Contribution Documents, the Revolving
Facility Documents and the Winchester Acquisition Documents and otherwise
satisfactory to the Administrative Agent and the Arrangers and the
capitalization, structure and equity ownership of the Borrower after the
Transactions shall be satisfactory to the Lenders in all respects.

(u)           The
Administrative Agent shall have received evidence or assurances satisfactory to
it that (i) each of the Transferred Subsidiaries has been (or concurrently with
the effectiveness of this Agreement and the funding of the initial Loans
hereunder, will be) released from all liabilities, obligations and Indebtedness
under the EXCO Credit Agreement and all Swap Agreements with any “Lender
Counterparty” under and as defined in the EXCO Credit Agreement (other than the
Existing Swap Agreements to which any Transferred Subsidiary is a party) and
that all Liens on assets and properties of such Transferred Subsidiaries
securing such liabilities, obligations and Indebtedness and the Texas
Properties have been released and terminated, and original executed instruments
releasing and terminating any and all such Liens in a form suitable for filing
in the applicable jurisdiction have been delivered to the Administrative Agent,
(ii) the Borrower has received (or concurrently with the effectiveness of this
Agreement and the funding of the initial Loans hereunder, will receive)
$651,000,000 in cash proceeds from the incurrence of the Indebtedness evidenced
by the Revolving Facility Documents and otherwise on terms and conditions
satisfactory to the Lenders and (iii) the CapEx Reimbursement Obligation
incurred by the MLP in connection with the EXCO Transfers 

 48
 

 

and Conversions shall have been (or concurrently with the effectiveness
of this Agreement and the initial funding of the Term Loans, will be) paid in
full.

(v)           The representations
and warranties of each Credit Party set forth in this Agreement shall be true
and correct in all material respects on and as of the date of the Effective
Date, 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.

(w)          At the time of and
immediately after giving effect to the Loans made on the Effective Date, no
Default shall have occurred and be continuing.

The Administrative Agent shall notify the Borrower and
the Lenders of the Effective Date, and such notice shall be conclusive and
binding.  Notwithstanding the foregoing,
the obligations of the Lenders to make Loans hereunder shall not become effective
unless each of the foregoing conditions is satisfied (or waived pursuant to
Section 11.02) at or prior to 3:00 p.m. on October 15, 2006.

Article VI

Affirmative
Covenants

Until the principal of and interest on each Loan and
all fees payable hereunder shall have been paid in full, each Credit Party
covenants and agrees with the Lenders that:

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

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

(b)           within
45 days after the end of each fiscal quarter of the Borrower, the consolidated
(and unaudited consolidating) balance sheet and related consolidated (and with
respect to statements of operations, consolidating) statements of operations,
partners’ equity and cash flows of the MLP and its Consolidated Subsidiaries as
of the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all

 49

 

certified by a
Responsible Officer as presenting fairly in all material respects the financial
condition and results of operations of the MLP and its Consolidated
Subsidiaries on a consolidated and consolidating basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;

(c)           concurrently
with any delivery of financial statements under clause (a) or (b) above, a
certificate in a form reasonably acceptable to Administrative Agent signed by a
Responsible Officer of the Borrower (i) certifying as to whether a Default
has occurred and, if a Default has occurred, specifying the details thereof and
any action taken or proposed to be taken with respect thereto, and
(ii) setting forth reasonably detailed calculations demonstrating
compliance with clauses (a), (b) and (c) of Section 7.11;

(d)           promptly
after the same become publicly available, copies of all periodic and other
reports, proxy statements and other materials filed by the Borrower or any Subsidiary
with the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with any
national securities exchange, or distributed by the Borrower to its
shareholders generally, as the case may be;

(e)           as
soon as available, and in any event no later than March 1 and
September 1 of each year, the Reserve Reports required on such dates
pursuant to the terms of the Revolving Facility Documents (or if the Revolving
Facility has terminated, pursuant to the terms of the Revolving Facility
Documents in effect as of the date of termination) together with a certificate
in a form reasonably acceptable to Administrative Agent signed by a Responsible
Officer of the Borrower (i) certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, and
(ii) setting forth reasonably detailed calculations demonstrating
compliance with clause (d) of Section 7.01;

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

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

 50
 

 

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

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

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

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

(a)           the
occurrence of any Default;

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

(c)           the
occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to result in liability
of the Borrower and the Restricted Subsidiaries in an aggregate amount
exceeding $5,000,000;

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

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

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

(g)           the
occurrence of any material breach or default under, or repudiation or
termination of, any EXCO Agreement;

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

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

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

Section 6.03.          Existence;
Conduct of Business.  The Borrower
will, and will cause each Restricted Subsidiary to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 7.03.

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

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

Section 6.06.          Books
and Records; Inspection Rights.  The
Borrower will, and will cause each Restricted Subsidiary to, keep proper books
of record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities.  The Borrower will, and will cause each
Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and, provided an officer of the Borrower has the reasonable opportunity to
participate, its independent accountants, all at such reasonable times and as
often as reasonably requested.

Section 6.07.          Compliance
with Laws.  The Borrower will, and
will cause each Restricted Subsidiary to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.

Section 6.08.          Use
of Proceeds.  The proceeds of the
Loans will be used only to (a) finance the Winchester Acquisition, including a
cash equity contribution by the Borrower to, or a loan from the Borrower to,
the Merger Sub to facilitate the payment of the merger consideration required
under the Winchester Merger Agreement, (b) to make the Restricted Payment
permitted under Section 7.06(d) on the Effective Date and (c) pay the fees,
expenses and transaction costs 

 53
 

 

of the Transactions.  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 Board).

Section 6.09.          Mortgages.  Each Borrower will, and will cause each
Guarantor to, execute and deliver to the Administrative Agent, for the benefit
of the Secured Parties, Mortgages in form and substance acceptable to the
Administrative Agent together with such other assignments, conveyances,
amendments, agreements and other writings, including, without limitation, UCC-1
financing statements (each duly authorized and executed, as applicable) as the
Administrative Agent shall deem necessary or appropriate to grant, evidence,
perfect and maintain Liens in (a) not less than ninety percent (90%) of the
Engineered Value of the Borrowing Base Properties and (b) the Midstream Assets.

Section 6.10.          Title
Data.  The Borrower will, and will
cause each Guarantor to, deliver to the Administrative Agent such opinions of
counsel or other evidence of title as the Administrative Agent shall deem
reasonably necessary or appropriate to verify at all times from and after the
Effective Date, not less than eighty percent (80%) of the Engineered Value of
the Mortgaged Properties of the Borrower and the Guarantors, taken as a whole,
and the validity, perfection and priority of the Liens created by such
Mortgages and such other matters regarding such Mortgages as Administrative
Agent shall reasonably request.

Section 6.11.          Swap
Agreements.  The Borrower will, and
will cause each Restricted Subsidiary to, maintain the Existing Swap Agreements
and none of the Existing Swap Agreements may be amended, modified or cancelled
without the prior written consent of the Required Lenders.  On or within ten (10) Business Days after the
Effective Date, the Borrower will enter into and thereafter maintain one or
more hedge, collar or swap transactions pursuant to Swap Agreements with
Approved Counterparties to hedge (together with the Existing Swap Agreements)
not less than seventy-five percent (75%) of the forecasted production of Crude
Oil and Natural Gas from the total proved developed producing Oil and Gas
Interests of the Borrower and its Restricted Subsidiaries, taken as a whole,
through at least December 31, 2010, as reflected in the Reserve Report used by
the Lenders to determine the initial Borrowing Base under the Revolving
Facility and at or above prices specified by the Administrative Agent on or
prior to the Effective Date or otherwise acceptable to the Administrative
Agent.  On or prior to the second
anniversary of the Effective Date, the Borrower will enter into and thereafter
maintain one or more hedge, collar or swap transactions pursuant to Swap
Agreements with Approved Counterparties to hedge (together with the Existing
Swap Agreements) not less than seventy-five percent (75%) of the forecasted
production of Crude Oil and Natural Gas from the total proved developed producing
Oil and Gas Interests of the Borrower and its Restricted Subsidiaries, taken as
a whole, through at least the fifth anniversary of the Effective Date on term
and conditions reasonably satisfactory to the Administrative Agent. Once
confirmed, no such hedge, collar or swap transaction nor any Swap Agreement may
be amended or modified, or cancelled without the prior written consent of
Required Lenders.  Upon the request of
the Required Lenders, the Borrower and each Restricted Subsidiary shall use their
commercially reasonable efforts to cause each Swap Agreement to which the
Borrower or any Restricted Subsidiary is a party to (a) be collaterally
assigned to the Administrative Agent, for the benefit of the Secured Parties
and (b) upon the occurrence of any default or event of default under such
agreement or contract, (i) to 

 54
 

 

permit the Lenders to
cure such default or event of default and assume the obligations of such Credit
Party under such agreement or contract and (ii) to prohibit the
termination of such agreement or contract by the counterparty thereto if the
Lenders assume the obligations of such Credit Party under such agreement or
contract and the Lenders take the actions required under the foregoing clause
(i). Upon the request of the Administrative Agent, the Borrower shall, within
thirty (30) days of such request, provide to the Administrative Agent and each
Lender copies of all agreements, documents and instruments evidencing the Swap
Agreements not previously delivered to the Administrative Agent and Lenders,
certified as true and correct by a Responsible Officer of the Borrower, and
such other information regarding such Swap Agreements as the Administrative
Agent and Lenders may reasonably request.

Section 6.12.          Operation
of Oil and Gas Interests.

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

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

Section 6.13.          Restricted
Subsidiaries.  In the event any
Person is or becomes a Restricted Subsidiary, Borrower will (a) promptly take
all action necessary to comply with Section 6.14, (b) promptly take all such
action and execute and deliver, or cause to be executed and delivered, to the
Administrative Agent all such documents, opinions, instruments, agreements, and
certificates similar to those described in Section 5.01(b) and Section 5.01(c)
that the Administrative Agent may request, and (c) promptly cause such
Restricted Subsidiary to (i) become a party to this Agreement and Guarantee the
Obligations by executing and delivering to the Administrative Agent a
Counterpart Agreement in the form of Exhibit C, and (ii) to the extent required
to comply with Section 6.09 or as requested by the Administrative Agent,
execute and deliver Mortgages and other Security Instruments creating Liens
prior and superior in right to any other Person (except Liens created pursuant
to the Revolving Facility Documents), subject to Permitted Encumbrances, in
such Restricted Subsidiary’s Oil and Gas Interests and other assets.  Upon delivery of any such Counterpart
Agreement to the Administrative Agent, notice of which is hereby waived by each
Credit Party, such Restricted Subsidiary shall be a Guarantor and shall be as
fully a party hereto as if such Restricted Subsidiary were an original signatory
hereto.  Each Credit Party expressly
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Credit Party hereunder.  This Agreement shall be fully effective as to
any Credit Party that is or becomes a party hereto regardless of whether any
other Person becomes or fails to become 

 55
 

 

or ceases to be a Credit
Party hereunder.  With respect to each
such Restricted Subsidiary, the Borrower shall 
promptly send to the Administrative Agent written notice setting forth
with respect to such Person the date on which such Person became a Restricted
Subsidiary of the Borrower, and supplement the data required to be set forth in
the Schedules to this Agreement as a result of the acquisition or creation of
such Restricted Subsidiary; provided that such supplemental data must be
reasonably acceptable to the Administrative Agent and Required Lenders.

Section 6.14.          Pledged
Equity Interests.  On the date hereof
and at the time hereafter that any Restricted Subsidiary of the Borrower is
created or acquired or any Unrestricted Subsidiary becomes a Restricted
Subsidiary, the Borrower and the Subsidiaries (as applicable) shall execute and
deliver to the Administrative Agent (or, until the Revolving Facility has been
terminated, by the Revolving Agent) for the benefit of the Secured Parties, a
Pledge Agreement, in form and substance acceptable to the Administrative Agent,
from the Borrower and/or the Subsidiaries (as applicable) covering all Equity
Interests owned by the Borrower or such Restricted Subsidiaries in such
Restricted Subsidiaries, together with all certificates (or other evidence
acceptable to Administrative Agent) evidencing the issued and outstanding
Equity Interests of each such Restricted Subsidiary of every class owned by
such Credit Party (as applicable) which, if certificated, shall be duly
endorsed or accompanied by stock powers executed in blank (as applicable), as
Administrative Agent shall deem necessary or appropriate to grant, evidence and
perfect a security interest in the issued and outstanding Equity Interests
owned by Borrower or any Restricted Subsidiary in each Restricted Subsidiary
prior and superior in right to any other Person (except Liens created pursuant
to the Revolving Facility Documents).

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

Section 6.16.          
Mandatory Prepayment of the Loans. 
On or within five (5) days after the IPO Date, the Borrower shall prepay
in full all of the Indebtedness under the Loan Documents and promptly
thereafter cause all of the Liens securing such Indebtedness to be released and
terminated.

Article VII

Negative
Covenants

Until the principal of and interest on each Loan and
all fees payable hereunder have been paid in full, each Credit Party covenants
and agrees with the Lenders that:

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

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(a)           The
Obligations;

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

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

(d)           Guarantees
of the Obligations;

(e)           Indebtedness
of the Borrower and the Restricted Subsidiaries incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof; provided that (i) such Indebtedness is incurred prior to or
within 90 days after such acquisition or the completion of such construction or
improvement and (ii) the aggregate principal amount of Indebtedness permitted
by this clause (e) shall not exceed $5,000,000 at any time outstanding;

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

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

(h)           Indebtedness
under the Revolving Facility in an aggregate principal amount not exceeding
$750,000,000 at any time outstanding; and

(i)            Other
unsecured Indebtedness of the Credit Parties in an aggregate principal amount
not exceeding $1,000,000 at any time outstanding.

 57
 

 

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

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

(b)           Permitted
Encumbrances;

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

(d)           any
Lien existing on any property or asset prior to the acquisition thereof by the
Borrower or any Restricted Subsidiary or existing on any property or asset of
any Person that becomes a Restricted Subsidiary after the date hereof prior to
the time such Person becomes a Restricted Subsidiary; provided that (i)
such Lien secures Indebtedness permitted by Section 7.01(e), (ii) such
Lien is not created in contemplation of or in connection with such acquisition
or such Person becoming a Restricted Subsidiary, as the case may be,
(iii) such Lien shall not apply to any other property or assets of the
Borrower or any other Restricted Subsidiary and (iv) such Lien shall secure
only those obligations which it secures on the date of such acquisition or the
date such Person becomes a Restricted Subsidiary, as the case may be and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof; and

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

(f)            Subject
to the Intercreditor Agreement, Liens securing Indebtedness permitted by clause
(h) of Section 7.01.

Section 7.03.          Fundamental
Changes.

(a)           The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or any
substantial part of its assets, or any of its Borrowing Base Properties or any
of the Equity Interests of any Restricted Subsidiary 

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(in each case, whether now owned or hereafter acquired), or liquidate
or dissolve, except that, the Borrower or any Restricted Subsidiary may sell
Hydrocarbons produced from its Oil and Gas Interests in the ordinary course of
business, and if at the time thereof and immediately after giving effect
thereto no Default shall have occurred and be continuing, (i) any
Restricted Subsidiary may merge into the Borrower in a transaction in which the
Borrower is the surviving entity, (ii) any Restricted Subsidiary may merge
into any other Restricted Subsidiary in a transaction in which the surviving
entity is a Restricted Subsidiary, (iii) any Restricted Subsidiary may sell,
transfer, lease or otherwise dispose of its assets to the Borrower or to
another Restricted Subsidiary, (iv) any Restricted Subsidiary may liquidate or
dissolve if the Borrower determines in good faith that such liquidation or
dissolution is in the best interests of the Borrower and is not materially
disadvantageous to the Lenders, (v) the Borrower or any Restricted Subsidiary
may sell, transfer, lease or otherwise dispose of equipment and related items
in the ordinary course of business, that are obsolete or no longer necessary in
the business of the Borrower or any of its Restricted Subsidiaries or that is
being replaced by equipment of comparable value and utility, (vi) the Borrower
or any Restricted Subsidiary may sell, transfer or otherwise dispose of the
Excluded Properties; (vii) the Borrower or any Restricted Subsidiary may
sell, transfer, lease, exchange, abandon or otherwise dispose of Borrowing Base
Properties with a value not exceeding, in the aggregate for the Borrower and
its Restricted Subsidiaries taken, as a whole, 5% of the Borrowing Base between
scheduled redeterminations as determined pursuant to the terms of the Revolving
Facility Documents (or if the Revolving Facility has been terminated, as
determined by the Administrative Agent in substantially the same manner as set
forth in the Revolving Facility Documents). 
Notwithstanding the foregoing, the Borrower or any Restricted Subsidiary
may sell, transfer, lease, exchange, abandon or otherwise dispose of Borrowing
Base Properties not otherwise permitted pursuant to the foregoing clause (vii) provided
that (A) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the
Borrowing Base Properties, interest therein or Restricted Subsidiary subject to
the sale or other disposition (as reasonably determined by, in the case of any
sale or disposition of the Borrowing Base Properties with a value equal to or
greater than $15,000,000) the Board of Directors of the Borrower and, if
requested by the Administrative Agent, the Borrower shall deliver a certificate
of a Financial Officer certifying to that effect), (B) 100% of the
consideration for such sale or other disposition shall be in the form of cash
or Permitted Investments and (C) except for the Net Cash Proceeds from the sale
or other disposition of the Excluded Properties, an amount equal to 100% of the
Net Cash Proceeds received from such sale or other disposition shall be used
within 90 days of such disposition (1) to acquire property, plant and equipment
or any business entity used or useful in carrying on the business of the
Borrower and its Restricted Subsidiaries and having a fair market value at
least equal to the fair market value of the properties sold or otherwise
disposed of or to improve or replace any existing property of the Borrower and
its Restricted Subsidiaries used or useful in carrying on the business of the
Borrower and its Restricted Subsidiaries (the “Reinvestment Deferred Amount”),
(2) to repay Indebtedness under the Revolving Facility (with a corresponding
permanent reduction of the commitments thereunder) or (3) to prepay the
Loans.  For purposes of the foregoing
clause (vi), the value of any Oil and Gas Interests included in the Borrowing
Base Properties shall be as

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determined pursuant to the terms of the Revolving Facility Documents
(or if the Revolving Facility has been terminated, as determined by the
Administrative Agent in substantially the same manner as set forth in the
Revolving Facility Documents).

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

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

(a)           Permitted
Investments;

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

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

(d)           Guarantees
constituting Indebtedness permitted by Section 7.01;

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

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

(g)           other
investments by the Borrower and the Restricted Subsidiaries; provided
that, on the date any such other investment is made, the amount of such
investment, together with all other investments made pursuant to this clause
(g) of Section 7.04 (in each case determined based on the cost of such
investment) since the Effective Date, does not exceed in the aggregate,
$1,000,000.

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Section 7.05.          Swap
Agreements.  The Borrower will not,
nor will it permit any of its Restricted Subsidiaries to, enter into or
maintain any Swap Agreement, except the Existing Swap Agreements, the Swap
Agreements required under Section 6.11 and Swap Agreements entered into in the
ordinary course of business with Approved Counterparties and not for
speculative purposes to (a) hedge or mitigate Crude Oil and Natural Gas price
risks to which the Borrower or any Restricted Subsidiary has actual exposure,
and (b) effectively cap, collar or exchange interest rates (from fixed to
floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or investment of any Credit
Party; provided that such Swap Agreements (at the time each transaction
under such Swap Agreement is entered into) would not cause the aggregate notional
amount of Hydrocarbons under all Swap Agreements then in effect (including the
Existing Swap Agreements and the Swap Agreements required under Section 6.11)
to exceed at any time (i) ninety percent (90%) of the “forecasted production
from proved producing reserves” (as defined below) of the Borrower and the
Restricted Subsidiaries for each of the first two years of the forthcoming five
year period and (ii) eighty percent (80%) of the forecasted production from
proved producing reserves of the Borrower and the Restricted Subsidiaries for
each of the third, fourth and fifth years of the forthcoming five year
period.  As used in this Section, “forecasted
production from proved producing reserves” means the forecasted production of
Crude Oil and Natural Gas as reflected in the most recent Reserve Report
delivered to the Administrative Agent pursuant to Section 6.01, after giving
effect to any pro forma adjustments for the consummation of any acquisitions or
dispositions since the effective date of such Reserve Report.  Once the Borrower or any Restricted
Subsidiaries enters into a Swap Agreement or any hedge transaction pursuant to
any Swap Agreement, the terms and conditions of such Swap Agreement and such
hedge transaction may not be amended or modified, nor may such Swap Agreement
or hedge transaction be cancelled without the prior written consent of Required
Lenders.  Each Credit Party and each
Lender agrees and acknowledges that (i) the Existing Swap Agreements are Swap
Agreements permitted under this Section 7.05, (ii) as of the Effective Date,
the counterparty to each Existing Swap Agreement is a Lender Counterparty, and
(iii) the obligations of the Credit Parties under the Existing Swap Agreements
are included in the defined term “Obligations” and such obligations are
entitled to the benefits of, and are secured by the Liens granted under, the
Security Instruments.

Section 7.06.          Restricted
Payments.  The Borrower will not, nor
will it permit any of its Restricted Subsidiaries to, declare or make, or agree
to pay or make, directly or indirectly, any Restricted Payment, except that (a)
the Borrower may declare and pay dividends with respect to its Equity Interests
payable solely in additional partnership interests, (b) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Borrower and its
Restricted Subsidiaries in an aggregate amount not to exceed $1,000,000 in any
fiscal year, (c) any Restricted Subsidiary may make Restricted Payments to the
Borrower or any Guarantor and (d)
on the Effective Date, the Borrower may declare and pay a dividend to the
holders of its Equity Interests in an aggregate amount not to exceed
$150,000,000; provided that the proceeds of such dividend are used by such
holders to pay in full the CapEx Reimbursement Obligation incurred by the MLP
in connection with the EXCO Transfers and Conversions.

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Section 7.07.          Transactions
with Affiliates.  The Borrower will
not, nor will it permit any of its Restricted Subsidiaries to, sell, lease or
otherwise transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (a) in the ordinary course of
business at prices and on terms and conditions not less favorable to the
Borrower or such Restricted Subsidiary than could be obtained on an arm’s-length
basis from unrelated third parties, (b) transactions between or among the Borrower
and its Restricted Subsidiaries not involving any other Affiliate, (c)
transactions described on Schedule 7.07, (d) any Restricted Payment permitted
by Section 7.06 and (e) the sales, transfers or other dispositions permitted
under Section 7.03(a)(vi), and (f) the transactions contemplated by the MLP
Contribution Documents.

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

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

Section 7.10.          Amendments
to Organizational Documents and Certain Liens and Guarantees.  The Borrower will not, nor will it permit any
of its Restricted Subsidiaries to, enter into or permit any material
modification or amendment of, or waive any material right or obligation of any
Person under its Organizational Documents. 
The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to grant any Liens in any assets of the Borrower or any of its
Subsidiaries to secure the Indebtedness under the Revolving Facility Documents
unless each Credit Party granting such Lien also grants a Lien on such assets
to the Administrative Agent for the benefit of the Secured Parties.  The Borrower will not permit any Subsidiary
to Guarantee all or any part of the Indebtedness under the Revolving Facility
Documents unless such Subsidiary is (or concurrently with any such Guarantee
becomes) a Guarantor.

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Section 7.11.          Financial
Covenants.

(a)           NPV.

(i)            The
Borrower will not permit the ratio, determined on March 1, 2007, but as of the
immediately preceding December 31 of (i) NPV to (ii) Consolidated Funded
Indebtedness to be less than 1.15 to 1.00.

(ii)           The
Borrower will not permit the ratio, determined on March 1 and September 1 of
each year, but as of the immediately preceding December 31 and June 30,
respectively (beginning September 1, 2007) of (i) NPV to (ii) Consolidated
Funded Indebtedness to be less than 1.25 to 1.00.

(b)           Leverage
Ratio.

(i)            The
Borrower will not permit the ratio, determined as of the end of any fiscal
quarter ending after December 31, 2006 and on or before June 30, 2007, of
(A) Consolidated Funded Indebtedness as of the end of such fiscal quarter, to
(B) Consolidated EBITDAX for the period from October 1, 2006 to the end of
such fiscal quarter multiplied by a fraction, the numerator of which is four
(4) and the denominator of which is the number of fiscal quarters ended since
October 1, 2006, including the then ending fiscal quarter, to be greater than
5.50 to 1.00.

(ii)           The
Borrower will not permit the ratio, determined as of the end of any fiscal
quarter ending on or after September 30, 2007, of (A) Consolidated Funded
Indebtedness as of the end of such fiscal quarter to (B) Consolidated EBITDAX
for the trailing four fiscal quarter period ending on such date, to be greater
than 5.50 to 1.00.

(c)           Interest
Coverage Ratio.

(i)            The
Borrower will not permit the ratio, determined as of the end of any fiscal
quarter, ending after December 31, 2006 and on or before June 30, 2007, of (A)
Consolidated EBITDAX for the period from October 1, 2006 to the end of such
fiscal quarter multiplied by a fraction, the numerator of which is four (4) and
the denominator of which is the number of fiscal quarters ended since October
1, 2006, including the then ending fiscal quarter to (B) Consolidated Interest
Expense for the period from October 1, 2006 to the end of such fiscal quarter
multiplied by a fraction, the numerator of which is four (4) and the
denominator of which is the number of fiscal quarters ended since October 1,
2006, including the then ending fiscal quarter, to be less than 2.00 to 1.00.

(ii)           The
Borrower will not permit the ratio, determined as of the end of any fiscal
quarter ending on or after September 30, 2007, of (A) Consolidated EBITDAX for
the trailing four fiscal quarter period ending on such date, to (B) 

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Consolidated Interest Expense for such four
fiscal quarter period to be less than 2.00 to 1.00

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

Section 7.13.          Capital
Expenditures.  The Borrower will not
make or commit to make, nor will it permit any Restricted Subsidiary to make or
commit to make, any Capital Expenditure, except Capital Expenditures of the
Borrower and its Restricted Subsidiaries in the ordinary course of business not
exceeding $125,000,000 in any fiscal year; provided, that (a) up to $25,000,000
of any such amount referred to above, if not so expended in the fiscal year for
which it is permitted, may be carried over for expenditure in the next
succeeding fiscal year and (b) Capital Expenditures made pursuant to this
Section during any fiscal year shall be deemed made, first, in respect of
amounts permitted for such fiscal year as provided above and, second, in
respect of amounts carried over from the prior fiscal year pursuant to clause
(a) above.

Article VIII

Guarantee of Obligations

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

Section 8.02.          Guarantee
Absolute.  Each Guarantor guarantees
that the Guaranteed Liabilities shall be paid strictly in accordance with the
terms of this Agreement and the Swap 

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

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

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

Section 8.05.          Subrogation.  No Guarantor shall exercise any rights which
it may acquire by way of subrogation, by any payment made under this Guarantee
or otherwise, until all the Guaranteed Liabilities have been paid in full and
this Agreement and the Swap Agreements to which any Lender Counterparty is a
party are no longer in effect.  If any
amount is paid to the Guarantor on account of subrogation rights under this
Guarantee at any time when all the Guaranteed Liabilities have not been paid in
full, the amount shall be held in trust for the benefit of the Lenders and the
Lender Counterparties and shall be promptly paid to the Administrative Agent to
be credited and applied to the Guaranteed Liabilities, whether matured or
unmatured or absolute or contingent, in accordance with the terms of this
Agreement and such Swap Agreements.  If
any Guarantor makes payment to the Administrative Agent, Lenders, or any Lender
Counterparties of all or any part of the Guaranteed Liabilities and all the
Guaranteed Liabilities are paid in full and this Agreement and such Swap
Agreements are no longer in effect, 

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the Administrative Agent,
Lenders and Lender Counterparties shall, at such Guarantor’s request, execute
and deliver to such Guarantor appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer by
subrogation to such Guarantor of an interest in the Guaranteed Liabilities
resulting from the payment.

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

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

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

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Agent, such Lender, or
such Lender Counterparty to give such notice shall not affect the validity
thereof.

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

Section 8.10.          Limitations
on Guarantee.  The provisions of the
Guarantee under this Article VIII are severable, and in any action or
proceeding involving any state corporate law, or any state, federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under this Guarantee
would otherwise be held or determined to be avoidable, invalid or unenforceable
on account of the amount of such Guarantor’s liability under this Guarantee,
then, notwithstanding any other provision of this Guarantee to the contrary,
the amount of such liability shall, without any further action by the
Guarantors, the Administrative Agent, any Lender or any Lender Counterparty, be
automatically limited and reduced to the highest amount that is valid and
enforceable as determined in such action or proceeding (such highest amount
determined hereunder being the relevant Guarantor’s “Maximum Liability”). This
Section 8.10 with respect to the Maximum Liability of the Guarantors is
intended solely to preserve the rights of the Administrative Agent, Lenders and
Lender Counterparties hereunder to the maximum extent not subject to avoidance
under applicable law, and no Guarantor nor any other Person shall have any
right or claim under this Section 8.10 with respect to the Maximum Liability,
except to the extent necessary so that none of the obligations of any Guarantor
hereunder shall not be rendered voidable under applicable law.

Article IX

Events of Default

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

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

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

(c)           any
representation or warranty made or deemed made by or on behalf of the Borrower
or any Restricted Subsidiary in or in connection with this Agreement or any
amendment or modification hereof or waiver hereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof or
waiver hereunder or in any Loan Document furnished pursuant to or in connection
with this Agreement or any amendment 

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or modification thereof or waiver hereunder,
shall prove to have been incorrect in any material respect when made or deemed
made;

(d)           the
Borrower or any Restricted Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in Section 2.10, Section 6.01, Section 6.02, Section 6.03 (with respect to the Borrower
or any Restricted Subsidiary’s existence), Section 6.05 (with respect to
insurance), Section 6.08, or in Article VII;

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

(f)            the
Borrower or any Restricted Subsidiary shall fail to make any payment (whether
of principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable; provided
that this clause (f) shall not apply to Indebtedness under the Revolving
Facility unless the holder or holders of any Indebtedness under the Revolving
Facility or any trustee or agent on its or their behalf have caused such
Indebtedness to become due prior to its scheduled maturity;

(g)           any
event or condition occurs that results in any Material Indebtedness becoming
due prior to its scheduled maturity or that enables or permits the holder or
holders of any Material Indebtedness or any trustee or agent on its or their
behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its
scheduled maturity; provided that this clause (g) shall not apply
to (i)  secured Indebtedness that becomes
due as a result of the voluntary sale or transfer of the property or assets
securing such Indebtedness and (ii) Indebtedness under the Revolving Facility
unless the holder or holders of any Indebtedness under the Revolving Facility
or any trustee or agent on its or their behalf have caused such Indebtedness to
become due prior to its scheduled maturity;

(h)           an
involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect
of the Borrower or any Restricted Subsidiary or its debts, or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Restricted Subsidiary or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;

(i)            the
Borrower or any Restricted Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law 

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now or hereafter in effect, (ii) consent
to the institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in clause (h) of this Article,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or
any Restricted Subsidiary or for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting
any of the foregoing;

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

(k)           one
or more judgments for the payment of money in an aggregate amount in excess of
$5,000,000 shall be rendered against the Borrower or any Restricted Subsidiary
or any combination thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach
or levy upon any assets of the Borrower or any Restricted Subsidiary to enforce
any such judgment;

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

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

(n)           (i)
any representation or warranty made by the Equity Contributor in the Equity
Contribution Agreement shall prove to have been incorrect in any material
respect when made, (ii) the Equity Contributor shall fail to observe or perform
any covenant, condition or agreement contained in the Equity Contribution
Agreement (including, without limitation, the agreements in Sections 2.1 and
4.2 thereof) or (iii) the delivery by the Equity Contributor of written notice
that its obligations under Section 2.1 of the Equity Contribution Agreement
have been revoked or are otherwise declared invalid or unenforceable;

(o)           a
Change of Control shall occur;

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

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by the Borrower; and in
case of any event with respect to the Borrower described in clause (h) or (i)
of this Article, the principal of the Loans then outstanding, together with
accrued interest thereon and all fees and other obligations of the Borrower
accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are hereby
waived by the Borrower.

Article X

The Administrative Agent

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

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

The Administrative Agent
shall not have any duties or obligations except those expressly set forth
herein.  Without limiting the generality
of the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent
is required to exercise in writing as directed by the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 11.02), and (c) except as expressly set
forth herein, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
any Credit Party that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity.  The Administrative Agent shall not be liable
for any action taken or not taken by it with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 11.02) or in
the absence of its own gross negligence or willful misconduct.  The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or
in connection with this Agreement, (ii) the contents of any certificate,
report or other document delivered hereunder or in connection herewith,
(iii) the performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article V or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative
Agent.

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

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

Subject to the
appointment and acceptance of a successor Administrative Agent as provided in
this paragraph, the Administrative Agent may resign at any time by notifying
the Lenders and the Borrower.  Upon any
such resignation, the Required Lenders shall have the right, in consultation
with the Borrower, to appoint a successor. 
If no successor shall have been so appointed by the Required Lenders and
shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders appoint a successor
Administrative Agent which shall be a bank with an office in Chicago, Illinois
or New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder.  The fees payable by the Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.  After the Administrative Agent’s resignation
hereunder, the provisions of this Article and Section 11.03 shall continue in
effect for the benefit of such retiring Administrative Agent, its sub-agents
and their respective Related Parties in respect of any actions taken or omitted
to be taken by any of them while it was acting as Administrative Agent.

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

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Article XI

Miscellaneous

Section 11.01.        Notices.

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

(i)            if
to the Borrower, to EXCO Partners Operating Partnership, LP, c/o EXCO
Resources, Inc., 12377 Merit Drive, Suite 1700, Dallas, Texas 75251,
Attention:  Douglas H. Miller, Chief
Executive Officer and Attention:  J.
Douglas Ramsey, Chief Financial Officer, Telecopy No. (214) 368-2087;

(ii)           if
to the Administrative Agent to JPMorgan Chase Bank, N.A., 21 South Clark St.,
19th Floor, Chicago, Illinois 60603-2003, Telecopy No.: (312) 385-7096,
Attention: Jose Rodriguez, with a copy to JPMorgan Chase Bank, N.A., 1717 Main
Street, TX1-2448, Dallas, Texas 75201, Telecopy No. (214) 290-2332, Attention:  Wm. Mark Cranmer, Senior Vice President; and

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

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

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

Section 11.02.        Waivers;
Amendments.

(a)           No
failure or delay by the Administrative Agent 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 

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the Administrative Agent and the Lenders
hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have.  No waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.  Without limiting the generality of the
foregoing, the making of a Loan shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent or any Lender may have
had notice or knowledge of such Default at the time.

(b)           Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the
Credit Parties and the Required Lenders or by the Credit Parties and the
Administrative Agent with the consent of the Required Lenders, and neither the
Equity Contribution Agreement nor any provision thereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Equity Contributor, the Borrower and the Required Lenders or by the
Equity Contributor, the Borrower and the Administrative Agent with the consent
of the Required Lenders; provided that no such agreement shall (1)
reduce the principal amount of any Loan or reduce the rate of interest thereon,
or reduce any fees payable hereunder, without the written consent of each
Lender affected thereby, (2) postpone the scheduled date of payment of the
principal amount of any Loan or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the Maturity Date, without the written consent of each Lender affected
thereby, (3) change Section 2.17(b) or Section 2.17(c) in a manner that would
alter the pro rata sharing of payments required thereby, without the written consent
of each Lender, (4) release any Credit Party from its obligations under the
Loan Documents or, except in connection with any sales, transfers, leases or
other dispositions permitted in Section 7.03, release any of the Collateral
without the written consent of each Lender, (5) change any of the provisions of
this Section or the definition of “Required Lenders” or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend
or modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender or (6) waive any
prepayment penalty, without the written consent of each Lender; provided
further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent hereunder without the prior
written consent of the Administrative Agent.

Section 11.03.        Expenses;
Indemnity; Damage Waiver.

(a)           The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of this Agreement and the other Loan Documents or any
amendments, modifications or waivers of the provisions hereof (whether or not
the transactions contemplated hereby or thereby shall be consummated) and (ii)
all out-of-pocket expenses incurred by the 

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Administrative Agent or any Lender, including
the fees, charges and disbursements of any counsel for the Administrative Agent
or any Lender, in connection with the enforcement or protection of its rights
in connection with the Loan Documents, including its rights under this Section,
or in connection with the Loans made hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans.

(b)           THE CREDIT PARTIES SHALL INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH
LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH
PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE
HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED
EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY
INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY 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 THE USE OF THE PROCEEDS THEREFROM, (III) ANY ACTUAL
OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY
OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR ANY ENVIRONMENTAL
LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY SUBSIDIARY, OR (IV) ANY
ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING
TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY
AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO; PROVIDED
THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT
THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNITEE.

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

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(d)           TO
THE MAXIMUM 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 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, except that (i) no Credit Party may assign or otherwise transfer any of
its rights or obligations hereunder without the prior written consent of each
Lender (and any attempted assignment or transfer by such Credit Party without
such consent shall be null and void) and (ii) no Lender may assign or otherwise
transfer its rights or obligations hereunder except in accordance with this Section.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, 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 and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

(b)

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

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

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

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(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
Loans, the amount of the 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 $1,000,000 unless each of the Borrower and the Administrative
Agent otherwise consent, provided that no such consent of the Borrower
shall be required if an Event of Default has occurred and is continuing;

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

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

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

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

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

(iii)          Subject
to acceptance and recording thereof pursuant to paragraph (b)(iv) of this
Section, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 2.14,
Section 2.15, Section 2.16 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 

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

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

(v)           Upon
its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register; provided
that if either the assigning Lender or the assignee shall have failed to make
any payment required to be made by it pursuant to Section 2.06, Section 2.17(d)
or Section 11.03(c), the Administrative Agent shall have no obligation to
accept such Assignment and Assumption and record the information therein in the
Register unless and until such payment shall have been made in full, together
with all accrued interest thereon.  No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.

(c)

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

 77
 

 

provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, modification or
waiver described in the first proviso to Section 11.02(b) that affects such
Participant.  Subject to paragraph
(c)(ii) of this Section, the Borrower agrees that each Participant shall be
entitled to the benefits of Section 2.14, Section 2.15 and Section 2.16 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 2.17(c) as though it were a Lender.

(ii)           A
Participant shall not be entitled to receive any greater payment under Section
2.14 or Section 2.16 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the prior written
consent of the Borrower.  A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.16 unless the Borrower is notified of the participation
sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.16(e) as though it were a Lender.

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

Section 11.05.        Survival.  All covenants, agreements, representations and
warranties made by the Credit Parties herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid.  The provisions of Section 2.14,
Section 2.15, Section 2.16 and Section 11.03 and Article X shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans 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 

 78
 

 

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

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

Section 11.08.        Right
of Setoff.  If an Event of Default
shall have occurred and be continuing, each Lender and each of its Affiliates
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
obligations at any time owing by such Lender or Affiliate to or for the credit
or the account of the Borrower against any of and all the obligations of any
Credit Party now or hereafter existing under this Agreement held by such
Lender, irrespective of whether or not such Lender shall have made any demand
under this Agreement and although such obligations may be unmatured.  The rights of each Lender under this Section
and Section 8.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.

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

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

(b)           EACH
CREDIT 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 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 

 79
 

 

AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH TEXAS STATE OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. 
EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  NOTHING IN THIS AGREEMENT SHALL
AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY CREDIT
PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

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

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

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

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

 80
 

 

Section 11.12.        Confidentiality.  Each of the Administrative Agent and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to
the extent requested by any regulatory authority, (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, or otherwise
consistent with, those of this Section, to (i) any assignee of or Participant
in, or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) 
any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Credit Parties and their obligations,
(g) with the consent of the Borrower or (h) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section or (ii) becomes available to the Administrative Agent or any
Lender on a nonconfidential basis from a source other than a Credit Party.  For the purposes of this Section, “Information”
means all information received from any Credit Party relating to any Credit
Party or its business, other than any such information that is available to the
Administrative Agent 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 

 81
 

 

Lender to identify each
Credit Party in accordance with the Act. 
The Borrower 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.

 82

 

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

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  EXCO
  OPERATING PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  EXCO Partners OLP GP, LLC

  
	
   

  	
   

  	
  its sole general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /S/ J. Douglas Ramsey, Ph.D.

  	
   

  
	
   

  	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial

  Officer

  
	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  WINCHESTER
  ACQUISITION, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /S/ J. Douglas Ramsey, Ph.D.

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  TXOK ENERGY RESOURCES HOLDINGS,

  L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /S/ J. Douglas Ramsey, Ph.D.

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  TXOK TEXAS ENERGY HOLDINGS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /S/ J. Douglas Ramsey, Ph.D.

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief FinancialOfficer

  
									

 

 

 

	
  

  	
  TXOK TEXAS ENERGY RESOURCES, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  TXOK Texas Energy Holdings, LLC,

  
	
   

  	
   

  	
  as general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
    /S/ J. Douglas Ramsey, Ph.D.

  	
   

  
	
   

  	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial

  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROJO PIPELINE, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  TXOK Texas Energy Holdings, LLC,

  
	
   

  	
   

  	
  Its sole general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /S/ J. Douglas Ramsey, Ph.D.

  	
   

  
	
   

  	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial

  Officer

  
								

 

 

 

	
  

  	
  JPMORGAN
  CHASE BANK, N.A.,

  
	
   

  	
  as a Lender and as Administrative Agent,

  
	
   

  	
   

  
	
   

  	
  By:

  	
    Wm. Mark Cranmer

  	
   

  
	
   

  	
  Name:

  	
  Wm. Mark Cranmer

  
	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

 

 

	
  

  	
  CREDIT
  SUISSE, CAYMAN ISLANDS

  BRANCH,

  
	
   

  	
  as a Lender and
  as Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /S/ Vanessa Gomez

  	
   

  
	
   

  	
  Name: 

  	
  Vanessa Gomez

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /S/ Karim Blasetti

  	
   

  
	
   

  	
  Name:

  	
  Karim Blasetti

  
	
   

  	
  Title: 

  	
  Associate

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