Document:

exhibit10-1.htm

Exhibit 10.1

 

Agreement for Use of Corporate Airplane

 

 

This Agreement for Use of Corporate Airplane (“Agreement”) is made effective as of January 1, 2011, by and between OSI Restaurant Partners, LLC (“OSI”) and Elizabeth Smith (“Executive”).

 

For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

	
1.  

	
During the calendar year 2011, OSI grants Executive the right to use the OSI corporate airplanes for personal trips at no cost to Executive.

 

	
2.  

	
Executive acknowledges and agrees that she is required to report any such personal use of the OSI corporate airplanes as taxable income.

 

	
3.  

	
OSI will provide Executive with a tax gross-up payment for applicable federal, state and local taxes paid by Executive in connection with (i) the airplane use for up to fifty (50) hours of flying time for personal trips, and (ii) the tax gross-up payment itself.  This gross-up payment shall be paid no later than April 15, 2012.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 30th day of June, 2011.

 

OSI Restaurant Partners, LLC                   Elizabeth Smith

By:          /s/ Joseph Kadow                       By:   /s/ Elizabeth Smith  

Name:    Joseph Kadow

Title:       Executive Vice PresidentExhibit 10.1

	
  

 
	
  

 
	
  

 
	
 SECOND AMENDED AND RESTATED CREDIT
 AGREEMENT

 
	
  

 
	
 dated as of August 8, 2011

 
	
  

 
	
 among

 
	
  

 
	
 Northern Oil and Gas, Inc.,

 
	
 as Borrower,

 
	
  

 
	
 Macquarie Bank Limited,

 
	
 as Administrative Agent,

 
	
  

 
	
 and

 
	
  

 
	
 The Lenders Party Hereto

 
	
  

 

TABLE OF CONTENTS

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Page

 
	
  

 
	
 Article I

 
	
 Definitions and Accounting Matters

 
	
  

 
	
 Section 1.01

 	
 Terms
 Defined Above

 	
  

 	
 1

 
	
 Section 1.02

 	
 Certain
 Defined Terms

 	
  

 	
 1

 
	
 Section 1.03

 	
 Types of
 Loans and Borrowings

 	
  

 	
 22

 
	
 Section 1.04

 	
 Terms
 Generally; Rules of Construction

 	
  

 	
 22

 
	
 Section 1.05

 	
 Accounting
 Terms and Determinations; GAAP

 	
  

 	
 23

 
	
  

 	
  

 	
  

 	
  

 
	
 Article II

 
	
 The Credits

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 2.01

 	
 Commitments

 	
  

 	
 23

 
	
 Section 2.02

 	
 Loans and
 Borrowings

 	
  

 	
 23

 
	
 Section 2.03

 	
 Requests for
 Borrowings

 	
  

 	
 24

 
	
 Section 2.04

 	
 Interest
 Elections; Conversions

 	
  

 	
 25

 
	
 Section 2.05

 	
 Funding of
 Borrowings

 	
  

 	
 27

 
	
 Section 2.06

 	
 Termination,
 Reduction and Increase of Aggregate Maximum Credit Amounts

 	
  

 	
 28

 
	
 Section 2.07

 	
 Borrowing
 Base

 	
  

 	
 30

 
	
 Section 2.08

 	
 Letters of
 Credit

 	
  

 	
 33

 
	
 Section 2.09

 	
 Loans and
 Borrowings Under Existing Credit Agreement

 	
  

 	
 38

 
	
  

 
	
 Article III

 
	
 Payments of Principal and Interest; Prepayments; Fees

 
	
  

 
	
 Section 3.01

 	
 Repayment of
 Loans

 	
  

 	
 38

 
	
 Section 3.02

 	
 Interest

 	
  

 	
 38

 
	
 Section 3.03

 	
 Alternate
 Rate of Interest

 	
  

 	
 39

 
	
 Section 3.04

 	
 Prepayments

 	
  

 	
 39

 
	
 Section 3.05

 	
 Fees

 	
  

 	
 42

 
	
  

 
	
 Article IV

 
	
 Payments; Pro Rata Treatment; Sharing of Set-offs

 
	
  

 
	
 Section 4.01

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

 	
  

 	
 43

 
	
 Section 4.02

 	
 Presumption
 of Payment by the Borrower

 	
  

 	
 44

 
	
 Section 4.03

 	
 Deductions
 by the Administrative Agent; Defaulting Lender

 	
  

 	
 44

 
	
 Section 4.04

 	
 Disposition
 of Proceeds

 	
  

 	
 46

 
	
  

 
	
 Article V

 
	
 Increased Costs; Break Funding Payments; Taxes; Illegality

 
	
  

 
	
 Section 5.01

 	
 Increased
 Costs

 	
  

 	
 47

 
	
 Section 5.02

 	
 Break
 Funding Payments

 	
  

 	
 48

 

i

	
  

 	
  

 	
  

 	
  

 
	
 Section 5.03

 	
 Taxes

 	
  

 	
 48

 
	
 Section 5.04

 	
 Designation
 of Different Lending Office

 	
  

 	
 51

 
	
 Section 5.05

 	
 Illegality

 	
  

 	
 52

 
	
  

 
	
 Article VI

 
	
 Conditions Precedent

 
	
  

 
	
 Section 6.01

 	
 Effective
 Date

 	
  

 	
 53

 
	
 Section 6.02

 	
 Each Credit
 Event

 	
  

 	
 55

 
	
 Section 6.03

 	
 Additional
 Conditions to Credit Events

 	
  

 	
 56

 
	
  

 
	
 Article VII

 
	
 Representations and Warranties

 
	
  

 
	
 Section 7.01

 	
 Organization;
 Powers

 	
  

 	
 56

 
	
 Section 7.02

 	
 Authority;
 Enforceability

 	
  

 	
 56

 
	
 Section 7.03

 	
 Approvals;
 No Conflicts

 	
  

 	
 56

 
	
 Section 7.04

 	
 Financial
 Condition; No Material Adverse Change

 	
  

 	
 57

 
	
 Section 7.05

 	
 Litigation

 	
  

 	
 57

 
	
 Section 7.06

 	
 Environmental
 Matters

 	
  

 	
 58

 
	
 Section 7.07

 	
 Compliance
 with the Laws and Agreements; No Defaults

 	
  

 	
 59

 
	
 Section 7.08

 	
 Investment
 Company Act

 	
  

 	
 59

 
	
 Section 7.09

 	
 Taxes

 	
  

 	
 59

 
	
 Section 7.10

 	
 ERISA

 	
  

 	
 59

 
	
 Section 7.11

 	
 Disclosure;
 No Material Misstatements

 	
  

 	
 60

 
	
 Section 7.12

 	
 Insurance

 	
  

 	
 61

 
	
 Section 7.13

 	
 Restriction
 on Liens

 	
  

 	
 61

 
	
 Section 7.14

 	
 Subsidiaries

 	
  

 	
 61

 
	
 Section 7.15

 	
 Location of
 Business and Offices

 	
  

 	
 61

 
	
 Section 7.16

 	
 Properties;
 Titles, Etc.

 	
  

 	
 62

 
	
 Section 7.17

 	
 Maintenance
 of Properties

 	
  

 	
 62

 
	
 Section 7.18

 	
 Gas
 Imbalances, Prepayments

 	
  

 	
 63

 
	
 Section 7.19

 	
 Marketing of
 Production

 	
  

 	
 63

 
	
 Section 7.20

 	
 Swap
 Agreements

 	
  

 	
 63

 
	
 Section 7.21

 	
 Use of Loans
 and Letters of Credit

 	
  

 	
 63

 
	
 Section 7.22

 	
 Solvency

 	
  

 	
 64

 
	
 Section 7.23

 	
 Casualty
 Events

 	
  

 	
 64

 
	
 Section 7.24

 	
 Material
 Agreements

 	
  

 	
 64

 
	
 Section 7.25

 	
 No Brokers

 	
  

 	
 64

 
	
 Section 7.26

 	
 Reliance

 	
  

 	
 65

 
	
 Section 7.27

 	
 Payments by
 Purchasers of Production

 	
  

 	
 65

 
	
 Section 7.28

 	
 Existing
 Accounts Payable

 	
  

 	
 65

 
	
 Section 7.29

 	
 Foreign
 Corrupt Practices

 	
  

 	
 65

 
	
 Section 7.30

 	
 Money
 Laundering

 	
  

 	
 65

 
	
 Section 7.31

 	
 OFAC

 	
  

 	
 66

 

ii

	
  

 	
  

 	
  

 	
  

 
	
 Article VIII

 
	
 Affirmative Covenants

 
	
  

 
	
 Section 8.01

 	
 Financial
 Statements; Ratings Change; Other Information

 	
  

 	
 66

 
	
 Section 8.02

 	
 Notices of
 Material Events

 	
  

 	
 70

 
	
 Section 8.03

 	
 Existence;
 Conduct of Business

 	
  

 	
 70

 
	
 Section 8.04

 	
 Payment of
 Obligations

 	
  

 	
 71

 
	
 Section 8.05

 	
 Performance
 of Obligations under Loan Documents

 	
  

 	
 71

 
	
 Section 8.06

 	
 Operation
 and Maintenance of Properties

 	
  

 	
 71

 
	
 Section 8.07

 	
 Insurance

 	
  

 	
 72

 
	
 Section 8.08

 	
 Books and
 Records; Inspection Rights

 	
  

 	
 72

 
	
 Section 8.09

 	
 Compliance
 with Laws

 	
  

 	
 72

 
	
 Section 8.10

 	
 Environmental
 Matters

 	
  

 	
 72

 
	
 Section 8.11

 	
 Further
 Assurances

 	
  

 	
 73

 
	
 Section 8.12

 	
 Reserve
 Reports

 	
  

 	
 74

 
	
 Section 8.13

 	
 Title
 Information

 	
  

 	
 75

 
	
 Section 8.14

 	
 Additional
 Collateral; Additional Guarantors

 	
  

 	
 76

 
	
 Section 8.15

 	
 ERISA
 Compliance

 	
  

 	
 77

 
	
 Section 8.16

 	
 Swap
 Agreements

 	
  

 	
 77

 
	
 Section 8.17

 	
 Marketing
 Activities

 	
  

 	
 77

 
	
 Section 8.18

 	
 Disclosures

 	
  

 	
 78

 
	
 Section 8.19

 	
 Post-Closing

 	
  

 	
 78

 
	
  

 
	
 Article IX

 
	
 Negative Covenants

 
	
  

 
	
 Section 9.01

 	
 Financial
 Covenants

 	
  

 	
 78

 
	
 Section 9.02

 	
 Debt

 	
  

 	
 78

 
	
 Section 9.03

 	
 Liens

 	
  

 	
 79

 
	
 Section 9.04

 	
 Dividends
 and Distributions

 	
  

 	
 79

 
	
 Section 9.05

 	
 Investments,
 Loans and Advances

 	
  

 	
 79

 
	
 Section 9.06

 	
 Nature of
 Business

 	
  

 	
 80

 
	
 Section 9.07

 	
 Limitation
 on Leases

 	
  

 	
 80

 
	
 Section 9.08

 	
 Proceeds of
 Notes

 	
  

 	
 80

 
	
 Section 9.09

 	
 ERISA
 Compliance

 	
  

 	
 81

 
	
 Section 9.10

 	
 Sale or Discount
 of Receivables

 	
  

 	
 81

 
	
 Section 9.11

 	
 Mergers, Etc

 	
  

 	
 81

 
	
 Section 9.12

 	
 Sale of
 Properties

 	
  

 	
 81

 
	
 Section 9.13

 	
 Environmental
 Matters

 	
  

 	
 82

 
	
 Section 9.14

 	
 Material
 Agreements

 	
  

 	
 82

 
	
 Section 9.15

 	
 Transactions
 with Affiliates

 	
  

 	
 82

 
	
 Section 9.16

 	
 Subsidiaries

 	
  

 	
 83

 
	
 Section 9.17

 	
 Negative
 Pledge Agreements; Dividend Restrictions

 	
  

 	
 83

 
	
 Section 9.18

 	
 Gas
 Imbalances, Take-or-Pay or Other Prepayments

 	
  

 	
 83

 
	
 Section 9.19

 	
 Swap
 Agreements

 	
  

 	
 83

 
	
 Section 9.20

 	
 Sale and
 Leasebacks

 	
  

 	
 83

 
	
 Section 9.21

 	
 Amendments
 to Organizational Documents

 	
  

 	
 84

 

iii

	
  

 	
  

 	
  

 	
  

 
	
 Article X

 
	
 Events of Default; Remedies

 
	
  

 
	
 Section
 10.01

 	
 Events of
 Default

 	
  

 	
 84

 
	
 Section
 10.02

 	
 Remedies

 	
  

 	
 86

 
	
  

 
	
 Article XI

 
	
 The Administrative Agent

 
	
  

 
	
 Section
 11.01

 	
 Appointment;
 Powers

 	
  

 	
 87

 
	
 Section
 11.02

 	
 Duties and
 Obligations of Administrative Agent

 	
  

 	
 87

 
	
 Section
 11.03

 	
 Action by
 Administrative Agent

 	
  

 	
 88

 
	
 Section
 11.04

 	
 Reliance by
 Administrative Agent

 	
  

 	
 89

 
	
 Section
 11.05

 	
 Subagents

 	
  

 	
 89

 
	
 Section
 11.06

 	
 Resignation
 or Removal of Administrative Agent

 	
  

 	
 89

 
	
 Section
 11.07

 	
 Administrative
 Agent as Lender

 	
  

 	
 90

 
	
 Section
 11.08

 	
 No Reliance

 	
  

 	
 90

 
	
 Section
 11.09

 	
 Administrative
 Agent May File Proofs of Claim

 	
  

 	
 91

 
	
 Section
 11.10

 	
 Authority of
 Administrative Agent to Release Collateral and Liens

 	
  

 	
 91

 
	
  

 
	
 Article XII

 
	
 Miscellaneous

 
	
  

 
	
 Section
 12.01

 	
 Notices

 	
  

 	
 92

 
	
 Section 12.02

 	
 Waivers;
 Amendments

 	
  

 	
 92

 
	
 Section
 12.03

 	
 Expenses,
 Indemnity; Damage Waiver

 	
  

 	
 94

 
	
 Section
 12.04

 	
 Successors
 and Assigns

 	
  

 	
 96

 
	
 Section
 12.05

 	
 Survival;
 Revival; Reinstatement

 	
  

 	
 100

 
	
 Section
 12.06

 	
 Counterparts;
 Integration; Effectiveness

 	
  

 	
 101

 
	
 Section 12.07

 	
 Severability

 	
  

 	
 101

 
	
 Section
 12.08

 	
 Right of
 Setoff

 	
  

 	
 101

 
	
 Section
 12.09

 	
 GOVERNING
 LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

 	
  

 	
 102

 
	
 Section
 12.10

 	
 Headings

 	
  

 	
 103

 
	
 Section
 12.11

 	
 Confidentiality

 	
  

 	
 103

 
	
 Section
 12.12

 	
 Interest
 Rate Limitation

 	
  

 	
 104

 
	
 Section
 12.13

 	
 EXCULPATION
 PROVISIONS

 	
  

 	
 105

 
	
 Section
 12.14

 	
 Collateral
 Matters; Swap Agreements

 	
  

 	
 105

 
	
 Section
 12.15

 	
 No Third
 Party Beneficiaries

 	
  

 	
 105

 
	
 Section
 12.16

 	
 USA Patriot
 Act Notice

 	
  

 	
 105

 
	
 Section
 12.17

 	
 Existing
 Credit Agreement

 	
  

 	
 105

 

iv

ANNEXES, EXHIBITS AND SCHEDULES

	
  

 	
  

 
	
 Annex I

 	
 List of
 Maximum Credit Amounts

 
	
  

 	
  

 
	
 Exhibit A

 	
 Form of Note

 
	
 Exhibit B

 	
 Form of
 Borrowing Request

 
	
 Exhibit C

 	
 Form of
 Interest Election Request

 
	
 Exhibit D

 	
 Form of
 Compliance Certificate

 
	
 Exhibit E

 	
 Security
 Instruments

 
	
 Exhibit F

 	
 Form of Assignment
 and Assumption

 
	
 Exhibit G

 	
 Form of Swap
 Agreement Certificate

 
	
 Exhibit H

 	
 Form of
 Reserve Report Certificate

 
	
 Exhibit I

 	
 List of
 Unmortgaged Properties

 
	
 Exhibit J-1

 	
 Form of
 Maximum Credit Amount Increase Agreement

 
	
 Exhibit J-2

 	
 Form of
 Additional Lender Agreement

 
	
  

 
	
 Schedule
 2.03

 	
 Australian
 Bank Holidays

 
	
 Schedule
 7.05

 	
 Litigation

 
	
 Schedule
 7.14

 	
 Subsidiaries
 and Partnerships

 
	
 Schedule
 7.18

 	
 Gas
 Imbalances

 
	
 Schedule
 7.19

 	
 Marketing
 Contracts

 
	
 Schedule
 7.20

 	
 Swap
 Agreements

 
	
 Schedule
 7.24

 	
 Material
 Agreements

 
	
 Schedule
 7.28

 	
 Existing
 Accounts Payable

 
	
 Schedule
 8.19

 	
 Post-Closing

 

v

          THIS
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as
of August 8, 2011, is among: Northern Oil and Gas, Inc., a corporation duly
formed and existing under the laws of the State of Minnesota (the “Borrower”),
each of the Lenders from time to time party hereto and Macquarie Bank Limited
(in its individual capacity, “MBL”), as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the “Administrative
Agent”).

R
E C I T A L S

          A.          The
Borrower, the Administrative Agent and the lender party thereto have heretofore
entered into that certain Amended and Restated Credit Agreement, dated as of
May 26, 2010 (as amended, the “Existing Credit Agreement”).

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

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

ARTICLE I

Definitions and Accounting Matters

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

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

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

          “Additional
Lender” has the meaning assigned to such term in Section 2.06(c)(i).

          “Additional
Lender Certificate” has the meaning assigned to such term in Section
2.06(c)(ii)(F).

          “Adjusted
LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next
1/100 of 1%) equal to the LIBO Rate for such Interest Period multiplied by the
Statutory Reserve Rate.

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

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

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

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

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

          “Alternate
Base Rate” means the Prime Rate.

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

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Utilization Grid

 	
  

 
	
 Borrowing Base Utilization 

 Percentage

 	
  

 	
  

 	
 <50%

 	
  

 	
  

 	
 ≥50% <75%

 	
  

 	
  

 	
 ≥75% <90%

 	
  

 	
  

 	
 ≥90%

 	
  

 
	
 Eurodollar Loans

 	
  

 	
  

 	
 2.50%

 	
  

 	
  

 	
 2.75%

 	
  

 	
  

 	
 3.00%

 	
  

 	
  

 	
 3.25%

 	
  

 
	
 ABR Loans

 	
  

 	
  

 	
 2.00%

 	
  

 	
  

 	
 2.00%

 	
  

 	
  

 	
 2.25%

 	
  

 	
  

 	
 2.50%

 	
  

 

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

          “Applicable
Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I.

          “Approved
Fund” means (i) any Person (other than a natural person) that is engaged in
making, purchasing, holding, or investing in commercial loans and similar
extensions of credit 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, advises or manages a Lender; (ii) with respect to any Lender that
is an investment fund, any other investment fund that invests in loans and that
is advised, administered or managed by the same investment advisor as such
Lender or by an Affiliate of such investment advisor; and (iii) any third party
which provides “warehouse financing” to a Person described in the
preceding clause (i) or (ii) (and any Person described in said clause (i) or
(ii) shall also be deemed an Approved Fund with respect to such third party
providing such warehouse financing).

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

2

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

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

          “BB
Hedge” means any hedge position or Swap Agreement considered by the
Administrative Agent in determining the then effective Borrowing Base.

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

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

          “Borrowing
Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to
time pursuant to Section 2.07(e), Section 8.13(c) or Section 9.12(d).

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

          “Borrowing
Base Utilization Percentage” means, as of any day, the fraction expressed
as a percentage, the numerator of which is the sum of the Revolving Credit
Exposures of the Lenders on such day, and the denominator of which is (a) the
Borrowing Base in effect on such Day multiplied by (b) the quotient of (i) the
percentage of Total Reserve Value of the Oil and Gas Properties evaluated in
the most recently completed Reserve Report (including, without limitation, for
purposes of the Initial Reserve Report, additional Oil and Gas Properties
acquired or leased prior to May 31, 2011) for which the Administrative Agent
has received reasonably sufficient title information (such percentage to be
determined by the Administrative Agent in its reasonable discretion) and (ii)
eighty-five percent (85%).

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

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

          “Capital
Expenditures” means, in respect of any Person, for any period, the
aggregate (determined without duplication) of all exploration and development
expenditures and costs that 

3

should be capitalized in accordance with GAAP and any other
expenditures that are capitalized on the balance sheet of such Person in accordance
with GAAP.

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

          “Cash
Collateral” has the meaning assigned such term in Section 2.08(i).

          “Cash
Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent (as a first-priority, perfected security interest), for
the benefit of the Issuing Bank and the Lenders, cash in dollars, at a location
and pursuant to documentation in form and substance satisfactory to the
Administrative Agent. “Cash Collateralized” has a correlative meaning.

          “Cash
Receipts” means all cash or cash equivalents received by or on behalf of
the Borrower and its Subsidiaries with respect to the following: (a) sales from
the Oil and Gas Properties (including any other working interest owner receipts
received by Borrower or its Affiliates as operator of Oil and Gas Properties),
(b) cash representing operating revenue earned or to be earned by the Borrower
and its Subsidiaries, (c) any insurance proceeds received by the Borrower or
its Subsidiaries, (d) any net proceeds from Swap Agreements and (e) any other
cash or cash equivalents received by the Borrower or its Subsidiaries from
whatever source; provided that advances under the Loans, and any capital
contributions or transfers made to the Borrower by any of its members, or by
the Borrower to any of its Subsidiaries, shall not constitute “Cash Receipts”.

          “Casualty
Event” means any loss, casualty or other insured damage to any Property of
the Borrower or any of its Subsidiaries in an amount greater than $250,000, or
any nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries
having a fair market value in excess of $250,000.

          “Change
in Control” means the occurrence of the following events: (a) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Securities Exchange Act of 1934
and the rules of the SEC thereunder as in effect on the date hereof) other than
Michael Reger or Ryan Gilbertson of Equity Interests so that such Person or
group owns 30% or more of the aggregate ordinary voting power represented by
the issued and outstanding Equity Interests of the Borrower, (b) occupation of
a majority of the seats (other than vacant seats) on the board of directors of
the Borrower by Persons who were neither (i) nominated by the board of
directors of the Borrower nor (ii) appointed by directors so nominated or (c)
Michael Reger or Ryan Gilbertson shall cease to devote a substantial amount of
their time, respectively, to the day-to-day management of the Credit Parties.

          “Change
in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement by any Governmental Authority, (b) any change in any
law, rule or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by
any Lender or the Issuing Bank (or, for purposes of Section 5.01(b)), by
any lending office of such Lender or by such Lender’s or the Issuing Bank’s

4

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; provided that notwithstanding anything
herein to the contrary (i) the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines or directives thereunder or
issued in connection therewith and (ii) all requests, rules, guidelines or
directives concerning capital adequacy promulgated by the Bank for
International Settlements, the Basel Committee on Banking Regulations and
Supervisory Practices (or any successor similar authority) or the United States
financial regulatory authorities, in each case pursuant to Basel III, shall be
deemed to be a “Change in Law”, regardless of the date enacted, adopted,
promulgated or issued.

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

          “Collateral
Account” has the meaning assigned such term in Section 2.08(i).

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

          “Commitment
Fee Rate” means, on any day, a rate per annum equal to 0.500%.

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

5

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

          “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. For the purposes of
this definition, and without limiting the generality of the foregoing, any
Person that owns directly or indirectly 10% or more of the Equity Interests
having ordinary voting power for the election of the directors or other
governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person. “Controlling”
and “Controlled” have meanings correlative thereto.

          “Credit
Parties” means, collectively, the Borrower and Guarantors, if any.

          “Debt”
means, for any Person, the sum of the following (without duplication): (a) all
obligations of such Person for borrowed money or evidenced by bonds, bankers’
acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services that are
more than sixty (60) days past the due date other than those which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) all obligations of such
Person under Capital Leases; (e) all obligations of such Person under Synthetic
Leases; (f) all Debt (as defined in the other clauses of this definition) of
others secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of
the amount of such Debt and the maximum stated amount of such guarantee or
assurance against loss; (h) all obligations or undertakings of such Person to
maintain or cause to be maintained the financial position or covenants of
others or to purchase the Debt or Property of others; (i) all obligations of
such Person to deliver commodities, goods or services, including, without
limitation, Hydrocarbons, in consideration of one or more advance payments,
other than gas balancing arrangements in the ordinary course of business; (j)
all obligations of such Person to pay for goods or services whether or not such
goods or services are actually received or utilized by such Person; (k) any
Debt of a partnership for which such Person is liable either by agreement, by
operation of law or by a Governmental Requirement but only to the extent of
such liability; (l) any Disqualified Capital Stock issued by such Person; and
(m) the undischarged balance of any production payment created by such Person
or for the creation of which such Person received payment. The Debt of any
Person shall include all obligations of such Person of the character described
above to the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is not included as a liability of such
Person under GAAP.

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

6

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

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

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

          “EBITDAX”
means, as of any date of determination, the sum of Consolidated Net Income for
the period of four fiscal quarters ending on the last day of the most recently
completed fiscal quarter plus the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: interest, income taxes,
depreciation, depletion, amortization, one-time fees and expenses paid or
accrued in connection with debt financings capital-raising transactions,
acquisitions and other one-time corporate transactions, the fair market value
of capital stock issued for consideration, exploration expenditures and costs
and other similar noncash charges, minus all noncash income added to
Consolidated Net Income.

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

7

          “Eligible
Obligor” means that on any date of determination, such obligor is (i) an
entity duly organized and validly existing under the laws of, and has its chief
executive offices in, the United States or any political subdivision thereof,
and has a billing address within the United States, (ii) a legal operating
entity or holding company, and not a natural person, (iii) not a governmental
authority, and (iv) not subject to insolvency proceedings.

          “Eligible
Assignee” means any Person that meets the requirements to be an assignee
under Section 12.04. 

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

          “Environmental
Laws” means any and all Governmental Requirements pertaining in any way to
health, safety, the environment, the preservation or reclamation of natural
resources, or the management, Release or threatened Release of any Hazardous
Materials, in effect in any and all jurisdictions in which the Borrower or any
Subsidiary is conducting, or at any time has conducted, business, or where any
Property of the Borrower or any Subsidiary is located, including without
limitation, the Oil Pollution Act of 1990, as amended, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and Liability
Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control
Act, as amended, the Occupational Safety and Health Act of 1970, as amended,
the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended,
the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Hazardous Materials Transportation Law, as amended, and other environmental
conservation or protection Governmental Requirements. 

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

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

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

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

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

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

8

          “Excepted
Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (b) Liens in connection with workers’
compensation, unemployment insurance or other social security, old age pension
or public liability obligations which are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (c) statutory landlord’s liens,
operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’,
suppliers’, workers’, materialmen’s, construction or other like Liens arising
by operation of law in the ordinary course of business or incident to the
exploration, development, operation and maintenance of Oil and Gas Properties
each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (d) contractual Liens
which arise in the ordinary course of business under operating agreements,
joint venture agreements, oil and gas partnership agreements, oil and gas
leases, farm-out agreements, division orders, contracts for the sale,
transportation or exchange of oil and natural gas, unitization and pooling
declarations and agreements, area of mutual interest agreements, royalty
agreements, overriding royalty agreements, marketing agreements, processing
agreements, net profits agreements, development agreements, gas balancing or
deferred production agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or other
geophysical permits or agreements and other agreements which are usual and
customary in the oil and gas business and are for claims which are not
delinquent or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Subsidiary or materially impair
the value of such Property subject thereto; (e) Liens arising solely by virtue
of any statutory or common law provision relating to banker’s liens, rights of
set-off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
Borrower or any of its Subsidiaries to provide collateral to the depository
institution; (f) easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, and Liens related
to surface leases and surface operations, that do not secure any monetary
obligations and which in the aggregate do not materially impair the use of such
Property for the purposes of which such Property is held by the Borrower or any
Subsidiary or materially impair the value of such Property subject thereto; (g)
Liens on cash or securities pledged to secure performance of tenders, surety
and appeal bonds, government contracts, performance and return of money bonds,
bids, trade contracts, leases, statutory obligations, regulatory obligations
and other obligations of a like nature incurred in the ordinary course of
business and (h) judgment and attachment Liens not giving rise to an Event of
Default, provided that any appropriate legal proceedings which may have been
duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may 

9

be initiated shall
not have expired and no action to enforce such Lien has been commenced;
provided, further that Liens described in clauses (a) through (e) shall remain
“Excepted Liens” only for so long as no action to enforce such Lien has
been commenced and no intention to subordinate the first priority Lien granted
in favor of the Administrative Agent and the Lenders is to be hereby implied or
expressed by the permitted existence of such Excepted Liens.

          “Excess
Cash Flow” for any period shall mean EBITDAX for such period less cash
payments for (a) taxes during such period, (b) any changes in working capital
from the preceding period (as determined in accordance with GAAP) made during
such period and (c) Capital Expenditures made during such period that are
approved by the Majority Lenders or are otherwise permitted under this
Agreement.

          “Excluded
Taxes” means, with respect to the Administrative Agent, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account
of any obligation of the Borrower or any Guarantor hereunder or under any other
Loan Document, (a) income taxes or franchise taxes (imposed in lieu of net
income taxes), by the United States of America or such other jurisdiction (or
any political subdivision) under the laws of which such recipient is organized
or in which its principal office is located or, in the case of any Lender, in
which its applicable lending office is located, (b) any branch profits taxes
imposed by the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower or any Guarantor is located, (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 5.04(b)), any withholding tax that is imposed by
the United States of America 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 or
inability (other than as a result of a Change in Law) to comply with
Section 5.03(f), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts with respect to such
withholding tax pursuant to Section 5.03(a) or Section 5.03(b), and
(d) any U.S. Federal Withholding Taxes imposed by FATCA.

          “FATCA”
means Sections 1471 through 1474 of the Code (or any amended or successor
version that is substantively comparable and not materially more onerous to
comply with) and any current or future regulations or official interpretations
thereof.

          “FCPA”
means the U.S. Foreign Corrupt Practices Act of 1977, as amended.

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

          “Fee
Letter” means that certain Fee Letter dated as of May 26, 2010 by and
between the Borrower and the Administrative Agent.

10

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

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

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

          “Foreign
Subsidiary” means any Subsidiary that is not organized under the laws of
the United States of America or any state thereof or the District of Columbia.

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

          “General
and Administrative Costs” means reasonable, normal and customary expenses
and costs paid or payable that are classified as general and administrative
costs, including salaries and all other compensation to the management of the
Borrower, consulting fees, salary, rent, supplies, travel and entertainment,
insurance, accounting, legal, engineering and broker related fees, required to
manage the affairs of the Borrower.

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

          “Governmental
Requirement” means any law, statute, code, ordinance, order, determination,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, rules of common law, authorization or other directive or requirement,
whether now or hereinafter in effect, of any Governmental Authority.

          “Guarantors”
means any Subsidiary of the Borrower that guarantees the Indebtedness pursuant
to Section 8.14(b).

          “Guaranty
Agreement” means that certain Second Amended and Restated Guaranty and
Collateral Agreement executed by the Borrower and the Guarantors, if any, in
form and substance reasonably acceptable to the Administrative Agent
unconditionally guarantying on a joint and several basis, payment of the
Indebtedness, as the same may be amended, modified or supplemented from time to
time.

          “Hazardous
Material” means any substance regulated or as to which liability might
arise under any applicable Environmental Law and including without limitation:
(a) any chemical, compound, material, product, byproduct, substance or waste
defined as or included in the definition or meaning of “hazardous substance,”
“hazardous material,” “hazardous waste,” “solid 

11

waste,” “toxic waste,” “extremely hazardous substance,” “toxic
substance,” “contaminant,” “pollutant,” or words of similar meaning or import
found in any applicable Environmental Law; (b) Hydrocarbons, petroleum
products, petroleum substances, natural gas, oil, oil and gas waste, crude oil,
and any components, fractions, or derivatives thereof; and (c) radioactive materials,
explosives, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon, infectious or medical wastes.

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

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

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

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

          “Indemnified
Taxes” means Taxes other than Excluded Taxes.

          “Indemnitee”
has the meaning set forth in Section 12.03.

          “Initial
Reserve Report” means the report dated as of December 31, 2010 prepared by
Ryder Scott Company Petroleum Consultants, L.P., with respect to certain Oil and
Gas Properties of the Borrower.

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

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

12

          “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 or three months
thereafter, as the Borrower may elect; provided, that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period. For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.

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

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

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

          “Issuing
Bank” means Macquarie Bank Limited, in its capacity as the issuer of
Letters of Credit, any Lender or any other Person named as an Issuing Bank by
the Administrative Agent and reasonably acceptable to the Borrower. 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
Commitment” at any time means five hundred thousand dollars ($500,000).

13

          “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
Parties” has the meaning set forth in Section 12.04.

          “Lenders”
means the Persons listed on Annex I and any Person that shall have become a party
hereto pursuant to an Assignment and Assumption, other than any such Person
that ceases to be a party hereto pursuant to an Assignment and Assumption, and
any Person that shall have become a party hereto as an Additional Lender
pursuant to Section 2.06(c).

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

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

          “LIBO
Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period:

	
  

 	
  

 	
  

 
	
  

 	
           (a)          if
 not less than two rates are displayed on Reuters page “LIBO” at or around
 11:00 a.m. (London time) on the second Business Day before the first day of
 the Interest Period for Eurodollar Loans over the period which is closest to
 that period, the arithmetic mean (expressed as a rate per cent per annum and
 rounded up to five decimal places) of those rates; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)          if
 less than two (2) rates are displayed on Reuters page “LIBO” at or
 around that time for Eurodollar Loans over that period, the arithmetic mean
 (expressed as a rate per cent per annum and rounded up to five decimal
 places) of the offer rates quoted to the Administrative Agent by not less
 than two banks which ordinarily display rates on Reuters page “LIBO”
 on application by Administrative Agent for Eurodollar Loans equal to that
 amount over the period equal to that period; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)          if
 the Administrative Agent is unable to determine a rate under paragraph (a) or
 (b) because an insufficient number of rates are displayed (in the case of
 paragraph (a)) or the Administrative Agent is unable to obtain the necessary
 number of quotes (in the case of paragraph (b)), the rate (expressed as a
 rate per cent per annum and rounded up to five decimal places) specified in
 good faith by the Administrative Agent at or around that time having regard,
 to the extent possible, to the offer rates otherwise quoted to the
 Administrative Agent for Eurodollar Loans equal to that amount over the
 period equal to that period at or around that time.

 

14

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

          “Loan
Documents” means this Agreement, the Notes, the Fee Letter, any Swap
Agreement between the Borrower or any Subsidiary and a Lender or an Affiliate
of a Lender, the Letter of Credit Agreements, the Letters of Credit and the
Security Instruments.

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

          “Majority
Lenders” means, at any time while no Loans or LC Exposure is outstanding,
Lenders having more than fifty percent (50%) of the Aggregate Maximum Credit
Amounts; and at any time while any Loans or LC Exposure is outstanding, Lenders
holding more than fifty percent (50%) of the outstanding aggregate principal
amount of the Loans and participation interests in Letters of Credit (without
regard to any sale by a Lender of a participation in any Loan under
Section 12.04(c)); provided, that if there are less than three Lenders,
all Lenders shall be required to constitute the “Majority Lenders”;
provided further that the Maximum Credit Amounts and the principal amount of
the Loans and participation interests in Letters of Credit of the Defaulting
Lenders (if any) shall be excluded from the determination of Majority Lenders.

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

          “Material
Agreements” has the meaning assigned such term in Section 7.24.

          “Material
Indebtedness” means Debt (other than the Loans and Letters of Credit), or
obligations in respect of one or more Swap Agreements, of any one or more of
the Borrower and its Subsidiaries in an aggregate principal amount exceeding
$250,000. For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of the Borrower or any Subsidiary in respect of
any Swap Agreement at any time shall be the Swap Termination Value.

15

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

          “Maximum
Credit Amount Increase Certificate” has the meaning assigned to such term
in Section 2.06(c)(ii)(E).

          “Money
Laundering Laws” means the laws, rules and regulations created pursuant to
the Money Laundering Control Act of 1986.

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

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

          “Net
Hedge Value” means, as to any novation, assignment, unwinding, termination,
or amendment of a BB Hedge, the net effect of such transaction (after giving
effect to any new hedge position or Swap Agreement entered into since the
determination of the Borrowing Base then in effect), if any, on the then
effective Borrowing Base, as determined by the Administrative Agent. 

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

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

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

          “OFAC”
means the U.S. Treasury Department Office of Foreign Assets Control.

          “Oil and
Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements, including production
sharing contracts and agreements, which relate to any of the Hydrocarbon
Interests or the production, sale, purchase, exchange or processing of Hydrocarbons
from or attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and
under and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits,
proceeds, products, revenues and other incomes from or attributable to the
Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and
Properties in any manner 

16

appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereafter acquired and situated upon, used, held for use
or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary
uses) and including any and all oil wells, gas wells, injection wells or other
wells, buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.

          “Operating
Account” means (a) the account #364-040573-295 maintained at the Borrower’s
expense with Morgan Stanley Smith Barney LLC, existing on the Effective Date or
(b) if the foregoing account is closed, a deposit account opened with a bank
reasonably acceptable to the Administrative Agent maintained at the Borrower’s
expense which account is subject to a duly executed account control agreement
between the Administrative Agent and the Operating Account Bank.

          “Operating
Account Bank” means the bank where Borrower maintains the Operating
Account.

          “Organizational
Documents” means, with respect to any Person, (a) in the case of any
corporation, the certificate of incorporation and by-laws (or similar
documents) of such Person, (b) in the case of any limited liability company,
the certificate of formation and limited liability company agreement (or
similar documents) of such Person, (c) in the case of any limited partnership,
the certificate of formation and limited partnership agreement (or similar
documents) of such Person, (d) in the case of any general partnership, the
partnership agreement (or similar document) of such Person and (e) in any other
case, the functional equivalent of the foregoing.

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

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

          “Patriot
Act” has the meaning assigned such term in Section 12.16.

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

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

17

the date hereof, sponsored, maintained or contributed to by the
Borrower or a Subsidiary or an ERISA Affiliate.

          “Post
Default Rate” shall mean, in respect of the principal of any Loan or any
other amount payable by the Borrower under this Agreement or any other Loan
Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to the applicable interest rate
plus two and one-half percent (2.5%) per annum, but in no event to exceed the
Highest Lawful Rate.

          “Prime
Rate” means, with respect to any day, the greater of (i) the average prime
rate of interest published by the Wall Street Journal on such day (or the
next following Business Day if such day is not a Business Day) and (ii) the
Adjusted LIBO Rate for a one (1) month Interest Period plus one percent (1.0%)
per annum, in each case changing from time to time as and when that rate
changes. The Prime Rate is a reference rate and does not necessarily represent
the lowest or best rate actually available.

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

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

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

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

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

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

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

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

18

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

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

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

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

          “Required
Lenders” means, at any time while no Loans or LC Exposure is outstanding,
Lenders having at least sixty-six and two-thirds percent (66 2/3%) of the
Aggregate Maximum Credit Amounts; and at any time while any Loans or LC
Exposure is outstanding, Lenders holding at least sixty-six and two-thirds
percent (66 2/3%) of the outstanding aggregate principal amount of the Loans
and participation interests in such Letters of Credit (without regard to any
sale by a Lender of a participation in any Loan under Section 12.04(c))
provided, that if there are less than three Lenders, all Lenders shall be
required to constitute the “Required Lenders”; provided further that the
Maximum Credit Amounts and the principal amount of the Loans and participation
interests in Letters of Credit of the Defaulting Lenders (if any) shall be
excluded from the determination of Required Lenders.

          “Reserve
Report” means a report, in form and substance reasonably satisfactory to
the Administrative Agent, setting forth, as of each January 1st or July 1st (or
such other date in the event of an Interim Redetermination) the oil and gas
reserves attributable to the Oil and Gas Properties of the Borrower and the
Subsidiaries, together with a projection of the rate of production and future
net income, taxes, operating expenses and Capital Expenditures with respect
thereto as of such date, based upon the economic assumptions consistent with
the Administrative Agent’s lending requirements at the time.

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

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

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

19

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

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

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

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

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

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

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

          “Swap
Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement, whether exchange traded,
“over-the-

20

counter” or otherwise, involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
the Borrower or the Subsidiaries shall be a Swap Agreement.

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

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

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

          “Termination
Date” means the earlier to occur of (i) May 26, 2014 or (ii) the date
that the Aggregate Maximum Credit Amount is sooner terminated pursuant to
Section 2.06 or Section 10.02.

          “Total
Reserve Value” means, with respect to any Proved Reserves expected to be
produced from any Oil and Gas Properties, the net present value, discounted at
10% per annum, of the future net revenues expected to accrue to the Borrower’s
and its Subsidiaries’ collective interests in such reserves during the
remaining expected economic lives of such reserves. Each calculation of such
expected future net revenues shall be made in accordance with the then existing
standards of the Society of Petroleum Engineers, provided that in any event (a)
appropriate deductions shall be made for severance and ad valorem taxes, and
for operating, gathering, transportation and marketing costs required for the
production and sale of such reserves, (b) the pricing assumptions used in
determining Total Reserve Value for any particular reserves shall be based upon
(i) annual quotations on the New York Mercantile Exchange for Henry Hub
(natural gas) or Cushing, Oklahoma (oil) futures on the date of the relevant
Reserve Report for each calendar year to the extent such quotations are
available for future periods, provided that with respect to quotations for
calendar years after the fifth calendar year, the quotation for the fifth
calendar year shall be applied, (ii) with respect to future periods for which
quotations are not available on the New York Mercantile Exchange, constant
pricing for such periods based on the quotation for the last period for which a
quotation is available on the New 

21

York Mercantile Exchange for Henry Hub (natural gas) or Cushing,
Oklahoma (oil), (c) operating expenses shall be held constant, (d) future
Capital Expenditures shall be expressed in current year dollars (i.e.,
inflation shall not be assumed), (e) to the extent basis Swap Agreements are
not in place, the cash-flows derived from the pricing assumptions set forth in
clause (b) above shall be further adjusted to account for the historical basis
differentials for each month during the preceding 12-month period calculated by
comparing realized crude oil and natural gas prices to Cushing, Oklahoma and
Henry Hub NYMEX prices for each month during such period and (f) to the extent
that Swap Agreements are in place the cash-flows derived from the pricing
assumptions set forth in clause (b) above shall be, (i) in the case of volumes
subject to a swap or other fixed priced hedge, at the applicable fixed price
and (ii) in the case of volumes subject to a floor or ceiling hedge (including
a collar), at the price set out in the preceding clause (b)(i), but not to
exceed such ceiling or to be less than such floor.

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

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

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

          Section 1.04     Terms
Generally; Rules of Construction. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including”
as used in this Agreement shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth in the Loan Documents), (b) any reference herein to
any law shall be construed as referring to such law as amended, modified,
codified or reenacted, in whole or in part, and in effect from time to time,
(c) any reference herein to any Person shall be construed to include such
Person’s successors and assigns (subject to the restrictions contained in the
Loan Documents), (d) the words “herein”, “hereof” and “hereunder”,
and words of similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular

22

provision hereof, (e) with respect to the determination of any time
period, the word “from” means “from and including” and the word “to”
means “to and including” and (f) any reference herein to Articles,
Sections, Annexes, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Annexes, Exhibits and Schedules to, this
Agreement. No provision of this Agreement or any other Loan Document shall be
interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

          Section 1.05     Accounting
Terms and Determinations; GAAP. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all financial
statements and certificates and reports as to financial matters required to be
furnished to the Administrative Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
Financial Statements except for changes in which the Borrower’s independent
certified public accountants concur and which are disclosed to the
Administrative Agent on the next date on which financial statements are
required to be delivered to the Lenders pursuant to Section 8.01(a);
provided that, unless the Borrower and the Majority Lenders shall otherwise
agree in writing, no such change shall modify or affect the manner in which
compliance with the covenants contained herein is computed such that all such
computations shall be conducted utilizing financial information presented
consistently with prior periods.

ARTICLE II

The Credits

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

          Section 2.02     Loans
and Borrowings.

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

23

	
  

 	
  

 
	
  

 	
                          (c)          Minimum
 Amounts; Limitation on Number of Borrowings. At the commencement of each
 Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an
 aggregate amount that is an integral multiple of $100,000 and not less than
 $100,000. At the time that each ABR Borrowing is made, such Borrowing shall
 be in an aggregate amount that is an integral multiple of $100,000 and not
 less than $100,000; provided that an ABR Borrowing may be in an aggregate
 amount that is equal to the entire unused balance of the total Commitments or
 that is required to finance the reimbursement of an LC Disbursement as
 contemplated by Section 2.08(e). Borrowings of more than one Type may be
 outstanding at the same time, provided that there shall not at any time be
 more than a total of six (6) Eurodollar Borrowings outstanding.
 Notwithstanding any other provision of this Agreement, the Borrower shall not
 be entitled to request, or to elect to convert or continue, any Borrowing if
 the Interest Period requested with respect thereto would end after the
 Termination Date.

 
	
  

 	
  

 
	
  

 	
                          (d)          Notes.
 The Loans made by each Lender shall be evidenced by a single promissory note
 of the Borrower upon request by such Lender in substantially the form of
 Exhibit A, dated, in the case of (i) any Lender party hereto as of the date
 of this Agreement, as of the date of this Agreement, (ii) any Lender that
 becomes a party hereto pursuant to an Assignment and Assumption, as of the
 effective date of the Assignment and Assumption, or (iii) any Lender that
 becomes a party hereto in connection with an increase in the Aggregate
 Maximum Credit Amounts pursuant to Section 2.06(c), as of the effective date
 of such increase, payable to such Lender or its registered assigns in a
 principal amount equal to its Maximum Credit Amount as in effect on such
 date, and otherwise duly completed. In the event that any Lender’s Maximum
 Credit Amount increases or decreases for any reason (whether pursuant to
 Section 2.06, Section 12.04 or otherwise), the Borrower shall
 deliver or cause to be delivered on the effective date of such increase or
 decrease, a new Note payable to such Lender in a principal amount equal to
 its Maximum Credit Amount after giving effect to such increase or decrease,
 and otherwise duly completed. The date, amount, Type, interest rate and, if
 applicable, Interest Period of each Loan made by each Lender, and all
 payments made on account of the principal thereof, shall be recorded by such
 Lender on its books for its Note. Failure to make any such notation shall not
 affect any Lender’s or the Borrower’s rights or obligations in respect of
 such Loans. Upon surrender of any Note at the principal office of
 Administrative Agent for registration of transfer or exchange (and in the
 case of a surrender for registration of transfer, duly endorsed or
 accompanied by a written instrument of transfer duly executed by the
 registered holder or its attorney duly authorized in writing and accompanied
 by the address for notices of each transferee of such Note or part thereof),
 and an assignment agreement in form and substance acceptable to
 Administrative Agent whereby the assignee holder agrees to be bound by the
 terms hereof that are applicable to holders, shall execute and deliver, at
 Borrower’s expense, a new Note in exchange therefor.

 

          Section 2.03     Requests
for Borrowings. To request a Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., Houston time, three (3)
Business Days before the date of the proposed Borrowing or (b) in the case of
an ABR Borrowing, not later than 11:00 a.m., Houston time, one (1) Business Day
before the date of the proposed Borrowing; provided that no 

24

such notice shall be required for any deemed request of an ABR
Borrowing to finance the reimbursement of an LC Disbursement as provided in
Section 2.08(e) and provided further that for purposes of this
Section 2.03 “Business Day” shall not include the Australian bank
holidays listed on Schedule 2.03. 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 substantially the
form of Exhibit B and signed by the Borrower. Each such telephonic and written
Borrowing Request shall specify the following information in compliance with
Section 2.02:

	
  

 	
  

 
	
  

 	
                               (i)          the
 aggregate amount of the requested Borrowing;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                               (iv)         in
 the case of a Eurodollar Borrowing, the initial Interest Period to be
 applicable thereto, which shall be a period contemplated by the definition of
 the term “Interest Period” and which shall not extend beyond the
 Termination Date;

 
	
  

 	
  

 
	
  

 	
                               (v)          the
 amount of the then effective Borrowing Base, (or Aggregate Maximum Credit
 Amounts, if such amount is less than the then effective Borrowing Base), the
 current total Revolving Credit Exposures (without regard to the requested
 Borrowing) and the pro forma total Revolving Credit
 Exposures (giving effect to the requested Borrowing); and

 
	
  

 	
  

 
	
  

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

 

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

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

          Section 2.04     Interest
Elections; Conversions.

	
  

 	
  

 
	
  

 	
                          (a)          Conversion
 and Continuance. Each Borrowing initially shall be of the Type specified
 in the applicable Borrowing Request and, in the case of a Eurodollar
 Borrowing, shall have an initial Interest Period as specified in such
 Borrowing Request. 

 

25

	
  

 	
  

 
	
  

 	
 Thereafter, the Borrower may elect to convert such Borrowing to a
 different Type or to continue such Borrowing and, in the case of a Eurodollar
 Borrowing, may elect Interest Periods therefor, all as provided in this
 Section 2.04. The Borrower may elect different options with respect to
 different portions of the affected Borrowing, in which case each such portion
 shall be allocated ratably among the Lenders holding the Loans comprising
 such Borrowing, and the Loans comprising each such portion shall be
 considered a separate Borrowing; provided that, each such portion of the
 affected Borrowing shall be in an aggregate amount that is an integral
 multiple of $100,000 and not less than $100,000.

 
	
  

 	
  

 
	
  

 	
                     (b)          Interest
 Election Requests; Conversion Requests. To make an election or
 conversion, as the case may be, pursuant to this Section 2.04, the
 Borrower shall notify the Administrative Agent of such election by telephone
 by the time that a Borrowing Request would be required under
 Section 2.03 if the Borrower was 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 substantially
 the form of Exhibit C and signed by the Borrower.

 
	
  

 	
  

 
	
  

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

 

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (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”
 and which shall not extend beyond the Termination Date.

 

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

	
  

 	
  

 
	
  

 	
                     (d)          Notice
 to Lenders by the Administrative Agent. Promptly following receipt of an
 Interest Election Request, the Administrative Agent shall advise 

 

26

	
  

 	
  

 
	
  

 	
 each Lender of the details thereof and of such Lender’s portion of
 each resulting Borrowing.

 
	
  

 	
  

 
	
  

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

 

          Section 2.05     Funding
of Borrowings.

	
  

 	
  

 
	
  

 	
                     (a)          Funding
 by Lenders. Each Lender shall make each Loan to be made by it hereunder
 on the funding date in the Borrowing Request by wire transfer of immediately
 available funds by 12:00 noon, Houston time, to the account of the
 Administrative Agent most recently designated by it for such purpose by
 notice to the Lenders. The Administrative Agent will make such Loans
 available to the Borrower by promptly crediting the amounts so received, in
 like funds, to an account of the Borrower and designated by the Borrower in
 the applicable Borrowing Request; provided that ABR Loans made to finance the
 reimbursement of an LC Disbursement as provided in Section 2.08(e) shall
 be remitted by the Administrative Agent to the Issuing Bank. Nothing herein
 shall be deemed to obligate any Lender to obtain the funds for its Loan in
 any particular place or manner or to constitute a representation by any
 Lender that it has obtained or will obtain the funds for its Loan in any
 particular place or manner.

 
	
  

 	
  

 
	
  

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

 

27

          Section 2.06     Termination,
Reduction and Increase of Aggregate Maximum Credit Amounts.

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                               (ii)          The
 Borrower shall notify the Administrative Agent of any election to terminate
 or reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i)
 at least three (3) Business Days prior to the effective date of such
 termination or reduction, specifying such election and the effective date
 thereof. Promptly following receipt of any notice, the Administrative Agent
 shall advise the Lenders of the contents thereof. Each notice delivered by
 the Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable.
 Any termination or reduction of the Aggregate Maximum Credit Amounts shall be
 permanent and may not be reinstated, except pursuant to Section 2.06(c). Each
 reduction of the Aggregate Maximum Credit Amounts shall be made ratably among
 the Lenders in accordance with each Lender’s Applicable Percentage.

 

	
  

 	
  

 
	
  

 	
                           (c)          Optional
 Increase in Aggregate Maximum Credit Amounts.

 

	
  

 	
  

 
	
  

 	
                                         (i)           Subject
 to the conditions set forth in Section 2.06(c)(ii), the Borrower may increase
 the Aggregate Maximum Credit Amounts then in effect by increasing the Maximum
 Credit Amount of a Lender or by causing a Person that at such time is not a
 Lender to become a Lender (an “Additional Lender”).

 
	
  

 	
  

 
	
  

 	
                                         (ii)          Any
 increase in the Aggregate Maximum Credit Amounts shall be subject to the
 following additional conditions:

 

	
  

 	
  

 
	
  

 	
                                                        (A)          such
 increase shall not be less than $20,000,000 and shall not be more than the
 Administrative Agent’s Maximum Credit Amount, unless the Administrative Agent
 otherwise consents; provided, no such increase shall be permitted
 without the consent of the Administrative Agent if after giving effect
 thereto the Aggregate Maximum Credit Amounts would exceed $75,000,000, and provided,
 further, 

 

28

	
  

 	
  

 
	
  

 	
 no such increase shall be permitted if after giving effect thereto
 the Aggregate Maximum Credit Amounts would exceed $500,000,000;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                                                        (C)          on
 the effective date of such increase, no Eurodollar Borrowings shall be
 outstanding or if any Eurodollar Borrowings are outstanding, then the
 effective date of such increase shall be the last day of the Interest Period
 in respect of such Eurodollar Borrowings unless the Borrower pays compensation
 required by Seciton 5.02;

 
	
  

 	
  

 
	
  

 	
                                                        (D)          no
 Lender’s Maximum Credit Amount may be increased without the consent of such
 Lender, which consent may be withheld in such Lender’s sole discretion;

 
	
  

 	
  

 
	
  

 	
                                                        (E)          if
 the Borrower elects to increase the Aggregate Maximum Credit Amounts by
 increasing the Maximum Credit Amount of a Lender, the Borrower and such
 Lender shall execute and deliver to the Administrative Agent a certificate
 substantially in the form of Exhibit J-1 (a “Maximum Credit Amount
 Increase Certificate”), together with a processing and recordation fee of
 $3,500, and the Borrower shall deliver, if requested by such Lender, a new
 Note payable to the order of such Lender in a principal amount equal to its
 Maximum Credit Amount after giving effect to such increase, and otherwise
 duly completed; 

 
	
  

 	
  

 
	
  

 	
                                                        (F)          If
 the Borrower elects to increase the Aggregate Maximum Credit Amounts by
 causing an Additional Lender to become a party to this Agreement, then the
 Borrower and such Additional Lender shall execute and deliver to the
 Administrative Agent a certificate substantially in the form of Exhibit J-2
 (an “Additional Lender Certificate”), together with an Administrative
 Questionnaire and a processing and recordation fee of $3,500, and the
 Borrower shall deliver, if requested by such Lender, a Note payable to the
 order of such Additional Lender in a principal amount equal to its Maximum
 Credit Amount, and otherwise duly completed; and

 
	
  

 	
  

 
	
  

 	
                                                        (G)          Borrower
 shall have satisfied the title requirements outlined on Schedule 8.19(b).

 

	
  

 	
  

 
	
  

 	
                                        (iii)          Subject
 to acceptance and recording thereof pursuant to Section 2.06(c)(iv), from and
 after the effective date specified in the Maximum Credit Amount Increase
 Certificate or the Additional Lender Certificate (or if any Eurodollar
 Borrowings are outstanding, then the last day of the Interest Period in
 respect of such Eurodollar Borrowings, unless the Borrower has paid
 compensation required by Section 5.02): (A) the amount of the Aggregate
 Maximum Credit Amounts shall be increased as set forth therein, and (B) in
 the case of an Additional Lender Certificate, any Additional Lender party
 thereto shall be a party to this Agreement and the other Loan Documents and
 have the rights and obligations of a Lender under this Agreement and the
 other Loan Documents. In addition, the Lender or the Additional Lender, as
 applicable, shall

 

29

	
  

 	
  

 
	
  

 	
 purchase a pro rata portion of the outstanding Loans (and
 participation interests in Letters of Credit) of each of the other Lenders
 (and such Lenders hereby agree to sell and to take all such further action to
 effectuate such sale) such that each Lender (including any Additional Lender,
 if applicable) shall hold its Applicable Percentage of the outstanding Loans
 (and participation interests) after giving effect to the increase in the Aggregate
 Maximum Credit Amounts.

 
	
  

 	
  

 
	
  

 	
                                         (iv)          Upon
 its receipt of a duly completed Maximum Credit Amount Increase Certificate or
 an Additional Lender Certificate, executed by the Borrower and the Lender or
 the Borrower and the Additional Lender party thereto, as applicable, the
 processing and recording fee referred to in Section 2.06(c)(ii), the
 Administrative Questionnaire referred to in Section 2.06(c)(ii), if
 applicable, and the written consent of the Administrative Agent to such
 increase required by Section 2.06(c)(i), the Administrative Agent shall
 accept such Maximum Credit Amount Increase Certificate or Additional Lender
 Certificate and record the information contained therein in the Register
 required to be maintained by the Administrative Agent pursuant to
 12.04(b)(iv). No increase in the Aggregate Maximum Credit Amounts shall be
 effective for purposes of this Agreement unless it has been recorded in the
 Register as provided in this Section 2.06(c)(iv).

 

          Section 2.07     Borrowing
Base.

	
  

 	
  

 
	
  

 	
                          (a)          Initial
 Borrowing Base. For the period from and including the Effective Date to
 but excluding the first Redetermination Date, the amount of the Borrowing
 Base shall be $150,000,000. Notwithstanding the foregoing, the Borrowing Base
 may be subject to further adjustments from time to time pursuant to Section
 2.07(e), Section 8.13(c) or Section 9.12.

 
	
  

 	
  

 
	
  

 	
                          (b)          Scheduled
 and Interim Redeterminations. The Borrowing Base shall be redetermined
 semi-annually in accordance with this Section 2.07 (a “Scheduled
 Redetermination”), and, subject to Section 2.07(d), such
 redetermined Borrowing Base shall become effective and applicable to the
 Borrower, the Issuing Bank and the Lenders on May 1st and November 1st of
 each year, commencing November 1, 2011. In addition, one time between
 Scheduled Redeterminations (i) the Borrower may, by notifying the
 Administrative Agent thereof, (ii) the Administrative Agent may, by notifying
 the Borrower thereof and (iii) the Required Lenders may, by directing the
 Administrative Agent to notify the Borrower thereof, each elect to cause the
 Borrowing Base to be redetermined between Scheduled Redeterminations (an “Interim
 Redetermination”) in accordance with this Section 2.07.

 
	
  

 	
  

 
	
  

 	
                          (c)          Scheduled
 and Interim Redetermination Procedure.

 

	
  

 	
  

 
	
  

 	
                               (i)            Each
 Scheduled Redetermination and each Interim Redetermination shall be
 effectuated as follows: Upon receipt by the Administrative Agent of (A) the
 Reserve Report and the certificate required to be delivered by the Borrower
 to the Administrative Agent, (1) in the case of a Scheduled Redetermination,
 pursuant to Section 8.12(a) and (c), and (2) in the 

 

30

	
  

 	
  

 
	
  

 	
 case of an Interim Redetermination, pursuant to Section 8.12(b)
 and (c), and (B) such other reports, data and supplemental information,
 including, without limitation, the information provided pursuant to
 Section 8.12(c), as may, from time to time, be reasonably requested by
 the Required Lenders (the Reserve Report, such certificate and such other
 reports, data and supplemental information being the “Engineering Reports”),
 the Administrative Agent shall evaluate the information contained in the Engineering
 Reports and shall, in its sole discretion, propose a new Borrowing Base (the
 “Proposed Borrowing Base”) based upon such information and such other
 information (including, without limitation, the status of title information
 with respect to the Oil and Gas Properties as described in the Engineering
 Reports and the existence of any other Debt, the internal credit evaluation
 and other financial information) as the Administrative Agent deems
 appropriate in its sole discretion. 

 
	
  

 	
  

 
	
  

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

 

	
  

 	
  

 
	
  

 	
                                    (A)          in
 the case of a Scheduled Redetermination (1) if the Administrative Agent shall
 have received the Engineering Reports required to be delivered by the
 Borrower pursuant to Section 8.12(a) and (c) and other information
 requested by the Administrative Agent in a timely and complete manner, then
 on or before April 15th and October 15th of such year following the date of
 delivery or (2) if the Administrative Agent shall not have received the
 Engineering Reports required to be delivered by the Borrower pursuant to
 Section 8.12(a) and (c) in a timely and complete manner, then promptly
 after the Administrative Agent has received complete Engineering Reports from
 the Borrower and has had a reasonable opportunity to determine the Proposed
 Borrowing Base in accordance with Section 2.07(c)(i); and

 
	
  

 	
  

 
	
  

 	
                                    (B)          in
 the case of an Interim Redetermination, promptly, and in any event, within
 thirty (30) days after the Administrative Agent has received the required
 Engineering Reports.

 

	
  

 	
  

 
	
  

 	
                               (iii)          Any
 Proposed Borrowing Base that would increase the Borrowing Base then in effect
 must be approved by all of the Lenders in their sole discretion as provided
 in this Section 2.07(c)(iii); and any Proposed Borrowing Base that would
 decrease or maintain the Borrowing Base then in effect must be approved by
 the Required Lenders as provided in this Section 2.07(c)(iii). Upon
 receipt of the Proposed Borrowing Base Notice, each Lender shall have fifteen
 (15) days to agree with the Proposed Borrowing Base or disagree with the
 Proposed Borrowing Base by proposing an alternate Borrowing Base. If at the
 end of such fifteen (15) days, any Lender has not communicated its approval
 or disapproval in writing to the Administrative Agent, such silence shall be
 deemed to be a rejection of the Proposed Borrowing Base. If, at the end of
 such 15-day period, all of the Lenders, in the case of a Proposed Borrowing
 Base that would

 

31

	
  

 	
  

 
	
  

 	
 increase the Borrowing Base then in effect, or the Required Lenders,
 in the case of a Proposed Borrowing Base that would decrease or maintain the
 Borrowing Base then in effect, have approved, as aforesaid, then the Proposed
 Borrowing Base shall become the new Borrowing Base, effective on the date
 specified in Section 2.07(d). If, however, at the end of such 15-day
 period, all of the Lenders or the Required Lenders, as applicable, have not
 approved, as aforesaid, then the Administrative Agent shall poll the Lenders
 to ascertain the highest Borrowing Base then acceptable to all of the Lenders
 in their reasonable discretion or the Required Lenders, as applicable, and,
 so long as such amount does not increase the Borrowing Base then in effect,
 such amount shall become the new Borrowing Base, effective on the date
 specified in Section 2.07(d).

 
	
  

 	
  

 
	
  

 	
                               (iv)        In
 connection with any Scheduled Redetermination or Interim Redetermination, the
 Administrative Agent and the Majority Lenders may propose a new definition
 for “Applicable Margin.” If the Borrower agrees to such new
 definition, such definition shall be in effect until the next Redetermination
 Date; provided that no decrease in the Applicable Margin for Loans made by
 any Lender shall apply to such Lender without its consent. 

 

	
  

 	
  

 
	
  

 	
                          (d)          Effectiveness
 of a Redetermined Borrowing Base. After a redetermined Borrowing Base is
 approved or is deemed to have been approved by all of the Lenders or Required
 Lenders, as applicable, pursuant to Section 2.07(c)(iii), or adjusted
 pursuant to Section 2.07(e), Section 8.13(c) or Section 9.12(d), the
 Administrative Agent shall notify the Borrower and the Lenders of the amount
 of the redetermined or adjusted Borrowing Base (the “New Borrowing Base
 Notice”), and such amount shall become the new Borrowing Base, effective
 and applicable to the Borrower, the Administrative Agent, the Issuing Bank
 and the Lenders:

 

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                               (ii)         in
 the case of an Interim Redetermination, on the Business Day next succeeding
 delivery of such notice. 

 

	
  

 	
  

 
	
  

 	
                          (e)          In
 addition to the Borrowing Base redeterminations provided for otherwise
 herein, if the Borrower or any Subsidiary novates, assigns, unwinds,
 terminates, or amends any BB Hedge, then the Borrowing Base shall
 automatically reduce by an amount equal to the negative Net Hedge Value, if
 any, resulting from such event. Such mandatory reduction of the Borrowing
 Base shall be effective as of the date the Administrative Agent notifies the
 Borrower of the negative Net Hedge Value resulting from such event.

 

32

Such amount shall then become the Borrowing Base until the next
Scheduled Redetermination Date, the next Interim Redetermination Date or the
next adjustment to the Borrowing Base under Section 2.07(e),
Section 8.13(c) or Section 9.12, whichever occurs first.
Notwithstanding the foregoing, no Scheduled Redetermination or Interim
Redetermination shall become effective until the New Borrowing Base Notice
related thereto is received by the Borrower.

          Section 2.08     Letters
of Credit.

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (b)          Notice
 of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
 request the issuance of a Letter of Credit (or the amendment, renewal or
 extension of an outstanding Letter of Credit), the Borrower shall hand
 deliver or telecopy (or transmit by electronic communication, if arrangements
 for doing so have been approved by the Issuing Bank) to the Issuing Bank and
 the Administrative Agent (not less than seven (7) Business Days in advance of
 the requested date of issuance, amendment, renewal or extension) a notice:

 

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

33

	
  

 	
  

 
	
  

 	
 requested Letter of Credit or the requested amendment, renewal or
 extension of an outstanding Letter of Credit).

 

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

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

Subject to the terms and conditions contained herein, the Issuing Bank
shall then issue the requested Letter of Credit on the Borrower’s behalf. 

	
  

 	
  

 
	
  

 	
                          (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 (5) Business Days prior to the Termination Date.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (e)          Reimbursement.
 If the Issuing Bank shall make any LC Disbursement in respect of a Letter of
 Credit, the Borrower shall reimburse the Administrative Agent (for itself or
 any of its Affiliates) such LC Disbursement by paying to the Administrative
 Agent an amount equal to such LC Disbursement not later than 11:00 a.m.,
 Houston time, on the date that such LC Disbursement is made, if the Borrower
 shall have received notice of such LC Disbursement prior to 9:00 a.m.,
 Houston time, on such date, or, if such notice has not been received by the
 Borrower

 

34

	
  

 	
  

 
	
  

 	
 prior to such time on such date, then not later than 11:00 a.m.,
 Houston time, on (i) the Business Day that the Borrower receives such notice,
 if such notice is received prior to 9:00 a.m., Houston time, on the day of
 receipt, or (ii) the Business Day immediately following the day that the
 Borrower receives such notice, if such notice is not received prior to such
 time on the day of receipt; provided that any such LC Disbursement shall,
 subject to the conditions to Borrowing set forth herein, be deemed to have
 requested, and the Borrower does hereby request under such circumstances,
 that such payment be financed with an ABR Borrowing in an equivalent amount
 and, to the extent so financed, the Borrower’s obligation to make such
 payment shall be discharged and replaced by the resulting ABR Borrowing. If
 the Borrower fails to make such payment when due, the Administrative Agent
 shall notify each Lender of the applicable LC Disbursement, the payment then
 due from the Borrower in respect thereof and such Lender’s Applicable
 Percentage thereof. Promptly following receipt of such notice, each Lender shall
 pay to the Administrative Agent its Applicable Percentage of the payment then
 due from the Borrower, in the same manner as provided in Section 2.05
 with respect to Loans made by such Lender (and Section 2.05 shall apply,
 mutatis
 mutandis, to the payment obligations of the Lenders), and the
 Administrative Agent shall promptly pay to the Issuing Bank the amounts so
 received by it from the Lenders. Promptly following receipt by the
 Administrative Agent of any payment from the Borrower pursuant to this Section 2.08(e),
 the Administrative Agent shall distribute such payment to the Issuing Bank
 or, to the extent that any Lenders that have made payments pursuant to this
 Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders and
 the Issuing Bank as their interests may appear. Any payment made by a Lender
 pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any
 LC Disbursement (other than the funding of ABR Loans as contemplated above)
 shall not constitute a Loan and shall not relieve the Borrower of its
 obligation to reimburse such LC Disbursement.

 
	
  

 	
  

 
	
  

 	
                          (f)          Obligations
 Absolute. The Borrower’s obligation to reimburse LC Disbursements as
 provided in Section 2.08(e) shall be absolute, unconditional and irrevocable,
 and shall be performed strictly in accordance with the terms of this
 Agreement under any and all circumstances whatsoever and irrespective of (i)
 any lack of validity or enforceability of any Letter of Credit, any Letter of
 Credit Agreement or this Agreement, or any term or provision therein, (ii)
 any draft or other document presented under a Letter of Credit proving to be
 forged, 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 any Letter of
 Credit Agreement, or (iv) any other event or circumstance whatsoever, whether
 or not similar to any of the foregoing, that might, but for the provisions of
 this Section 2.08(f), constitute a legal or equitable discharge of, or
 provide a right of setoff against, the Borrower’s obligations hereunder.
 Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any
 of their Related Parties shall have any liability or responsibility by reason
 of or in connection with the issuance or transfer of any Letter of Credit or
 any payment or failure to make any payment thereunder (irrespective of any of
 the circumstances referred to in the preceding sentence), or any error,
 omission, interruption, loss or delay in transmission or delivery of any
 draft, notice or other communication under or relating to any Letter of
 Credit (including any document required to make a drawing thereunder), any
 error in 

 

35

	
  

 	
  

 	
  

 
	
  

 	
 interpretation of technical terms or any consequence arising from
 causes beyond the control of the Issuing Bank or the Administrative Agent. In
 furtherance of the foregoing and without limiting the generality thereof, the
 Borrower agrees that, with respect to documents presented which appear on
 their face to be in substantial compliance with the terms of a Letter of
 Credit, the Issuing Bank may, in its sole discretion, either accept and make
 payment upon such documents without responsibility for further investigation,
 regardless of any notice or information to the contrary, or refuse to accept
 and make payment upon such documents if such documents are not in strict
 compliance with the terms of such Letter of Credit.

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
                          (i)          Cash
 Collateralization.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                             (i)          If
 (a) any Event of Default shall occur and be continuing and the Borrower
 receives notice from the Administrative Agent or the Majority Lenders
 demanding that the Borrower Cash Collateralize the outstanding LC Exposure
 pursuant to this Section 2.08(i), (b) the Borrower is required to Cash
 Collateralize the excess attributable to an LC Exposure in connection with
 any prepayment pursuant to Section 3.04(c), or (c) the Borrower is
 required to Cash Collateralize a Defaulting Lender’s LC Exposure pursuant to
 Section 4.03(c)(iii)(B), then the Borrower shall Cash Collateralize such
 LC Exposure or the excess attributable to such LC Exposure, as the case may
 be, as of such date plus any accrued and unpaid interest thereon; provided
 that the obligation to Cash Collateralize pursuant to this Section 2.08(i)
 shall become effective immediately, and immediately due and payable, without
 demand or other notice of any kind, upon the occurrence of any Event of
 Default described in Section 10.01(h) or Section 10.01(i). 

 

36

	
  

 	
  

 
	
  

 	
                             (ii)          The
 Borrower hereby grants to the Administrative Agent, for the benefit of the
 Issuing Bank and the Lenders, an exclusive first priority and continuing
 perfected security interest in and Lien on each account (a “Collateral
 Account”) in which the Borrower has Cash Collateralized any obligation
 hereunder and all cash, checks, drafts, certificates and instruments, if any,
 from time to time deposited or held in such Collateral Account, all deposits
 or wire transfers made thereto, any and all investments purchased with funds
 deposited in such account, all interest, dividends, cash, instruments,
 financial assets and other Property from time to time received, receivable or
 otherwise payable in respect of, or in exchange for, any or all of the
 foregoing, and all proceeds, products, accessions, rents, profits, income and
 benefits therefrom, and any substitutions and replacements therefor
 (collectively, the “Cash Collateral”).

 
	
  

 	
  

 
	
  

 	
                             (iii)          The
 Borrower’s obligation to Cash Collateralize pursuant to this Section 2.08(i)
 shall be absolute and unconditional, without regard to whether any
 beneficiary of any Letter of Credit has attempted to draw down all or a portion
 of such amount under the terms of a Letter of Credit, and, to the fullest
 extent permitted by applicable law, shall not be subject to any defense or be
 affected by a right of set-off, counterclaim or recoupment which the Borrower
 or any Subsidiary may now or hereafter have against any such beneficiary, the
 Issuing Bank, the Administrative Agent, the Lenders or any other Person for
 any reason whatsoever.

 
	
  

 	
  

 
	
  

 	
                             (iv)          Each
 Collateral Account and all Cash Collateral shall secure the payment and
 performance of the Borrower’s and the Guarantors’ obligations under this
 Agreement and the other Loan Documents. The Administrative Agent shall have
 exclusive dominion and control, including the exclusive right of withdrawal,
 over each Collateral Account and the Cash Collateral. Other than any interest
 earned on the investment of such deposits, which investments shall be made at
 the option and reasonable 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 each
 Collateral Account. Moneys in such account shall be applied by the
 Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which
 it has not been reimbursed and, to the extent not so applied, shall be held
 for the satisfaction of the reimbursement obligations of the Borrower for the
 LC Exposure at such time or, if the maturity of the Loans has been
 accelerated, be applied to satisfy other obligations of the Borrower and the
 Guarantors under this Agreement or the other Loan Documents. If the Borrower
 is required to Cash Collateralize hereunder as a result of the occurrence of
 an Event of Default, and the Borrower is not otherwise required to pay to the
 Administrative Agent the excess attributable to an LC Exposure in connection
 with any prepayment pursuant to Section 3.04(c) or Cash Collateralize a
 Defaulting Lender’s LC Exposure pursuant to Section 4.03(c)(iii)(B), then such
 amount (to the extent not applied as aforesaid) shall be returned to the
 Borrower within three (3) Business Days after all Events of Default have been
 cured or waived.

 

37

	
  

 	
  

 
	
  

 	
                          (j)          Confirmation.
 Upon written request of the Borrower, the Issuing Bank shall provide the
 Borrower, at the sole cost and expense of the Borrower, with a confirmation
 of the existence of an outstanding Letter of Credit.

 

          Section 2.09     Loans
and Borrowings Under Existing Credit Agreement. In connection with the
amendment and restatement of the Existing Credit Agreement:

	
  

 	
  

 
	
  

 	
                          (a)          each
 “ABR Borrowing” outstanding under the Existing Credit Agreement shall
 be extended and renewed so as to continue as a new ABR Borrowing under this
 Agreement;

 
	
  

 	
  

 
	
  

 	
                          (b)          each
 “Eurodollar Borrowing” outstanding under the Existing Credit Agreement
 shall be deemed repaid on the Effective Date and funded as a new Eurodollar
 Borrowing under this Agreement; and

 
	
  

 	
  

 
	
  

 	
                          (c)          the
 Existing Credit Agreement and the commitments thereunder shall be superseded
 by this Agreement and such commitments shall terminate.

 

ARTICLE III

Payments of Principal and Interest; Prepayments; Fees

          Section 3.01     Repayment
of Loans. The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Loan in full in cash on the Termination Date. All payments by
the Borrower of principal, interest, fees and other obligations shall be made
in dollars in immediately available funds, and shall be absolute and
unconditional, without defense, rescission, recoupment, setoff or counterclaim,
free of any restriction or condition.

          Section 3.02     Interest.

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (c)          Post
 Default Rate. Notwithstanding the foregoing, if an Event of Default has
 occurred and is continuing, or if any principal of or interest on any Loan or
 any fee or other amount payable by the Borrower or any Guarantor hereunder or
 under any other Loan Document is not paid when due, whether at stated
 maturity, upon acceleration or otherwise, and including any payments in
 respect of a Borrowing Base Deficiency under Section 3.04(c), then all
 Loans outstanding, in the case of an Event of Default, and such overdue
 amount, in the case of a failure to pay amounts when due, shall bear
 interest, after as well as before judgment, at the lesser of (i) the Highest
 Lawful Rate or (ii) the Post Default Rate.

 

38

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (e)          Interest
 Rate Computations. All interest hereunder shall be computed on the basis
 of a year of 360 days, unless such computation would exceed the Highest
 Lawful Rate, in which case interest shall be computed on the basis of a year
 of 365 days (or 366 days in a leap year), 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 the
 LIBO Rate shall be determined by the Administrative Agent, and such
 determination shall be conclusive absent manifest error, and be binding upon
 the parties hereto.

 

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

	
  

 	
  

 
	
  

 	
                          (a)          the
 Administrative Agent determines (which determination shall be conclusive
 absent manifest error) (i) that adequate and reasonable means do not exist
 for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest
 Period or (ii) deposits (whether in dollars or an alternative currency) are
 not being offered to Lenders in the applicable offshore interbank market for
 such currency for the applicable amount and Interest Period of such
 Eurodollar Borrowing; or

 
	
  

 	
  

 
	
  

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

 

then the Administrative Agent shall give notice thereof to the Borrower
and the Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies the Borrower and the Lenders that
the circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made either as an ABR Borrowing or at an alternate rate of
interest determined by all Lenders, sufficient to cover each Lender’s cost of
funds.

          Section 3.04     Prepayments.

	
  

 	
  

 
	
  

 	
                          (a)          Optional
 Prepayments. Subject to any break funding costs payable pursuant to
 Section 5.02 and prior notice in accordance with Section 3.04(b),
 the 

 

39

	
  

 	
  

 
	
  

 	
 Borrower shall have the right at any time and from time to time to
 prepay any Borrowing in whole or in part, in minimum increments of $100,000
 or if less than $100,000, the remaining balance of the Loans.

 
	
  

 	
  

 
	
  

 	
                          (b)          Notice
 and Terms of Optional Prepayment. The Borrower shall notify the
 Administrative Agent by telephone (confirmed by telecopy) of any prepayment
 hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later
 than 11:00 a.m., Houston time, three (3) Business Days before the date of
 prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
 than 11:00 a.m., Houston time, one Business Day before the date of
 prepayment. Each such notice shall be irrevocable and shall specify the
 prepayment date and the principal amount of each Borrowing or portion thereof
 to be prepaid. Promptly following receipt of any such notice relating to a
 Borrowing, the Administrative Agent shall advise the Lenders of the contents
 thereof. Each partial prepayment of any Borrowing shall be in an amount that
 would be permitted in the case of an advance of a Borrowing of the same Type
 as provided in Section 2.02. Each prepayment of a Borrowing shall be
 applied ratably to the Loans included in the prepaid Borrowing. Prepayments
 shall be accompanied by accrued interest to the extent required by
 Section 3.02.

 
	
  

 	
  

 
	
  

 	
                          (c)          Mandatory
 Prepayments.

 

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                               (ii)         Upon
 any redetermination of or adjustment to the amount of the Borrowing Base in
 accordance with Section 2.07 or Section 8.13(c), if the total
 Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing
 Base, then the Borrower shall either:

 

	
  

 	
  

 
	
  

 	
                                   (A)          prepay
 the Borrowings in an aggregate principal amount equal to such excess and if
 any excess remains after prepaying all of the Borrowings as a result of an LC
 Exposure, Cash Collateralized such excess as provided in Section 2.08(i); or

 
	
  

 	
  

 
	
  

 	
                                   (B)          pledge
 additional collateral not included in the most recent Reserve Report to the
 Administrative Agent having a fair market value equal to at least the amount
 of the deficiency or otherwise satisfactory to the Administrative Agent such
 that the total Revolving Credit Exposures are less than or equal to the
 Borrowing Base as redetermined or adjusted; or

 

40

	
  

 	
  

 
	
  

 	
                                   (C)          prepay
 the Borrowings in an aggregate principal amount equal to such excess (and if
 any excess remains after prepaying all of the Borrowings as a result of an LC
 Exposure, Cash Collateralize such excess as provided in Section 2.08(i)) in
 not more than six (6) equal monthly installments plus accrued interest
 thereon.

 
	
  

 	
  

 
	
  

 	
 The Borrower shall be obligated to make such prepayment and/or Cash
 Collateralize such excess pursuant to clause (A), pledge of collateral
 pursuant to clause (B) or first monthly prepayment pursuant to clause (C)
 within thirty (30) days following its receipt of the New Borrowing Base
 Notice in accordance with Section 2.07(d) or the date the adjustment
 occurs; provided that all payments required to be made pursuant to this
 Section 3.04(c)(ii) must be made on or prior to the Termination Date.

 

	
  

 	
  

 
	
  

 	
                               (iii)          Upon
 any adjustments to the Borrowing Base pursuant to Section 9.12, if the
 total Revolving Credit Exposures exceeds the Borrowing Base as adjusted, then
 the Borrower shall (a) prepay the Borrowings in an aggregate principal amount
 equal to such excess, and (b) if any excess remains after prepaying all of
 the Borrowings as a result of an LC Exposure, Cash Collateralize such excess
 as provided in Section 2.08(i). The Borrower shall be obligated to make such
 prepayment and/or Cash Collateralize such excess on the date it or any
 Subsidiary receives proceeds as a result of such disposition; provided that
 all payments required to be made pursuant to this Section 3.04(c)(iii)
 must be made on or prior to the Termination Date.

 
	
  

 	
  

 
	
  

 	
                               (iv)          If
 a Borrowing Base Deficiency exists, or during an Event of Default, the
 Borrower shall prepay the Borrowings with all net cash proceeds received from
 sales and other dispositions of Properties.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

	
  

 	
  

 
	
  

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

 

41

          Section 3.05     Fees.

	
  

 	
  

 
	
  

 	
                          (a)          Commitment
 Fees. The Borrower agrees to pay to the Administrative Agent for the
 account of each Lender a commitment fee, which shall accrue at the Commitment
 Fee Rate on the average daily unused amount of the Commitment of such Lender
 during the period from and including the date of this Agreement to but
 excluding the Termination Date. Accrued commitment fees shall be payable in
 arrears on the last day of March, June, September and December of each year
 and on the Termination Date, commencing on the first such date to occur after
 the date hereof. All commitment fees shall be computed on the basis of a year
 of 360 days, unless such computation would exceed the Highest Lawful Rate, in
 which case interest shall be computed on the basis of a year of 365 days (or
 366 days in a leap year), and shall be payable for the actual number of days
 elapsed (including the first day but excluding the last day).

 
	
  

 	
  

 
	
  

 	
                          (b)          Letter
 of Credit Fees. The Borrower agrees to pay (i) to the Administrative
 Agent for the account of each Lender, a participation fee with respect to its
 participations in Letters of Credit, which shall accrue at the same
 Applicable Margin used to determine the interest rate applicable to
 Eurodollar Loans on the average daily amount of such Lender’s LC Exposure
 (excluding any portion thereof attributable to unreimbursed LC Disbursements)
 during the period from and including the date of this Agreement to but
 excluding the later of the date on which such Lender’s Commitment terminates
 and the date on which such Lender ceases to have any LC Exposure, (ii) to the
 Issuing Bank, a fronting fee, which shall accrue at the rate of 0.325% per
 annum on the average daily amount of the LC Exposure (excluding any portion
 thereof attributable to unreimbursed LC Disbursements) during the period from
 and including the date of this Agreement to but excluding the later of the
 date of termination of the Commitments and the date on which there ceases to be
 any LC Exposure, provided that in no event shall such fee be less than $500
 during any quarter and (iii) to the Issuing Bank for its own account, the
 standard fees charged to it by the Issuing Bank with respect to the issuance,
 amendment, renewal or extension of any Letter of Credit or processing of
 drawings thereunder. Participation fees and fronting fees accrued through and
 including the last day of March, June, September and December of each year
 shall be payable on the third Business Day following such last day,
 commencing on the first such date to occur after the date of this Agreement;
 provided that all such fees shall be payable on the Termination Date and any
 such fees accruing after the Termination Date shall be payable on demand. Any
 other fees payable pursuant to this Section 3.05(b) shall be payable
 within ten (10) days after demand. All participation fees and fronting fees
 shall be computed on the basis of a year of 360 days, unless such computation
 would exceed the Highest Lawful Rate, in which case interest shall be
 computed on the basis of a year of 365 days (or 366 days in a leap year), and
 shall be payable for the actual number of days elapsed (including the first
 day but excluding the last day).

 
	
  

 	
  

 
	
  

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

 

42

ARTICLE IV

Payments; Pro Rata Treatment; Sharing of Set-offs

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (a)          Payments
 by the Borrower. The Borrower shall make each payment required to be made
 by it hereunder (whether of principal, interest, fees or reimbursement of LC
 Disbursements, or of amounts payable under Section 5.01,
 Section 5.02, Section 5.03 or otherwise) prior to 11:00 a.m.,
 Houston time, on the date when due, in immediately available funds, without
 defense, deduction, recoupment, set-off or counterclaim. Fees, once paid,
 shall be fully earned and shall not be refundable under any circumstances.
 Any amounts received after such time on any date may, in the discretion of
 the Administrative Agent, be deemed to have been received on the next
 succeeding Business Day for purposes of calculating interest thereon. All
 such payments shall be made to the Administrative Agent to the account of the
 Administrative Agent most recently designated by it for such purpose, except
 payments to be made directly to the Issuing Bank as expressly provided herein
 and except that payments pursuant to Section 5.01, Section 5.02,
 Section 5.03 and Section 12.03 shall be made directly to the
 Persons entitled thereto. The Administrative Agent shall distribute any such
 payments received by it for the account of any other Person to the
 appropriate recipient promptly following receipt thereof. If any payment
 hereunder shall be due on a day that is not a Business Day, the date for
 payment shall be extended to the next succeeding Business Day, and, in the
 case of any payment accruing interest, interest thereon shall be payable for
 the period of such extension. All payments hereunder shall be made in
 dollars.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (c)          Sharing
 of Payments by Lenders. If any Lender shall, by exercising any right of
 set-off or counterclaim or otherwise, obtain payment in respect of any
 principal of or interest on any of its Loans or participations in LC
 Disbursements resulting in such Lender receiving payment of a greater
 proportion of the aggregate amount of its Loans and participations in LC
 Disbursements and accrued interest thereon than the proportion received by
 any other Lender, then the Lender receiving such greater proportion shall
 purchase (for cash at face value) participations in the Loans and
 participations in LC Disbursements of other Lenders to the extent necessary
 so that the benefit of all such payments shall be shared by the Lenders
 ratably in accordance with the aggregate amount of principal of and accrued
 interest on their respective Loans and participations in LC Disbursements;
 provided that (i) if any such participations are purchased and all or any
 portion of the payment giving rise thereto is recovered, such 

 

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 participations shall be rescinded and the purchase price restored to
 the extent of such recovery, without interest, and (ii) the provisions of
 this Section 4.01(c) shall not be construed to apply to any payment made
 by the Borrower pursuant to and in accordance with the express terms of this
 Agreement or any payment obtained by a Lender as consideration for the
 assignment of or sale of a participation in any of its Loans or
 participations in LC Disbursements to any assignee or participant, other than
 to the Borrower or any Subsidiary or Affiliate thereof (as to which the
 provisions of this Section 4.01(c) shall apply). The Borrower consents
 to the foregoing and agrees, to the extent it may effectively do so under
 applicable law, that any Lender acquiring a participation pursuant to the
 foregoing arrangements may exercise against the Borrower rights of set-off
 and counterclaim with respect to such participation as fully as if such
 Lender were a direct creditor of the Borrower in the amount of such participation.

 

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

	
  

 	
  

 
	
  

 	
 Section 4.03     Deductions by the
 Administrative Agent; Defaulting Lender.

 
	
  

 	
  

 
	
  

 	
                          (a)          If
 any Lender shall fail to make any payment required to be made by it pursuant
 to Section 2.05(b), Section 2.08(c), Section 2.08(e) or
 Section 4.02, then the Administrative Agent may, in its sole discretion
 (notwithstanding any contrary provision hereof), apply any amounts thereafter
 received by the Administrative Agent for the account of such Lender to
 satisfy such Lender’s obligations under such Sections until all such
 unsatisfied obligations are fully paid in cash.

 
	
  

 	
  

 
	
  

 	
                          (b)          Payments
 to Defaulting Lenders. If a Defaulting Lender (or a Lender who would be a
 Defaulting Lender but for the expiration of the relevant grace period) as a
 result of the exercise of a set-off shall have received a payment in respect
 of its Revolving Credit Exposure which results in its Revolving Credit
 Exposure being less than its Applicable Percentage of the aggregate Revolving
 Credit Exposures, then no payments will be made to such Defaulting Lender
 until such time as such Defaulting Lender shall have complied with
 Section 4.03(c) and all amounts due and owing to the Lenders have been
 equalized in accordance with each Lender’s respective pro rata share of the
 Indebtedness. Further, if at any time prior to the acceleration or maturity
 of the Loans, the Administrative Agent shall receive any payment in respect
 of principal of a Loan or a reimbursement of an LC Disbursement while one or
 more Defaulting Lenders 

 

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 shall be party to this Agreement, the Administrative Agent shall
 apply such payment first to the Borrowing(s) for which such Defaulting
 Lender(s) shall have failed to fund its pro rata share until such time as
 such Borrowing(s) are paid in full or each Lender (including each Defaulting
 Lender) is owed its Applicable Percentage of all Loans then outstanding.
 After acceleration or maturity of the Loans, subject to the first sentence of
 this Section 4.03(b), all principal will be paid ratably as provided in
 Section 10.02(c).

 
	
  

 	
  

 
	
  

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

 

	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                  
                (ii)          the
 Commitment and Revolving Credit Exposure of such Defaulting Lender shall not
 be included in determining whether all Lenders, the Majority Lenders or the
 Required Lenders have taken or may take any action hereunder (including any
 consent to any amendment or waiver pursuant to Section 12.02), provided
 that any waiver, amendment or modification (A) that would increase the
 Commitment or the Maximum Credit Amount of such Defaulting Lender or (B)
 requiring the consent of all Lenders or each adversely affected Lender which
 affects such Defaulting Lender differently than all other Lenders or all
 other adversely affected Lenders, as the case may be, shall require the
 consent of such Defaulting Lender; and provided further that any
 redetermination or affirmation of the Borrowing Base shall occur without the
 participation of a Defaulting Lender, but the Commitment (i.e. the Applicable
 Percentage of the Borrowing Base of a Defaulting Lender) may not be increased
 without the consent of such Defaulting Lender.

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 

	
  

 	
  

 	
  

 	
  

 	
  

 
	 	
  

 	
  

 	
  

 	
                   
          (A)          all
 or any part of such LC Exposure shall be reallocated among the Non-Defaulting
 Lenders in accordance with their respective Applicable Percentages but only
 to the extent (1) the sum of all Non-Defaulting Lenders’ Revolving Credit
 Exposures plus such Defaulting Lender’s LC Exposure does not exceed the total
 of all Non-Defaulting Lenders’ Commitments, (2) the conditions set forth in
 Section 6.02 are satisfied at such time, and (3) the sum of each Non-Defaulting
 Lender’s Revolving Credit Exposure plus its reallocated share of such
 Defaulting Lender’s LC Exposure does not exceed such Non-Defaulting Lender’s
 Commitment; provided, that no such reallocation will constitute a waiver or
 release of any claim the Borrower, the Administrative Agent, the Issuing Bank
 or any Lender may have against such Defaulting Lender or cause such
 Defaulting Lender to be a Non-Defaulting Lender; 

 

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                     (B)          if
 the reallocation described in Section 4.03(c)(iii)(A) cannot, or can
 only partially, be effected, then the Borrower shall within one Business Day
 following notice by the Administrative Agent Cash Collateralize such
 Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation
 pursuant to Section 4.03(c)(iii)(A)) for so long as such LC Exposure is
 outstanding;

 
	 	
  

 	
  

 	
  

 
	 	
  

 	
  

 	
                     (C)          if
 the Borrower Cash Collateralizes any portion of such Defaulting Lender’s LC
 Exposure pursuant to Section 4.03(c)(iii)(B)), then the Borrower shall
 not be required to pay any fees to such Defaulting Lender pursuant to
 Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure
 during the period such Defaulting Lender’s LC Exposure is Cash Collateralized;

 
	 	
  

 	
  

 	
  

 
	 	
  

 	
  

 	
                     (D)          if
 the LC Exposure of the Non-Defaulting Lenders is reallocated pursuant to
 Section 4.03(c)(iii)(A), then the fees payable to the Lenders pursuant
 to Section 3.05(b) shall be adjusted in accordance with such Non-Defaulting
 Lenders’ Applicable Percentages; and

 
	 	
  

 	
  

 	
  

 
	 	
  

 	
  

 	
                     (E)          if
 any Defaulting Lender’s LC Exposure is neither Cash Collateralized nor
 reallocated pursuant to Section 4.03(c)(iii), then, without prejudice to
 any rights or remedies of the Issuing Bank or any Lender hereunder, all
 letter of credit fees payable under Section 3.05(b) with respect to such
 Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until
 such LC Exposure is Cash Collateralized and/or reallocated.

 

	
  

 	
  

 
	
  

 	
                     (d)          In
 the event that the Administrative Agent, the Borrower and the Issuing Bank
 each agrees that a Defaulting Lender has adequately remedied all matters that
 caused such Lender to be a Defaulting Lender, then the LC Exposure of the
 Lenders shall be readjusted to reflect the inclusion of such Lender’s
 Commitment and on such date such Lender shall purchase at par such of the
 Loans of the other Lenders as the Administrative Agent shall determine may be
 necessary in order for such Lender to hold such Loans in accordance with its
 Applicable Percentage; provided, that no adjustments will be made
 retroactively with respect to fees accrued while such Lender was a Defaulting
 Lender; and provided, further, that except to the extent otherwise expressly
 agreed by the affected parties, no change hereunder from Defaulting Lender to
 Non-Defaulting Lender will constitute a waiver or release of any claim of any
 party hereunder arising from such Lender having been a Defaulting Lender.

 

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

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an Event of Default has occurred and is continuing, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but
the Lenders will instead permit such proceeds to be paid to the Borrower and
its Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent
to take such actions as may be necessary to cause such proceeds to be paid to
the Borrower and/or such Subsidiaries.

ARTICLE V

Increased Costs; Break Funding Payments; Taxes; Illegality

          Section 5.01     Increased
Costs.

	
  

 	
  

 
	
  

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

 

	
  

 	
  

 	
  

 	
  

 
	 	
  

 	
  

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

 
	 	
  

 	
  

 	
  

 
	 	
  

 	
  

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

 

	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                 
         (c)          Certificates.
 A certificate of a Lender or the Issuing Bank setting forth the amount or
 amounts necessary to compensate such Lender or the Issuing Bank or its
 holding company, as the case may be, as specified in Section 5.01(a) or
 (b) shall be 

 

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 delivered to the Borrower and shall be conclusive absent manifest
 error. The Borrower shall pay such Lender or the Issuing Bank, as the case
 may be, the amount shown as due on any such certificate within ten (10) days
 after receipt thereof.

 
	
  

 	
  

 
	
  

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

 

          Section 5.02     Break
Funding Payments. In the event of (a) the payment of any principal of any
Eurodollar Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion of
any Eurodollar Loan into an ABR Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto, or (d) the assignment of any Eurodollar Loan other than on the
last day of the Interest Period applicable thereto as a result of a request by
the Borrower pursuant to Section 5.04, 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), minus
(ii) the amount of interest which would accrue on such principal amount for
such period at the interest rate which such Lender would bid were it to bid, at
the commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the Eurodollar market.

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

          Section 5.03     Taxes.

	
  

 	
  

 
	
  

 	
                          (a)          Payments
 Free of Taxes. Any and all payments by or on account of any obligation of
 the Borrower or any Guarantor under any Loan Document shall be made free and
 clear of and without deduction for any Indemnified Taxes or Other Taxes;
 provided that if the Borrower or any Guarantor shall be required to deduct
 any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
 payable shall be 

 

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 increased as necessary so that after making all required deductions
 (including deductions applicable to additional sums payable under this
 Section 5.03(a)), the Administrative Agent, each Lender or the Issuing
 Bank, as the case may be, receives an amount equal to the sum it would have
 received had no such deductions been made, (ii) the Borrower or such
 Guarantor shall make such deductions and (iii) the Borrower or such Guarantor
 shall pay the full amount deducted to the relevant Governmental Authority in
 accordance with applicable law.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (d)          Indemnification
 by the Lenders. Each Lender shall severally indemnify the Administrative
 Agent for the full amount of any Excluded Taxes attributable to such Lender
 that are paid or payable by the Administrative Agent in connection with any
 Loan Documents and any reasonable expenses arising therefrom or with respect
 thereto, whether or not such Excluded Taxes were correctly or legally imposed
 or asserted by the relevant Governmental Authority. The indemnity under this
 paragraph (d) shall be paid within 10 days after the Administrative Agent
 delivers to the applicable Lender a certificate stating the amount of
 Excluded Taxes so payable by the Administrative Agent. Such certificate shall
 be conclusive of the amount so payable absent manifest error.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (f)          Foreign
 Lenders. Any Foreign Lender that is entitled to an exemption from or
 reduction of withholding tax under the law of the jurisdiction in which the
 Borrower is located, or any treaty to which such jurisdiction is a party,
 with respect to payments under this Agreement or any other Loan Document
 shall deliver to the 

 

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 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. In addition, any Lender, if requested by the Borrower or the
 Administrative Agent, shall deliver such other documentation prescribed by
 applicable law or reasonably requested by the Borrower or the Administrative
 Agent as will enable the Borrower or the Administrative Agent to determine
 whether or not such Lender is subject to backup withholding or information
 reporting requirements.

 
	
  

 	
  

 
	
  

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

 

	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 

	
  

 	
  

 
	
  

 	
                     (g)          Notwithstanding
 anything to the contrary herein, a Foreign Lender shall not be required to
 provide any form or statement pursuant to this section that such Foreign
 Lender is not legally able to deliver. Borrower shall not be required to pay
 any additional amount to any Foreign Lender to the extent that withholding or
 deduction from payments is the result of such Lender failing to provide such
 forms, certificates or other evidence (collectively, “Exemption Forms”)
 required by Section 5.03(f) above, establishing that such Foreign Lender
 is exempt from United States federal withholding tax, or to notify Borrower
 of its inability to provide such Exemption Forms as the case 

 

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 may be, provided that if such Foreign Lender shall have satisfied the
 requirements to provide such Exemption Forms on the Effective Date or upon
 such Foreign Lender becoming a Lender hereunder, nothing in this last
 sentence of this Section 5.03(g) shall relieve Borrower of its obligation to
 pay any additional amounts pursuant to this Section 5.03(g) in the event
 that, as a result of a change in law, treaty, governmental rule, regulation
 or order (or the interpretation, administration or application thereof), at a
 subsequent date such Exemption Forms were no longer applicable to such Lender
 or such Lender was no longer properly entitled to complete or deliver such
 Exemption Forms.

 
	
  

 	
  

 
	
  

 	
                     (h)          Effect
 of Tax Refund. If a Lender determines, in its sole discretion, that it
 has received a benefit in the nature of a refund, deduction or credit
 (including a refund in the form of a deduction from or credit against taxes
 that are otherwise payable by such Lender) of any Taxes or Other Taxes with
 respect to which the Borrower has made a payment under this
 Section 5.03, such Lender will notify the Borrower and agrees to
 reimburse the Borrower to the extent of the benefit of such refund, deduction
 or credit, including any interest paid by the relevant Governmental
 Authority, promptly after such Lender reasonably determines that such refund,
 deduction or credit has become final; provided, that the Borrower, upon
 request of the 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 such Lender in the event that such Lender is
 required to repay such refund to such Governmental Authority. Nothing
 contained in this Section 5.03(h) shall require any Lender to make available
 its tax returns (or any other information relating to its taxes which it
 deems to be confidential) or to attempt to obtain any such refund, deduction
 or credit (including any interest paid by the relevant Governmental Authority
 and received by such Lender), which attempt would be inconsistent with any
 reporting position otherwise taken by any Lender on its applicable tax
 returns.

 
	
  

 	
  

 
	
  

 	
                     (i)          FATCA.
 If a payment made to a Lender under this Agreement would be subject to U.S.
 Federal withholding tax imposed by FATCA if such Lender fails to comply with
 the applicable reporting requirements of FATCA (including those contained in
 Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall
 deliver to the Borrower or the Administrative Agent, at the time or times
 prescribed by law and at such time or times reasonably requested by the
 Borrower or the Administrative Agent, such documentation prescribed by
 applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the
 Code) and such additional documentation reasonably requested by the Borrower
 or the Administrative Agent as may be necessary for the Borrower or the
 Administrative Agent to comply with its obligations under FATCA, to determine
 that such Lender has complied with such Lender’s obligations under FATCA or
 to determine the amount to deduct and withhold from any such payments. For
 purposes of this Section 5.03(i), FATCA shall include any regulations or
 official interpretations of FATCA.

 

          Section 5.04     Mitigation
Obligations; Replacement of Lenders

	
  

 	
  

 
	
  

 	
                          (a)          Designation
 of Different Lending Office. If any Lender requests compensation under
 Section 5.01, or if the Borrower is required to pay any additional 

 

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

 
	
  

 	
  

 
	
  

 	
                     (b)          If
 any Lender requests compensation under Section 5.01, or if the Borrower
 is required to pay additional amounts to any Lender or any Governmental
 Authority for the account of any Lender pursuant to Section 5.03 and, in
 each case, such Lender has declined or is unable to designate a different
 lending office in accordance with Section 5.04(a), or if any Lender is a
 Defaulting Lender, 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, and consents required by, Section 12.04),
 all of its interests, rights and obligations under this Agreement and the
 related Loan Documents to an Eligible 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 paid to the Administrative Agent the assignment fee (if
 any);

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                          (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
 and under the other Loan Documents (including any amounts under
 Section 5.02) 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);

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                          (iii)          in
 the case of any such assignment resulting from a claim for compensation under
 Section 5.01or payments required to be made pursuant to
 Section 5.03, such assignment will result in a reduction in such
 compensation or payments thereafter; and

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                          (iv)          such
 assignment does not conflict with applicable law.

 

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

52

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

ARTICLE VI

Conditions Precedent

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

	
  

 	
  

 
	
  

 	
                          (a)          The
 Administrative Agent and the Lenders shall have received all commitment,
 facility and agency fees, including those set forth in the Fee Letter, and
 all other fees and amounts due and payable on or prior to the Effective Date,
 including, to the extent invoiced, reimbursement or payment of all
 out-of-pocket expenses required to be reimbursed or paid by the Borrower
 hereunder (including, without limitation, the fees and expenses of Vinson
 & Elkins LLP, counsel to the Administrative Agent).

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

53

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (g)          The
 Administrative Agent shall have received from each party thereto duly
 executed counterparts (in such number as may be requested by the
 Administrative Agent) of the Security Instruments, including the Guaranty
 Agreement, and the other Security Instruments described on Exhibit E (other
 than those listed on Schedule 8.19). In connection with the execution and
 delivery of the Security Instruments, the Administrative Agent shall be
 reasonably satisfied that the Security Instruments create first priority,
 perfected Liens (subject only to Excepted Liens identified in clauses (a) to
 (d) and (f) of the definition thereof, but subject to the provisos at the end
 of such definition) on at least 85% of the Total Reserve Value of the Oil and
 Gas Properties evaluated in the Initial Reserve Report and all other Oil and
 Gas Properties identified and requested by the Administrative Agent,
 including, without limitation additional Oil and Gas Properties acquired or
 leased prior to May 31, 2011.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (i)          The
 Administrative Agent shall have received a certificate of a Responsible
 Officer of the Borrower certifying that the Borrower has received all
 consents and approvals required by Section 7.03.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

          The
Administrative Agent shall notify the Borrower and the Lenders of the Effective
Date, and such notice shall be conclusive and binding. Notwithstanding the
foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank
to issue Letters of Credit hereunder shall not become effective unless each of
the foregoing conditions is satisfied (or waived pursuant to
Section 12.02) at or prior to 1:00 p.m., Houston time, on August 10, 2011
(and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).

54

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (d)          The
 making of such Loan or the issuance, amendment, renewal or extension of such
 Letter of Credit, as applicable would not conflict with, or cause any Lender
 or the Issuing Bank to violate or exceed, any applicable Governmental
 Requirement, and no Change in Law shall have occurred that enjoins, prohibits
 or restrains the making or repayment of any Loan, the issuance, amendment,
 renewal, extension or repayment of any Letter of Credit or any participations
 therein or the consummation of the transactions contemplated by this
 Agreement or any other Loan Document.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

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

55

          Section 6.03     Additional
Conditions to Credit Events. In addition to the conditions precedent set
forth in Section 6.02, so long as any Lender is a Defaulting Lender, the
Issuing Bank shall not be required to issue, amend or increase any Letter of
Credit, unless it is satisfied that the LC Exposure will be 100% covered by the
Commitments of the Non-Defaulting Lenders and/or the Borrower will Cash
Collateralize the LC Exposure in accordance with Section 4.03(c)(iii), and
participating interests in any such newly issued or increased Letter of Credit
shall be allocated among Non-Defaulting Lenders in accordance with Section
4.03(c)(iii)(A) (and Defaulting Lenders shall not participate therein).

ARTICLE VII

Representations and Warranties

          The
Borrower represents and warrants to the Lenders that:

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

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

          Section 7.03     Approvals;
No Conflicts. The Transactions (a) do not require any consent or approval
of, registration or filing with, or any other action by, any Governmental
Authority or any other third Person (including shareholders or any class of
directors, whether interested or disinterested, of the Borrower or any other
Person), nor is any such consent, approval, registration, filing or other
action necessary for the validity or enforceability of any Loan Document or the
consummation of the transactions contemplated thereby, except such as have been
obtained or made and are in full force and effect other than (i) the recording
and filing of the Security Instruments as required by this Agreement, (ii)
those third party approvals or consents which, if not made or obtained, would
not cause a Default hereunder, could not reasonably be expected to have a
Material Adverse Effect or do not have an adverse effect on the enforceability
of the Loan Documents and (iii) the filing by the Borrower of a current report
on Form 8-K with the SEC disclosing this Agreement and the Transactions, (b)
will not violate any 

56

applicable law or regulation or any Organizational Document of any
Credit Party or any order of any Governmental Authority, (c) will not violate
or result in a default under any indenture, agreement or other instrument
binding upon any Credit Party or its Properties, or give rise to a right
thereunder to require any payment to be made by any Credit Party and (d) will
not result in the creation or imposition of any Lien on any Property of any
Credit Party (other than the Liens created by the Loan Documents).

          Section 7.04     Financial
Condition; No Material Adverse Change.

	
  

 	
  

 
	
  

 	
                          (a)          The
 Borrower has heretofore furnished to the Lenders its consolidated balance
 sheet and statements of income, stockholders equity and cash flows (i) as of
 and for the fiscal year ended December 31, 2010, reported on by Mantyla
 McReynolds LLC, independent public accountants, and (ii) as of and for the
 fiscal quarter and the portion of the fiscal year ended March 31, 2011,
 certified by its chief financial officer. Such financial statements present
 fairly, in all material respects, the financial position and results of
 operations and cash flows of the Borrower and its Consolidated Subsidiaries
 as of such dates and for such periods in accordance with GAAP, subject to
 year-end audit adjustments and the absence of footnotes in the case of the
 unaudited quarterly financial statements.

 
	
  

 	
  

 
	
  

 	
                          (b)          Since
 December 31, 2010, (i) there has been no event, development or circumstance
 that has had or could reasonably be expected to have a Material Adverse
 Effect and (ii) the business of the Borrower and its Subsidiaries has been
 conducted only in the ordinary course consistent with past business
 practices.

 
	
  

 	
  

 
	
  

 	
                          (c)          Neither
 the Borrower nor any Subsidiary has on the date hereof any material Debt
 (including Disqualified Capital Stock) or any contingent liabilities,
 off-balance sheet liabilities or partnerships, liabilities for taxes or
 unrealized or anticipated losses from any unfavorable commitments, except as
 referred to or reflected or provided for in the financial statements
 described in Section 7.04(a) or in the most recent financial statements
 delivered pursuant to Section 8.01(a) or (b).

 

          Section 7.05     Litigation.

	
  

 	
  

 
	
  

 	
                          (a)          Except
 as set forth on Schedule 7.05 on the Effective Date or as otherwise disclosed
 in writing to the Administrative Agent and the Lenders after the Effective
 Date (which shall supplement Schedule 7.05), there are no actions, suits,
 investigations or proceedings by or before any arbitrator or Governmental
 Authority pending against or, to the knowledge of the Borrower, threatened
 against or affecting the Borrower or any Subsidiary (i) as to which there is
 a reasonable possibility of an adverse determination that, if adversely
 determined, could reasonably be expected, individually or in the aggregate,
 to result in a Material Adverse Effect or (ii) that involve any Loan Document
 or the Transactions.

 
	
  

 	
  

 
	
  

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

 

57

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

	
  

 	
  

 
	
  

 	
                          (a)          The
 Credit Parties and each of their respective Properties and operations thereon
 are, and within all applicable statute of limitation periods have been, in
 compliance with all applicable Environmental Laws.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (c)          There
 are no claims, demands, suits, orders, inquiries, or proceedings concerning
 any violation of, or any liability (including as a potentially responsible
 party) under, any applicable Environmental Laws that is pending or, to
 Borrower’s knowledge, threatened against the Credit Parties or any of their
 respective Properties or as a result of any operations at such Properties.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (f)          No
 Credit Party has received any written notice asserting an alleged liability
 or obligation under any applicable Environmental Laws with respect to the
 investigation, remediation, abatement, removal, or monitoring of any
 Hazardous Materials at, under, or Released or threatened to be Released from
 any real properties offsite any Credit Party’s Properties and, to any Credit
 Party’s knowledge, there are no conditions or circumstances that could
 reasonably be expected to result in the receipt of such written notice.

 
	
  

 	
  

 
	
  

 	
                          (g)          There
 has been no exposure of any Person or Property to any Hazardous Materials as
 a result of or in connection with the operations and businesses of 

 

58

	
  

 	
  

 
	
  

 	
 any of the Credit Parties’ Properties that could reasonably be
 expected to form the basis for a claim for damages or compensation.

 
	
  

 	
  

 
	
  

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

 

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (b)          No
 Credit Party is in default nor has any event or circumstance occurred which,
 but for the expiration of any applicable grace period or the giving of
 notice, or both, would constitute a default or would require a Credit Party
 to Redeem or make any offer to Redeem under any indenture, note, credit
 agreement or instrument pursuant to which any Material Indebtedness is
 outstanding or by which any Credit Party or any of their Properties is bound.

 
	
  

 	
  

 
	
  

 	
                          (c)          No
 Default has occurred and is continuing.

 

          Section 7.08     Investment Company
Act. No Credit Party is an “investment company” or a company “controlled”
by an “investment company,” within the meaning of, or subject to regulation
under, the Investment Company Act of 1940, as amended.

          Section 7.09     Taxes. Each Credit Party 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 such Credit Party, as
applicable, has set aside on its books adequate reserves in accordance with
GAAP or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect. The charges, accruals and
reserves on the books of each Credit Party in respect of Taxes and other
governmental charges are, in the reasonable opinion of such Credit Party,
adequate. No Liens for Taxes have been filed and, to the knowledge of the
Credit Parties, no claim is being asserted with respect to any such Tax or
other such governmental charge.

          Section 7.10     ERISA.

	
  

 	
  

 
	
  

 	
                          (a)          Each
 Credit Party and each ERISA Affiliate have complied in all material respects
 with ERISA and, where applicable, the Code regarding each Plan 

 

59

	
  

 	
  

 
	
  

 	
 except to the extent the failure to do so could not reasonably be
 expected to result in a Material Adverse Effect.

 
	
  

 	
  

 
	
  

 	
                          (b)          Each
 Plan is, and has been, established and maintained in substantial compliance
 with its terms, ERISA and, where applicable, the Code except to the extent
 the failure to do so could not reasonably be expected to result in a Material
 Adverse Effect.

 
	
  

 	
  

 
	
  

 	
                          (c)          No
 act, omission or transaction has occurred which could result in imposition on
 any Credit Party or any ERISA Affiliate (whether directly or indirectly) of
 (i) either a civil penalty assessed pursuant to subsections (c), (i), (l) or
 (m) of section 502 of ERISA or a tax imposed pursuant to Chapter 43 of
 Subtitle D of the Code or (ii) breach of fiduciary duty liability damages
 under section 409 of ERISA except to the extent such penalty or liability could
 not reasonably be expected to result in a Material Adverse Effect.

 
	
  

 	
  

 
	
  

 	
                          (d)          Full
 payment when due has been made of all amounts which a Credit Party or any
 ERISA Affiliate is required under the terms of each Plan or applicable law to
 have paid as contributions to such Plan as of the date hereof except to the
 extent the failure to do so could not reasonably be expected to result in a
 Material Adverse Effect.

 
	
  

 	
  

 
	
  

 	
                          (e)          No
 Credit Party nor any ERISA Affiliate sponsors, maintains, or contributes to
 an employee welfare benefit plan, as defined in section 3(1) of ERISA,
 including, without limitation, any such plan maintained to provide benefits
 to former employees of such entities, that may not be terminated by a Credit
 Party or any ERISA Affiliate in its sole discretion at any time without any
 material liability.

 
	
  

 	
  

 
	
  

 	
                          (f)          No
 Credit Party nor any ERISA Affiliate sponsors, maintains or contributes to,
 or has at any time in the six-year period preceding the date hereof
 sponsored, maintained or contributed to, any employee pension benefit plan,
 as defined in section 3(2) of ERISA, that is subject to Title IV of ERISA,
 section 302 of ERISA or section 412 of the Code.

 

          Section 7.11     Disclosure;
No Material Misstatements. The Borrower has disclosed to the Administrative
Agent and the Lenders all agreements, instruments and corporate or other
restrictions to which it or any other Credit Party is subject, and all other
matters known to it, that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect. None of the other reports,
financial statements, certificates or other information furnished by or on
behalf of any Credit Party to the Administrative Agent or any Lender or any of
their Affiliates in connection with the negotiation of this Agreement or any
other Loan Document or delivered hereunder or under any other Loan Document (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Credit Parties represent only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time. There is no fact peculiar to the 

60

Borrower or other Credit Party which could reasonably be expected to
have a Material Adverse Effect or in the future is reasonably likely to have a
Material Adverse Effect and which has not been set forth in this Agreement or
the Loan Documents or the other documents, certificates and statements
furnished to the Administrative Agent or the Lenders by or on behalf of the
Borrower or any other Credit Party prior to, or on, the date hereof in
connection with the transactions contemplated hereby. None of the Credit
Parties provided any statements or conclusions in the preparation of any
Reserve Report which were based upon or include misleading information or
failed to take into account material information regarding the matters reported
therein, it being understood that projections concerning volumes attributable
to the Oil and Gas Properties and production and cost estimates contained in
each Reserve Report are necessarily based upon professional opinions, estimates
and projections and that the Credit Parties do not warrant that such opinions,
estimates and projections will ultimately prove to have been accurate.

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

          Section 7.13     Restriction
on Liens. No Credit Party is a party to any material agreement or
arrangement (other than Capital Leases creating Liens permitted by
Section 9.03(c), but only on the Property subject of such Capital Lease),
or subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to the Administrative Agent and
the Lenders on or in respect of their Properties to secure the Indebtedness and
the Loan Documents.

          Section 7.14     Subsidiaries.
Except as set forth on Schedule 7.14 or as disclosed in writing to the
Administrative Agent (which shall promptly furnish a copy to the Lenders),
which shall be a supplement to Schedule 7.14, the Borrower has no Subsidiaries.

          Section 7.15     Location
of Business and Offices. The Borrower’s jurisdiction of organization is
Minnesota; the name of the Borrower as listed in the public records of its
jurisdiction of organization, as of the date hereof, is Northern Oil and Gas,
Inc.; and the organizational identification number of the Borrower in its
jurisdiction of organization is 3896342-5 (or, in each case, as set forth in a
notice delivered to the Administrative Agent pursuant to Section 8.01(m)
in accordance with Section 12.01). The Borrower’s principal place of
business and chief executive office is located at the address specified in
Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(m)
and Section 12.01(c)). Each Subsidiary’s jurisdiction of organization,
name as listed in the public records of its jurisdiction of organization,
organizational identification number in its jurisdiction of organization, and
the location of its principal place of business and chief executive office is
stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to
Section 8.01(m)).

61

          Section 7.16     Properties;
Titles, Etc.

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (d)          All
 of the Properties of the Credit Parties which are reasonably necessary for
 the operation of their businesses are in good working condition and are
 maintained in accordance with prudent business standards.

 
	
  

 	
  

 
	
  

 	
                          (e)          Each
 Credit Party owns, or is licensed to use, all trademarks, tradenames,
 copyrights, patents and other intellectual Property material to its business,
 and the use thereof by such Credit Party does not and will not infringe upon
 the rights of any other Person, except for any such infringements that,
 individually or in the aggregate, could not reasonably be expected to result
 in a Material Adverse Effect. The Credit Parties either own or have valid
 licenses or other rights to use all databases, geological data, geophysical
 data, engineering data, seismic data, maps, interpretations and other
 technical information used in their businesses as presently conducted,
 subject to the limitations contained in the agreements governing the use of
 the same, which limitations are customary for companies engaged in the
 business of the exploration and production of Hydrocarbons, with such
 exceptions as could not reasonably be expected to have a Material Adverse
 Effect.

 

          Section 7.17     Maintenance
of Properties. Except for such acts or failures to act as could not be
reasonably expected to have a Material Adverse Effect, the Oil and Gas
Properties (and Properties unitized therewith) of the Credit Parties have been
maintained, operated and 

62

developed in a good and workmanlike manner and in conformity with all
Governmental Requirements and in conformity with the provisions of all leases,
subleases or other contracts comprising a part of the Hydrocarbon Interests and
other contracts and agreements forming a part of the Oil and Gas Properties of
the Credit Parties. Specifically in connection with the foregoing, except for
those as could not be reasonably expected to have a Material Adverse Effect,
(i) no Oil and Gas Property of any Credit Party is subject to having allowable
production reduced below the full and regular allowable (including the maximum
permissible tolerance) because of any overproduction (whether or not the same
was permissible at the time) and (ii) none of the wells comprising a part of
the Oil and Gas Properties (or Properties unitized therewith) of any Credit
Party is deviated from the vertical more than the maximum permitted by
Governmental Requirements, and such wells are, in fact, bottomed under and are
producing from, and the well bores are wholly within, the Oil and Gas
Properties (or in the case of wells located on Properties unitized therewith,
such unitized Properties) of such Credit Party. All pipelines, wells, gas
processing plants, platforms and other material improvements, fixtures and
equipment owned in whole or in part by any Credit Party that are necessary to
conduct normal operations are being maintained in a state adequate to conduct
normal operations, and with respect to such of the foregoing which are operated
by any Credit Party, in a manner consistent with such Credit Party’s past
practices (other than those the failure of which to maintain in accordance with
this Section 7.17 could not reasonably be expected to have a Material
Adverse Effect).

          Section 7.18     Gas
Imbalances, Prepayments. Except as set forth on Schedule 7.18 or on the
most recent certificate delivered pursuant to Section 8.12(c), on a net
basis there are no gas imbalances, take or pay or other prepayments which would
require any Credit Party to deliver Hydrocarbons produced from the Oil and Gas
Properties at some future time without then or thereafter receiving full
payment therefor exceeding two percent (2%) of the Credit Parties’ Proved
Reserves of natural gas (on an mcf equivalent basis) in the aggregate.

          Section 7.19     Marketing
of Production. Except as set forth on Schedule 7.19 or on the most recent
certificate delivered pursuant to Section 8.12(c), no Credit Party is a party
to any material agreements which is not cancelable on sixty (60) days notice or
less without penalty or detriment for the sale of production from the Credit
Parties’ Hydrocarbons (including, without limitation, calls on or other rights
to purchase, production, whether or not the same are currently being exercised)
that (a) pertain to the sale of production at a fixed price and (b) have a
maturity or expiry date of longer than six (6) months from the date thereof.

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

          Section 7.21     Use
of Loans and Letters of Credit. The proceeds of the Loans and the Letters
of Credit shall be used to provide working capital for exploration and
production operations and for general corporate purposes. The Credit Parties
are not engaged principally, or as one of its or their important activities, in
the business of extending credit for the purpose, 

63

whether immediate, incidental or ultimate, of buying or carrying margin
stock (within the meaning of Regulation T, U or X of the Board). No part of the
proceeds of any Loan or Letter of Credit will be used for any purpose which
violates the provisions of Regulations T, U or X of the Board.

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

          Section 7.23     Casualty
Events. Since December 31, 2010, neither the business nor any Properties of
any Credit Party have been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any domestic or foreign
Governmental Authority, riot, activities or armed forces or acts of God or of
any public enemy.

          Section 7.24     Material
Agreements. Set forth on Schedule 7.24 hereto or as disclosed in writing to
the Administrative Agent (which shall promptly furnish a copy to the Lenders),
which shall be a supplement to Schedule 7.24, is a complete and correct list of
all material agreements and other instruments maintained by the Credit Parties
setting forth each counterparty thereto (other than the Loan Documents and
joint operating agreements to which any Credit Party is a party) relating to
the purchase, transportation by pipeline, gas processing, marketing, development,
sale and supply of Hydrocarbons, farmout arrangements, contract operating
agreements or other material contracts (excluding oil and gas leases of the
Credit Parties and joint operating agreements to which any Credit Party is a
party) to which the Credit Parties are a party or by which its Properties is
bound, in each case for which breach, nonperformance, cancellation or failure
to renew could reasonably be expected to have a Material Adverse Effect
(collectively “Material Agreements”) and copies of such documents have
been provided to the Administrative Agent. All such agreements are in full
force and effect and the Credit Parties are not in default thereunder, nor is
there any uncured default by any Affiliate predecessor in interest to any
Credit Party or, to any Credit Party’s knowledge, by any predecessor in
interest to such Credit Party (other than an Affiliate predecessor) or
counterparty thereto, nor has any Credit Party altered any material item of
such agreements since the Effective Date without the prior written consent of
the Lenders.

          Section 7.25     No
Brokers. No Person is entitled to any brokerage fee or finder’s fee or
similar fee or commission in connection with arranging the Loans contemplated
by this Agreement.

64

          Section 7.26     Reliance.
In connection with the negotiation of and the entering into this Agreement, the
Credit Parties acknowledge and represent that none of the Lenders, the
Administrative Agent or any representative of any of the foregoing is acting as
a fiduciary or financial or investment advisor for it; it is not relying upon
any representations (whether written or oral) of such Persons; they have
consulted with their own legal, regulatory, tax, business investment, financial
and accounting advisors to the extent it has deemed necessary, and they have
made their own investment, hedging, and trading decisions based upon their own
judgment and upon any advice from such advisors as they have deemed necessary
and not upon any view expressed by any Lender, the Administrative Agent or any
representative of any of the foregoing; they have not been given by any Lender,
the Administrative Agent or any representative of any of the foregoing
(directly or indirectly through any other Person) any advice, counsel, assurance,
guarantee, or representation whatsoever as to the expected or projected
success, profitability, return, performance, result, effect, consequence, or
benefit (either legal, regulatory, tax, financial, accounting, or otherwise) of
this Agreement or the transactions contemplated hereby; and they are entering
into this Agreement and the other Loan Documents with a full understanding of
all of the risks hereof and thereof (economic and otherwise), and they are
capable of assuming and willing to assume (financially and otherwise) those
risks.

          Section 7.27     Payments
by Purchasers of Production. All proceeds from the sale of any Credit
Party’s interests in Hydrocarbons from its Oil and Gas Properties are currently
being paid in full by the purchaser thereof on a timely basis and at prices and
terms comparable to market prices and terms generally available at the time
such prices and terms were negotiated for oil and gas production from producing
areas situated near such Oil and Gas Properties, and none of such proceeds are
currently being held in suspense by such purchaser or any other Person.

          Section 7.28     Existing
Accounts Payable. As of the Effective Date, set forth on Schedule 7.28
hereto is a complete and correct list of all existing accounts payable of the
Borrower that are more than sixty (60) days past due.

          Section 7.29     Foreign
Corrupt Practices. Neither the Borrower nor any of its Subsidiaries, nor
any director, officer, agent, employee or Affiliate of the Borrower or any of
its Subsidiaries is aware of or has taken any action, directly or indirectly,
that would result in a material violation by such Persons of the FCPA,
including without limitation, making use of the mails or any means or
instrumentality of interstate commerce corruptly in furtherance of an offer,
payment, promise to pay or authorization of the payment of any money, or other
property, gift, promise to give, or authorization of the giving of anything of
value to any “foreign official” (as such term is defined in the FCPA) or any
foreign political party or official thereof or any candidate for foreign
political office, in contravention of the FCPA; and, the Borrower, its
Subsidiaries and its and their Affiliates have conducted their business in material
compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith. 

          Section 7.30     Money
Laundering. The operations of the Borrower and its Subsidiaries are and
have been conducted at all times in material compliance with applicable
financial recordkeeping and reporting requirements of the Money Laundering
Laws, and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator 

65

involving the Borrower or any of its Subsidiaries with respect to the
Money Laundering Laws is pending or, to the best knowledge of the Borrower,
threatened.

          Section 7.31     OFAC.
Neither the Borrower nor any of its Subsidiaries, nor any director, officer,
agent, employee or Affiliate of the Borrower or any of its Subsidiaries is
currently subject to any material U.S. sanctions administered by OFAC, and the
Borrower will not directly or indirectly use the proceeds from the Loans or
lend, contribute or otherwise make available such proceeds to any Subsidiary,
joint venture partner or other Person, for the purpose of financing the
activities of any Person currently subject to any U.S. sanctions administered
by OFAC.

ARTICLE VIII

Affirmative Covenants

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

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

	
  

 	
  

 
	
  

 	
                          (a)          Annual
 Financial Statements. As soon as available, but in any event in
 accordance with then applicable law and not later than ninety (90) days after
 the end of each fiscal year of the Borrower, its audited consolidated and
 consolidating balance sheet and related statements of operations,
 stockholders’ equity and cash flows as of the end of and for such year,
 setting forth in each case in comparative form the figures for the previous
 fiscal year, all reported on by (i) Deloitte & Touche LLP, (ii) any
 independent public accountants of recognized national standing or (iii) any
 other independent public accountant reasonably acceptable to the
 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 and consolidating financial
 statements present fairly in all material respects the financial condition
 and results of operations of the Borrower and its Consolidated Subsidiaries
 on a consolidated and consolidating basis in accordance with GAAP
 consistently applied.

 
	
  

 	
  

 
	
  

 	
                          (b)          Quarterly
 Financial Statements. Within sixty (60) days after the end of each fiscal
 quarter, a balance sheet, income statement and statement of the cumulative
 cash flows of the Borrower (including all notes thereto) for the period from
 the beginning of the then current fiscal year to the end of such fiscal
 quarter, prepared by the Borrower and accompanied by a certification of an
 Responsible Officer of the Borrower, dated the date of the delivery of the
 financial statements to the Administrative Agent and each Lender, and further
 certifying that no Default exists under this Agreement and that such
 financial statements present fairly in all material respects the consolidated
 and consolidating financial position and results of operations of the 

 

66

	
  

 	
  

 
	
  

 	
 Borrower on a consolidated and consolidating basis in accordance with
 GAAP, subject to normal year-end adjustments and the absence of footnotes
 (other than those reasonably required to explain financial data).

 
	
  

 	
  

 
	
  

 	
                          (c)          Certificate
 of Financial Officer – Compliance. Concurrently with any delivery of
 financial statements under Section 8.01(a) or Section 8.01(b), a
 certificate of the Chief Executive Officer or a Financial Officer in
 substantially the form of Exhibit D attached hereto (i) certifying as to
 whether a Default has occurred and, if a Default has occurred, specifying the
 details thereof and any action taken or proposed to be taken with respect
 thereto, (ii) setting forth reasonably detailed calculations demonstrating
 compliance with Section 8.14(a) and Section 9.01, (iii) stating
 whether any change in GAAP or in the application thereof has occurred since
 the date of the audited financial statements referred to in Section 7.04
 and, if any such change has occurred, specifying the effect of such change on
 the financial statements accompanying such certificate, and (iv) if, at any
 time, the Borrower has any Consolidated Subsidiaries, setting forth
 consolidating spreadsheets that show all Consolidated Subsidiaries and the
 eliminating entries, in such form as would be presentable to the auditors of
 the Borrower.

 
	
  

 	
  

 
	
  

 	
                          (d)          Certificate
 of Accounting Firm – Defaults. Concurrently with any delivery of
 financial statements under Section 8.01(a), a certificate of the
 accounting firm that reported on such financial statements stating whether
 they obtained knowledge during the course of their examination of such
 financial statements of any Default (which certificate may be limited to the
 extent required by accounting rules or guidelines).

 
	
  

 	
  

 
	
  

 	
                          (e)          Certificate
 of Financial Officer – Swap Agreements. Concurrently with any delivery of
 financial statements under Section 8.01(a) and Section 8.01(b), a
 certificate of a Financial Officer, in substantially the form of Exhibit G
 attached hereto, setting forth as of the last Business Day of such fiscal
 quarter or fiscal year, a true and complete list of all Swap Agreements of
 each Credit Party, the material terms thereof (including the type, term,
 effective date, termination date and notional amounts or volumes), the net
 mark-to-market value therefor, any new credit support agreements relating
 thereto not listed on Schedule 7.20, any margin required or supplied under
 any credit support document, and the counterparty to each such agreement.

 
	
  

 	
  

 
	
  

 	
                          (f)          Certificate
 of Insurer – Insurance Coverage. Upon change or renewal, a certificate of
 insurance coverage from each insurer with respect to the insurance required
 by Section 8.07, in form and substance satisfactory to the
 Administrative Agent, and, if requested by the Administrative Agent or any
 Lender, all copies of the applicable policies.

 
	
  

 	
  

 
	
  

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

 

67

	
  

 	
  

 
	
  

 	
                          (h)          SEC
 and Other Filings; Reports to Shareholders. Promptly after the same
 become publicly available, copies of all periodic and other reports, proxy
 statements and other materials filed by the Borrower or any Subsidiary with
 the SEC, or with any national securities exchange, or distributed by the
 Borrower to its shareholders generally, as the case may be; provided, however
 that the Borrower shall be deemed to have complied with the requirements of
 this Section 8.01(h) to the extent that such reports, proxy statements
 and other materials are publicly available on the SEC’s EDGAR filing system
 or any successor system and the Borrower has notified the Administrative
 Agent that such materials are available. Notwithstanding the foregoing
 proviso, the Borrower shall provide copies of any materials required under
 this Section 8.01(h) upon request by the Administrative Agent.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (j)          Lists
 of Purchasers. Concurrently with the delivery of any Reserve Report to
 the Administrative Agent pursuant to Section 8.12, a list of all Persons
 purchasing Hydrocarbons from the Borrower to the extent that any Credit Party
 controls the marketing and the sale of such Hydrocarbons (which listings
 shall include, with respect to each such purchaser, the legal name and
 address thereof, the appropriate contact person thereat, the Oil and Gas
 Properties from which Hydrocarbons were purchased and the volume of
 Hydrocarbons purchased).

 
	
  

 	
  

 
	
  

 	
                          (k)          Notice
 of Sales of Oil and Gas Properties. In the event any Credit Party intends
 to sell, transfer, assign or otherwise dispose of any Oil or Gas Properties
 or any Equity Interests in any other Credit Party in accordance with
 Section 9.12, prior written notice of such disposition, the price
 thereof and the anticipated date of closing and any other details thereof
 requested by the Administrative Agent or any Lender; provided that, the
 foregoing shall not apply to the sale of the Oil and Gas Properties listed on
 Schedule 9.12 to the extent such sale is expressly permitted by
 Section 9.12(d).

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                          (m)          Information
 Regarding Credit Parties. Prompt written notice (and in any event within
 ten Business Days prior thereto) of any change (i) in any Credit Party’s
 organizational name, (ii) in the location of any Credit Party’s chief
 executive office or principal place of business, (iii) in any Credit Party’s
 identity or organizational structure or in the jurisdiction in which such
 Person is organized or formed, (iv) in any Credit Party’s jurisdiction of
 organization or such Person’s organizational identification number in such
 jurisdiction of organization and (v) in any Credit Party’s federal taxpayer
 identification number.

 

68

	
  

 	
  

 
	
  

 	
                          (n)          Other
 Reports. The Borrower shall prepare and provide the Lenders and
 Administrative Agent the following reports:

 

	
  

 	
  

 
	
  

 	
                               (i)          on
 a quarterly basis by the 45th day following each calendar quarter, a report
 setting forth, for such calendar quarter, the volume of production and sales
 attributable to production (and the prices at which such sales were made and
 the revenues derived from such sales) for each such calendar quarter from the
 Oil and Gas Properties with Proved Developed Producing Reserves described in
 the most recent Reserve Report, and setting forth the related ad valorem,
 severance and production taxes and lease operating expenses attributable
 thereto and incurred for each such calendar quarter;

 
	
  

 	
  

 
	
  

 	
                               (ii)         after
 the occurrence and during the continuance of any Borrowing Base Deficiency,
 the Borrower shall provide, on a monthly basis on the 15th day of each such
 month, a report setting forth, for the immediately preceding calendar month,
 the Credit Parties’ Excess Cash Flow;

 
	
  

 	
  

 
	
  

 	
                               (iii)        on a
 quarterly basis by the 45th day after the end of each calendar quarter, an
 updated report setting forth the Credit Parties’ forecasted Capital Expenditure
 budget for the following twelve (12) month period; and

 
	
  

 	
  

 
	
  

 	
                               (iv)        such
 other information as the Administrative Agent may reasonably request,
 including, but not limited to, each of the following to the extent available:
 an unaudited income statement, a consolidated balance sheet and a statement
 of cash flow (with such statement to show any variations from the budget
 previously delivered), copies of any Credit Party’s bank account statements,
 statement of expenses for the preceding month, notice of any material changes
 with regard to oil and gas prices received, contracts or production expenses
 or any material litigation affecting the operation of the Oil and Gas
 Properties of any Credit Party.

 

	
  

 	
  

 
	
  

 	
                          (o)          Notices
 of Certain Changes. Subject to Section 9.21, promptly, but in any
 event within five (5) Business Days after the execution thereof, copies of
 any amendment, modification or supplement to the Organizational Documents,
 any preferred stock designation or any other organizational document of any
 Credit Party.

 
	
  

 	
  

 
	
  

 	
                          (p)          Notice
 of Purchase of Oil and Gas Properties. In the event a Credit Party
 acquires additional Oil and Gas Properties, the Borrower shall deliver
 promptly, but in any event within forty-five (45) days after the end of each
 calendar quarter in which such acquisition occurred, to the Administrative
 Agent a list of all Oil and Gas Properties of the Credit Parties (including
 each such newly acquired Oil and Gas Property) not subject to a Lien of the
 Security Instruments at the time of delivery of such list to the
 Administrative Agent, in substantially the form of Exhibit I attached hereto.

 
	
  

 	
  

 
	
  

 	
                          (q)          Non-Consent
 Election. Promptly, but in any event within five (5) Business Days after
 any Credit Party’s election thereof, to withhold consent to participate in
 any wells located on Oil and Gas Properties.

 

69

	
  

 	
  

 
	
  

 	
                          (r)          Other
 Requested Information. 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
 or any other Loan Document, in each case, as the Administrative Agent or any
 Lender may reasonably request.

 
	
  

 	
  

 
	
  

 	
                          (s)          Surface
 Acreage Reports. As soon as available and in any event within thirty (30)
 days after the last day of each calendar quarter, a report certified as true
 and complete in all material respects by a Responsible Officer, in form and
 substance satisfactory to Administrative Agent, setting forth as of the last
 Business Day of such calendar quarter an accounting of all surface acreage
 sold by the Borrower or any Guarantor, the gross and net proceeds received
 therefore and the amount of such proceeds distributed to the partners of
 Borrower.

 
	
  

 	
  

 
	
  

 	
                          (t)          Tax
 Returns. As soon as available and in any event within fifteen (15) days
 after the filing of any tax return, or any other filing with a taxing
 authority, of the Borrower, any Guarantor or any Subsidiary of either
 thereof, a copy of such filed tax return or other filing, together with all
 exhibits and attachments thereto.

 

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

	
  

 	
  

 
	
  

 	
                          (a)          the
 occurrence of any Default;

 
	
  

 	
  

 
	
  

 	
                          (b)          the
 filing or commencement of, or the threat in writing of, any action, suit,
 proceeding, investigation or arbitration by or before any arbitrator or
 Governmental Authority against or affecting a Credit Party or any Affiliate
 thereof not previously disclosed in writing to the Lenders or any material
 adverse development in any action, suit, proceeding, investigation or
 arbitration (whether or not previously disclosed to the Lenders) that, in
 either case, if adversely determined, could reasonably be expected to result
 in a Material Adverse Effect; and

 
	
  

 	
  

 
	
  

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

 

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

          Section 8.03     Existence;
Conduct of Business. The Borrower will, and will cause each Subsidiary to,
do or cause to be done all things necessary to preserve, renew and keep in full
force and effect its legal existence and the rights, licenses, permits,
privileges and franchises material to the conduct of its business and maintain,
if necessary, its qualification to do business in each jurisdiction in which
its Oil and Gas Properties is located or the ownership of its Properties
requires such qualification, except where the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect; provided that the
foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 9.11.

70

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

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

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

71

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

          Section
8.07     Insurance. The Borrower will, and will
cause each Subsidiary to, maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations. The loss payable clauses or
provisions in said insurance policy or policies insuring any of the collateral
for the Loans shall be endorsed in favor of and made payable to the
Administrative Agent as its interests may appear and such policies shall name
the Administrative Agent and the Lenders as “additional insureds” and “loss
payees”, as applicable, and provide that the insurer will endeavor to give at
least thirty (30) days prior notice of any cancellation to the Administrative
Agent.

          Section
8.08     Books and Records; Inspection Rights.
The Borrower will, and will cause each 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 Subsidiary to, permit any representatives
designated by the Administrative Agent or any Lender, upon reasonable prior
notice, to visit and inspect its Properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.

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

          Section
8.10     Environmental Matters.

	
  

 	
  

 
	
  

 	
                         
 (a)          The Borrower
 shall at its sole expense: (i) comply, and shall cause its Properties and
 operations and each Subsidiary and each Subsidiary’s Properties and
 operations to comply, with all applicable Environmental Laws, the breach of
 which could be reasonably expected to have a Material Adverse Effect; (ii)
 not Release or threaten to Release, and shall cause each Subsidiary not to
 Release or threaten to Release, any Hazardous Material on, under, about or
 from any of such Credit Parties’ Properties or any other property offsite the
 Property to the extent caused by a Credit Party’s operations except in
 compliance with applicable Environmental Laws, the Release or threatened
 Release of which could reasonably be expected to have a Material Adverse
 Effect; (iii) timely obtain or file, and shall cause each Subsidiary to timely
 obtain or file, all Environmental Permits, if any, required under applicable
 Environmental Laws to be 

 

72

	
  

 	
  

 
	
  

 	
 obtained or filed in connection with the operation or use of a Credit
 Parties’ Properties, which failure to obtain or file could reasonably be
 expected to have a Material Adverse Effect; (iv) promptly commence and
 diligently prosecute to completion, and shall cause each Subsidiary to
 promptly commence and diligently prosecute to completion, any assessment,
 evaluation, investigation, monitoring, containment, cleanup, removal, repair,
 restoration, remediation or other remedial obligations (collectively, the “Remedial
 Work”) in the event any Remedial Work is required or reasonably necessary
 under applicable Environmental Laws because of or in connection with the
 actual or suspected past, present or future Release or threatened Release of
 any Hazardous Material on, under, about or from any of the Credit Parties’
 Properties, which failure to commence and diligently prosecute to completion
 could reasonably be expected to have a Material Adverse Effect; (v) conduct,
 and cause its Subsidiaries to conduct, their respective operations and
 businesses in a manner that will not expose any Property or Person to
 Hazardous Materials that could reasonably be expected to form the basis for a
 claim for damages or compensation that could reasonably be expected to have a
 Material Adverse Effect; and (vi) establish and implement, and shall cause
 each Subsidiary to establish and implement, such procedures as may be necessary
 to continuously determine and assure that the Credit Parties’ obligations
 under this Section 8.10(a) are timely and fully satisfied, which failure to
 establish and implement could reasonably be expected to have a Material
 Adverse Effect.

 
	
  

 	
  

 
	
  

 	
                         
 (b)          The Borrower
 will promptly, but in no event later than five (5) days of the occurrence of
 a triggering event, notify the Administrative Agent and the Lenders in
 writing of any threatened action, investigation or inquiry by any
 Governmental Authority or any threatened demand or lawsuit by any Person
 against any Credit Party or their Properties of which the Borrower has
 knowledge in connection with any Environmental Laws if the Borrower could
 reasonably anticipate that such action will result in liability (whether
 individually or in the aggregate) in excess of $100,000, not fully covered by
 insurance, subject to normal deductibles.

 
	
  

 	
  

 
	
  

 	
                         
 (c)          The Borrower
 will, and will cause each Subsidiary to, provide environmental assessments,
 audits and tests in accordance with the most current version of the American
 Society of Testing Materials standards upon request by the Administrative
 Agent and the Lenders if the Administrative Agent reasonably believes (i)
 that there has been a Release of Hazardous Materials or (ii) non-compliance
 with an Environmental Law has occurred, and that such an event could
 reasonably be expected to cause a Material Adverse Effect (or as otherwise
 required to be obtained by the Administrative Agent or the Lenders by any
 Governmental Authority), in connection with any Oil and Gas Properties or
 other Properties.

 
	
  

 	
  

 
	
  

 	
 Section 8.11     Further Assurances.

 
	
  

 	
  

 
	
  

 	
                         
 (a)          The Borrower
 at its sole expense will, and will cause each Subsidiary to, promptly execute
 and deliver to the Administrative Agent all such other documents, agreements
 and instruments reasonably requested by the Administrative Agent to comply
 with, cure any defects or accomplish the conditions precedent, covenants and
 agreements of the Credit Parties, as the case may be, in the Loan 

 

73

	
  

 	
  

 
	
  

 	
 Documents, including the Notes, if any, or to further evidence and
 more fully describe the collateral intended as security for the Indebtedness,
 or to correct any defect, error or inaccuracy in this Agreement or the
 Security Instruments, or to state more fully the obligations secured therein,
 or to perfect, protect or preserve any Liens created pursuant to this
 Agreement or any of the Security Instruments or the priority thereof, or to
 make any recordings, file any notices or obtain any consents, all as may be
 reasonably necessary or appropriate, in the sole discretion of the
 Administrative Agent, in connection therewith.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
 Section 8.12      Reserve Reports.

 
	
  

 	
  

 
	
  

 	
                          
 (a)          Commencing on
 October 1, 2011 and on or before each April 1 and October 1 of each year
 thereafter, the Borrower shall furnish to the Administrative Agent and the
 Lenders a Reserve Report evaluating the Oil and Gas Properties of the Credit
 Parties as of the immediately preceding January 1st and July 1st. The Reserve
 Reports as of January 1 and July 1 of each year shall be prepared by one or
 more Approved Petroleum Engineers.

 
	
  

 	
  

 
	
  

 	
                         
 (b)          In the event
 of an Interim Redetermination, the Borrower shall furnish to the
 Administrative Agent and the Lenders a Reserve Report prepared by one or more
 Approved Petroleum Engineers. For any Interim Redetermination requested by
 the Administrative Agent or the Borrower pursuant to Section 2.07(b), the
 Borrower shall provide such Reserve Report with an “as of” date as required
 by the Administrative Agent as soon as possible, but in any event no later
 than thirty (30) days following the receipt of such request.

 
	
  

 	
  

 
	
  

 	
                         
 (c)          With the
 delivery of each Reserve Report, the Borrower shall provide to the
 Administrative Agent and the Lenders a certificate from a Responsible
 Officer, in substantially the form of Exhibit H attached hereto, certifying
 that in all material respects: (i) the data contained in the Reserve Report
 and any other information delivered in connection therewith is true and correct,
 (ii) the Credit Parties own good and defensible title to the Hydrocarbon
 Interests in the Oil and Gas Properties evaluated in such Reserve Report and
 such Properties are free of all Liens except for Liens permitted by Section
 9.03, (iii) except as set forth on an exhibit to the certificate, on a net
 basis there are no gas imbalances, take or pay or other prepayments in excess
 of the volume specified in Section 7.18 with respect to its Oil and Gas
 Properties evaluated in such Reserve Report which would require any Credit
 Party to deliver Hydrocarbons either generally or produced from such Oil and
 Gas Properties at some future time without then or thereafter receiving full
 payment therefor, (iv) none of their Oil and Gas Properties 

 

74

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
 Section 8.13      Title Information.

 
	
  

 	
  

 
	
  

 	
                          
 (a)          On or before
 the delivery to the Administrative Agent and the Lenders of each Reserve
 Report required by Section 8.12(a), the Borrower will deliver title
 information in form and substance reasonably acceptable to the Administrative
 Agent covering enough of the Oil and Gas Properties evaluated by such Reserve
 Report that were not included in the immediately preceding Reserve Report, so
 that the Administrative Agent shall have received together with title
 information previously delivered to the Administrative Agent, reasonably
 satisfactory title information on at least 85% of the Total Reserve Value of
 the Oil and Gas Properties evaluated by such Reserve Report; provided that, following
 reasonable notice from the Administrative Agent, the aforementioned threshold
 shall automatically be increased to acceptable title information with respect
 to at least 90% of the Total Reserve Value of the Oil and Gas Properties
 evaluated by each such Reserve Report.

 
	
  

 	
  

 
	
  

 	
                          
 (b)          If the
 Borrower has provided title information for additional Properties under
 Section 8.13(a), the Borrower shall, within forty-five (45) days of notice
 from the Administrative Agent that title defects or exceptions exist with
 respect to such additional Properties, either (i) cure any such title defects
 or exceptions (including defects or exceptions as to priority) which are not
 permitted by Section 9.03 raised by such information, (ii) substitute
 acceptable Mortgaged Properties with no title defects or exceptions except
 for Excepted Liens (other than Excepted Liens described in clauses (e), (g)
 and (h) of such definition) having an equivalent value or (iii) deliver title
 information in form and substance acceptable to the Administrative Agent so
 that the Administrative Agent shall have received, together with title
 information previously delivered to the Administrative Agent, satisfactory
 title information on at least 85% or 90%, as applicable, of the Total Reserve
 Value of the Oil and Gas Properties evaluated by such Reserve Report.

 
	
  

 	
  

 
	
  

 	
                          
 (c)          If the
 Borrower is unable to cure any title defect requested by the Administrative
 Agent or the Lenders to be cured within the 45-day period or the Borrower
 does not comply with the requirements to provide acceptable title information
 covering 85% or 90%, as applicable, of the Total Reserve Value of the Oil and
 Gas Properties evaluated in the most recent Reserve Report, such default
 shall not be a Default, but instead the Administrative Agent and/or the
 Majority Lenders shall have the right to exercise the following remedy in
 their sole discretion from time to time, and any failure to so exercise this
 remedy at any time shall not be a waiver as to future exercise of 

 

75

	
  

 	
  

 
	
  

 	
 the remedy by the Administrative Agent or the Lenders. To the extent
 that the Administrative Agent or the Majority Lenders are not satisfied with
 title to any Mortgaged Property after the 45-day period has elapsed, such
 unacceptable Mortgaged Property shall not count towards the 85% or 90%, as
 applicable, requirement, and the Administrative Agent may send a notice to
 the Borrower and the Lenders that the then outstanding Borrowing Base shall
 be reduced by an amount as determined by the Majority Lenders to cause the
 Borrower to be in compliance with the requirement to provide acceptable title
 information on 85% or 90%, as applicable, of the Total Reserve Value of the
 Oil and Gas Properties. This new Borrowing Base shall become effective
 immediately after receipt of such notice.

 
	
  

 	
  

 
	
  

 	
 Section 8.14      Additional Collateral;
 Additional Guarantors.

 
	
  

 	
  

 
	
  

 	
                          
 (a)          In connection
 with each redetermination of the Borrowing Base, the Borrower shall review
 the Reserve Report and the list of current Mortgaged Properties (as described
 in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
 represent at least 85% of the Total Reserve Value of the Oil and Gas
 Properties evaluated in the most recently completed Reserve Report; provided
 that, following reasonable advance notice from the Administrative Agent, the
 aforementioned threshold shall automatically be increased to 90% of the Total
 Reserve Value of the Oil and Gas Properties evaluated in the most recently
 completed Reserve Report. In the event that the Mortgaged Properties do not
 represent at least 85% or 90%, as applicable, of such Total Reserve Value,
 then the Credit Parties shall, and shall cause their Subsidiaries to, grant, within
 forty-five (45) days of delivery of the certificate required under Section
 8.12(c), to the Administrative Agent as security for the Indebtedness a
 first-priority Lien interest (provided that Excepted Liens of the type
 described in clauses (a) to (d) and (f) of the definition thereof may exist,
 but subject to the provisos at the end of such definition) on additional Oil
 and Gas Properties not already subject to a Lien of the Security Instruments
 such that after giving effect thereto, the Mortgaged Properties will
 represent at least 85% or 90%, as applicable, of such Total Reserve Value.
 All such Liens will be created and perfected by and in accordance with the
 provisions of deeds of trust, security agreements and financing statements or
 other Security Instruments, all in form and substance reasonably satisfactory
 to the Administrative Agent and in sufficient executed (and acknowledged
 where necessary or appropriate) counterparts for recording purposes. 

 
	
  

 	
  

 
	
  

 	
                         
 (b)          In the event
 that a Credit Party forms or acquires any Subsidiary, the Credit Parties
 shall promptly cause such Subsidiary to guarantee the Indebtedness pursuant
 to the Guaranty Agreement. In connection with any such guaranty, the Credit
 Parties shall, or shall cause such Subsidiary to, (i) execute and deliver a
 supplement to the Guaranty Agreement executed by such Subsidiary, (ii) pledge
 all of the Equity Interests of such new Subsidiary (including, without
 limitation, delivery of original stock certificates evidencing the Equity
 Interests of such Subsidiary, together with an appropriate undated stock
 powers for each certificate duly executed in blank by the registered owner
 thereof) and (iii) execute and deliver such other additional closing
 documents, certificates and legal opinions as shall reasonably be requested
 by the Administrative Agent.

 

76

	
  

 	
  

 
	
  

 	
                         
 (c)          If requested
 by the Administrative Agent, the Borrower shall, and shall cause its
 Subsidiaries to, grant, within thirty (30) days of such request, to the
 Administrative Agent as security for the Indebtedness a first-priority Lien
 interest (provided that Excepted Liens of the type described in clauses (a)
 to (d) and (f) of the definition thereof may exist, but subject to the provisos
 at the end of such definition) on any Oil and Gas Properties of the Credit
 Parties not already subject to a Lien of the Security Instruments. All such
 Liens will be created and perfected by and in accordance with the provisions
 of deeds of trust, security agreements and financing statements or other
 Security Instruments, all in form and substance reasonably satisfactory to
 the Administrative Agent and in sufficient executed (and acknowledged where
 necessary or appropriate) counterparts for recording purposes.

 
	
  

 	
  

 
	
           Section
 8.15     ERISA Compliance. The Borrower will
 promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
 promptly furnish to the Administrative Agent promptly after the filing
 thereof with the United States Secretary of Labor or the Internal Revenue
 Service, copies of each annual and other report with respect to each Plan or
 any trust created thereunder, and immediately upon becoming aware of the
 occurrence of any “prohibited transaction” as described in section 406 of
 ERISA or in section 4975 of the Code, in connection with any Plan or any
 trust created thereunder, a written notice signed by the President or the
 principal Financial Officer, the Subsidiary or the ERISA Affiliate, as the
 case may be, specifying the nature thereof, what action such Credit Party,
 the Subsidiary or the ERISA Affiliate is taking or proposes to take with
 respect thereto, and, when known, any action taken or proposed by the
 Internal Revenue Service or the Department of Labor with respect thereto.

 
	
  

 	
  

 
	
           Section
 8.16     Swap Agreements. The Borrower shall
 from time to time enter into Swap Agreements in respect of commodities so
 that the notional volumes of all Swap Agreements and additional fixed-price
 physical off-take contracts, in the aggregate, are more than 50% of the
 reasonably anticipated projected production from the Borrower’s Proved
 Developed Producing Reserves for each month continuing through and including
 the date that is thirty-six (36) months following the effective date of each
 such Swap Agreement.

 
	
  

 	
  

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

 

77

          Section
8.18     Disclosures. The Borrower shall, in
any public or private disclosure concerning the availability under this
Agreement, accurately describe availability as being the lesser of the then
effective Borrowing Base and the Aggregate Maximum Credit Amounts.

          Section
8.19     Post-Closing. (a) Within 15 days of
the Effective Date, the Borrower shall have completed all of the post-closing
tasks outlined on Schedule 8.19(a) and (b) within 30 days of the Effective
Date, the Borrower shall have completed all of the post-closing tasks outlined
on Schedule 8.19(b).

ARTICLE IX

Negative Covenants

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

          Section
9.01     Financial Covenants.

	
  

 	
  

 
	
  

 	
                         
 (a)          Ratio of
 Debt to EBITDAX. The Borrower will not, at any time, permit its ratio of
 Debt as of such time to EBITDAX to be greater than 3.5 to 1.0.

 
	
  

 	
  

 
	
  

 	
                         
 (b)          Current
 Ratio. The Borrower will not permit, as of the last day of any fiscal
 quarter, its ratio of (i) consolidated current assets (including the unused
 amount of the total Commitments, but excluding non-cash assets under FASB ASC
 815) to (ii) consolidated current liabilities (excluding non-cash obligations
 under FASB ASC 815 and current maturities under this Agreement) to be less
 than 1.0 to 1.0.

 
	
  

 	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                         
 (c)          Debt under
 Capital Leases not to exceed $200,000 in aggregate principal amount at any
 time outstanding;

 
	
  

 	
  

 
	
  

 	
                         
 (d)          Debt
 associated with bonds or surety obligations required by Governmental
 Requirements in connection with the operation of, or provision for the
 abandonment and remediation of, the Oil and Gas Properties; and

 
	
  

 	
  

 
	
  

 	
                         
 (e)          intercompany
 Debt between any Credit Parties to the extent permitted by Section 9.05(f);
 provided that such Debt is not held, assigned, transferred, 

 

78

	
  

 	
  

 
	
  

 	
 negotiated or pledged to any Person other than the one of the Credit
 Parties, and, provided further, that any such Debt owed by any Credit Party
 shall be subordinated to the Indebtedness on terms set forth in the Guaranty
 Agreement.

 
	
  

 	
  

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

 
	
  

 	
  

 
	
  

 	
                          
 (a)          Liens securing
 the payment of any Indebtedness;

 
	
  

 	
  

 
	
  

 	
                          
 (b)          Excepted
 Liens; and

 
	
  

 	
  

 
	
  

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

 

          Section
9.04     Dividends and Distributions. The
Borrower will not, and will not permit any of its Subsidiaries to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
return any capital to its stockholders or make any distribution of its Property
to its Equity Interest holders, except (i) the Borrower may declare and pay
dividends with respect to its Equity Interests payable solely in additional
shares of its Equity Interests (other than Disqualified Capital Stock), (ii)
Subsidiaries may declare and pay dividends and make distributions to the
Borrower with respect to their Equity Interests and (iii) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Credit Parties.

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

79

	
  

 	
  

 
	
  

 	
                         
 (f)          Investments
 (i) made by the Borrower in or to any Subsidiary which is a Guarantor and
 with respect to which 100% of the issued and outstanding Equity Interests
 have been pledged to Administrative Agent, and (ii) made by any Guarantor in
 or to any other Credit Party;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                         
 (h)          Investments in
 stock, obligations or securities received in settlement of debts arising from
 Investments permitted under this Section 9.05 owing to any Credit Party as a
 result of a bankruptcy or other insolvency proceeding of the obligor in
 respect of such debts or upon the enforcement of any Lien in favor of any
 Credit Party; provided that the Borrower shall give the Administrative Agent prompt
 written notice in the event that the aggregate amount of all Investments held
 at any one time outstanding under this Section 9.05(h) exceeds $100,000; and

 
	
  

 	
  

 
	
  

 	
                          
 (i)          other
 Investments not to exceed $200,000 in the aggregate at any time.

 

          Section
9.06     Nature of Business. The Borrower will
not, and will not permit any Subsidiary to, allow any material change to be
made in the character of its business as an independent oil and gas exploration
and production company. From and after the date hereof, the Credit Parties and
their Subsidiaries will not acquire or make any other expenditure (whether such
expenditure is capital, operating or otherwise) in or related to, any Oil and
Gas Properties not located within the geographical boundaries of the United
States.

          Section
9.07     Limitation on Leases. The Borrower
will not, and will not permit any Subsidiary to, create, incur, assume or
suffer to exist any obligation for the payment of rent or hire of Property of
any kind whatsoever (real or personal but excluding Capital Leases and leases
of Hydrocarbon Interests), under leases or lease agreements which would cause
the aggregate amount of all payments made by the Credit Parties and the
Subsidiaries pursuant to all such leases or lease agreements, including,
without limitation, any residual payments at the end of any lease, to exceed
$200,000 in any period of twelve consecutive calendar months during the life of
such leases.

          Section
9.08     Proceeds of Notes. The Borrower will
not permit the proceeds of the Notes to be used for any purpose other than
those permitted by Section 7.21. No Credit Party nor any Person acting on
behalf of a Credit Party has taken or will take any action which might cause
any of the Loan Documents to violate Regulations T, U or X or any other
regulation of the Board or to violate Section 7 of the Securities Exchange Act
of 1934 or any rule or regulation thereunder, in each case as now in effect or
as the same may hereinafter be in effect. If requested by the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR
Form U-1 

80

or such other form referred to in Regulation U, Regulation T or
Regulation X of the Board, as the case may be.

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

	
  

 	
  

 
	
  

 	
                          
 (a)          engage in, or
 permit any ERISA Affiliate to engage in, any transaction in connection with
 which a Credit Party or any ERISA Affiliate could be subjected to either a
 civil penalty assessed pursuant to subsections (c), (i), (l) or (m) of
 section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code
 if such penalty or liability could reasonably be expected to result in a
 Material Adverse Effect.

 
	
  

 	
  

 
	
  

 	
                         
 (b)          Fail to make,
 or permit any ERISA Affiliate to fail to make, full payment when due of all
 amounts which, under the provisions of any Plan, agreement relating thereto
 or applicable law, a Credit Party or any ERISA Affiliate is required to pay
 as contributions thereto if such failure could reasonably be expected to
 result in a Material Adverse Effect.

 
	
  

 	
  

 
	
  

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

 

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

          Section
9.11     Mergers, Etc. The Borrower will not,
and will not permit any Subsidiary to, merge into or with or consolidate with
any other Person, or permit any other Person to merge into or consolidate with
it, or sell, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
Property to any other Person (whether now owned or hereafter acquired) (any
such transaction, a “consolidation”), or liquidate or dissolve; provided
that any Subsidiary may participate in a consolidation with (i) the Borrower so
long as the Borrower shall be the continuing or surviving entity or (ii) any
other Subsidiary (provided that if one of such Subsidiaries is a wholly-owned
Subsidiary, then the surviving Person shall be a wholly-owned Subsidiary).

          Section
9.12      Sale of Properties. The Borrower will
not, and will not permit any Subsidiary to, sell, assign, farm-out, convey or
otherwise transfer (including through the sale of a 

81

production payment or overriding royalty interest) any Property except
for (a) the sale of Hydrocarbons in the ordinary course of business; (b)
farmouts, sales or other dispositions of undeveloped acreage and assignments in
connection with such farmouts with the approval of the Administrative Agent;
(c) the sale or transfer of equipment that is no longer necessary for the
business of a Credit Party or is replaced by equipment of at least comparable
value and use; (d) the sale or other disposition (including Casualty Events) of
any Oil and Gas Property or any interest therein or any Subsidiary owning Oil
and Gas Properties; provided that (i) 100% of the consideration received in
respect of such sale or other disposition shall be cash, (ii) the consideration
received in respect of such sale or other disposition shall be equal to or
greater than the fair market value of the Oil and Gas Property, interest
therein or the Subsidiary subject of such sale or other disposition (as
reasonably determined by the board of directors of the Borrower and, if
requested by the Administrative Agent, the Borrower shall deliver a certificate
of a Responsible Officer of the Borrower certifying to that effect), (iii) if
such sale or other disposition of Oil and Gas Property or Subsidiary owning Oil
and Gas Properties included in the most recently delivered Reserve Report
during any period between two successive Scheduled Redetermination Dates has a
fair market value in excess of $250,000, individually or in the aggregate, the
Borrowing Base shall be reduced, effective immediately upon such sale or
disposition, by an amount equal to the value, if any, assigned such Property in
the most recently delivered Reserve Report and (iv) if any such sale or other
disposition is of a Subsidiary owning Oil and Gas Properties, such sale or
other disposition shall include all the Equity Interests of such Subsidiary;
(e) the disposition of Oil and Gas Properties not included in the most recently
delivered Reserve Report in exchange for either (i) other Oil and Gas
Properties of a similar use or purpose or (ii) an operator’s commitment to
drill an oil or natural gas well; and (f) sales and other dispositions of
Properties not regulated by Section 9.12(a) to (e) having a fair market value
not to exceed $250,000 during any twelve (12) month period.

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

          Section
9.14     Material Agreements. The Borrower will
not, and will not permit any Subsidiary to, enter into or amend or otherwise
modify any Material Agreement or any other contract or agreement that involves
an individual commitment from such Person of more than $500,000 in the
aggregate in any twelve (12) month period, except for contracts for the
acquisition of Oil and Gas Properties.

          Section
9.15     Transactions with Affiliates. The
Borrower will not, and will not permit any Subsidiary to, enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate (other
than the Guarantors and wholly-owned Subsidiaries of the Borrower) unless such
transactions are otherwise permitted under this Agreement and are upon fair and
reasonable terms no less 

82

favorable to it than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.

          Section
9.16     Subsidiaries. The Borrower will not,
and will not permit any Subsidiary to, create any additional Subsidiary unless
the Borrower gives written notice to the Administrative Agent of such creation
and complies with Section 8.14(b). The Borrower shall not, and shall not permit
any Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in
any Subsidiary except in compliance with Section 9.12(d). Neither the Borrower
nor any Subsidiary shall have any Foreign Subsidiaries.

          Section
9.17     Negative Pledge Agreements; Dividend
Restrictions. The Borrower will not, and will not permit any Subsidiary to,
create, incur, assume or suffer to exist any contract, agreement or
understanding (other than this Agreement, the Security Instruments, or Capital
Leases creating Liens permitted by Section 9.03(c)) which in any way prohibits
or restricts the granting, conveying, creation or imposition of any Lien on any
of its Property in favor of the Administrative Agent and the Lenders or
restricts any Subsidiary from paying dividends or making distributions to any
Credit Party, or which requires the consent of or notice to other Persons in
connection therewith. 

          Section
9.18     Gas Imbalances, Take-or-Pay or Other
Prepayments. The Borrower will not, and will not permit any Subsidiary to,
allow gas imbalances, take-or-pay or other prepayments with respect to the Oil
and Gas Properties of any Credit Party that would require a Credit Party to
deliver Hydrocarbons at some future time without then or thereafter receiving
full payment therefor to exceed two percent (2%) of the Credit Parties’ Proved
Reserves of natural gas (on an mcf equivalent basis) in the aggregate.

          Section
9.19     Swap Agreements. The Borrower will not,
and will not permit any Subsidiary to, enter into any Swap Agreements with any
Person other than Lenders or their Affiliates. The Borrower shall neither
assign, terminate or unwind any such Swap Agreements nor sell any Swap
Agreements (a) listed on Schedule 7.20 or (b) if the effect of such action
(when taken together with any other Swap Agreements executed contemporaneously
with the taking of such action) would have the effect of cancelling its
positions under such Swap Agreements required hereby. The Borrower shall not
enter into Swap Agreements in respect of commodities if the effect thereof
would be to cause the notional volumes of all Swap Agreements and additional
fixed-price physical off-take contracts, in the aggregate, to exceed 100% of
the reasonably anticipated projected production from the Borrower’s Proved
Developed Producing Reserves for any month continuing through and including the
date that is forty-eight (48) months following the effective date of each such
Swap Agreement.

          Section
9.20     Sale and Leasebacks. The Borrower will
not, any will not permit any Subsidiary or Guarantor to enter into any
arrangement, directly or indirectly, with any Person whereby the Borrower or
any Subsidiary or Guarantor shall sell or transfer any of its Property, whether
now owned or hereafter acquired, and whereby Borrower or any Subsidiary or
Guarantor shall then or thereafter rent or lease as lessee such Property or any
part thereof or other Property which Borrower or any Subsidiary or Guarantor intends
to use for substantially the same purpose or purposes as the Property sold or
transferred.

83

          Section
9.21     Amendments to Organizational Documents.
Without the prior written consent of the Majority Lenders, neither Borrower nor
any Guarantor will amend, or permit to be amended, its Organizational Documents
or waive any right or obligation of any Person thereunder except to the extent
such amendment or waiver could not reasonably be expected to adversely affect
the rights and benefits of the Administrative Agent, the Lenders and/or other
secured parties under this Agreement or any other Loan Document.

ARTICLE X

Events of Default; Remedies

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                         
 (b)          the Borrower
 shall fail to pay any interest on any Loan or any fee or any other amount
 (other than an amount referred to in Section 10.01(a)) payable under any Loan
 Document, when and as the same shall become due and payable, and such failure
 shall continue unremedied for a period of three (3) Business Days;

 
	
  

 	
  

 
	
  

 	
                         
 (c)          any
 representation or warranty made or deemed made by or on behalf of a Credit
 Party in or in connection with any Loan Document or any amendment or
 modification of any Loan Document or waiver under such Loan Document or in
 any report, certificate, financial statement or other document furnished
 pursuant to or in connection with any Loan Document or any amendment or
 modification thereof or waiver thereunder, shall prove to have been incorrect
 in any material respect when made or deemed made;

 
	
  

 	
  

 
	
  

 	
                         
 (d)          a Credit Party
 shall fail to observe or perform any covenant, condition or agreement
 contained in Section 8.01(i), Section 8.01(m), Section 8.02, Section 8.03,
 Section 8.14 or in Article IX;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                         
 (f)          a Credit Party
 shall fail to make any payment (whether of principal or interest and
 regardless of amount) in respect of any Material Indebtedness, beyond any
 period of grace provided with respect thereto;

 

84

	
  

 	
  

 
	
  

 	
                            (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 (after taking into
 account any applicable period of grace with respect thereto), or to require
 the Redemption thereof or any offer to Redeem to be made in respect thereof,
 prior to its scheduled maturity or an event or condition requires a Credit
 Party to make an offer in respect thereof;

 
	
  

 	
  

 
	
  

 	
                            (h)          an
 involuntary proceeding shall be commenced or an involuntary petition shall be
 filed seeking (i) liquidation, reorganization or other relief in respect of a
 Credit Party 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 a Credit Party
 or for a substantial part of its assets, and, in any such case, such
 proceeding or petition shall continue undismissed for forty-five (45) days or
 an order or decree approving or ordering any of the foregoing shall be
 entered;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                            (j)          a
 Credit Party shall become unable, admit in writing its inability or fail
 generally to pay its debts as they become due;

 
	
  

 	
  

 
	
  

 	
                            (k)          (i)
 one or more judgments for the payment of money in an aggregate amount in
 excess of $250,000 (to the extent not covered by independent third party
 insurance provided by insurers of the highest claims paying rating or
 financial strength as to which the insurer does not dispute coverage and is
 not subject to an insolvency proceeding) or (ii) any one or more non-monetary
 judgments that have, or could reasonably be expected to have, individually or
 in the aggregate, a Material Adverse Effect, shall be rendered against a
 Credit Party or any combination thereof and, in either such case, the same
 shall remain undischarged for a period of forty-five (45) 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
 a Credit Party to enforce any such judgment;

 
	
  

 	
  

 
	
  

 	
                            (l)           the Loan Documents after delivery thereof shall for any reason, except to the
 extent permitted by the terms thereof, cease to be in full force and effect
 and 

 

85

	
  

 	
  

 
	
  

 	
 valid, binding and enforceable in accordance with their terms against
 the Borrower or a Guarantor party thereto or shall be repudiated by any of
 them, or cease to create a valid and perfected Lien of the priority required
 thereby on any of the collateral purported to be covered thereby, except to
 the extent permitted by the terms of this Agreement, or a Credit Party or any
 of their Affiliates shall so state in writing;

 
	
  

 	
  

 
	
  

 	
                            (m)         a
 Change in Control shall occur; 

 
	
  

 	
  

 
	
  

 	
                            (n)          a
 failure to cure a Borrowing Base Deficiency as outlined in Section 3.04(c)(ii)
 or (iii); and 

 
	
  

 	
  

 
	
  

 	
                            (o)          an
 “Event of Default”, “Termination Event” or “Additional Termination Event”
 (other than an “Event of Default”, “Termination Event” or “Additional Termination
 Event” associated with a breach thereof by Macquarie Bank Limited) shall occur
 under that certain ISDA Master Agreement by and between Macquarie Bank
 Limited and the Borrower dated on or about February 27, 2009 as the same may
 be amended from time to time or any other Swap Agreement between the Borrower
 and any Lender or Affiliate of any Lender (in each case after giving effect
 to any applicable grace periods).

 
	
  

 	
  

 
	
  

 	
 Section 10.02     Remedies.

 
	
  

 	
  

 
	
  

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

 

86

	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                                 (iv)           fourth,
 pro rata to payment of all other Indebtedness;

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 

ARTICLE XI

The Administrative Agent

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

          Section
11.02     Duties and Obligations of Administrative Agent. The Administrative
Agent shall not have any duties or obligations except those expressly set forth
in the Loan Documents. Without limiting the generality of the foregoing, (a)
the Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing (the use
of the term “agent” herein and in the other Loan Documents with reference to
the Administrative Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law; rather, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship
between independent contracting parties), (b) the Administrative Agent shall
have no duty to take any discretionary action or exercise any discretionary
powers, except as provided in Section 11.03, and (c) except as expressly
set forth herein, the Administrative Agent shall not have any duty to disclose,
and shall not be liable for the failure to

87

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 be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and shall not be
responsible for or have any duty to ascertain or inquire into (i) any
statement, warranty or representation made in or in connection with this
Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or under any other Loan Document
or in connection herewith or therewith, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth herein
or in any other Loan Document, (iv) the validity, enforceability, effectiveness
or genuineness of this Agreement, any other Loan Document or any other
agreement, instrument or document, (v) the satisfaction of any condition set
forth in Article VI or elsewhere herein, other than to confirm receipt of
items expressly required to be delivered to the Administrative Agent or as to
those conditions precedent expressly required to be to the Administrative
Agent’s satisfaction, (vi) the existence, value, perfection or priority of any
collateral security or the financial or other condition of any Credit Party or
any other obligor or guarantor, or (vii) any failure by a Credit Party or any
other Person (other than itself) to perform any of its obligations hereunder or
under any other Loan Document or the performance or observance of any
covenants, agreements or other terms or conditions set forth herein or therein.
For purposes of determining compliance with the conditions specified in
Article VI, each Lender shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to a
Lender unless the Administrative Agent shall have received written notice from
such Lender prior to the proposed closing date specifying its objection
thereto.

          Section 11.03     Action
by Administrative Agent. The Administrative Agent shall have no
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby or by the
other Loan Documents that the Administrative Agent is required to exercise in
writing as directed by the Majority Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 12.02) and in all cases the Administrative Agent shall be fully
justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders, as applicable, (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in
Section 12.02) specifying the action to be taken and (b) be indemnified to
its satisfaction by the Lenders against any and all liability and expenses
which may be incurred by it by reason of taking or continuing to take any such
action. The instructions as aforesaid and any action taken or failure to act
pursuant thereto by the Administrative Agent shall be binding on all of the
Lenders. If a Default has occurred and is continuing, then the Administrative
Agent shall take such action with respect to such Default as shall be directed
by the requisite Lenders in the written instructions (with indemnities)
described in this Section 11.03, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law. The Administrative Agent shall
not be liable for any action taken

88

or not taken by it with the consent or at the request of the Majority
Lenders or the Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 12.02),
and otherwise the Administrative Agent shall not be liable for any action taken
or not taken by it hereunder or under any other Loan Document or under any
other document or instrument referred to or provided for herein or therein or
in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except
for its own gross negligence or willful misconduct.

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

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

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

89

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 XI and Section 12.03 shall continue in effect for the benefit
of such retiring Administrative Agent, its sub-agents and their respective
Related Parties in respect of any actions taken or omitted to be taken by any
of them while it was acting as Administrative Agent.

          Section
11.07     Administrative Agent as Lender. Each Person serving as an
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 an Administrative Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Borrower or any Subsidiary or other Affiliate thereof as if it were not an
Administrative Agent hereunder.

          Section
11.08     No Reliance.

	
  

 	
  

 
	
  

 	
                            (a)          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 and each other Loan Document to which it is a
 party. Each Lender also acknowledges that it will, independently and without
 reliance upon the Administrative Agent or any other Lender and based on such
 documents and information as it shall from time to time deem appropriate,
 continue to make its own decisions in taking or not taking action under or
 based upon this Agreement, any other Loan Document, any related agreement or
 any document furnished hereunder or thereunder. The Administrative Agent
 shall not be required to keep itself informed as to the performance or
 observance by the Borrower or any of its Subsidiaries of this Agreement, the
 Loan Documents or any other document referred to or provided for herein or to
 inspect the Properties or books of the Borrower or its Subsidiaries. Except
 for notices, reports and other documents and information expressly required
 to be furnished to the Lenders by the Administrative Agent hereunder, the
 Administrative Agent shall not have any duty or responsibility to provide any
 Lender with any credit or other information concerning the affairs, financial
 condition or business of the Borrower (or any of its Affiliates) which may
 come into the possession of such Agent or any of its Affiliates. In this
 regard, each Lender acknowledges that Vinson & Elkins LLP is acting in
 this transaction as special counsel to the Administrative Agent only, except
 to the extent otherwise expressly stated in any legal opinion or any Loan
 Document. Each other party hereto will consult with its own legal counsel to
 the extent that it deems necessary in connection with the Loan Documents and
 the matters contemplated therein.

 
	
  

 	
  

 
	
  

 	
                            (b)          The
 Lenders acknowledge that the Administrative Agent is acting solely in an
 administrative capacity with respect to the structuring and syndication of
 this facility and have no duties, responsibilities or liabilities under this
 Agreement and the other Loan Documents other than their administrative
 duties, responsibilities and liabilities specifically as set forth in the
 Loan Documents and in their capacity as Lenders hereunder. In structuring,
 arranging or syndicating this facility, each Lender 

 

90

	
  

 	
  

 
	
  

 	
 acknowledges that the Administrative Agent may be an agent or lender
 under these Notes, other loans or other securities and waives any existing or
 future conflicts of interest associated with the their role in such other
 debt instruments. If in its administration of this facility or any other debt
 instrument, the Administrative Agent determines (or is given written notice
 by any Lender that a conflict exists), then it shall eliminate such conflict
 within ninety (90) days or resign pursuant to Section 11.06 and shall
 have no liability for action taken or not taken while such conflict existed.

 

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

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

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

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

91

connection with any sale or other disposition of Property to the extent
such sale or other disposition is permitted by the terms of Section 9.12
or is otherwise authorized by the terms of the Loan Documents.

ARTICLE XII

Miscellaneous

	
  

 	
  

 	
  

 
	
  

 	
 Section 12.01     Notices.

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                                 (i)          if
 to the Borrower, to it at 315 Manitoba Avenue, Suite 200, Wayzata, MN 55391,
 Attention of Chief Financial Officer (Telecopy No. (952) 476-9801);

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                                 (ii)         if
 to the Administrative Agent or the Issuing Bank to it at: Macquarie Bank
 Limited, No. 1 Martin Place, Sydney NSW 2000 Australia, Attention: Metals and
 Energy Capital Division (Facsimile: +612 8232 3590) with a copy to Macquarie
 Bank Limited-Representative Office, One Allen Center, 500 Dallas Street,
 Suite 3250, Houston TX 77002 USA, Attention: Metals and Energy Capital
 Division (Facsimile: +1 713 275 6222); 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, Article III, Article IV and
 Article V unless otherwise agreed by the Administrative Agent and the
 applicable Lender. The Administrative Agent or the Borrower may, in its
 discretion, agree to accept notices and other communications to it hereunder
 by electronic communications pursuant to procedures approved by it; provided
 that approval of such procedures may be limited to particular notices or
 communications.

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
 Section 12.02     Waivers; Amendments.

 
	
  

 	
  

 	
  

 
	
  

 	
                            (a)          No
 failure on the part of the Administrative Agent, the Issuing Bank or any
 Lender to exercise and no delay in exercising, and no course of dealing with
 respect to, any right, power or privilege, or any abandonment or
 discontinuance of steps 

 

92

	
  

 	
  

 
	
  

 	
 to enforce such right, power or privilege, under any of the Loan
 Documents shall operate as a waiver thereof, nor shall any single or partial
 exercise of any right, power or privilege under any of the Loan Documents
 preclude any other or further exercise thereof or the exercise of any other
 right, power or privilege. The rights and remedies of the Administrative
 Agent, the Issuing Bank and the Lenders hereunder and under the other Loan
 Documents are cumulative and are not exclusive of any rights or remedies that
 they would otherwise have. No waiver of any provision of this Agreement or
 any other Loan Document or consent to any departure by the Borrower therefrom
 shall in any event be effective unless the same shall be permitted by
 Section 12.02(b), and then such waiver or consent shall be effective only
 in the specific instance and for the purpose for which given. Without
 limiting the generality of the foregoing, the making of a Loan or issuance of
 a Letter of Credit shall not be construed as a waiver of any Default,
 regardless of whether the Administrative Agent, the Issuing Bank or any
 Lender may have had notice or knowledge of such Default at the time.

 
	
  

 	
  

 
	
  

 	
                            (b)          Neither
 this Agreement nor any provision hereof nor any Security Instrument nor any
 provision thereof may be waived, amended or modified except pursuant to an
 agreement or agreements in writing entered into by the Borrower and the
 Required Lenders or by the Borrower and the Administrative Agent with the
 consent of the Required Lenders; provided that no such agreement shall (i)
 increase the Commitment or the Maximum Credit Amount of any Lender without
 the written consent of such Lender, (ii) increase the Borrowing Base without
 the written consent of all of the Lenders, decrease or maintain the Borrowing
 Base without the consent of the Required Lenders, or modify Section 2.07
 in any manner without the consent of each Lender (other than any Defaulting
 Lender); provided that a Scheduled Redetermination may be postponed by the
 Required Lenders, (iii) reduce the principal amount of any Loan or LC
 Disbursement or reduce the rate of interest thereon, or reduce any fees
 payable hereunder, or reduce any other Indebtedness hereunder or under any
 other Loan Document, without the written consent of each Lender affected
 thereby, (iv) postpone the scheduled date of payment or prepayment of the
 principal amount of any Loan or LC Disbursement, or any interest thereon, or
 any fees payable hereunder, or any other Indebtedness hereunder or under any
 other Loan Document, or reduce the amount of, waive or excuse any such
 payment, or postpone or extend the Termination Date without the written
 consent of each Lender affected thereby, (v) change Section 4.01(b) or
 Section 4.01(c) in a manner that would alter the pro rata sharing of
 payments required thereby, without the written consent of each Lender, (vi)
 waive or amend Section 3.04(c), Section 6.01, Section 8.14,
 Section 10.02(c) or Section 12.14 or change the definition of the
 terms “Foreign Subsidiary” or “Subsidiary”, without the written
 consent of each Lender (other than any Defaulting Lender), (vii) release any
 Guarantor (except as set forth in the Guaranty Agreement), release any of the
 collateral (other than as provided in Section 11.10), or reduce the
 percentage set forth in Section 8.13(a) to less than 90%, without the
 written consent of each Lender (other than any Defaulting Lender), or (viii)
 change any of the provisions of this Section 12.02(b) or the definitions
 of “Majority Lenders” or “Required Lenders” or any other
 provision hereof specifying the number or percentage of Lenders required to
 waive, amend or modify any rights hereunder or under any other Loan Documents
 or make any determination or grant any consent hereunder or any other Loan
 Documents, without the written consent of each Lender (other than any
 Defaulting 

 

93

	
  

 	
  

 
	
  

 	
 Lender); provided further that no such agreement shall amend, modify
 or otherwise affect the rights or duties of the Administrative Agent or the
 Issuing Bank hereunder or under any other Loan Document without the prior
 written consent of the Administrative Agent or the Issuing Bank, as the case
 may be. Notwithstanding the foregoing, any supplement to Schedule 7.14
 (Subsidiaries) or Schedule 7.24 (Material Agreements) shall be effective
 simply by delivering to the Administrative Agent a supplemental schedule
 clearly marked as such and, upon receipt, the Administrative Agent will
 promptly deliver a copy thereof to the Lenders.

 
	
  

 	
  

 
	
  

 	
 Section 12.03     Expenses, Indemnity; Damage Waiver.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                            (b)          THE
 BORROWER SHALL INDEMNIFY 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 DEFEND AND HOLD EACH
 INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES,
 LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND
 DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED
 AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF 

 

94

	
  

 	
  

 
	
  

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

 

95

	
  

 	
  

 
	
  

 	
 BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR
 RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY
 THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY
 RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xiii) ANY
 OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
 DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION,
 INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED
 ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY
 INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
 INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
 CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
 OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
 IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
 INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE
 OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
 INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
 LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
 JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE
 GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH INDEMNITEE.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
 Section 12.04     Successors and Assigns.

 
	
  

 	
  

 
	
  

 	
                            (a)          The
 provisions of this Agreement shall be binding upon and inure to the benefit
 of the parties hereto and their respective successors and assigns permitted
 hereby (including any Affiliate of the Issuing Bank that issues any Letter of
 Credit), except that (i) the Borrower may not assign or otherwise transfer
 any of its rights or 

 

96

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 obligations hereunder without the prior written consent of each
 Lender (and any attempted assignment or transfer by the Borrower without such
 consent shall be null and void) and (ii) no Lender may assign or otherwise
 transfer its rights or obligations hereunder except in accordance with this
 Section 12.04. Nothing in this Agreement, expressed or implied, shall be
 construed to confer upon any Person (other than the parties hereto, their
 respective successors and assigns permitted hereby (including any Affiliate
 of the Issuing Bank that issues any Letter of Credit), Participants (to the
 extent provided in Section 12.04(c)) and, to the extent expressly
 contemplated hereby, the Related Parties of each of the Administrative Agent,
 the Issuing Bank and the Lenders) any legal or equitable right, remedy or
 claim under or by reason of this Agreement.

 
	
  

 	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
                               (A)          except
 in the case of an assignment to a Lender or an Affiliate of a Lender or an
 assignment of the entire remaining amount of the assigning Lender’s
 Commitment or Loans, the amount of the Commitment or Loans of the assigning
 Lender subject to each such assignment (determined as of the date the
 Assignment and Assumption with respect to such assignment is delivered to the
 Administrative Agent) shall not be less than $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 under this Agreement;

 

97

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
                          (iv)          The
 Administrative Agent as Registrar (the “Registrar”), acting for this
 purpose as an agent of the Borrower, shall maintain (or shall appoint a
 designee to maintain) at one of its offices located in the United States a
 copy of each Assignment and Assumption delivered to it and a register for the
 recordation of the names and addresses of the Lenders, and the Maximum Credit
 Amount of, and principal amount of the Loans and LC Disbursements owing to,
 each Lender pursuant to the terms hereof from time to time (the “Register”).
 The entries in the Register shall be conclusive, and the Borrower, the
 Administrative Agent, the Issuing Bank and the Lenders may treat each Person
 whose name is recorded in the Register pursuant to the terms hereof as a
 Lender hereunder for all purposes of this Agreement, notwithstanding notice
 to the contrary; provided that, failure to make any such recordation, or any
 error in such recordation, shall not affect any Lender’s Commitments or
 Borrower’s obligations in respect of any Loans or LC Disbursements. The
 Register shall be available for inspection by the Borrower, the Issuing Bank
 and any Lender, at any reasonable time and from time to time upon reasonable
 prior notice. In connection with any changes to the Register, if necessary,
 the Administrative Agent will reflect the revisions on Annex I and forward a
 copy of such revised Annex I to the Borrower, the Issuing Bank and each
 Lender.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
                          (v)          At
 the request of the registered owner of the Loan or Note, the Registrar shall
 note a collateral assignment of the Loan or Note on the Register and,
 provided that the Registrar has been given the name and address of such
 collateral assignee, the Registrar (i) shall not permit any further transfers
 of 

 

98

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 the Loan or Note on the Register absent receipt of written consent to
 such transfers from such collateral assignee and (ii) shall record the
 transfer of the Loan or Note on the Register to such collateral assignee (or
 such collateral assignee’s designee, nominee or assignee) upon written
 request by such collateral assignee.

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 

99

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Participant agrees, for the benefit of the Borrower, to comply with
 Section 5.03(f) 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, including to a trustee or other
 pledgee, to secure obligations of such Lender, including, without limitation,
 any pledge or assignment to secure obligations to a Federal Reserve Bank, and
 this Section 12.04(d) shall not apply to any such pledge or assignment
 of a security interest; provided that no such pledge or assignment of a
 security interest shall release a Lender from any of its obligations
 hereunder or substitute any such pledgee or assignee for such Lender as a
 party hereto.

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
                            (f)          Notwithstanding
 any other provisions of this Section 12.04, no transfer or assignment of
 the interests or obligations of any Lender or any grant of participations
 therein shall be permitted if such transfer, assignment or grant would be to
 an Affiliate of the Borrower, provided that an Approved Fund shall not be
 deemed an Affiliate of the Borrower.

 
	
  

 	
  

 	
  

 
	
  

 	
 Section 12.05     Survival; Revival; Reinstatement.

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
                            (b)          To
 the extent that any payments on the Indebtedness or proceeds of any collateral
 are subsequently invalidated, declared to be fraudulent or preferential, set
 aside or required to be repaid to a trustee, debtor in possession, receiver
 or other Person 

 

100

	
  

 	
  

 
	
  

 	
 under any bankruptcy law, common law or equitable cause, then to such
 extent, the Indebtedness so satisfied shall be revived and continue as if
 such payment or proceeds had not been received and the Administrative Agent’s
 and the Lenders’ Liens, security interests, rights, powers and remedies under
 this Agreement and each Loan Document shall continue in full force and
 effect. In such event, each Loan Document shall be automatically reinstated
 and the Borrower shall take such action as may be reasonably requested by the
 Administrative Agent and the Lenders to effect such reinstatement.

 
	
  

 	
  

 
	
  

 	
 Section 12.06     Counterparts; Integration; Effectiveness.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

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

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

101

any of and all the obligations of a Credit Party owed to such Lender
now or hereafter existing under this Agreement or any other Loan Document, irrespective
of whether or not such Lender shall have made any demand under this Agreement
or any other Loan Document and although such obligations may be unmatured. The
rights of each Lender under this Section 12.08 are in addition to other
rights and remedies (including other rights of setoff) which such Lender or its
Affiliates may have.

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

102

	
  

 	
  

 
	
  

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

 

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

          Section 12.11     Confidentiality.
Each of the Administrative Agent, the Issuing 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
potential investors, rating agencies, and secured parties, including Approved
Funds, 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), (c) to the extent requested by any regulatory
authority, (d) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (e) to any other party to this Agreement
or any other Loan Document, (f) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any suit, action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (g) subject to an agreement containing
provisions substantially the same as those of this Section 12.11, to (i)
any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any Swap Agreement
relating to a Credit Party and its obligations, (h) with the consent of the
Borrower or (i) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section 12.11 or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
non-confidential basis from a source other than a Credit Party. For the
purposes of this Section 12.11, “Information” means all information
received from any Credit Party relating to any Credit Party and their
businesses, other than any such information that is available to the
Administrative Agent, the Issuing Bank or any Lender on a non-confidential
basis prior to disclosure by a Credit

103

Party; provided that, in the case of information received from a 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 12.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

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

104

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

          Section 12.14     Collateral
Matters; Swap Agreements. The benefit of the Security
Instruments and of the provisions of this Agreement relating to any collateral
securing the Indebtedness shall also extend to and be available any Swap
Agreement between the Borrower or any Subsidiary and a Lender or its Affiliates
on a pro
rata basis in respect of any obligations of the Credit Parties.

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

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

          Section 12.17     Existing
Credit Agreement. This Agreement amends and restates in its
entirety and supersedes the Existing Credit Agreement. This Agreement and any
Notes issued hereunder have been given in renewal, extension, rearrangement and
increase, and not in extinguishment of the obligations under the Existing
Credit Agreement and the notes and other

105

documents related thereto. All Liens, deeds of trust, mortgages,
assignments and security interests securing the Existing Credit Agreement and
the obligations relating thereto are hereby ratified, confirmed, renewed,
extended, brought forward and rearranged as security for the Indebtedness. None
of the Liens and security interests created pursuant to the Existing Credit
Agreement are released. Additionally, the substantive rights and obligations of
the parties hereto shall be governed by this Agreement, rather than the
Existing Credit Agreement.

[SIGNATURE PAGES FOLLOW]

106

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

	
  

 	
  

 	
  

 
	
 BORROWER:

 	
 NORTHERN OIL AND GAS, INC.

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Michael Reger 

 
	
  

 	
 Name:

 	
 Michael
 Reger 

 
	
  

 	
 Title:

 	
 Chief
 Executive Officer

 

Schedule 8.19 – 1

	
  

 	
  

 	
  

 
	
 ADMINISTRATIVE
 AGENT:

 	
 MACQUARIE BANK LIMITED,

 
	
  

 	
 as
 Administrative Agent

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Katie Choi 

 
	
  

 	
 Name:

 	
 Katie Choi

 
	
  

 	
 Title:

 	
 Division
 Director

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Julia Mathison 

 
	
  

 	
 Name:

 	
 Julia
 Mathison

 
	
  

 	
 Title:

 	
 Associate
 Director

 

Schedule 8.19 – 2

	
  

 	
  

 	
  

 
	
 LENDERS:

 	
 MACQUARIE BANK LIMITED,

 
	
  

 	
 as a Lender

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Katie Choi 

 
	
  

 	
 Name:

 	
 Katie Choi

 
	
  

 	
 Title:

 	
 Division
 Director

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Julia Mathison 

 
	
  

 	
 Name:

 	
 Julia
 Mathison

 
	
  

 	
 Title:

 	
 Associate
 Director

 

Schedule 8.19 – 3

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