Document:

Exhibit
4.2

	
  

  	
  Certificate
  Evidencing Class D Units

  	
   

  
	
  Certificate No. [Insert
  Number]

  	
  Representing
  Limited Liability Company Interests in

  	
  Class D
  Units

  
	
   

  	
  Linn
  Energy, LLC

  	
   

  

 

In accordance with Section 4.1 of the Second Amended and Restated
Limited Liability Company Agreement of Linn Energy, LLC, as amended,
supplemented or restated from time to time (the “Company Agreement”), Linn
Energy, LLC, a Delaware limited liability company (the “Company”),

	
  hereby certifies that

  	
  [Insert
  Name of Purchaser]

  	
   

  

 

	
  (the “Holder”) is the registered owner of

  	
  [Insert
  Number of Class D Units]

  	
  CLASS D UNITS

  

 

representing
limited liability company interests in the Company (the “Class D Units”) transferable on the books
of the Company, in person or by duly authorized attorney, upon surrender of
this Certificate properly endorsed.  The
rights, preferences and limitations of the Class D Units are set forth in, and
this Certificate and the Class D Units represented hereby are issued and shall
in all respects be subject to the terms and provisions of, the Company
Agreement.  Copies of the Company
Agreement are on file at, and will be furnished without charge on delivery of
written request to the Company at, the principal office of the Company located
at 600 Travis, Suite 7000, Houston, Texas 77002.  Capitalized terms used herein but not defined
shall have the meanings given them in the Company Agreement.

The
Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Member and to have agreed to comply with
and be bound by and to have executed the Company Agreement, (ii) represented
and warranted that the Holder has all right, power and authority and, if an
individual, the capacity necessary to enter into the Company Agreement, (iii)
granted the powers of attorney provided for in the Company Agreement and
(iv) made the waivers and given the consents and approvals contained in
the Company Agreement.

This Certificate
shall not be valid for any purpose unless it has been signed by duly authorized
officers of the Company.

Dated:    August
31, 2007

THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND, IN THE CASE OF A
TRANSACTION EXEMPT FROM REGISTRATION, UNLESS SOLD PURSUANT TO RULE 144 UNDER
SUCH ACT OR THE ISSUER HAS RECEIVED DOCUMENTATION REASONABLY SATISFACTORY TO IT
THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER SUCH ACT. THIS
SECURITY IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THE SECOND
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF THE COMPANY DATED
AS OF JANUARY 19, 2006, AS AMENDED, A COPY OF WHICH MAY BE OBTAINED FROM THE
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.

	
  LINN ENERGY, LLC

  	 

	
   

  	 

	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Chairman, President and

  	
   

  
	
   

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Secretary

  	
   

  
				

 

 

Linn Energy, LLC

ABBREVIATIONS

The following abbreviations, when used in the
inscription on the face of this Certificate, shall be construed as follows
according to applicable laws or regulations:

	
  TEN COM

  	
  – as tenants in common

  	
  UNIF GIFT MIIN ACT–

  	
   

  	
  Custodian

  	
   

  
	
  TEN ENT

  	
  – as tenants by the entireties

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
  JT TEN

  	
  – as joint tenants with right
  of

  	
   

  	
  under Uniform Gifts to Minors

  
	
   

  	
     survivorship
  and not as tenants

  	
   

  	
  Act

  	
   

  	
   

  
	
   

  	
     in common

  	
   

  	
   

  	
  (State)

  	
   

  
								

 

Additional abbreviations, though
not in the above list, may also be used.

ASSIGNMENT OF CLASS D UNITS

In

Linn Energy, LLC

	
  FOR VALUE RECEIVED,

  	
  hereby
  assigns, conveys, sells and transfers unto

  
	
   

  	
   

  
	
   

  
	
  (Please print or typewrite name and address of Assignee)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Please insert Social Security or other identifying number of
  Assignee)

  
	
   

  	
   

  
	
   

  
	
                                        Class
  D Units representing limited liability company interests evidenced by this
  Certificate, subject to the Company Agreement, and does hereby irrevocably
  constitute and appoint                                                 as
  its attorney-in-fact with full power of substitution to transfer the same on
  the books of Linn Energy, LLC

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  NOTE:
  The signature to any endorsement hereon must 

  
	
   

  	
  correspond with the name as
  written upon the face of this Certificate in every particular, without
  alteration, enlargement or change.

  
	
   

  	
   

  
	
   

  	
   

  
	
  The signature(s) should be
  guaranteed by an “eligible guarantor

  	
   

  	
   

  
	
  institution” as defined in
  Rule 17Ad-15 under the Securities and Exchange Act of 1934, as amended.

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  
	
  SIGNATURE(S) GUARANTEED:

  	
   

  	
   

  
					

 

No assignment or transfer of the Class D Units evidenced hereby will be
registered on the books of the Company unless the Certificate evidencing the
Class D Units to be transferred is surrendered for registration or transfer.Exhibit
10.1

Execution Copy

Third Amended and Restated Credit
Agreement

Dated as of

August 31, 2007

among

Linn Energy, LLC,

as Borrower,

BNP Paribas,

as Administrative Agent,

Royal Bank of Canada,

as Syndication Agent,

Societe
Generale, Citibank, NA and BMO Capital Markets Financing, Inc.

as Co-Documentation Agents

and

The Lenders Party Hereto

Joint Lead Arrangers and Joint Book Runners

	
  BNP Paribas

  	
  RBC Capital Markets

  

 

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

  	
  20

  
	
  Section 1.04

  	
  Terms Generally

  	
  20

  
	
  Section 1.05

  	
  Accounting Terms and Determinations; GAAP

  	
  21

  
	
   

  	
   

  
	
  ARTICLE
  II

  	
   

  
	
  THE
  CREDITS

  	
   

  
	
   

  	
   

  
	
  Section 2.01

  	
  Commitments

  	
  21

  
	
  Section 2.02

  	
  Loans and Borrowings

  	
  21

  
	
  Section 2.03

  	
  Requests for Borrowings

  	
  23

  
	
  Section 2.04

  	
  Interest Elections

  	
  24

  
	
  Section 2.05

  	
  Funding of Borrowings

  	
  25

  
	
  Section 2.06

  	
  Termination and Reduction of Aggregate Maximum

  Credit Amounts

  	
  25

  
	
  Section 2.07

  	
  Borrowing Base

  	
  26

  
	
  Section 2.08

  	
  Letters of Credit

  	
  29

  
	
   

  	
   

  
	
  ARTICLE
  III

  	
   

  
	
  PAYMENTS
  OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

  	
   

  
	
   

  	
   

  
	
  Section 3.01

  	
  Repayment of Loans

  	
  33

  
	
  Section 3.02

  	
  Interest

  	
  33

  
	
  Section 3.03

  	
  Alternate Rate of Interest

  	
  34

  
	
  Section 3.04

  	
  Prepayments

  	
  35

  
	
  Section 3.05

  	
  Fees

  	
  36

  
	
   

  	
   

  
	
  ARTICLE
  IV

  	
   

  
	
  PAYMENTS;
  PRO RATA TREATMENT; SHARING OF SET-OFFS.

  	
   

  
	
   

  	
   

  
	
  Section 4.01

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

  	
  37

  
	
  Section 4.02

  	
  Presumption of Payment by the Borrower

  	
  38

  
	
  Section 4.03

  	
  Certain Deductions by the Administrative Agent

  	
  39

  
	
   

  	
   

  
	
  ARTICLE
  V

  	
   

  
	
  INCREASED
  COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

  	
   

  
	
   

  	
   

  
	
  Section 5.01

  	
  Increased Costs

  	
  39

  
	
  Section 5.02

  	
  Break Funding Payments

  	
  40

  
	
  Section 5.03

  	
  Taxes

  	
  41

  
	
  Section 5.04

  	
  Designation of Different Lending Office; Replacement
  of Lenders

  	
  41

  
	
  Section 5.05

  	
  Illegality

  	
  42

  
	
   

  	
   

  
	
  ARTICLE
  VI

  	
   

  
	
  CONDITIONS
  PRECEDENT

  	
   

  
	
   

  	
   

  
	
  Section 6.01

  	
  Effective Date

  	
  43

  

 

CREDIT AGREEMENT

 i
 

 

	
  Section 6.02

  	
  Each Credit Event

  	
  45

  
	
   

  	
   

  
	
  ARTICLE
  VII

  	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  Section 7.01

  	
  Organization; Powers

  	
  46

  
	
  Section 7.02

  	
  Authority; Enforceability

  	
  46

  
	
  Section 7.03

  	
  Approvals; No Conflicts

  	
  46

  
	
  Section 7.04

  	
  Financial Position; No Material Adverse Change

  	
  47

  
	
  Section 7.05

  	
  Litigation

  	
  47

  
	
  Section 7.06

  	
  Environmental Matters

  	
  48

  
	
  Section 7.07

  	
  Compliance with the Laws and Agreements; No Defaults

  	
  49

  
	
  Section 7.08

  	
  Investment Company Act

  	
  49

  
	
  Section 7.09

  	
  Taxes

  	
  49

  
	
  Section 7.10

  	
  ERISA

  	
  49

  
	
  Section 7.11

  	
  Disclosure; No Material Misstatements

  	
  50

  
	
  Section 7.12

  	
  Insurance

  	
  50

  
	
  Section 7.13

  	
  Restriction on Liens

  	
  51

  
	
  Section 7.14

  	
  Subsidiaries

  	
  51

  
	
  Section 7.15

  	
  Location of Business and Offices

  	
  51

  
	
  Section 7.16

  	
  Properties; Titles, Etc

  	
  51

  
	
  Section 7.17

  	
  Maintenance of Properties

  	
  52

  
	
  Section 7.18

  	
  Gas Imbalances, Prepayments

  	
  52

  
	
  Section 7.19

  	
  Marketing of Production

  	
  53

  
	
  Section 7.20

  	
  Swap Agreements

  	
  53

  
	
  Section 7.21

  	
  Use of Loans and Letters of Credit

  	
  53

  
	
  Section 7.22

  	
  Solvency

  	
  53

  
	
  Section 7.23

  	
  Acquisition

  	
  53

  
	
   

  	
   

  
	
  ARTICLE
  VIII

  	
   

  
	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 8.01

  	
  Financial Statements; Other Information

  	
  54

  
	
  Section 8.02

  	
  Notices of Material Events

  	
  57

  
	
  Section 8.03

  	
  Existence; Conduct of Business

  	
  57

  
	
  Section 8.04

  	
  Payment of Obligations

  	
  57

  
	
  Section 8.05

  	
  Performance of Obligations under Loan Documents

  	
  58

  
	
  Section 8.06

  	
  Operation and Maintenance of Properties

  	
  58

  
	
  Section 8.07

  	
  Insurance

  	
  58

  
	
  Section 8.08

  	
  Books and Records; Inspection Rights

  	
  59

  
	
  Section 8.09

  	
  Compliance with Laws

  	
  59

  
	
  Section 8.10

  	
  Environmental Matters

  	
  59

  
	
  Section 8.11

  	
  Further Assurances

  	
  60

  
	
  Section 8.12

  	
  Reserve Reports

  	
  61

  
	
  Section 8.13

  	
  Title Information

  	
  62

  
	
  Section 8.14

  	
  Additional Collateral; Additional Guarantors

  	
  62

  
	
  Section 8.15

  	
  ERISA Compliance

  	
  63

  
	
  Section 8.16

  	
  Marketing Activities

  	
  63

  
	
  Section 8.17

  	
  Swap Agreements

  	
  64

  

 

 ii
 

 

	
  ARTICLE IX

  	
   

  
	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 9.01

  	
  Financial Covenants

  	
  64

  
	
  Section 9.02

  	
  Debt

  	
  64

  
	
  Section 9.03

  	
  Liens

  	
  65

  
	
  Section 9.04

  	
  Dividends, Distributions and Redemptions

  	
  66

  
	
  Section 9.05

  	
  Investments, Loans and Advances

  	
  66

  
	
  Section 9.06

  	
  Nature of Business

  	
  68

  
	
  Section 9.07

  	
  Limitation on Leases

  	
  68

  
	
  Section 9.08

  	
  Proceeds of Notes

  	
  68

  
	
  Section 9.09

  	
  ERISA Compliance

  	
  68

  
	
  Section 9.10

  	
  Sale or Discount of Receivables

  	
  69

  
	
  Section 9.11

  	
  Mergers, Etc.

  	
  69

  
	
  Section 9.12

  	
  Sale of Properties

  	
  69

  
	
  Section 9.13

  	
  Environmental Matters

  	
  69

  
	
  Section 9.14

  	
  Transactions with Affiliates

  	
  70

  
	
  Section 9.15

  	
  Subsidiaries

  	
  70

  
	
  Section 9.16

  	
  Negative Pledge Agreements; Dividend Restrictions

  	
  70

  
	
  Section 9.17

  	
  Gas Imbalances, Take-or-Pay or Other Prepayments

  	
  70

  
	
  Section 9.18

  	
  Swap Agreements

  	
  70

  
	
  Section 9.19

  	
  Tax Status as Partnership

  	
  71

  
	
  Section 9.20

  	
  Acquisition Documents

  	
  71

  
	
   

  	
   

  
	
  ARTICLE
  X

  	
   

  
	
  EVENTS
  OF DEFAULT; REMEDIES

  	
   

  
	
   

  	
   

  
	
  Section 10.01

  	
  Events of Default

  	
  71

  
	
  Section 10.02

  	
  Remedies

  	
  73

  
	
  Section 10.03

  	
  Disposition of Proceeds

  	
  74

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XI

  	
   

  
	
  THE
  ADMINISTRATIVE AGENT

  	
   

  
	
   

  	
   

  
	
  Section 11.01

  	
  Appointment; Powers

  	
  74

  
	
  Section 11.02

  	
  Duties and Obligations of Administrative Agent

  	
  74

  
	
  Section 11.03

  	
  Action by Agent

  	
  75

  
	
  Section 11.04

  	
  Reliance by Agent

  	
  76

  
	
  Section 11.05

  	
  Subagents

  	
  76

  
	
  Section 11.06

  	
  Resignation or Removal of Agents

  	
  76

  
	
  Section 11.07

  	
  Agents and Lenders

  	
  76

  
	
  Section 11.08

  	
  No Reliance

  	
  77

  
	
  Section 11.09

  	
  Administrative Agent May File Proofs of Claim

  	
  77

  
	
  Section 11.10

  	
  Authority of Administrative Agent to Release
  Collateral and Liens

  	
  78

  
	
  Section 11.11

  	
  The Arrangers and the Agents

  	
  78

  
	
   

  	
   

  
	
  ARTICLE
  XII

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  Section 12.01

  	
  Notices

  	
  78

  
	
  Section 12.02

  	
  Waivers; Amendments

  	
  80

  
	
  Section 12.03

  	
  Expenses, Indemnity; Damage Waiver

  	
  81

  

 

 iii
 

 

	
  Section 12.04

  	
  Successors and Assigns

  	
  83

  
	
  Section 12.05

  	
  Survival; Revival; Reinstatement

  	
  85

  
	
  Section 12.06

  	
  Counterparts; Integration; Effectiveness

  	
  86

  
	
  Section 12.07

  	
  Severability

  	
  86

  
	
  Section 12.08

  	
  Right of Setoff

  	
  87

  
	
  Section 12.09

  	
  GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
  PROCESS

  	
  87

  
	
  Section 12.10

  	
  Headings

  	
  88

  
	
  Section 12.11

  	
  Confidentiality

  	
  88

  
	
  Section 12.12

  	
  Interest Rate Limitation

  	
  89

  
	
  Section 12.13

  	
  EXCULPATION PROVISIONS

  	
  90

  
	
  Section 12.14

  	
  Collateral Matters; Swap Agreements

  	
  90

  
	
  Section 12.15

  	
  No Third Party Beneficiaries

  	
  90

  
	
  Section 12.16

  	
  USA Patriot Act Notice

  	
  91

  

 

 iv
 

ANNEXES, EXHIBITS AND SCHEDULES

	
  Annex I

  	
  List of Maximum Credit Amounts

  
	
   

  	
   

  
	
  Exhibit A

  	
  Form of Note

  
	
  Exhibit B

  	
  Form of Compliance Certificate

  
	
  Exhibit C

  	
  Security Instruments

  
	
  Exhibit D

  	
  Form of Assignment and Assumption

  
	
  Exhibit E

  	
  Form of Borrowing Request

  
	
  Exhibit F

  	
  Form of Interest Election Request

  
	
  Exhibit G

  	
  Subordinated Debt Terms

  
	
   

  
	
   

  
	
  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

  

 

 v

THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of August 31, 2007, is among Linn Energy, LLC, a limited liability
company duly formed and existing under the laws of the State of Delaware  (the “Borrower”); each of the
Lenders from time to time party hereto; BNP PARIBAS  (in its individual capacity, “BNP Paribas”), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”); Royal Bank of
Canada (in its individual capacity, “RBC”), as syndication agent for the
Lenders (in such capacity, together with its successor in such capacity, the “Syndication
Agent”), and Societe Generale, Citibank, NA and BMO Capital Markets
Financing, Inc. as co-documentation agents (in such capacities, together with
their successors in such capacity, the “Co-Documentation Agents”) for
the Lenders.

R E C I T A L S

A.                                   The
Borrower, the Administrative Agent and other financial institutions named and
defined therein as lenders and agents entered into that certain Credit
Agreement dated as of April 13, 2005, as amended by the First Amendment, dated
May 3, 2005, the Second Amendment dated August 12, 2005, the Third Amendment
dated October 27, 2005 and the Fourth Amendment dated December 19, 2005.

B.                                     The
Borrower and the Administrative Agent amended and restated such Credit
Agreement and entered into, with other financial institutions named and defined
therein as lenders and agents, that certain Amended and Restated Credit
Agreement dated as of April 7, 2006 and as amended by the First Amendment,
dated May 5, 2006.

C.                                     The
Borrower, and the Administrative Agent amended and restated such Amended and
Restated Credit Agreement, and are parties to that certain Second Amended and
Restated Credit Agreement, dated August 1, 2006, as amended by the First
Amendment, dated February 1, 2007, the Second Amendment, dated June 29, 2007
and the Third Amendment, dated July 13, 2007, pursuant to which such lenders
provided certain loans to and extensions of credit on behalf of the Borrower
(as heretofore amended, modified or supplemented, the “Existing Credit
Agreement”).

D.                                    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.

E.                                      Now,
therefore, 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.

“Acquisition”
means the acquisition of certain oil, gas and mineral Properties pursuant to
the terms and conditions of the Acquisition Documents.

“Acquisition
Documents” means (a) the Mid-Continent Onshore Package Purchase Agreement
between Dominion Exploration & Production, Inc., Dominion Oklahoma Texas Exploration
& Production, Inc., LDNG Texas Holdings, LLC and DEPI Texas Holdings, LLC,
as sellers, and Borrower, as purchaser, dated June 29, 2007, to be effective
August 31, 2007, and (b) all bills of sale, assignments, agreements,
instruments and documents executed and delivered in connection therewith, as
amended.

“Acquisition
Properties” means (a) the Oil and Gas Properties and other properties
described in the Acquisition Documents and (b) the Equity Interests of each of
Dominion Gas Marketing, Inc., a Delaware corporation, Dominion Exploration
MidContinent, Inc., an Oklahoma corporation, DEPI Survivor LP, a Texas limited
partnership and DOTEPI Survivor LP, a Texas limited partnership, as acquired by
the Borrower or any Guarantor pursuant to the Acquisition Documents.

“Acquisition
Reserve Report” means (a) the report of Degolyer & MacNaughton dated as
of December 31, 2006, with respect to the Acquisition Properties and (b) the
unaudited Reserve Report dated July 1, 2007 evaluating the Acquisition Properties.

“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.

“Agent”
means the Administrative Agent, the Syndication Agent, any Co-Documentation
Agent or any combination of them as the context requires.

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

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

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

 2
 

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

	
  Borrowing Base Utilization 

  Percentage

  	
   

  	
  Eurodollar Loans

  	
   

  	
  ABR Loans

  	
   

  
	
  Less than 33%

  	
   

  	
  1.000

  	
  %

  	
  0.000

  	
  %

  
	
  Greater than or
  equal to 33% and less than 66%

  	
   

  	
  1.250

  	
  %

  	
  0.000

  	
  %

  
	
  Greater than or
  equal to 66% and less than 85%

  	
   

  	
  1.500

  	
  %

  	
  0.125

  	
  %

  
	
  Greater than or
  equal to 85% and less than 100%

  	
   

  	
  1.750

  	
  %

  	
  0.250

  	
  %

  
	
  Greater than or
  equal to 100% and less than 110%

  	
   

  	
  2.000

  	
  %

  	
  0.500

  	
  %

  
	
  Greater than or equal
  to 110%

  	
   

  	
  2.250

  	
  %

  	
  0.750

  	
  %

  

Each
change in the Applicable Margin shall apply during the period commencing on the
effective date of such change and ending on the date immediately preceding the
effective date of the next such change, provided, however, that if at any time
the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a),
then until such time as a Reserve Report is delivered 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
Counterparty” means (a) any Lender or any Affiliate of a Lender and (b) any
other Person whose long term senior unsecured debt rating is A/A2 by S&P or
Moody’s (or their equivalent) or higher.

“Arrangers”
means BNP Paribas and RBC Capital Markets, in their capacities as joint lead
arrangers and joint book runners hereunder.

“Assignee”
means the Person identified as such in an Assignment and Assumption.

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

 3
 

and accepted by the Administrative Agent, in the form of
Exhibit D 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.

“Available
Cash” means, with respect to any fiscal quarter ending prior to the
Termination Date:

(a)
the sum of (i) all cash and cash equivalents of the Borrower and each
Subsidiary on hand at the end of such fiscal quarter; and (ii) all additional
cash and cash equivalents of the Borrower and each Subsidiary on hand on the
date of determination of Available Cash for such fiscal quarter resulting from
working capital borrowings made subsequent to the end of such fiscal quarter,
less

(b)
the amount of any cash reserves established by the board of directors of the
Borrower to (i) provide for the proper conduct of the business of the Borrower
and each Subsidiary (including reserves for future capital expenditures
including drilling and acquisitions and for anticipated future credit needs of
the Borrower and each Subsidiary), (ii) comply with applicable law or any loan
agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which the Borrower or any Subsidiary is a party or by which it is
bound or its assets are subject or (iii) provide funds for distributions with
respect to any one or more of the next four fiscal quarters;

provided that disbursements made by the
Borrower or any Subsidiary or cash reserves established, increased or reduced
after the end of such fiscal quarter but on or before the date of determination
of Available Cash with respect to such fiscal quarter shall be deemed to have
been made, established, increased or reduced, for purposes of determining
Available Cash, within such fiscal quarter if the board of directors so
determines.

“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(c)(iv), Section 3.04(c)(iv), Section 8.13(c), Section
9.02(e) or Section 9.12(d).  Prior to the
Borrowing Base Equalization Date, the Borrowing Base and the Conforming Borrowing
Base shall be two separate and distinct determinations under Section 2.07;
provided, that, on and after the Borrowing Base Equalization Date, there shall
only be a single determination under Section 2.07 of the Borrowing Base.

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

“Borrowing
Base Equalization Date” means the earlier of (a) August 31, 2008 and (b)
the issuance by the Borrower of additional Equity Interests or any Funded Debt.

 4
 

“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) prior
to the Borrowing Base Equalization Date, the Conforming Borrowing Base in
effect on such day and (b) on and after the Borrowing Base Equalization Date,
the Borrowing Base in effect on such day.

“Borrowing
Request” means a request by the Borrower for a Borrowing in accordance with
Section 2.03 in substantially the form of Exhibit E.

“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 dealings in
dollar deposits are carried out in the London interbank market.

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

“Casualty
Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries
having a fair market value in excess of $10,000,000 in the aggregate for any
calendar year.

“Change
in Control” means the occurrence of any of the following events: (a) any
Person or group of Persons acting in concert as a partnership or other group (a
“Group of Persons”), other than one or more of the Permitted Holders,
shall be the legal or beneficial owner (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as amended) of more than 35% of the
combined voting power of the then total membership interests (including all
securities which are convertible into membership interests) of the Borrower, provided,
that a “Group of Persons” shall not include the underwriter in any firm
underwriting undertaken in connection with any public offering of the Borrower,
or (b) occupation of a majority of the seats (other than vacant seats) on the
board of directors (or board of managers) of the Company by Persons who were
neither (i) nominated by the board of directors of the Borrower nor (ii)
appointed by directors a majority of whom were so nominated.

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

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

 5
 

“Commitment”
means, with respect to each Lender, the commitment of such Lender to make Loans
and to acquire participations in Letters of Credit hereunder, expressed as an
amount representing the maximum aggregate amount of such Lender’s Revolving
Credit Exposure hereunder, as such commitment may be (a) modified from time to
time pursuant to Section 2.06 and (b) modified from time to time pursuant to
assignments by or to such Lender pursuant to Section 12.04(b).  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, for any day, the rate per annum set forth in the grid
below based upon the Borrowing Base Utilization Percentage then in effect

	
  Borrowing Base Utilization 

  Percentage

  	
   

  	
  Commitment Fee Rate

  	
   

  
	
  Less than 33%

  	
   

  	
  0.375

  	
  %

  
	
  Greater than or equal
  to 33%

  	
   

  	
  0.300

  	
  %

  

 

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

“Conforming Borrowing Base”
means at any time an amount equal to the amount determined in accordance with
Section 2.07, as the same may be adjusted from time to time pursuant to
Section 2.07(e), Section 8.13(c), Section 9.02(h) or Section 9.12(d).

“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 a 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 the 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; (d) non-cash gains, losses or
adjustments under FASB Statement No. 133 as a result of changes in the 

 6
 

fair market value of derivatives; (e) any gains or losses
attributable to writeups or writedowns of assets, including ceiling test
writedowns; and (f) non-cash share-based payments under FASB Statement No.
123R; 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.

“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 will be
deemed to “control” such other Person.  “Controlling”
and “Controlled” have meanings correlative thereto.

“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, accrued expenses, liabilities or other obligations of such
Person, in each such case to pay the deferred purchase price of Property or
services; (d) all obligations under Capital Leases; (e) all obligations under
Synthetic Leases; (f) all Debt (as defined in the other clauses of this
definition) of others secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) a Lien on any
Property of such Person, whether or not such Debt is assumed by such Person;
(g) all Debt (as defined in the other clauses of this definition) of others
guaranteed by such Person or with respect to 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) obligations 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) obligations to pay for goods or services whether or not such
goods or services are actually received or utilized by such Person (other than
obligations under firm transportation or drilling contracts); (k) any Debt of a
partnership for which such Person is liable either by agreement, by operation
of law or by a Governmental Requirement but only to the extent of such
liability; (l) Disqualified Capital Stock; and (m) the undischarged balance of
any production payment created by such Person or for the creation of which such
Person directly or indirectly received payment. 
The Debt of any Person shall include all obligations of such Person of
the character described above to the extent such Person remains legally liable
in respect thereof notwithstanding that any such obligation is not included as
a liability of such Person under GAAP.

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

 7
 

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

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

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

“Dominion
Production Payment” means (i) the Production Payment Purchase and Sale
Agreement between Dominion Oklahoma Texas Exploration & Production, Inc.
and Dominion Natural Gas III, L.P., as sellers, and Dominion VPP Holdings, LLC,
as buyer, dated as of August 27, 2007, (ii) the Conveyance of Term Overriding
Royalty Including Assignment of Interests in Oil and Gas Wells and Leases from
Dominion Exploration & Production, Inc. and Dominion
Natural Gas III, L.P. to Dominion VPP Holdings, LLC, dated as of August 27,
2007, and (iii) the Natural Gas Exchange Agreement between Dominion Oklahoma
Texas Exploration & Production, Inc. and Dominion VPP Holdings, LLC dated
as of August 27, 2007; in the case of each agreement referenced in clause (i),
(ii) or (iii) above, as such agreement is amended on or prior to the Effective
Date.

“EBITDA”
means, for any period, the sum of Consolidated Net Income for such period plus
the following expenses or charges to the extent deducted from Consolidated Net
Income in such period: Interest Expense, income taxes, depreciation, depletion,
amortization and other similar 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).

“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 and safety (to the extent relating to exposure to Hazardous Materials),
the environment or the preservation or reclamation of natural resources, 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 (“OPA”), as amended, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and Liability
Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control
Act, as amended, the Occupational Safety and Health Act of 1970, as amended,
the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended,
the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
and Hazardous Materials Transportation Act, as amended.  The term “oil” shall have the meaning
specified in OPA, the terms “hazardous substance” and “release”
(or “threatened release”) have the meanings specified in CERCLA, the 

 8
 

terms “solid waste” and “disposal” (or “disposed”)
have the meanings specified in RCRA and the term “oil and gas waste”
shall mean those waste that are excluded from the definition of “hazardous
waste” pursuant to 40 C.F.R. Section 261.4(b)(5) (“Section 261.4(b)(5)”);
provided, however, that (a) in the event either OPA, CERCLA, RCRA or Section
261.4(b)(5) is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (b) to the extent the laws of the state or other
jurisdiction in which any Property of the Borrower or any Subsidiary is located
establish a meaning for “oil,” “hazardous substance,” “release,”
“solid waste,” “disposal” or “oil and gas waste” which is
broader than that specified in either OPA, CERCLA, RCRA or Section 261.4(b)(5),
such broader meaning shall apply.

“Environmental
Permit” means any permit, registration, license, approval, consent,
exemption, variance, or other authorization of a Governmental Authority
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 any of its Subsidiaries 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.

“ERISA
Event” means (a) a reportable event described in section 4043 of ERISA and
the regulations issued thereunder, (b) the withdrawal of the Borrower or any of
its Subsidiaries or any ERISA Affiliate from a Plan during a plan year in which
it was a “substantial employer” as defined in section 4001(a)(2) of ERISA, (c)
in each case solely with respect to a Plan subject to Title IV of ERISA, the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt by the Borrower or any
of its Subsidiaries or any ERISA Affiliate of a notice of withdrawal liability
pursuant to Section 4202 of ERISA with respect to any Multiemployer Plan or (f)
any other event or condition which might constitute grounds under section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Plan subject to Title IV of ERISA.

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

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

“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 

 9
 

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, 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 of
its Subsidiaries or materially impair the value of material 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 the 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 of its Subsidiaries for
the purpose of roads, pipelines, transmission lines, transportation lines,
distribution lines for the removal of gas, oil, coal or other minerals or
timber, and other like purposes, or for the joint or common use of real estate,
rights of way, facilities and equipment, that do not secure any monetary
obligations and which in the aggregate do not materially impair the use of such
Property for the purposes of which such Property is held by the Borrower or any
of its Subsidiaries or materially impair the value of any material Property
subject thereto; (g) Liens on cash or securities pledged to secure performance
of tenders, surety and appeal bonds, government contracts, performance and
return of money bonds, bids, trade contracts, leases, statutory obligations,
regulatory obligations and other obligations of a like nature incurred in the
ordinary course of business; (h) judgment and attachment Liens not giving rise
to an Event of Default, provided that any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceeding may be
initiated shall not have expired and no action to enforce such Lien has been
commenced; and (i) Liens arising from precautionary Uniform Commercial Code
financing statement filings entered into by the Borrower and the Subsidiaries
covering Property under true leases entered into in the ordinary course of
business; provided, further that Liens described in clauses (a) through (e)
shall remain “Excepted Liens” only for so long as no action to enforce such
Lien has been commenced and no intention to subordinate the first priority Lien
granted in favor of the Administrative Agent and the Lenders is to be hereby
implied or expressed by the permitted existence of such Excepted Liens.

“Excluded
Taxes” means, with respect to the Administrative Agent, any Lender, any
Issuing Bank or any other recipient of any payment to be made by or on account
of any obligation of the 

 10
 

Borrower or any Guarantor hereunder or under any other Loan
Document, (a) income or franchise taxes imposed on (or measured by) its net income
by the United States of America or such other jurisdiction under the laws of
which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction in which the Borrower or
any Guarantor is located and (c) in the case of a Foreign Lender any
withholding tax that is imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party to this Agreement (or designates a
new lending office) or is attributable to such Foreign Lender’s failure to
comply with Section 5.03(e), unless such Foreign Lender (or its assignor, if
any) was entitled at the time of designation of a new lending office (or
assignment) to receive additional amounts with respect to such withholding tax
pursuant to Section 5.03(a) or Section 5.03(c).

“Existing
Credit Agreement” has the meaning assigned to such term in the recitals.

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

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

“Funded
Debt” means any Debt of the type described in clause (a), (e), (i) or (m)
of the definition thereof other than Loans.

“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.

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

 11
 

“Governmental
Requirement” means any law, statute, code, ordinance, order, determination,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other directive or requirement, whether now or
hereinafter in effect, including, without limitation, Environmental Laws,
energy regulations and occupational, safety and health standards or controls,
of any Governmental Authority.

“Guarantors”
means the Subsidiaries of the Borrower listed on Part I of Schedule 7.14 and
each other Material Domestic Subsidiary or other Domestic Subsidiary that
guarantees the Indebtedness pursuant to Section 8.14(b).

“Guaranty
Agreement” means an agreement executed by the Guarantors in form and
substance reasonably satisfactory 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 waste,” “toxic waste,” “extremely hazardous
substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar
meaning or import found in any applicable Environmental Law; (b) petroleum
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, asbestos containing materials,
polychlorinated biphenyls, or radon.

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

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

“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, without duplication, any and all amounts owing or to be owing by the
Borrower 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, any Issuing Bank or any
Lender under any Loan Document; (b) to any Lender or any Affiliate of a Lender
under any Swap Agreements among such Person and the Borrower or any Subsidiary
or assigned to such Person while such Person (or in the case of its Affiliate,
the Lender affiliated therewith) is a Lender hereunder and (c) all renewals,
extensions and/or rearrangements of any of the above.

 12
 

“Indemnified
Taxes” means Taxes other than Excluded Taxes.

“Initial
Reserve Reports” means the Acquisition Reserve Report and that certain
Reserve Report by DeGolyer and MacNaughton, dated August 9, 2007, with respect
to Oil and Gas Properties of the Borrower, as of July 1, 2007.

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

“Interest
Expense” means, for any period, the sum (determined without duplication) of
the aggregate gross interest expense of the Borrower and the Consolidated
Subsidiaries for such period, including (a) to the extent included in interest
expense under GAAP:  (i) amortization of
debt discount, (ii) capitalized interest and (iii) the portion of any payments
or accruals under Capital Leases allocable to interest expense, plus the
portion of any payments or accruals under Synthetic Leases allocable to
interest expense whether or not the same constitutes interest expense under
GAAP and (b) cash dividend payments by the Borrower in respect of any
Disqualified Capital Stock; but excluding non-cash gains, losses or adjustments
under FASB Statement No. 133 as a result of changes in the fair market value of
derivatives.

“Interest
Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (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).

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

 13
 

“Issuing
Bank” means BNP Paribas, in its capacity as an issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section
2.08(i).  Any Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of such 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 Fifty Million Dollars ($50,000,000).

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

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

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

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

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

“LIBO
Rate” means, with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum determined on the basis of
the rate for deposits in dollars for a period equal to such Interest Period
commencing on the first day of such Interest Period appearing on the Reuters
Screen LIBOR01 Page as of 11:00 A.M., London time, two Business Days prior to
the beginning of such Interest Period. 
In the event that such rate does not appear on such page (or otherwise
on such screen), the “LIBO Rate” shall be determined by reference to
such other comparable publicly available service for displaying eurodollar
rates as may be selected by the Administrative Agent or, in the absence of such
availability, by reference to the rate at which the Administrative Agent is
offered dollar deposits at or about 11:00 A.M., London time, two Business Days
prior to the beginning of such Interest Period in the interbank eurodollar
market where its eurodollar and foreign currency and exchange operations are
then being conducted for delivery on the first day of such Interest Period for
the number of days comprised therein.

 “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 they have
acquired or hold subject to a conditional sale agreement, or 

 14
 

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 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 (50.0%) of the Aggregate Maximum Credit
Amounts; and at any time while any Loans or LC Exposure is outstanding, Lenders
holding more than fifty percent (50.0%) 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)).

“Managers”
means the members of the Board of Managers or Board of Directors (however
designated from time to time) of the Borrower as constituted from time to time.

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

“Material
Domestic Subsidiary” means, as of any date, any Domestic Subsidiary that
(a) is a Wholly-Owned Subsidiary and (b) together with its Subsidiaries, owns
Property having a fair market value of $10,000,000 or more.

“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
$10,000,000.  For purposes of determining
Material Indebtedness, the “principal amount” of the obligations of the
Borrower or any of its Subsidiaries in respect of any Swap Agreement at any
time shall be the maximum aggregate amount (giving effect to any netting
agreements) that the Borrower or such Subsidiary would be required to pay if
such Swap Agreement were terminated at such time.

“Maturity
Date” means August 1, 2010.

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

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

 15
 

“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.

“Multiemployer
Plan” means a multiemployer plan as defined in section 3(37) or 4001 (a)(3)
of ERISA to which any Borrower or any Subsidiary or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within the six
calendar years preceding the date hereof, made or accrued an obligation to make
contributions.

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

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

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

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

“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.

 16
 

“Panhandle
Acquisition” means the acquisition of certain oil and gas properties in the
Texas Panhandle for $22.5 million, subject to customary closing adjustments,
pursuant to a definitive purchase agreement entered into by the Borrower on
August 2, 2007 and disclosed in the Borrower’s Form 10-Q for the period ending
June 30, 2007.

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

“PBGC”
means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Permitted
Holders” means Quantum Energy Partners II, LP, a Delaware limited
partnership (“QEP II”), and the management and Managers of the Borrower
on the date hereof, provided, that if QEP II dissolve or otherwise distribute
their ownership interests in the Borrower to their respective partners or
members, the term Permitted Holders shall include each of those partners or
members of QEP II who were partners or members, or affiliates of such partners
or members, of QEP II, as the case may be, on the date thereof; provided that,
with respect to the Managers of the Borrower, the Managers shall continue to
include future Managers of the Borrower so long as occupation of the majority
of the seats (other than vacant seats) on the board of directors (or board of
managers) of the Borrower are by Persons who were either (i) nominated by the
Managers of the Borrower as of the Effective Date or (ii) appointed by Managers
a majority of whom were so nominated.

“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 or maintained by the Borrower,
any of its Subsidiaries or an ERISA Affiliate or (b) was at any time during the
six calendar years preceding the date hereof, sponsored or maintained by the
Borrower, any of its Subsidiaries or an ERISA Affiliate.

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

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

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

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

“Proved
Developed Producing Properties” means Oil and Gas Properties which are
categorized as “Proved Reserves” that are both “Developed” and “Producing”, as
such terms are 

 17
 

defined in the Definitions for Oil and Gas Reserves as
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question.

“Proved
Properties” means Oil and Gas Properties which are identified as “Proved
Reserves” on the most recent Engineering Report.

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

“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 spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing.

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

“Reserve
Report” means a report, in form and substance reasonably satisfactory to
the Administrative Agent, setting forth, as of each December 31st or June 30th
(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 its
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 or any Vice President of such Person.  Unless otherwise specified, all references to
a Responsible Officer herein means 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.

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

 18
 

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

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

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

“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, manager 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” means a Subsidiary of
the Borrower.

“Supermajority
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 Letters of Credit (without regard to any sale by a
Lender of a participation in any Loan under Section 12.04(c)).

“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-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 any of its Subsidiaries
shall be a Swap Agreement.

“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 

 19
 

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 of the Maturity Date and the date of termination of
the Commitments.

“Transactions”
means, with respect to (a) the Borrower, the execution, delivery and
performance by the Borrower of this Agreement, each other Loan Document and
Acquisition Document to which it is a party, the Acquisition, 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
and Acquisition Document to which it is a party, the Acquisition, 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.

“Transferee”
means any Assignee or Participant.

“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 LIBO Rate.

“Wholly-Owned
Subsidiary” means any Subsidiary of which all of the outstanding Equity
Interests (other than any directors’ qualifying shares mandated by applicable
law), on a fully-diluted basis, are owned by the Borrower or one or more of the
Wholly-Owned Subsidiaries or are owned by the Borrower and one or more of the Wholly-Owned
Subsidiaries.

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

Section 1.04                                Terms
Generally.  The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase
“without limitation”.  The word “will”
shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth 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 

 20
 

contained
in the Loan Documents), (d) the words “herein”, “hereof” and “hereunder”, and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (e) with respect to the
determination of any time period, the word “from” means “from and including”
and the word “to” means “to and including” and (f) any reference herein to
Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Annexes, Exhibits and Schedules to, this
Agreement.  No provision of this
Agreement or any other Loan Document shall be interpreted or construed against
any Person solely because such Person or its legal representative drafted such
provision.

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

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.

(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 $500,000 and not less than $1,000,000.  At the time 

 21
 

that
each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $250,000 and not less than $1,000,000; provided that
an ABR Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.08(e).  Borrowings of more than one Type may be
outstanding at the same time; provided that there shall not at any time be more
than a total of twelve (12) Eurodollar Borrowings outstanding.  Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to
convert or continue, any Borrowing if the Interest Period requested with
respect thereto would end after the Maturity Date.

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

(e)                                  Loans
and Borrowings under the Existing Credit Agreement.  On the Effective Date (or as soon as
practicable with respect to (iii)):

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

(ii)                                  each
“ABR Loan” and “Eurodollar Loan” outstanding under the Existing Credit
Agreement shall be deemed to be amended and restated with the proceeds of a new
ABR Loan or Eurodollar Loan, as applicable, and continued as existing Loans
under this Agreement and not as a novation;

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

(iv)                              any
letters of credit outstanding under the Existing Credit Agreement shall be
deemed issued under this Agreement; and

 22

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

It is the intent of the parties hereto that this Agreement
not constitute a novation of the obligations and liabilities existing under the
Existing Credit Agreement or evidence repayment of any such obligations and
liabilities and that this Agreement amend and restate in its entirety the
Existing Credit Agreement and re-evidence the obligations of the Borrower
outstanding thereunder.

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 Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon,
Houston time, on the date of the proposed Borrowing; provided that no such
notice shall be required for any deemed request of an ABR Borrowing to finance
the reimbursement of an LC Disbursement as provided in Section 2.08(e).  Each such telephonic Borrowing Request shall
be irrevocable and shall be confirmed promptly by hand delivery or telecopy to
the Administrative Agent of a written Borrowing Request 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”;

(v)                                 the
amount of the then effective Borrowing Base and the then effective Conforming
Borrowing Base (if applicable), 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.

After the Borrowing Base Equalization
Date, information regarding the Conforming Borrowing Base may be omitted from
subsequent Borrowing Requests.

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

 23
 

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.

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

(b)                                 Interest
Election Requests. 
To make an election pursuant to this Section 2.04, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that
a Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. 
Each such telephonic 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 signed by the Borrower.

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

(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”.

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

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

 24
 

(e)                                  Effect
of Failure to Deliver Timely Interest Election Request and Events of Default
and Borrowing Base Deficiencies on Interest Election.  If the Borrower fails to deliver a timely
Interest Election Request with respect to a Eurodollar Borrowing prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period such Borrowing
shall be continued as a Eurodollar Loan having an Interest Period of
one-month.  Notwithstanding any contrary
provision hereof, (i) if an Event of Default has occurred and is
continuing:  (A) 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 (B) unless repaid, each Eurodollar Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto and (ii) if a
Borrowing Base Deficiency exists: (A) outstanding Borrowings may not be converted or continued as
Eurodollar Borrowings unless, after giving effect thereto and to the conversion
or continuation of Borrowings to ABR Borrowings, there are ABR Borrowings in an
amount no less than the amount of such Borrowing Base Deficiency  and
(B) unless sooner repaid, any Eurodollar Borrowing in excess of the Borrowing
Base 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
proposed date thereof by wire transfer of immediately available funds by 1:00
p.m., 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 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 that made such LC
Disbursement.  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.

Section
2.06                                Termination
and Reduction of Aggregate Maximum Credit Amounts.

 25
 

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

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

(i)                                     The
Borrower may at any time terminate, or from time to time reduce, the Aggregate
Maximum Credit Amounts; provided that (A) each reduction of the Aggregate
Maximum Credit Amounts shall be in an amount that is an integral multiple of
$500,000 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(c), the
total Revolving Credit Exposures would exceed the total Commitments.

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

Section
2.07                                Borrowing
Base.

(a)                                  Initial
Borrowing Base and Initial Conforming Borrowing Base.  For the period from and including the
Effective Date to but excluding April 1, 2008, the amount of the Borrowing Base
shall be $1,800,000,000 and the amount of the Conforming Borrowing Base shall
be $1,650,000,000.  Notwithstanding the
foregoing, the Borrowing Base and the Conforming Borrowing Base may be subject
to further adjustments from time to time pursuant to Section 2.07(c)(iv),
Section 2.07(e), Section 3.04(c)(iv), Section 8.13(c), Section 9.02(e) or
Section 9.12(d).  As of the Borrowing
Base Equalization Date, the Conforming Borrowing Base shall equal the Borrowing
Base and all references to the “Conforming Borrowing Base” in this Agreement
shall mean the Borrowing Base.  The
Borrowing Base shall, under no circumstances, exceed the Aggregate Maximum
Credit Amounts.

(b)                                 Scheduled
and Interim Redeterminations.  Subject to Section 2.07(d), the Borrowing
Base and the Conforming Borrowing Base shall be redetermined (a “Scheduled
Redetermination”) on April 1st and October 1st of each year,
commencing April 1, 2008.  In addition,
either the Borrower or the Administrative Agent, at the direction of the Majority
Lenders, may, once during each calendar year, each elect to cause the Borrowing
Base and the Conforming Borrowing Base to be redetermined between Scheduled
Redeterminations (an “Interim Redetermination”) in accordance with this
Section 2.07.  The Borrower shall have
the right, once during each calendar year, to initiate an Interim
Redetermination in addition to the one otherwise provided in this Section
2.07(b) upon the proposed acquisition of Proved Developed Producing Properties
whose purchase price is greater than 10% of the Borrowing Base, provided such
Interim Redetermination is in accordance with this Section 2.07.

 26
 

(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, in the case of a
Scheduled Redetermination, pursuant to Section 8.12(a) and (c), and, in the
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 Majority 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 good faith, propose a new Borrowing Base and which shall, prior to the
Borrowing Base Equalization Date, also specify a new Conforming Borrowing Base
(the “Proposed Borrowing Base”) based upon such information and such
other information (including, without limitation, the status of title
information with respect to the Oil and Gas Properties as described in the
Engineering Reports and the existence of any other Debt) as the Administrative
Agent, in good faith, deems appropriate and consistent with its normal oil and
gas lending criteria as it exists at the particular time.  In no event shall the Proposed Borrowing Base
exceed the Aggregate Maximum Credit Amounts.

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

(A)                              in
the case of a Scheduled Redetermination (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) in a timely and complete manner, then on or
before the March 15th and September 15th of such year following the
date of delivery of such Engineering Report 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 in any event,
within fifteen (15) days after the Administrative Agent has received the
required Engineering Report; and

(B)                                in
the case of an Interim Redetermination, promptly, and in any event, within
fifteen (15) days after the Administrative Agent has received the required
Engineering Reports.

(iii)                               Any
Proposed Borrowing Base that would increase the Borrowing Base (or the
Conforming Borrowing Base) then in effect must be approved or deemed to have
been approved by all of the Lenders as provided in this Section 2.07(c)(iii);
and any Proposed Borrowing Base that would decrease or maintain the Borrowing
Base (or the Conforming Borrowing Base) then in effect must be approved or be
deemed to have been approved by the Supermajority 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 (which proposal must also propose a Conforming Borrowing Base,
if appropriate).  If at the end of such
fifteen (15) days, any Lender has not 

 27
 

communicated its approval or disapproval
in writing to the Administrative Agent, such silence shall be deemed to be an
approval of the Proposed Borrowing Base. 
If, at the end of such 15-day period, all of the Lenders, in the case of
a Proposed Borrowing Base that would increase the Borrowing Base (or the
Conforming Borrowing Base) then in effect, or the Supermajority Lenders, in the
case of a Proposed Borrowing Base that would decrease or maintain the Borrowing
Base (or the Conforming Borrowing Base) then in effect, have approved or deemed
to have approved, as aforesaid, then the Proposed Borrowing Base shall become
the new Borrowing Base (and the new
Conforming 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
Supermajority Lenders, as applicable, have not approved or deemed to have
approved, as aforesaid, then the Administrative Agent shall poll the Lenders to
ascertain the highest Borrowing Base (and/or
the Conforming Borrowing Base) then acceptable
to a number of Lenders sufficient to constitute the Supermajority Lenders and,
so long as such amount does not increase the Borrowing Base (or the Conforming Borrowing Base) then
in effect, such amount shall become the new Borrowing Base (and the new Conforming Borrowing Base),
effective on the date specified in Section 2.07(d).  While the Conforming Borrowing Base is in
effect, the foregoing procedures shall apply to each proposed Borrowing Base
and each proposed Conforming Borrowing Base separately.

(iv)                              The
Borrowing Base shall not be more than $150,000,000 greater than the Conforming
Borrowing Base.  If the Conforming
Borrowing Base is adjusted pursuant to Section 2.07(e) or otherwise and the
Borrowing Base is more than $150,000,000 greater than the Conforming Borrowing
Base, then the Borrowing Base shall automatically be reduced to an amount that
is equal to $150,000,000 greater than the Conforming Borrowing Base.

(d)                                 Effectiveness
of a Redetermined Borrowing Base.  After a redetermined Borrowing Base (and Conforming Borrowing Base) is approved or
is deemed to have been approved by all of the Lenders or the Supermajority
Lenders, as applicable, pursuant to Section 2.07(c)(iii), the Administrative
Agent shall notify the Borrower and the Lenders (the “New Borrowing Base
Notice”) of the amount of the redetermined Borrowing Base (and Conforming Borrowing Base), and such amount
shall become the new Borrowing Base (and
new Conforming Borrowing Base), effective and
applicable to the Borrower, the Administrative Agent, each 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 April 1st or October 1st, as applicable, following delivery of the New
Borrowing Base 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 the New Borrowing Base Notice; and

(ii)                                  in
the case of an Interim Redetermination, on the Business Day next succeeding
delivery of the New Borrowing Base Notice.

Such
amount shall then become the Borrowing Base (and
the Conforming Borrowing Base) until the next
Scheduled Redetermination Date, the next Interim Redetermination date or the
next adjustment to the Borrowing Base (and
the Conforming Borrowing Base) under Section
2.07(c)(iv), 

 28
 

Section 2.07(e), Section 3.04(c)(iv), Section 8.13(c),
Section 9.02(e) or Section 9.12(d), whichever occurs first.

(e)                                  Reduction
of the Conforming Borrowing Base Upon Issuance of Funded Debt.  Notwithstanding anything to the contrary
contained herein, upon the issuance of any Funded Debt, the Conforming
Borrowing Base then in effect shall be reduced by an amount equal to the
product of 0.25 multiplied by the stated principal amount of such Debt
(excluding any original issue discount), and the Conforming Borrowing Base as
so reduced shall become the new Conforming Borrowing Base immediately upon the
date of such issuance, effective and applicable to the Borrower, the Agents,
each Issuing Bank and the Lenders on such date until the next redetermination
or modification thereof hereunder.

Section
2.08                                Letters
of Credit.

(a)                                  General.  Subject to the terms and conditions set forth
herein, the Borrower may request any Issuing Bank to issue Letters of Credit
for its own account or for the account of the Borrower or any of its
Subsidiaries, in a form reasonably acceptable to the Administrative Agent and
such 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, an 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  deliver as permitted by
Section 12.01(a)  (or transmit by
electronic communication, if arrangements for doing so have been approved by
the Issuing Bank) to any Issuing Bank and the Administrative Agent (not less
than three (3) Business Days in advance of the requested date of issuance,
amendment, renewal or extension) a notice:

(i)                                     requesting
the issuance of a Letter of Credit or identifying the Letter of Credit issued
by such Issuing Bank 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 the Conforming 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 

 29
 

requested
amendment, renewal or extension of an outstanding Letter of Credit) and the pro forma total Revolving Credit Exposures
(giving effect to the requested Letter of Credit or the requested amendment,
renewal or extension of an outstanding Letter of Credit).

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

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

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

(d)                                 Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank that issues such Letter of Credit
or the Lenders, each Issuing Bank that issues a Letter of Credit hereunder
hereby grants to each Lender, and each Lender hereby acquires from such 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
any Issuing Bank that issues a Letter of Credit hereunder, such Lender’s
Applicable Percentage of each LC Disbursement made by such 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 any Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit issued by such Issuing Bank, the
Borrower shall reimburse such LC Disbursement by paying to the Administrative
Agent an amount equal to such LC Disbursement not later than 1:00 p.m., Houston
time, on the third day after 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
prior to such time on such date, then not later than 1:00 p.m., Houston time,
on (i) the third day after 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 third day after the Borrower receives
such notice, if such notice is not received prior to such time on the day of
receipt; provided that if such LC Disbursement is not less than $1,000,000, the
Borrower shall, subject to the conditions to Borrowing set forth herein, be
deemed to have requested, and the Borrower does hereby request under such
circumstances, that such payment be financed with a Eurodollar Borrowing with
an Interest Period of one month in an equivalent amount and, to the extent so
financed, the Borrower’s obligation to make 

 30
 

such
payment shall be discharged and replaced by the resulting Eurodollar
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 that issued such Letter of Credit 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 that issued such Letter of
Credit or, to the extent that Lenders have made payments pursuant to this Section
2.08(e) to reimburse such Issuing Bank, then to such Lenders and such Issuing
Bank as their interests may appear.  Any
payment made by a Lender pursuant to this Section 2.08(e) to reimburse any
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.  Any LC Disbursement not reimbursed by the
Borrower or funded as a Loan prior to 1:00 p.m., Houston time, shall bear
interest for such day at the Alternate Base Rate plus the Applicable Margin.

(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 any Issuing Bank under a Letter of
Credit issued by such Issuing Bank 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 any Issuing Bank, nor any of their Related Parties shall
have any liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure to make
any payment thereunder (irrespective of any of the circumstances referred to in
the preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of any Issuing Bank;
provided that the foregoing shall not be construed to excuse any Issuing Bank
from liability to the Borrower to the extent of any direct damages (as opposed
to consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by such Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. 
The parties hereto expressly agree that, in the absence of gross negligence
or willful misconduct on the part of any Issuing Bank (as finally determined by
a court of competent jurisdiction), such Issuing Bank shall be deemed to have
exercised all requisite care in each such determination.  In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank that issued such Letter
of Credit 

 31
 

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. 
Each Issuing Bank shall, promptly following its receipt thereof, examine
all documents purporting to represent a demand for payment under a Letter of
Credit issued by such Issuing Bank.  Such
Issuing Bank shall promptly notify the Administrative Agent and the Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether such
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 such Issuing Bank and the Lenders with
respect to any such LC Disbursement.

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

(i)                                     Replacement
of an Issuing Bank. 
Any Issuing Bank may be replaced or resign at any time by written
agreement among the Borrower, the Administrative Agent, such resigning or
replaced Issuing Bank and, in the case of a replacement, the successor Issuing
Bank.  The Administrative Agent shall
notify the Lenders of any such resignation or replacement of an Issuing
Bank.  At the time any such resignation
or replacement shall become effective, the Borrower shall pay all unpaid fees
accrued for the account of the resigning or replaced Issuing Bank pursuant to
Section 3.05(b).  In the case of the
replacement of an Issuing Bank, from and after the effective date of such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of the replaced Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to “Issuing
Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require.  After the resignation or
replacement of an Issuing Bank hereunder, the resigning or replaced Issuing
Bank shall remain a party hereto and shall continue to have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such resignation or replacement, but shall not be
required to issue additional Letters of Credit.

(j)                                     Cash
Collateralization. 
If (i) any Event of Default shall occur and be continuing and the
Borrower receives notice from the Administrative Agent or the Majority Lenders
demanding the deposit of cash collateral pursuant to this Section 2.08(j), or
(ii) the Borrower is required to pay to the Administrative Agent the excess
attributable to an LC Exposure in connection with any prepayment pursuant to
Section 3.04(c), then the Borrower shall deposit, in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to, in the case of an Event of
Default, the LC Exposure, and in the case of a payment required by Section
3.04(c), the amount of such excess as provided in Section 3.04(c), as of such
date plus any accrued and unpaid interest thereon; provided that the obligation
to deposit such cash collateral shall become effective immediately, and such
deposit shall become 

 32
 

immediately
due and payable, without demand or other notice of any kind, upon the
occurrence of any Event of Default with respect to the Borrower or any of its
Subsidiaries described in Section 10.01(h) or Section 10.01(i).  The Borrower hereby grants to the
Administrative Agent, for the benefit of each Issuing Bank and the Lenders, an
exclusive first priority and continuing perfected security interest in and Lien
on such account and all cash, checks, drafts, certificates and instruments, if
any, from time to time deposited or held in such account, all deposits or wire
transfers made thereto, any and all investments purchased with funds deposited
in such account, all interest, dividends, cash, instruments, financial assets
and other Property from time to time received, receivable or otherwise payable
in respect of, or in exchange for, any or all of the foregoing, and all
proceeds, products, accessions, rents, profits, income and benefits therefrom,
and any substitutions and replacements therefor.  The Borrower’s obligation to deposit amounts
pursuant to this Section 2.08(j) shall be absolute and unconditional, without
regard to whether any beneficiary of any such Letter of Credit has attempted to
draw down all or a portion of such amount under the terms of a Letter of
Credit, and, to the fullest extent permitted by applicable law, shall not be
subject to any defense or be affected by a right of set-off, counterclaim or
recoupment which the Borrower or any of its Subsidiaries may now or hereafter
have against any such beneficiary, any Issuing Bank, the Administrative Agent,
the Lenders or any other Person for any reason whatsoever.  Such deposit shall be held as collateral
securing the payment and performance of the Borrower’s and any Guarantor’s
obligations under this Agreement and the other Loan Documents.  The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account; provided that investments of funds in such account in investments
permitted by Section 9.05(c) or (e) may be made at the option of the Borrower
at its direction, risk and expense. 
Interest or profits, if any, on such investments shall accumulate in
such account.  Moneys in such account
shall be applied by the Administrative Agent to reimburse, on a pro rata basis, each 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, if any, under this Agreement or the other Loan
Documents.  If the Borrower is required
to provide an amount of cash collateral hereunder as a result of the occurrence
of an Event of Default, and the Borrower is not otherwise required to pay to
the Administrative Agent the excess attributable to an LC Exposure in
connection with any prepayment pursuant to Section 3.04(c), then such amount
(to the extent not applied as aforesaid) shall be returned to the Borrower
within three Business Days after all Events of Default have been cured or
waived.

ARTICLE III

Payments of Principal and Interest; Prepayments; Fees

Section
3.01                                Repayment
of Loans.  The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then unpaid principal amount of each Loan on the Termination
Date.

Section
3.02                                Interest.

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

 33
 

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

(c)                                  Post-Default
and Borrowing Base Deficiency Rate.  Notwithstanding the foregoing, (i) 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 a rate per annum equal to two percent (2%)
plus the rate applicable to ABR Loans as provided in Section 3.02(a), but in no
event to exceed the Highest Lawful Rate, and (ii) during any Borrowing
Base Deficiency, the amount of such Borrowing Base Deficiency shall bear
interest, after as well as before judgment, at the rate then applicable to such
Loans, plus the Applicable Margin, if any, plus an additional two percent (2%),
but in no event to exceed the Highest Lawful Rate.

(d)                                 Interest
Payment Dates. 
Accrued interest on each Loan shall be payable in arrears on: (i) with
respect to any ABR Loan, the last day of each March, June, September and
December; (ii) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part but in
all cases to be paid at least every three months and (iii) in any case, on the
Termination Date; provided that (x) interest accrued pursuant to Section
3.02(c)(i) shall be payable on demand, (y) 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 (z)
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), except that interest computed by reference to the Alternate
Base Rate shall be computed on the basis of a year of 365 days (or 366 days in
a leap year), and in each case shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).  The applicable Alternate Base Rate or LIBO
Rate shall be determined by the Administrative Agent, and such determination
shall be conclusive absent manifest error, and be binding upon the parties
hereto.

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

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

(b)                                 the
Administrative Agent is advised by the Majority Lenders that the LIBO Rate 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;

 34
 

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

Section 3.04                                Prepayments.

(a)                                  Optional
Prepayments. 
The Borrower shall have the right at any time and from time to time to
prepay any Borrowing in whole or in part, subject to prior notice in accordance
with Section 3.04(b).

(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 12:00 noon,
Houston time, three Business Days before the date of prepayment, or (ii) in the
case of prepayment of an ABR Borrowing, not later than 12:00 noon, 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, on the same
Business Day, (A) prepay the Borrowings on the date of such termination or
reduction in an aggregate principal amount equal to such excess, and (B) if any
excess remains after prepaying all of the Borrowings as a result of an LC Exposure,
pay to the Administrative Agent on behalf of the Lenders an amount equal to
such excess to be held as cash collateral as provided in Section 2.08(j).

(ii)                                  Upon
any redetermination of or adjustment to the amount of the Borrowing Base in
accordance with Section 2.07 or Section 8.13(c), if the total Revolving Credit
Exposures exceeds the redetermined or adjusted Borrowing Base, 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, pay to the Administrative Agent on
behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j). 
The Borrower shall be obligated to make such prepayment and/or deposit
of cash collateral within ninety days (90) following the later of 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.

 35
 

(iii)                               Upon
any adjustments to the Borrowing Base pursuant to Section 9.12(d), if the total
Revolving Credit Exposures exceed 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, pay to the Administrative Agent on
behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j). 
The Borrower shall be obligated to make such prepayment and/or deposit
of cash collateral on the date it or any Subsidiary receives cash 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, at any time after the Effective Date, the Borrower
issues additional Equity Interests or Funded Debt and the total Revolving
Credit Exposures exceed the Conforming Borrowing Base or any Borrowing Base
Deficiency exists, then the Borrower shall (A) use 100% of the
Net Cash Proceeds from the issuance of such Equity Interests or Funded Debt to
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, pay to the Administrative Agent on behalf of the Lenders an
amount equal to such excess to be held as cash collateral as provided in
Section 2.08(j).  The Borrower shall be
obligated to make such prepayment and/or deposit of cash collateral on the date
it or any Subsidiary receives such Net Cash Proceeds as a result of such issuance
of Equity Interests or Funded Debt.  Additionally, the Borrowing Base shall be
reduced by the Net Cash Proceeds of such issuance of Equity Interests or Funded
Debt until the Borrowing Base equals the Conforming Borrowing Base.

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

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

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

Section
3.05                                Fees.

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

 36

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 each Issuing Bank a fronting fee equal to 0.125% per annum on the face
amount of each Letter of Credit issued by such Issuing Bank hereunder, provided
that in no event shall such fee be less than $500 and (iii) to each Issuing
Bank, for its own account, its standard fees with respect to the amendment,
renewal or extension of any Letter of Credit issued by such Issuing Bank or
processing of drawings thereunder. 
Participation 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 and fronting fees with respect to any
Letter of Credit shall be payable at the time of issuance of such Letter of
Credit; provided that all such fees shall be payable on the Termination Date
and any such fees accruing after the Termination Date shall be payable on
demand.  Any other fees payable to an
Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days
after demand.  All participation fees and
fronting fees shall be computed on the basis of a year of 360 days, unless such
computation would exceed the Highest Lawful Rate, in which case such fees 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.

(d)                                 Borrowing
Base Increase Fees.  The Borrower
agrees to pay to the Administrative Agent, for the account of each Lender then
party to this Agreement, ratably in accordance with its Applicable Percentage,
a Conforming Borrowing Base increase fee equal to 0.25% on the amount of any
increase of the Conforming Borrowing Base (or, if after the Borrowing Base
Equalization Date, any increase of the Borrowing Base) over the highest
Conforming Borrowing Base (or Borrowing Base) previously in effect, payable on
the day a New Borrowing Base Notice is given.

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 1:00
p.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, absent manifest error.  Any amounts received after

 37
 

such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon.  All such payments
shall be made to the Administrative Agent at its offices specified in Section
12.01, except payments to be made directly to an 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 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 any 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 such Issuing Bank, as the case may be,
the amount due.  In such event, if the

 38
 

Borrower has not
in fact made such payment, then each of the Lenders or such 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 such 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                                Certain
Deductions by the Administrative Agent. 
If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(b), Section 2.08(d), Section 2.08(e), Section 4.01(c)
or Section 4.02 then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender’s obligations under such Sections until all such unsatisfied
obligations are fully paid.

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 (including marginal, special, emergency
or supplemental reserves), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender for Eurocurrency liabilities under Regulation D of the Board (as the
same may be amended, supplemented or replaced from time to time) or otherwise;
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 any
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
such Issuing Bank’s capital or on the capital of such Lender’s or such 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 such Issuing Bank, to a level below that which such
Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding
company could have achieved but for such Change in Law (taking into
consideration such Lender’s or such Issuing Bank’s policies and the policies of
such Lender’s or such Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or such
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Bank or such Lender’s or such Issuing
Bank’s holding company for any such reduction suffered.

 39
 

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

(d)                                 Effect
of Failure or Delay in Requesting Compensation.  Failure or delay on the part of any Lender or
any Issuing Bank to demand compensation pursuant to this Section 5.01 shall not
constitute a waiver of such Lender’s or such Issuing Bank’s right to demand
such compensation; provided that the Borrower shall not be required to
compensate a Lender or any 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 such 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 such 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.  No Lender or Issuing Bank may make any demand
pursuant to this Section 5.01 more than 180 days after the Termination Date.

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

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

 40
 

Section
5.03                                Taxes.

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

(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 each Issuing Bank, within
10 days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Administrative Agent, such Lender or such
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 an Issuing Bank as to the
basis of such Indemnified Taxes or Other Taxes and the amount of such payment
or liability under this Section 5.03 shall be delivered to the Borrower and
shall be conclusive absent manifest error.

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

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

Section
5.04                                Designation
of Different Lending Office; Replacement of Lenders.

(a)                                  Designation
of Different Lending Office.  If any
Lender requests compensation under Section 5.01, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 5.03, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking

 41
 

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)                                 Replacement
of Lenders.  If (i) any Lender
requests compensation under Section 5.01, (ii) the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 5.03, (iii) the obligation of any
Lender to make Eurodollar Loans or continue Loans as Eurodollar Loans has been
suspended pursuant to Section 5.05, (iv) any Lender defaults in its obligation
to fund Loans hereunder or (v) any Lender has voted against an amendment,
modification or waiver of any provision of this Agreement proposed by the
Borrower, which proposed amendment, modification or waiver (x) was approved by
Lenders representing no less than 90% of the aggregate Commitments but (y)
required the approval of all of the Lenders and did not get such approval, then
the Borrower may, at its sole expense and effort, upon notice to such Lender
and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 12.04(b)), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (1) the
Borrower shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, (2) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans and participations in LC Disbursements, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts) and (3) in the case of any such
assignment resulting from a claim for compensation under Section 5.01 or payments
required to be made pursuant to Section 5.03, such assignment will result
in a reduction in such compensation or payments.  A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.

Section
5.05                                Illegality.  Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its applicable
lending office to honor its obligation to make or maintain Eurodollar Loans
either generally or having a particular Interest Period hereunder, then (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 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.

 42
 

ARTICLE VI

Conditions
Precedent

Section
6.01                                Effective
Date.  The obligations of the Lenders
to make Loans and of any 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
Arrangers, the Administrative Agent and the Lenders shall have received all
fees and other 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.

(b)                                 The
Administrative Agent shall have received a certificate of the Borrower and of
each Guarantor setting forth (i) resolutions of the Managers, board of
directors or other managing body with respect to the authorization of the
Borrower or such Guarantor to execute and deliver the Loan Documents to which
it is a party and to enter into the transactions contemplated in those
documents, (ii) the individuals (y) who are authorized to sign the Loan
Documents to which the Borrower or such Guarantor is a party and (z) who will,
until replaced by another individual 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 other Loan
Documents to which it is a party, (iii) specimen signatures of such authorized
individuals, and (iv) the articles or certificate of incorporation or formation
and bylaws, operating agreement or partnership agreement, as applicable, of the
Borrower and each Guarantor, in each case, certified as being true and
complete.  The Administrative Agent and
the Lenders may conclusively rely on such certificate until the Administrative
Agent receives notice in writing from the Borrower to the contrary.

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

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

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

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

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

 43
 

(i)                                     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 80% of the total value of the Oil and Gas
Properties evaluated in the Initial Reserve Reports.

(ii)                                  have
received certificates, together with undated, blank stock powers for each such
certificate, representing all of the issued and outstanding Equity Interests of
each of the Guarantors, to the extent such Equity Interests are certificated.

(h)                                 The
Administrative Agent shall have received an opinion of (i) Akin Gump Strauss
Hauer Feld LLP, special counsel to the Borrower, in form and substance
satisfactory to the Administrative Agent, as to such matters incident to the
Transactions as the Administrative Agent may reasonably request and (ii) local
counsel in each of the following states: West Virginia, Pennsylvania, Texas,
Oklahoma and California and any other jurisdictions requested by the
Administrative Agent, in form and substance satisfactory to the Administrative
Agent.

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

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

(k)                                  The
Administrative Agent shall have received the financial statements referred to
in Section 7.04(a).

(l)                                     The
Administrative Agent shall have received appropriate UCC search certificates
reflecting no prior Liens encumbering the Properties the Borrower, and its
Subsidiaries for each of the following jurisdictions: Pennsylvania, West
Virginia, New York, Delaware, Oklahoma, Texas, Colorado, Kansas, Illinois 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.

(m)                               The
Administrative Agent shall have received a certificate of a Responsible Officer
of the Borrower certifying that the Borrower has recently issued Equity
Interests with Net Cash Proceeds of at least $1,300,000,000.

(n)                                 The
Administrative Agent shall have received evidence that the Borrower has entered
into Swap Agreements, the prices, volumes and terms of which are satisfactory
to the Arrangers.

(o)                                 The
Administrative Agent or its counsel shall have received (i) a certificate of a
Responsible Officer of the Borrower certifying: (A) that the Borrower is
concurrently consummating the Acquisition in accordance with the terms of the
Acquisition Documents (with all of the material conditions precedent thereto having
been satisfied in all material respects by the parties thereto) and acquiring
substantially all of the Acquisition Properties contemplated by the Acquisition
Documents; (B) as to the final purchase price for the Acquisition Properties
after giving effect to all adjustments as of the closing date contemplated by
the Acquisition Documents and

 44
 

specifying, by
category, the amount of such adjustment, provided that the final purchase price
shall not be greater than $2,100,000,000, subject to pre-closing and post-closing
adjustments under the Acquisition Documents; (C) that attached thereto is a
true and complete list of the Acquisition Properties which have been excluded
from the Acquisition pursuant to the terms of the Acquisition Documents,
specifying with respect thereto the basis of exclusion as (1) title defect, (2)
preferential purchase right, (3) environmental or (4) casualty loss; (D) that
attached thereto is a true and complete list of all Acquisition Properties for
which any seller has elected to cure a title defect, (E) that attached thereto
is a true and complete list of all Acquisition Properties for which any seller
has elected to remediate an adverse environmental condition, (F) there was no
known breach of the seller’s title or environmental representations in the
Acquisition Documents that would have a material adverse effect on the
Acquisition Properties, taken as a whole, and (G) that attached thereto is a
true and complete list of all Acquisition Properties which are currently
pending final decision by a third party regarding purchase of such property in
accordance with any preferential right; (ii) a true and complete executed copy
of each of the Acquisition Documents; (iii) original counterparts or copies,
certified as true and complete, of the assignments, deeds and leases for all of
the Acquisition Properties; and (iv) such other related documents and
information as the Administrative Agent shall have reasonably requested.

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

The
Administrative Agent shall notify the Borrower and the Lenders of the Effective
Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the
obligations of the Lenders to make Loans and of each 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 October 1, 2007 (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at
such time).

Section
6.02                                Each
Credit Event.  The obligation of each
Lender to make a Loan on the occasion of any Borrowing (including the initial
funding), and of each 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 Material Adverse Effect shall have occurred.

(c)                                  The
representations and warranties of the Borrower and the Guarantors, set forth in
this Agreement and in the other Loan Documents shall be true and correct on and
as of the 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.

 45
 

(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 any Issuing Bank to violate or exceed, any applicable Governmental
Requirement, and no Change in Law shall have occurred, and no litigation shall
be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
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)                                  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 (e).

ARTICLE VII

Representations
and Warranties

The
Borrower represents and warrants to the Lenders that:

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

Section
7.02                                Authority;
Enforceability.  The Transactions are
within the Borrower’s and each Guarantor’s corporate powers and have been duly
authorized by all necessary corporate and, if required, member 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).  When executed and
delivered, each Loan Document and Acquisition Document to which the Borrower
and any Guarantor is a party will have been duly executed and delivered by the
Borrower and such Guarantor and will constitute a legal, valid and binding
obligation of the Borrower and such Guarantor, as applicable, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered
in a proceeding in equity or at law.

Section
7.03                                Approvals;
No Conflicts.  The Transactions (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 the members or any class of directors of the Borrower or any other
Person, whether interested or disinterested), 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 (i) such as have been obtained or made and are in

 46
 

full force and
effect, (ii) as may not be filed or obtained until after the consummation of
the Acquisition and (iii) for the filing and recording of Security Instruments
to perfect the Liens created hereby and by Security Instruments, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrower or any of its Subsidiaries 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 the
Borrower or any of its Subsidiaries or their Properties, or give rise to a
right thereunder to require any payment to be made by the Borrower or such
Subsidiary and (d) will not result in the creation or imposition of any Lien on
any Property of the Borrower or any of its Subsidiaries (other than the Liens
created by the Loan Documents).

Section
7.04                                Financial
Position; No Material Adverse Change.

(a)                                  The
Borrower has heretofore furnished to the Lenders (i) the audited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of December
31, 2006, and related audited consolidated statements of income, cash flows and
changes in members’ equity for the fiscal year ending December 31, 2006, (ii)
the unaudited consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of and for the fiscal quarter and the portion of the fiscal
year ended June 30, 2007, certified by its chief financial officer, (iii) audited statements of revenues and operating
expenses for the Acquisition Properties for the fiscal year ended December 31,
2006 (which audit reports for such financial statements are not subject to any
qualification) and (iv) unaudited statements of revenues and operating expenses
for the Acquisition Properties for the fiscal quarter ending June 30, 2007 (and
for the comparable period in the preceding fiscal year).  The financial statements in clauses
(i) and (ii) present fairly, in all material respects, the financial position
and results of operations and cash flows of the Borrower and its consolidated
subsidiaries as of such date and for such period in accordance with GAAP.  The
financial statements in clauses (iii) and (iv) present fairly, in all material
respects, revenues and operating expenses for the Acquisition Properties as of
the dates and for the periods set forth above 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, 2006, (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 of its Subsidiaries has on the date hereof any material
Debt (including Disqualified Capital Stock), or any contingent liabilities,
off-balance sheet liabilities or partnerships, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except for the (i) Indebtedness or (ii) as referred to
or reflected or provided for in the Financial Statements.

Section
7.05                                Litigation.  Except as set forth on Schedule 7.05 (as
supplemented prior to the Effective Date), 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 of its Subsidiaries or involving the
Acquisition (a) 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 (b)
that involve any Loan Document or (c) that could impair the consummation of the
Acquisition on the time and in the manner contemplated by the Acquisition
Documents.

 47
 

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 the Borrower:

(a)                                  the
Borrower and its Subsidiaries 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
Borrower and its Subsidiaries 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
Borrower or its Subsidiaries has 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 threatened against
the Borrower or its Subsidiaries or any of their respective Properties or as a
result of any operations at the Properties;

(d)                                 none
of the Properties contain or have contained any:  (i) underground storage tanks; (ii) asbestos
containing materials in a friable condition or otherwise requiring abatement
under Environmental Laws; or (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 similar state remedial priority list promulgated or
published pursuant to any comparable state law;

(e)                                  there
is no Release or threatened Release, of Hazardous Materials at, on, under or
from any of Borrower’s or its Subsidiaries’ Properties, there are no
investigations, remediations, abatements, removals, or monitorings of Hazardous
Materials required under applicable Environmental Laws at such Properties and
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)                                    neither
the Borrower nor its Subsidiaries 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 the Borrower’s or its Subsidiaries’ Properties
and there are no conditions or circumstances that would 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 any of the
Borrower’s or its Subsidiaries’ Properties that would reasonably be expected to
form the basis for a material claim for damages or compensation and there are
no conditions or circumstances that would reasonably be expected to result in
the receipt of notice regarding such exposure; and

(h)                                 the
Borrower and its Subsidiaries have made available to Lenders copies of all
material environmental site assessment reports and other material documents
relating to any alleged non-compliance with or liability under Environmental
Laws that are in any of the Borrower’s

 48
 

or its Subsidiaries’
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 Borrower and its Subsidiaries 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
present conduct of its business, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

(b)                                 Neither
the Borrower nor any of its Subsidiaries is in default nor has any event or
circumstance occurred which, but for the expiration of any applicable grace
period or the giving of notice, or both, would constitute a default or would
require the Borrower or any of its Subsidiaries to Redeem or make any offer to
Redeem all or any portion of any Debt outstanding under any indenture, note,
credit agreement or instrument pursuant to which any Material Indebtedness is
outstanding or by which the Borrower or any of its Subsidiaries or any of their
Properties is bound.

(c)                                  No
Default has occurred and is continuing.

Section
7.08                                Investment
Company Act.  Neither the Borrower
nor any of its Subsidiaries is an “investment company” or a company “controlled”
by an “investment company,” within the meaning of, or subject to regulation
under, the Investment Company Act of 1940, as amended.

Section
7.09                                Taxes.  Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all Tax returns (including extensions) and
reports required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the Borrower
or such Subsidiary, as applicable, has set aside on its books adequate reserves
in accordance with GAAP or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse Effect.  The charges, accruals and reserves on the
books of the Borrower and its Subsidiaries in respect of Taxes and other
governmental charges are, in the reasonable opinion of the Borrower,
adequate.  No Tax Lien has been filed
and, to the knowledge of the Borrower, no claim is being asserted with respect
to any such Tax or other such governmental charge.

Section
7.10                                ERISA.  Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:

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

(b)                                 Each
Plan, if any, is, and has been, maintained in substantial compliance with ERISA
and, where applicable, the Code.

(c)                                  No
act, omission or transaction has occurred that could result in imposition on
the Borrower, any of its Subsidiaries or any ERISA Affiliate (whether directly
or indirectly) of (i) either a civil penalty assessed pursuant to subsections
(c), (i) or (l) of section 502 of ERISA or a tax

 49
 

imposed pursuant
to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA.

(d)                                 No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by the Borrower, any of its Subsidiaries or any ERISA Affiliate
has been or is expected by the Borrower, any of its Subsidiaries or any ERISA
Affiliate to be incurred with respect to any Plan.  No ERISA Event with respect to any Plan has
occurred.

(e)                                  No
accumulated funding deficiency (as defined in section 302 of ERISA and section
412 of the Code), whether or not waived, exists with respect to any Plan.

(f)                                    Neither
the Borrower, its Subsidiaries nor any ERISA Affiliate sponsors, maintains or
contributes to, or has at any time in the six-year period preceding the date
hereof sponsored, maintained or contributed to, any Multiemployer Plan.

(g)                                 Neither
the Borrower, its Subsidiaries nor any ERISA Affiliate is required to provide
security under section 401 (a) (29) of the Code due
to a Plan amendment that results in an increase in current liability for the
Plan.

Section
7.11                                Disclosure;
No Material Misstatements.  None of
the reports, financial statements, certificates or other information furnished
by or on behalf of the Borrower or any of its Subsidiaries to the Administrative
Agent, any other 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 Borrower
represents only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time.  There is no fact peculiar to the Borrower or
any of its Subsidiaries that 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, any other Agent or the Lenders by or on behalf of the
Borrower or any of its Subsidiaries prior to, or on, the date hereof in
connection with the transactions contemplated hereby.  There are no statements or conclusions in any
Reserve Report which are based upon or include misleading information or fail
to take into account material information regarding the matters reported
therein, it being understood that projections concerning volumes attributable
to the Oil and Gas Properties and production and cost estimates contained in
each Reserve Report are necessarily based upon professional opinions, estimates
and projections and that the Borrower and the Subsidiaries do not warrant that
such opinions, estimates and projections will ultimately prove to have been
accurate.

Section
7.12                                Insurance.  The Borrower 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.

 50
 

Section
7.13                                Restriction
on Liens.  Neither the Borrower nor
any of its Subsidiaries is a party to any material agreement or arrangement
(other than Capital Leases creating Liens to the extent permitted by Section
9.03(d), but then only on the Property subject to such Capital Leases), 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), and which disclosure 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 Delaware; the name of the Borrower
as listed in the public records of its jurisdiction of organization is Linn
Energy, LLC, and the organizational identification number of the Borrower in
its jurisdiction of organization is 3951040 (or, in each case, as set forth in
a notice delivered to the Administrative Agent pursuant to Section 8.01(l) in
accordance with Section 12.01).  The
Borrower’s principal place of business and chief executive offices are located
at the address specified in Section 12.01 (or as set forth in a notice
delivered pursuant to Section 8.01(l) 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 (l)).

Section
7.16                                Properties;
Titles, Etc.

(a)                                  Each
of the Borrower and its Subsidiaries has good and defensible title to its 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, the Borrower or any of
its Subsidiaries 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 the Borrower or any of its Subsidiaries to bear the
costs and expenses relating to the maintenance, development and operations of
each such Property in an amount in excess of the working interest of each
Property set forth in the most recently delivered Reserve Report that is not
offset by a corresponding proportionate increase in the Borrower’s or any of
its Subsidiaries’ net revenue interest in such Property.

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

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

 51
 

(d)                                 All
of the material Properties of the Borrower and each of its Subsidiaries that
are reasonably necessary for the operation of their businesses are in good
working condition and are maintained in accordance with prudent business
standards.

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

(f)                                    For
purposes of determining any Default or Event of Default, each of the
representations and warranties in this Section 7.16 shall be deemed to have
been made without qualification by this Section 7.16(f).  Subject to the preceding sentence, each of
the representations and warranties in this Section 7.16 as to the Acquisition Properties
is to the knowledge of the Borrower and its Subsidiaries.

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)
have been maintained, operated and developed in a good and workmanlike manner
and in conformity with all Government 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.  Specifically in
connection with the foregoing, except as could not reasonably be expected to
have a Material Adverse Effect, (a) no Oil and Gas Property 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 (b) none of the wells
comprising a part of the Oil and Gas Properties (or Properties unitized
therewith) is deviated from the vertical more than the maximum permitted by
Government 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).  All pipelines,
wells, gas processing plants, platforms and other material improvements,
fixtures and equipment owned in whole or in part by the Borrower or any of its
Subsidiaries that are necessary to conduct normal operations are being
maintained in a state adequate to conduct normal operations, and with respect
to such of the foregoing which are operated by the Borrower or any of its
Subsidiaries, in a manner consistent with the Borrower’s or its Subsidiaries’
past practices (other than those the failure of which to maintain in accordance
with this Section 7.17 could not reasonably be expect to have a Material
Adverse Effect).

Section
7.18                                Gas
Imbalances, Prepayments.  As of the
date hereof, except as set forth on Schedule 7.18 or on the most recent
certificate delivered pursuant to Section 8.12(c), on a net basis there are no
gas imbalances, take or pay or other prepayments which would require the
Borrower or any of its Subsidiaries to deliver, in the aggregate, two percent
(2%) or more of the monthly

 52

production
from Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor.

Section
7.19                                Marketing
of Production.  Except for contracts
listed and in effect on the date hereof on Schedule 7.19, and thereafter either
disclosed in writing to the Administrative Agent or included in the most
recently delivered Reserve Report (with respect to all of which contracts the
Borrower represents that it or its Subsidiaries are receiving a price for all
production sold thereunder which is computed substantially in accordance with
the terms of the relevant contract and are not having deliveries curtailed
substantially below the subject Property’s delivery capacity), no material
agreements exist which are not cancelable on 60 days notice or less without
penalty or detriment for the sale of production from the Borrower’s or its
Subsidiaries’ 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 more than six (6) months from the date
hereof.

Section
7.20                                Swap
Agreements.  Schedule 7.20, as of
July 31, 2007, and after the date hereof, each report required to be delivered
by the Borrower pursuant to Section 8.01(d) (as of the relevant period end),
sets forth, a true and complete list of all Swap Agreements of the Borrower and
each of its Subsidiaries, the material terms thereof (including the type, term,
effective date, termination date and notional amounts or volumes), the net
marked-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 (a) to provide
working capital, (b) to amend and restate existing indebtedness (including the
Existing Credit Agreement), (c) for the acquisition, exploration and
development of oil and gas properties, including the Acquisition, (d) for the
issuance of Letters of Credit, and (e) for general corporate purposes,
including Restricted Payments.  The
Borrower and its Subsidiaries are not engaged principally, or as one of its or
their important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying
margin stock (within the meaning of Regulation T, U or X of the Board).  No part of the proceeds of any Loan or Letter
of Credit will be used for any purpose which violates the provisions of
Regulations T, U or X of the Board.

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

Section
7.23                                Acquisition.  The copies of the Acquisition Documents
previously delivered by the Borrower to the Administrative Agent are true,
accurate and complete and have not been

 53
 

amended or
modified in any manner, other than pursuant to amendments or modifications
previously delivered to the Administrative Agent.  No party to any Acquisition Document is in
default in respect of any material term or obligation thereunder.

ARTICLE VIII

Affirmative
Covenants

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

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

(a)                                  Annual
Financial Statements.  As soon as
available, but in any event not later than 90 days after the end of each fiscal
year, Borrower’s audited consolidated balance sheet and related statements of
operations, members’ 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 KPMG, LLP or independent public accountants of
recognized national standing and 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 financial statements present fairly in all material respects
the financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied.

(b)                                 Quarterly
Financial Statements.  As soon as
available, but in any event not later than 45 days after the end of each of the
first three fiscal quarters of each fiscal year of the Borrower, its
consolidated balance sheet and related statements of operations, members’
equity and cash flows as of the end of and for such quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
a Financial Officer as presenting fairly in all material respects the financial
position and results of operations of the Borrower and its Consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes.

(c)                                  Certificate
of Financial Officer — Compliance. 
Concurrently with any delivery of financial statements under Section
8.01(a) or Section 8.01(b), a certificate of a Financial Officer in
substantially the form of Exhibit B 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 9.01 and (iii) stating whether any change in GAAP or in the
application thereof has occurred since the Effective Date and, if any such
change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate.

(d)                                 Swap
Agreements.  Concurrently with any
delivery of financial statements under Section 8.01(a) and Section 8.01(b), a
true and complete list of all Swap Agreements, as of the last Business Day of
such fiscal quarter or fiscal year, of the Borrower and each of its
Subsidiaries, the material terms thereof (including the type, term, effective
date, termination date and notional

 54
 

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. To the extent the Borrower or a Subsidiary changes the material
terms of a Swap Agreement listed in the foregoing schedule, terminates any such
Swap Agreement or enters into a new Swap Agreement which has the effect of
creating an off-setting position, the Borrower will give the Lenders prompt
written notice of such event if, with respect to any commodity-price Swap
Agreement, the product of (i) the notional volumes of such commodity-price Swap
Agreement times (ii) the excess of (A) the strike or fixed rate payor price
over (B) the “price deck” used in calculating the Borrowing Base for the
relevant commodities, exceeds in the aggregate during such period $50,000,000.

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

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

(g)                                 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 furnished the
information required by this Section 8.01(g) if it shall have timely made the
same available on “EDGAR” and/or on its home page on the worldwide web (at the
date of this Agreement located at http://www.linnenergy.com); provided further,
however, that if any Lender is unable to access EDGAR or the Borrower’s home
page on the worldwide web, the Borrower agrees to provide such Lender with
paper copies of the information required to be furnished pursuant to this
Section 8.01(g) promptly following notice from the Administrative Agent that
such Lender has requested same. 
Information required to be delivered pursuant to this Section 8.01(g)
shall be deemed to have been delivered on the date on which the Borrower
provides notice to the Administrative Agent that such information has been
posted on “EDGAR” or the Borrower’s website or another website identified in
such notice and accessible by the Administrative Agent without charge (and the
Borrower hereby agrees to provide such notice).

(h)                                 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.

(i)                                     Lists
of Purchasers.  Concurrently with the
delivery of any Reserve Report to the Administrative Agent pursuant to Section
8.12, a list of Persons purchasing Hydrocarbons from the Borrower and its
Subsidiaries reasonably expected to account for at least 80% of the revenues

 55
 

resulting from the
sale of Hydrocarbons produced from the Mortgaged Properties in the quarter
following the “as of” date of such Reserve Report.

(j)                                     Notice
of Sales of Oil and Gas Properties. 
In the event the Borrower or any of its Subsidiaries intends to sell,
transfer, assign or otherwise dispose of any Oil or Gas Properties included in
the most recently delivered Reserve Report (or any Equity Interests in any
Subsidiary owning interests in such Oil and Gas Properties) during any period
between two successive Scheduled Redetermination Dates having a fair market
value, individually or in the aggregate, in excess of $10,000,000, prior
written notice of such disposition, the price thereof, the anticipated date of
closing, and any other details thereof reasonably requested by the
Administrative Agent or any Lender.

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

(l)                                     Information
Regarding Borrower and Guarantors. 
Prompt written notice of (and in any event within ten (10) days after)
any change (i) in the Borrower or any Guarantor’s corporate name or in any
trade name used to identify such Person in the conduct of its business or in
the ownership of its Properties, (ii) in the location of the Borrower or
any Guarantor’s chief executive office or principal place of business,
(iii) in the Borrower or any Guarantor’s identity or corporate structure
or in the jurisdiction in which such Person is incorporated or formed, (iv) in
the Borrower or any Guarantor’s jurisdiction of organization or such Person’s
organizational identification number in such jurisdiction of organization, and
(v) in the Borrower or any Guarantor’s federal taxpayer identification number,
if any.

(m)                               Production Report and Lease Operating Statements.  Within 45 days after the end of each fiscal
quarter, a report setting forth, for each calendar month during the
then-current fiscal year to date, the volume of production and sales attributable
to production (and the prices at which such sales were made and the revenues
derived from such sales) for each such calendar month from the Oil and Gas
Properties, and setting forth the related ad valorem, severance and production
taxes and lease operating expenses attributable thereto and incurred for each
such calendar month.

(n)                                 Notices
of Certain Changes.  Promptly, but in
any event within five (5) Business Days after the execution thereof, copies of
any amendment, modification or supplement to the certificate or articles of
incorporation, by-laws, any preferred stock designation or any other organic
document of the Borrower or any of its Subsidiaries.

(o)                                 Annual
Budget.  Promptly, but in any event
within 90 days after the end of each fiscal year, a budget for the then current
fiscal year, including a pro forma balance sheet and income and cash flow
projections.

(p)                                 Notices
Relating to Acquisition.  In the
event that after the Effective Date:  (i)
the Borrower is required or elects to purchase any of the Acquisition
Properties which had been excluded from, or return any of the Acquisition
Properties which had been included in, the Acquisition Properties in accordance
with the terms of the Acquisition Documents, (ii) the Borrower is required to
honor any preferential purchase right in respect of any Acquisition Property
which has not been waived, (iii) any matter being disputed in accordance with
the terms of the Acquisition Documents is resolved, (iv) the Borrower receives
the draft and final statements setting forth the final

 56
 

calculation of the
Interest Purchase Prices and showing the calculation of each adjustment,
delivered to the Borrower pursuant to Section 8.4(b) of the Acquisition
Documents, then, in each such case, the Borrower shall promptly give the
Administrative Agent notice in reasonable detail of such circumstances and such
copies of such documents, as applicable.

(q)                                 Other
Requested Information.  Promptly
following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Borrower or any of
its Subsidiaries (including, without limitation, any Plan and any reports or
other information required to be filed under ERISA), or compliance with the
terms of this Agreement or any other Loan Document, as the Administrative Agent
or any Lender may reasonably request.

Section
8.02                                Notices
of Material Events.  The Borrower
will furnish to the Administrative Agent and each Lender, promptly after the
Borrower obtains knowledge thereof, 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,
investigation, arbitration or proceeding by or before any arbitrator or
Governmental Authority against or affecting the Borrower or any Subsidiary
thereof, or any material adverse development in any action, suit, proceeding,
investigation or arbitration (whether or not previously disclosed to the
Lenders), that, in either case, if adversely determined, could reasonably be
expected to result in liability in excess of $10,000,000;

(c)                                  the
occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to result in liability
of the Borrower and its Subsidiaries in an aggregate amount exceeding
$3,000,000; and

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

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

Section
8.03                                Existence;
Conduct of Business.  The Borrower
will, and will cause each of its Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business and maintain, if necessary, its qualification to
do business in each other jurisdiction in which any of 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.

Section
8.04                                Payment
of Obligations.  The Borrower will,
and will cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities of the Borrower and all of 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) the
Borrower or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with

 57
 

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
material Property of the Borrower or any of its Subsidiaries.

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 the Borrower will cause each of its
Subsidiaries 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 will, and will cause each of its Subsidiaries 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
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 material 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
material Oil and Gas Properties and will do all other things necessary to keep
unimpaired their material rights with respect thereto and prevent any forfeiture
thereof or material default thereunder.

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

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

Section
8.07                                Insurance.  The Borrower will, and will cause each of its
Subsidiaries 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

 58
 

and made payable
to the Administrative Agent as its interests may appear and such policies shall
name the Administrative Agent and the Lenders as “additional insureds” and
provide that the insurer will give at least 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 of its Subsidiaries 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 of its
Subsidiaries 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 of its Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to them or
their 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 (including such contribution from third
parties as may be available): (i) comply, and shall cause its Properties and
operations and each Subsidiary and each Subsidiary’s Properties and operations
to comply, with all applicable Environmental Laws, the breach of which could be
reasonably expected to have a Material Adverse Effect; (ii) not dispose of or
otherwise release, and shall cause each Subsidiary not to dispose of or
otherwise release, any oil, oil and gas waste, hazardous substance, or solid
waste on, under, about or from any of the Borrower’s or its Subsidiaries’
Properties or any other Property to the extent caused by the Borrower’s or any
of its Subsidiaries’ operations except in compliance with applicable
Environmental Laws, the disposal or release of which could reasonably be
expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each Subsidiary to timely obtain or file, all notices, permits,
licenses, exemptions, approvals, registrations or other authorizations, if any,
required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower’s or its Subsidiaries’
Properties, which failure to obtain or file could reasonably be expected to
have a Material Adverse Effect; (iv) promptly commence and diligently prosecute
to completion, and shall cause each Subsidiary to promptly commence and
diligently prosecute to completion, any assessment, evaluation, investigation,
monitoring, containment, cleanup, removal, repair, restoration, remediation or
other remedial obligations (collectively, the “Remedial Work”) in the
event any Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected
past, present or future disposal or other release of any oil, oil and gas
waste, hazardous substance or solid waste on, under, about or from any of the
Borrower’s or its Subsidiaries’ Properties, which failure to commence and
diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect; and (v) establish and implement, and shall cause
each Subsidiary to establish and implement, such reasonable policies of
environmental audit and compliance as may be reasonably necessary to
continuously determine and assure that the Borrower’s and its Subsidiaries’
obligations under this Section 8.10(a) are timely and fully satisfied, which
failure to establish and implement could reasonably be expected to have a
Material Adverse Effect.

 59
 

(b)                                 The
Borrower will promptly, but in any event within five (5) days thereof, notify
the Administrative Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority or any threatened demand
or lawsuit by any landowner or other third party against the Borrower or its
Subsidiaries or their Properties of which the Borrower has knowledge in
connection with any Environmental Laws (excluding routine testing and
corrective action) if the Borrower reasonably anticipates that such action will
result in liability (whether individually or in the aggregate) in excess of
$10,000,000, not fully covered by insurance, subject to normal deductibles.

(c)                                  The
Borrower will, and will cause each Subsidiary to, provide environmental audits
and tests in accordance with American Society of Testing Materials standards
upon request by the Administrative Agent and the Lenders and no more than once
per year in the absence of any Event of Default (or as otherwise reasonably
required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority), in connection with any future acquisitions of material
Oil and Gas Properties or other material Properties.

Section
8.11                                Further
Assurances.

(a)                                  The
Borrower at its sole expense will, and will cause each of its Subsidiaries to,
promptly execute and deliver to the Administrative Agent all such other
documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrower or any of its
Subsidiaries, as the case may be, in the Loan Documents, including the Notes,
or to further evidence and more fully describe the collateral intended as
security for the Indebtedness, or to correct any omissions in this Agreement or
the Security Instruments, or to state more fully the obligations secured
therein, or to perfect, protect or preserve any Liens created pursuant to this
Agreement or any of the Security Instruments or the priority thereof, or to
make any recordings, file any notices or obtain any consents, all as may be
reasonably necessary or appropriate, in the 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 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.  The Administrative Agent will promptly send
the Borrower any financing or continuation statements it files without the
signature of the Borrower or any other Guarantor and the Administrative Agent
will promptly send the Borrower the filing or recordation information with
respect thereto.

 60
 

Section
8.12                                Reserve
Reports.

(a)                                  On
or before March 1st and September 1st of each year, the Borrower shall furnish
to the Administrative Agent and the Lenders a Reserve Report as of the
immediately preceding December 31 or June 30, as applicable.  The Reserve Report as of December 31 of each
year shall be prepared by one or more petroleum engineers reasonably acceptable
to the Administrative Agent and the June 30 Reserve Report of each year shall
be prepared by or under the supervision of the chief engineer of the Borrower
who shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately preceding
December 31 Reserve Report.

(b)                                 In
the event of an Interim Redetermination, the Borrower shall furnish to the Administrative
Agent and the Lenders a Reserve Report prepared by or under the supervision of
the chief engineer of the Borrower who shall certify such Reserve Report to be
true and accurate in all material respects and to have been prepared in
accordance with the procedures used in the immediately preceding December 31
Reserve Report.  For any Interim
Redetermination requested by the Administrative Agent or the Borrower pursuant
to Section 2.07(b), the Borrower shall provide such Reserve Report with an “as
of” date as required by the Administrative Agent as soon as possible, but in
any event no later than thirty (30) days following the receipt of such request.

(c)                                  With
the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects: (i) the information provided by the
Borrower in connection with the preparation of such Reserve Report and any
other information delivered in connection therewith by the Borrower is true and
correct, and any projections based upon such information have been prepared in
good faith based upon assumptions believed by the Borrower to be reasonable,
subject to uncertainties inherent in all projections, (ii) the Borrower or its
Subsidiaries owns good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.03, (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 their Oil and Gas Properties evaluated in such Reserve Report that
would require the Borrower or any of its Subsidiaries 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 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 date hereof or the most recently delivered
Reserve Report that the Borrower could reasonably be expected to have been
obligated to list on Schedule 7.20 had such agreement been in effect on the
date hereof and (vi) attached thereto is a schedule of the Oil and Gas
Properties evaluated by such Reserve Report that are Mortgaged Properties and
demonstrating the percentage of the present value that such Mortgaged Properties
represent.

 61
 

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), to the extent requested by the
Administrative Agent, 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 such
portion of Oil and Gas Properties evaluated by such Reserve Report, not to
exceed 80% of the total value thereof, as may be reasonably requested by the
Administrative Agent.

(b)                                 If
the Borrower has provided title information for additional Properties under
Section 8.13(a), the Borrower shall, within 60 days of notice from the
Administrative Agent that 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 reasonably acceptable to the Administrative
Agent so that the Administrative Agent shall have received, together with title
information previously delivered to the Administrative Agent, reasonably
satisfactory title information on such portion of Oil and Gas Properties
evaluated by such Reserve Report, not to exceed 80% of the total value thereof,
as may be reasonably requested by the Administrative Agent.

(c)                                  If
the Borrower is unable to cure any title defect requested by the Administrative
Agent or the Lenders to be cured within the 60-day period or the Borrower does
not comply with the requirements to provide acceptable title information as
required by Section 8.13(a) and Section 8.13(b), such default shall not be a
Default, but instead the Administrative Agent and/or the Majority Lenders shall
have the right to exercise the following remedy in their sole discretion from
time to time, and any failure to so exercise this remedy at any time shall not
be a waiver as to future exercise of the remedy by the Administrative Agent or
the Lenders.  To the extent that the
Administrative Agent or the Majority Lenders are not reasonably satisfied with
title to any Mortgaged Property after the 60-day period has elapsed, such
unacceptable Mortgaged Property shall not count towards the requirements of
Section 8.13 (a)
and Section 8.13(b), and the Administrative Agent may send a notice to the
Borrower and the Lenders that the then outstanding Borrowing Base (and if the Conforming Borrowing Base is then
in effect, the Conforming 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 pursuant to
Section 8.13(a) and Section 8.13(b). 
This new Borrowing Base (and if
the Conforming Borrowing Base is then in effect, this new Conforming Borrowing
Base) shall become effective immediately after receipt of such notice.

Section
8.14                                Additional
Collateral; Additional Guarantors.

(a)                                  In
connection with each redetermination of the Borrowing Base, the Borrower shall
review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 80% of the total value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving

 62
 

effect to
exploration and production activities, acquisitions, dispositions and
production.  In the event that the
Mortgaged Properties do not represent at least 80% of such total value, then
the Borrower shall, and shall cause its Subsidiaries to, grant, within sixty
(60) days of the delivery of the certificate contemplated by Section 8.12(c),
to the Administrative Agent or its designee as security for the Indebtedness a
first-priority Lien interest (provided the 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
80% of such total value.  All such Liens
will be created and perfected by and in accordance with the provisions of deeds
of trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent or its designee and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for recording
purposes.  In order to comply with the
foregoing, if any Subsidiary places a Lien on its Oil and Gas Properties and
such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply
with Section 8.14(b).

(b)                                 If
(i) the Borrower determines that any Subsidiary is a Material Domestic
Subsidiary or (ii) any Domestic Subsidiary incurs or guarantees any Debt other
than the Indebtedness, and in either case, such Subsidiary is not already a Guarantor,
then the Borrower shall promptly cause such Subsidiary to guarantee the
Indebtedness pursuant to the Guaranty Agreement.  In connection with any such guaranty, the
Borrower shall, or shall cause such Subsidiary to, (A) execute and deliver a
supplement to the Guaranty Agreement executed by such Subsidiary, (B) pledge
all of the Equity Interests of such 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 (C)
execute and deliver such other additional closing documents, certificates and
legal opinions as shall reasonably be requested by the Administrative Agent or
its designee.

Section
8.15                                ERISA
Compliance.  The Borrower will
promptly furnish, and will cause its Subsidiaries and any ERISA Affiliate to
promptly furnish, to the Administrative Agent (a) immediately upon becoming
aware of the occurrence of any ERISA Event, a written notice signed by the
President or the principal Financial Officer of the Borrower, its Subsidiaries
or the ERISA Affiliate, as the case may be, specifying the nature thereof, what
action the Borrower, its Subsidiaries or the ERISA Affiliate is taking or
proposes to take with respect thereto, and, if then known, any action taken or
proposed by the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto, and (b) immediately upon receipt thereof, copies of any
notice of the PBGC’s intention to terminate or to have a trustee appointed to
administer any Plan.

Section
8.16                                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 (a)
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, (b) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties
of the Borrower and its Subsidiaries that the Borrower or one of its
Subsidiaries has the right to market pursuant to joint operating agreements,
unitization agreements or other similar contracts that are usual and customary
in the oil and gas business and (c) other contracts for the purchase and/or sale
of Hydrocarbons of third parties (i) which have generally offsetting provisions
(i.e. corresponding pricing mechanics, delivery dates and points and volumes)
such that

 63
 

no “position” is
taken and (ii) for which appropriate credit support has been taken to alleviate
the material credit risks of the counterparty thereto.

Section
8.17                                Swap
Agreements.  The Borrower shall
maintain the hedge position established by the Swap Agreements required under
Section 6.01(n) during the period specified therein and shall neither assign,
terminate or unwind any such Swap Agreements nor sell any Swap Agreements 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 canceling its positions under such Swap Agreements required hereby.

ARTICLE IX

Negative
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 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 EBITDA to Interest Expense.  The
Borrower will not, as of the last day of any fiscal quarter, commencing with
the fiscal quarter ending December 31, 2007 and as of the end of each fiscal
quarter thereafter, permit its ratio of EBITDA to Interest Expense for such
period to be less than 2.5 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 FAS 133) to (ii) consolidated current liabilities (excluding
non-cash obligations under FAS 133 and current maturities under this Agreement)
to be less than 1.0 to 1.0.

For
purposes of this Section 9.01, the calculation of EBITDA and Interest Expense
shall be as follows: (w) for the fiscal quarter ending December 31, 2007,
EBITDA and Interest Expense for such quarter, each multiplied by four, (x) for
the fiscal quarter ending March 31, 2008, EBITDA and Interest Expense for the
two quarter period ending on such date, each multiplied by two, (y) for the
fiscal quarter ending June 30, 2008, EBITDA and Interest Expense for the three
quarter period ending on such date, each multiplied by 4/3 and (z) on each
fiscal quarter ending on or after September 30, 2008, EBITDA and Interest
Expense for the period of four fiscal quarters then ending.

Section
9.02                                Debt.  Neither the Borrower nor any of its
Subsidiaries will incur, create, assume or suffer to exist any Debt, except:

(a)                                  the
Notes or other Indebtedness or any guaranty of or suretyship arrangement for
the Notes or other Indebtedness.

(b)                                 accounts
payable and other accrued expenses, liabilities or other obligations to pay
(for the deferred purchase price of Property or services) from time to time
incurred in the ordinary course of business which are not greater than ninety
(90) days past the date of invoice or

 64
 

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

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

(e)                                  Debt
associated with bonds or surety obligations required by Governmental
Requirements in connection with the operation of Oil and Gas Properties in the
ordinary course of business.

(f)                                    Debt
consisting of the Dominion Production Payment or any unsecured guarantee by the
Borrower or any Guarantor in respect thereto.

(g)                                 Capital
Leases not to exceed $25,000,000 in the aggregate at any one time.

(h)                                 Debt
and any guarantees thereof subordinated in right of payment and liquidation to
the Indebtedness and any guarantees thereof, provided that (i) (A) at the time
such Debt is incurred, no Default has occurred and is then continuing and (B) no
Default would result from the incurrence of such Debt after giving effect to
the incurrence of such Debt (and any concurrent repayment of Debt with the
proceeds of such incurrence), (ii) immediately after the incurrence of such
Debt, the Borrowing Base and/or the Conforming Borrowing Base shall be adjusted
in accordance with Section 2.07(c)(iv) and/or Section 3.04(c)(iv) and the
incurrence of such Debt (and any concurrent repayment of Debt with the proceeds
of such incurrence) would not result in the total Revolving Credit Exposure
exceeding such adjusted Borrowing Base, (iii) such Debt does not have any
scheduled amortization prior to four years after the Maturity Date, (iv) such
Debt does not mature sooner than four years after the Maturity Date, (v) such
Debt and any guarantees thereof are on market terms for issuers of similar size
and credit quality given the then prevailing market conditions and subordinated
on terms set forth on Exhibit G, with such changes as to which the
Administrative Agent and the Majority Lenders may agree and (vi) such Debt does
not have any mandatory prepayment or redemption provisions which would require
a mandatory prepayment or repurchase in priority to the Indebtedness.

(i)                                     other
Debt not to exceed $40,000,000 in the aggregate at any one time outstanding.

Section
9.03                                Liens.  Neither the Borrower nor any of its
Subsidiaries will 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.

 65
 

(c)                                  The
Dominion Production Payment.

(d)                                 Liens
in connection with Capital Leases permitted under Section 9.02(g).

(e)                                  Liens
on cash, marketable securities or Letters of Credit in an aggregate amount not
to exceed $50,000,000 at any one time to secure Swap Agreements with Persons
(or their Affiliates) who have ceased to be Lenders.

(f)                                    Liens
on Property not constituting collateral for the Indebtedness and not otherwise
permitted by the foregoing clauses of this Section 9.03; provided that the
aggregate principal or face amount of all Debt secured under this Section
9.03(e) shall not exceed $1,000,000 at any time.

Section
9.04                                Dividends,
Distributions and Redemptions.

(a)                                  Restricted
Payments.  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 their Property to their respective
Equity Interest holders, except (i)  the Borrower may declare and pay
dividends or distributions 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 or distributions
ratably with respect to their Equity Interests and (iii) so long as (A) no
Borrowing Base Deficiency, Default or Event of Default has occurred and is
continuing or would result therefrom and (B) the total Revolving Credit
Exposure is less than the Conforming Borrowing Base, the Borrower may declare
and pay quarterly cash dividends to its members out of Available Cash for the
preceding quarter (including amounts borrowed as contemplated under clause
(a)(ii) of the definition of Available Cash subsequent to the end of such quarter).

(b)                                 Redemption
or Repayment of Subordinated Debt. 
The Borrower will not, and will not permit any Subsidiary to: (i) call,
make or offer to make any Redemption of or otherwise Redeem (whether optional
or mandatory and whether in whole or in part) or repay any subordinated Debt
permitted to be incurred hereunder; (ii) amend, modify, waive or otherwise
change, consent or agree to any amendment, modification, waiver or other change
to, any of the terms of any notes evidencing any subordinated Debt permitted
hereunder, including any indenture, agreement, instrument, certificate or other
document relating to any subordinated Debt permitted hereunder if (A) the
effect of such amendment, modification or waiver is to shorten the final
maturity, except as permitted under Section 9.02(h), create amortization of
principal thereof prior to four years after the Termination Date, or increase
the amount of any payment of principal thereof or (B) such action adds
covenants, events of default or other agreements to the extent more restrictive
than those contained in this Agreement, or (iii) designate any Debt (other than
obligations of the Borrower and the Subsidiaries pursuant to the Loan
Documents) as “Specified Senior Indebtedness” or “Specified Guarantor Senior
Indebtedness” or give any such other Debt any other similar designation for the
purposes of any indentures or other documents relating to any subordinated Debt
permitted hereunder.

Section
9.05                                Investments,
Loans and Advances.  Neither the
Borrower nor any of its Subsidiaries will make or permit to remain outstanding
any Investments in or to any Person, except that the foregoing restriction
shall not apply to:

 66

(a)                                  Investments
reflected in the Financial Statements.

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

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

(d)                                 commercial
paper maturing within one year from the date of creation thereof rated A2 or P2
by S&P or Moody’s.

(e)                                  deposits
maturing within one year from the date of creation thereof with, including
certificates of deposit issued by, any Lender or any office located in the
United States of any other bank or trust company which is organized under the
laws of the United States or any state thereof, has capital, surplus and undivided
profits aggregating at least $250,000,000 (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.

(f)                                    deposits
in money market funds investing primarily in Investments described in Section
9.05(c), Section 9.05(d) or Section 9.05(e).

(g)                                 Investments
(i) made by the Borrower in or to the Guarantors, (ii) made by any Subsidiary
in or to the Borrower or any Guarantor, and (iii) made by the Borrower or any
Guarantor in Subsidiaries that are not Guarantors, provided that the aggregate
of all Investments made by the Borrower and the Guarantors in or to all
Subsidiaries that are not Guarantors shall not exceed $10,000,000 at any time.

(h)                                 Investments
(including, without limitation, capital contributions) in general or limited
partnerships or other types of entities (each a “venture”) entered into
by the Borrower or any of its Subsidiaries with others in the ordinary course
of business; provided that (i) any such venture is engaged exclusively in oil
and gas exploration, development, production, processing and related
activities, including transportation, treatment and storage (ii) the interest
in such venture is acquired in the ordinary course of business and on fair and
reasonable terms and (iii) such venture interests acquired and capital
contributions made (valued as of the date such interest was acquired or the
contribution made) do not exceed, in the aggregate at any time outstanding an
amount equal to $10,000,000.

(i)                                     subject
to the limits in Section 9.06, Investments, including the Acquisition and the
Panhandle Acquisition, in direct ownership interests in additional Oil and Gas
Properties and gas gathering systems related thereto or related to farm-out,
farm-in, joint operating, joint venture or area of mutual interest agreements,
gathering systems, pipelines or other similar arrangements which are usual and
customary in the oil and gas exploration and production business located within
the geographic boundaries of the United States of America.

(j)                                     loans
or advances to employees, officers or directors in the ordinary course of
business of the Borrower or any of its Subsidiaries, in each case only as
permitted by applicable law, including Section 402 of the Sarbanes Oxley Act of
2002, but in any event not to exceed $1,000,000 in the aggregate at any time.

 67
 

(k)                                  Investments
in stock, obligations or securities received in settlement of debts arising from
Investments permitted under this Section 9.04(b) owing to the Borrower or any
of its Subsidiaries as a result of a bankruptcy or other insolvency proceeding
of the obligor in respect of such debts or upon the enforcement of any Lien in
favor of the Borrower or any of its Subsidiaries, provided that the Borrower
shall give the Administrative Agent prompt written notice in the event that the
aggregate amount of all Investments held at any one time under this Section
9.05(k) exceeds $1,000,000.

(l)                                     Any
guarantee permitted under Section 9.02.

Section
9.06                                Nature
of Business.  Neither the Borrower
nor any of its Subsidiaries will allow any material change to be made in the
character of its business as an independent oil and gas exploration and
production company.  The Borrower will
not, and will not permit any of its Subsidiaries to, operate its business
outside the geographical boundaries of the United States.

Section
9.07                                Limitation
on Leases.  Neither the Borrower nor
any of its Subsidiaries will 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 permitted by Section 9.02(g) and
leases of Hydrocarbon Interests), under leases or lease agreements which would
cause the aggregate amount of all payments made by the Borrower and its
Subsidiaries pursuant to all such leases or lease agreements, including,
without limitation, any residual payments at the end of any lease, to exceed
$5,000,000 in any period of twelve consecutive calendar months during the life
of such leases.

Section
9.08                                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.  Neither the
Borrower nor any Person acting on behalf of the Borrower has taken or will take
any action which might cause any of the Loan Documents to violate Regulations
T, U or X or any other regulation of the Board or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.  If requested by the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement
to the foregoing effect in conformity with the requirements of FR Form U-1 or
such other form referred to in Regulation U, Regulation T or Regulation X of
the Board, as the case may be.

Section
9.09                                ERISA
Compliance.  Except as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, the Borrower and its Subsidiaries will not at any time:

(a)                                  terminate,
or permit any ERISA Affiliate to terminate, any Plan in a manner, or take any
other action with respect to any Plan, which could result in any liability of
the Borrower, any of its Subsidiaries or any ERISA Affiliate to the PBGC.

(b)                                 contribute
to or assume an obligation to contribute to, or permit any ERISA Affiliate to
contribute to or assume an obligation to contribute to, any Multiemployer Plan.

(c)                                  acquire,
or permit any ERISA Affiliate to acquire, an interest in any Person that causes
such Person to become an ERISA Affiliate with respect to the Borrower or any of
its Subsidiaries or with respect to any ERISA Affiliate of the Borrower or any
of its Subsidiaries if such Person sponsors, maintains or contributes to, or at
any time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (i) any Multiemployer Plan, or (ii) any other

 68
 

Plan that is
subject to Title IV of ERISA under which the actuarial present value of
the benefit liabilities under such Plan exceeds the current value of the assets
(computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities.

Section
9.10                                Sale
or Discount of Receivables.  Except
for receivables obtained by the Borrower or any of its Subsidiaries 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, neither the
Borrower nor any of its Subsidiaries will discount or sell (with or without
recourse) any of its notes receivable or accounts receivable.

Section
9.11                                Mergers,
Etc.  Neither the Borrower nor any of
its Subsidiaries will merge into or with or consolidate with any other Person,
or sell, 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, except that any Wholly-Owned Subsidiary may merge with any other
Wholly-Owned Subsidiary so long as in the case of any merger involving a
Guarantor, a Guarantor is the surviving entity, and that the Borrower may merge
with any Wholly-Owned Subsidiary so long as the Borrower is the survivor.

Section
9.12                                Sale
of Properties.  The Borrower will
not, and will not permit any of its Subsidiaries to, sell, assign, farm-out,
convey or otherwise transfer any Property except for: (a) the sale of
Hydrocarbons in the ordinary course of business; (b) farmouts of undeveloped
acreage and assignments in connection with such farmouts; (c) the sale or
transfer of equipment that is no longer necessary for the business of the
Borrower or such Subsidiary or is replaced by equipment of at least comparable
value and use; (d) other sales or dispositions (including Casualty Events)
of Oil and Gas Properties or any interest therein or Subsidiaries owning Oil
and Gas Properties; provided that (i) 100% of the consideration received in
respect of such other sale or disposition shall be cash, (ii) the consideration
received in respect of such other sale or disposition shall be equal to or
greater than the fair market value of the Oil and Gas Property, interest
therein or Subsidiary subject of such other sale or 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 other sale or
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
(as determined by the Administrative Agent), individually or in the aggregate,
in excess of $50,000,000, the Borrowing Base (and the Conforming Borrowing
Base) shall be reduced, effective immediately upon such sale or disposition, by
an amount equal to the value, if any, assigned such Property as determined in
good faith by the Supermajority Lenders assigned such Property in the most
recently delivered Reserve Report and (iv) if any such other sale or
disposition is of a Subsidiary owning Oil and Gas Properties, such other sale
or disposition shall include all the Equity Interests of such Subsidiary; and
(e) sales and other dispositions of Properties not regulated by Section 9.12(a)
to (d) having a fair market value not to exceed $10,000,000 during any 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 any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant

 69
 

facts, conditions
and circumstances, if any, pertaining to such Property where such violations or
remedial obligations could reasonably be expected to have a Material Adverse
Effect.

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

Section
9.15                                Subsidiaries.  The Borrower shall have no Subsidiaries other
than Wholly-Owned Subsidiaries.  The
Borrower shall not, and shall not permit its Subsidiaries to, create or acquire
any additional Subsidiary unless the Borrower gives written notice to the
Administrative Agent of such creation or acquisition and complies with Section
8.14(b).  The Borrower shall not, and
shall not permit any of its Subsidiaries to, sell, assign or otherwise dispose
of any Equity Interests in any of its Subsidiaries.  The Borrower shall have no Foreign
Subsidiaries.

Section
9.16                                Negative
Pledge Agreements; Dividend Restrictions. 
Neither the Borrower nor any of its Subsidiaries will create, incur,
assume or suffer to exist any contract, agreement or understanding (other than
this Agreement or the Security Instruments) that 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 the Borrower or
any Guarantor, or which requires the consent of or notice to other Persons in
connection therewith; provided, however, that the preceding  restrictions will not apply to encumbrances
or restrictions arising under or by reason of (1) the Dominion Production
Payment but only on the Oil and Gas Property subject thereto, (2) any leases
(other than leases of Oil and Gas Properties) or licenses or similar contracts
as they affect any Property or Lien subject to such lease or license, (3) any
restriction with respect to a Subsidiary imposed pursuant to an agreement
entered into for the direct or indirect sale or disposition of all or
substantially all the equity or Property of such Subsidiary (or the Property
that is subject to such restriction) pending the closing of such sale or
disposition, (4) customary provisions with respect to the distribution of
Property in joint venture agreements or (5) Capital Leases permitted under
Section 9.02(g), but then only on the Property subject of such Capital Leases.

Section
9.17                                Gas
Imbalances, Take-or-Pay or Other Prepayments.  The Borrower will not, and will not permit
any of its Subsidiaries to, allow gas imbalances, take-or-pay or other
prepayments with respect to the Oil and Gas Properties of the Borrower or any
of its Subsidiaries that would require the Borrower or such Subsidiary to
deliver, in the aggregate, two percent (2%) or more of the monthly production
of Hydrocarbons at some future time without then or thereafter receiving full
payment therefor.

Section
9.18                                Swap
Agreements.  Neither the Borrower nor
any of its Subsidiaries will enter into any Swap Agreements with any Person
other than (a) Swap Agreements in respect of commodities (i) with an Approved
Counterparty, (ii) the notional volumes for which (when aggregated with other
commodity Swap Agreements then in effect other than basis differential swaps on
volumes already hedged pursuant to other Swap Agreements) do not exceed, as of
the date such Swap Agreement is executed, 85% of the reasonably anticipated
projected production from Proved Properties for each month during the period
during which such Swap Agreement is in effect for each of crude oil and natural
gas, calculated separately, for the remainder of the calendar year plus the

 70
 

next two full
calendar years succeeding the execution of such Swap Agreement and 70% of the
reasonably anticipated projected production from Proved Properties for each
month during the period during which such Swap Agreement is in effect for each
of crude oil and natural gas, calculated separately, for each month thereafter,
and (iii) the notional volumes for which do not exceed the current net monthly
production (regardless of projected production levels) at the time such Swap
Agreement is executed, calculated separately for each of crude oil and natural
gas and (b) Swap Agreements in respect of interest rates with an Approved
Counterparty, which effectively convert interest rates from floating to fixed,
the notional amounts of which (when aggregated with all other Swap Agreements
of the Borrower and its Subsidiaries then in effect effectively converting
interest rates from floating to fixed) do not exceed 90% of the then
outstanding principal amount of the Borrower’s Debt for borrowed money which
bears interest at a floating rate. 
Notwithstanding anything to the contrary in this Section 9.18, there
shall be no prohibition against the Borrower entering into any “put” contracts
or commodity price floors so long as such agreements are entered into for
non-speculative purposes and in the ordinary course of business for the purpose
of hedging against fluctuations of commodity prices.

Section
9.19                                Tax
Status as Partnership.  The Borrower
shall not alter its status as a partnership for purposes of United States
Federal Income taxes.

Section
9.20                                Acquisition
Documents.  The Borrower will not,
and will not permit any of its Subsidiaries to, amend, modify or supplement any
of the Acquisition Documents if the effect thereof could reasonably be expected
to have a Material Adverse Effect (and provided that the Borrower promptly
furnishes to the Administrative Agent a copy of such amendment, modification or
supplement).

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 or otherwise.

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

(c)                                  any
representation or warranty made or deemed made by or on behalf of the Borrower
or any of its Subsidiaries in or in connection with any Loan Document or any
amendment or modification of any Loan Document or waiver under such Loan
Document, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with any Loan Document or any amendment
or modification thereof or waiver thereunder, shall prove to have been
incorrect when made or deemed made.

 71
 

(d)                                 the
Borrower or any of its Subsidiaries shall fail to observe or perform any
covenant, condition or agreement contained in, Section 8.01(l), Section
8.01(m), Section 8.02, Section 8.03 or in ARTICLE IX.

(e)                                  the
Borrower or any of its Subsidiaries shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other than those
specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d)) or any
other Loan Document, and such failure shall continue unremedied for a period of
30 days after the earlier to occur of (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 the Borrower or any of its
Subsidiaries otherwise becoming aware of such default.

(f)                                    the
Borrower or any of its Subsidiaries shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable (after giving
effect to any applicable notice and cure period).

(g)                                 any
event or condition occurs (after giving effect to any notice or cure period)
that results in any Material Indebtedness becoming due prior to its scheduled
maturity or that enables or permits (with or without the giving of notice, the
lapse of time or both) the holder or holders of any Material Indebtedness or
any trustee or agent on its or their behalf to cause any Material Indebtedness
to become due, or to require the Redemption thereof or any offer to Redeem to
be made in respect thereof, prior to its scheduled maturity or require the
Borrower or any of its Subsidiaries 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 the
Borrower or any of its Subsidiaries or its debts, or of a substantial part of
its assets, under any  federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any of its Subsidiaries or
for a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered.

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

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

 72
 

(k)                                  (i)
one or more judgments for the payment of money in an aggregate amount in excess
of $10,000,000 (to the extent not covered by independent third party insurance
provided by insurers of the highest claims paying rating or financial strength
as to which the insurer does not dispute coverage and is not subject to an
insolvency proceeding) or (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 the Borrower,
any of its Subsidiaries or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any of its
Subsidiaries to enforce any such judgment.

(l)                                     the
Loan Documents after delivery thereof shall for any reason, except to the
extent permitted by the terms thereof, cease to be in full force and effect and
valid, binding and enforceable in accordance with their terms against the
Borrower or a Guarantor party thereto or shall be repudiated by them, or cease
to create a valid and perfected Lien of the priority required thereby on any of
the collateral purported to be covered thereby, except to the extent permitted
by the terms of this Agreement, or the Borrower or any of its Subsidiaries
shall so state in writing.

(m)                               an
ERISA Event shall have occurred that, when taken together with all other ERISA
Events that have occurred, could reasonably be expected to have a Material
Adverse Effect.

(n)                                 a
Change in Control shall occur.

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, 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(j)), shall become due and payable immediately, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby waived by the
Borrower and each Guarantor; and in case of an Event of Default described in
Section 10.01(h), Section 10.01(i) or 
Section 10.01(j), the Commitments shall automatically terminate and the
Notes and the principal of the Loans then outstanding, together with accrued
interest thereon and all fees and the other obligations of the Borrower and the
Guarantors accrued hereunder and under the Notes and the other Loan Documents
(including, without limitation, the payment of cash collateral to secure the LC
Exposure as provided in Section 2.08(j)), shall automatically become due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower and each Guarantor.

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

 73
 

(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:  first, to reimbursement of expenses and
indemnities provided for in this Agreement and the Security Instruments; second, to accrued interest on the Notes; third, to fees; fourth, pro rata to principal outstanding on the Notes, to
Indebtedness referred to in Clause (b) of the definition of Indebtedness and to
serve as cash collateral to be held by the Administrative Agent to secure the
LC Exposure, in each case, owing to a Lender or an Affiliate of a Lender; fifth, to any other Indebtedness; and any
excess shall be paid to the Borrower or as otherwise required by any
Governmental Requirement.

Section
10.03                          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, except after the occurrence
and during the continuance of an Event of Default, (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 its Subsidiaries.

ARTICLE XI

The
Administrative Agent

Section
11.01                          Appointment;
Powers.  Each of the Lenders and each
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 have no 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 have no duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates
in any capacity.  The Administrative
Agent shall be deemed not to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent by the Borrower or
a Lender, and shall not be responsible for or have any duty to ascertain or
inquire into (i) any

 74
 

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, (vi) the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower and its Subsidiaries or any other
obligor or guarantor, or (vii) any failure by the Borrower or any other Person
(other than itself) to perform any of its obligations hereunder or under any
other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or therein.  For purposes of determining compliance with
the conditions specified in ARTICLE VI, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed closing date specifying
its objection thereto.

Section
11.03                          Action
by 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.  If a Default has
occurred and is continuing, the Syndication Agent and the Co-Documentation
Agents shall have no obligation to perform any act in respect thereof.  No Agent shall be liable for any action taken
or not taken by it with the consent or at the request of the Majority Lenders
or the Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 12.02), and otherwise
the Administrative Agent shall not be liable for any action taken or not taken
by it hereunder or under any other Loan Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own
gross negligence or willful misconduct.

 75
 

Section
11.04                          Reliance
by Agent.  Each 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.  Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon and each of the Borrower, the Lenders and each Issuing Bank hereby
waives the right to dispute such Agent’s record of such statement, except in
the case of gross negligence or willful misconduct by such Agent.  Each 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 Agents 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 Agent.

Section
11.06                          Resignation
or Removal of Agents.  Subject to the
appointment and acceptance of a successor Agent as provided in this Section
11.06, any Agent may resign at any time by notifying the Lenders, each Issuing
Bank and the Borrower and any 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, to appoint a successor.  If no successor shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation or removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders and each
Issuing Bank, appoint a successor Agent. 
Upon the acceptance of its appointment as Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Borrower to a
successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the Borrower and such successor.  After the Agent’s resignation hereunder, the
provisions of this ARTICLE XI and Section 12.03 shall continue in effect for
the benefit of such retiring Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Agent.

Section
11.07                          Agents
and Lenders.  Each bank serving as an
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not an
Agent, and such bank and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

 76
 

Section
11.08                          No
Reliance.

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

(b)                                 The
Lenders acknowledge that the Administrative Agent and the Arrangers are acting
solely in administrative capacities with respect to the structuring and
syndication of this facility and have no duties, responsibilities or
liabilities under this Agreement and the other Loan Documents other than their
administrative duties, responsibilities and liabilities specifically as set
forth in the Loan Documents and in their capacity as Lenders hereunder.  In structuring, arranging or syndicating this
facility, each Lender acknowledges that the Administrative Agent and/or
Arrangers may be agents or lenders 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 90 days or resign pursuant to Section 11.06 and shall have
no liability for action taken or not taken, other than actions taken or not
taken which represent Administrative Agent’s gross negligence or willful
misconduct, 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

 77
 

respective agents
and counsel and all other amounts due the Lenders and the Administrative Agent
under Section 12.03) allowed in such judicial proceeding; and

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

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

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

Section
11.10                          Authority
of Administrative Agent to Release Collateral and Liens.  Each Lender and each 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 each Issuing Bank hereby
authorizes the Administrative Agent to execute and deliver to the Borrower, at
the Borrower’s sole cost and expense, any and all releases of Liens,
termination statements, assignments or other documents reasonably requested by
the Borrower in connection with any sale or other disposition of Property to
the extent such sale or other disposition is permitted by the terms of Section
9.12 or is otherwise authorized by the terms of the Loan Documents.

Section
11.11                          The
Arrangers and the Agents.  The
Arrangers, the Syndication Agent and the Co-Documentation Agents shall have no
duties, responsibilities or liabilities under this Agreement and the other Loan
Documents other than their duties, responsibilities and liabilities in their
individual capacity as Lenders hereunder to the extent they are a party to this
Agreement as a Lender.

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

Linn Energy, LLC

600 Travis Street, Suite
5100

Houston, TX 77002

 78
 

Attention: Kolja Rockov

Telephone: 713-223-0880
x1101

Fax: 713-223-0888

E-Mail: kr@linnenergy.com

with a copy to:

Linn Energy, LLC

600 Travis Street, Suite
5100

Houston, TX 77002

Attention:  Charlene A. Ripley

Telephone: 281-840-4119

Fax:  281-840-4180

E-mail: cripley@linnenergy.com

(ii)                                 if
to the Administrative Agent, to it at

919
Third Avenue

New York, New York 10022

Attention: Dina Wilson,
Loan Assistant

Telecopy: 
212-841-2683

with a copy to the Administrative Agent at:

1200 Smith Street, Suite
3100

Houston, Texas  77002

Attention:  Betsy Jocher

Telecopy: 713-659-6915

(iii)                              if to any other Lender,
in their capacity as such, or any other Lender in its capacity as an Issuing
Bank, 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.

 79
 

Section
12.02                          Waivers;
Amendments.

(a)                                  No
failure on the part of the Administrative Agent, any other Agent, any Issuing
Bank or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege, or any abandonment or
discontinuance of steps to enforce such right, power or privilege, under any of
the Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.  The
rights and remedies of the Administrative Agent, any other Agent, each Issuing
Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any
provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by Section 12.02(b), and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.  Without limiting the generality
of the foregoing, the making of a Loan or issuance of a Letter of Credit shall
not be construed as a waiver of any Default, regardless of whether the
Administrative Agent, any other Agent, any Lender or any Issuing Bank 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
other Loan Document nor any provision thereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrower and the Majority Lenders or by the Borrower and the
Administrative Agent with the written consent of the Majority Lenders; provided
that no such agreement shall (i) increase the Maximum Credit Amount of any
Lender without the written consent of such Lender, (ii) increase the Borrowing
Base or the Conforming Borrowing Base without the consent or deemed consent of
each Lender, decrease or maintain the Borrowing Base or the Conforming
Borrowing Base without the consent of the Supermajority Lenders, or modify in
any manner Section 2.07 without the consent of each Lender, (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 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 or the Maturity 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 6.01, Section 10.02(c) or Section 8.14 or change the definition
of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, “Material Domestic
Subsidiary” or “Subsidiary”, without the written consent of each Lender, (vii)
release any Guarantor (except as set forth in the Guaranty Agreement), release
all or a substantial portion of the collateral (other than as provided in
Section 11.10), or reduce the percentage set forth in Section 8.14(a) to less
than 80%, without the written consent of each Lender, or (viii) change any of
the provisions of this Section 12.02(b) or the definition of “Majority Lenders”
or “Supermajority Lenders” or any other provision hereof specifying the number
or percentage of Lenders required to waive, amend or modify any rights
hereunder or under any other Loan Documents or make any determination or grant
any consent hereunder or any other Loan Documents, without the written consent
of each Lender; provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent, any other Agent,
or any Issuing Bank hereunder or under any other Loan Document without the
prior written consent of the Administrative Agent, such other Agent or such
Issuing Bank, as the case may be. 
Notwithstanding the foregoing, any supplement to Schedule 7.14

 80
 

(Subsidiaries)
shall be effective simply by delivering to the Administrative Agent a
supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the Lenders.

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, 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 out-of-pocket costs, expenses, Taxes, assessments
and other charges incurred by any Agent or any Lender in connection with any
filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any Security Instrument or any other document
referred to therein, (iii) all reasonable out-of-pocket expenses incurred by
each Issuing Bank in connection with the issuance, amendment, renewal or
extension of any Letter of Credit issued by such Issuing Bank or any demand for
payment thereunder, (iv) all out-of-pocket expenses incurred by any Agent, any
Issuing Bank or any Lender, including the fees, charges and disbursements of
any counsel for any Agent, any 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 EACH AGENT, THE ARRANGERS, EACH ISSUING BANK AND EACH
LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH
PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE
HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED
EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY
INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THAN EXPENSES IN CONNECTION WITH
THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS DATED
OF EVEN DATE HEREWITH, WHICH EXPENSES SHALL ONLY BE PAID BY THE BORROWER TO THE
EXTENT PROVIDED IN SECTION 12.03(A))
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 OF ITS SUBSIDIARIES 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

 81
 

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 ANY
ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT ISSUED BY
SUCH ISSUING BANK 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 ITS SUBSIDIARIES OR ANY OF
THEIR PROPERTIES, 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
SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE
BORROWER OR ANY OF ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO
THE BORROWER OR ANY OF ITS SUBSIDIARIES, (x) THE PAST OWNERSHIP BY THE BORROWER
OR ANY OF ITS SUBSIDIARIES 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 SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
BORROWER OR ANY OF ITS SUBSIDIARIES 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

 82
 

RESULTED FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

(c)                                  To
the extent that the Borrower fails to pay any amount required to be paid by it
to such Agent or any Issuing Bank under Section 12.03(a) or (b), each Lender
severally agrees to pay to such Agent or such Issuing Bank, as the case may be,
such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against such Agent or such 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 within ten (10) Business
Days of 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 any Issuing Bank that issues any Letter of Credit),
except that (i)  the Borrower may not assign or otherwise transfer any of
its rights or obligations hereunder without the prior written consent of each
Lender (and any attempted assignment or transfer by the Borrower without such
consent shall be null and void) and (ii) no Lender may assign or otherwise
transfer its rights or obligations hereunder except in accordance with this
Section 12.04.  Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns permitted
hereby (including any Affiliate of any 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, each 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 or an Affiliate of a Lender 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 or any
Affiliate of a Lender, immediately prior to giving effect to such assignment.

 83
 

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

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

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

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

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

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

(v)                                 Upon
its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and

 84
 

recordation fee
referred to in Section 12.04(b) and any written consent to such assignment
required by Section 12.04(b), the Administrative Agent shall accept such
Assignment and Assumption and record the information contained therein in the
Register.  No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this Section 12.04 (b).

(c)                                  (i)                                     Any
Lender may, without the consent of the Borrower the Administrative Agent or any
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, each 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(b).  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 Participant agrees, for the benefit of the
Borrower, to comply with Section 5.03(e) as though it were a Lender.

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

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

 85
 

other party or on
its behalf and notwithstanding that the Administrative Agent, any other Agent,
any 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 Section 12.03, Section 12.11 and ARTICLE XI shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Commitments or the termination of
this Agreement, any other Loan Document or any provision hereof or thereof.

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

Section
12.06                          Counterparts;
Integration; Effectiveness.

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

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

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

Section
12.07                          Severability.  Any provision of this Agreement or any other
Loan Document held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability without affecting the

 86

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 limitation, obligations under Swap
Agreements) at any time owing by such Lender or Affiliate to or for the credit
or the account of the Borrower or any of its Subsidiaries against any of and
all the obligations of the Borrower or any of its Subsidiaries 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 TEXAS 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.  CHAPTER 346 OF THE TEXAS FINANCE
CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES.

(b)                                 ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT
IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, 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

 87
 

ASSIGNMENT AND
ASSUMPTION), SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING.  NOTHING HEREIN SHALL AFFECT THE
RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANOTHER PARTY IN ANY OTHER JURISDICTION.

(d)                                 EACH
PARTY HEREBY (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 OR
AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR
IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVERS, AND (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 Agents, each Issuing Bank and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority or self-regulatory body, (c) to the extent required by applicable
laws or regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement or any other Loan Document, (e) 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, (f) 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 the Borrower and their obligations, (g) with the
consent of the Borrower, (h) 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, any Issuing Bank or any
Lender on a nonconfidential basis from a source other than the Borrower, or (i)
to the National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires access to
information about a Lender’s investment portfolio in connection with ratings
issued with respect to such Lender.  For
the purposes of this Section 12.11, “Information” means all information
received from the Borrower or any of its Subsidiaries relating to the Borrower
or any of its Subsidiaries and their businesses, other than any such
information that is available to the Administrative Agent, any Issuing

 88
 

Bank or any Lender on a nonconfidential basis prior to disclosure by
the Borrower or any of its Subsidiaries; provided that, in the case of
information received from the Borrower, or any of its Subsidiaries 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.

Each Lender acknowledges
that information furnished to it pursuant to this Agreement or the other Loan
Documents may include material non-public information concerning the Borrower
and its Affiliates and their related parties or their respective securities,
and confirms that it has developed compliance procedures regarding the use of
material non-public information and agrees that it will handle such material
non-public information in accordance with those procedures and applicable law,
including federal and state securities laws.

All
information, including requests for waivers and amendments, furnished by the
Borrower or the Administrative Agent pursuant to, or in the course of
administering, this Agreement or the other Loan Documents will be
syndicate-level information, which may contain material non-public information
about the Borrower and its Affiliates and their related parties or their
respective securities.  Accordingly, each
Lender represents to the Borrower and the Administrative Agent that it has
identified in its Administrative Questionnaire a credit contact who may receive
information that may contain material non-public information in accordance with
its compliance procedures and applicable law, including federal and state
securities laws.

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 Texas 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:  (a) 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 (b) 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

 89
 

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 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.  To the extent that Chapter 303 of the Texas
Finance Code is relevant for the purpose of determining the Highest Lawful Rate
applicable to a Lender, such Lender elects to determine the applicable rate
ceiling under such Chapter by the weekly ceiling from time to time in
effect.  Chapter 346 of the Texas Finance
Code does not apply to the Borrower’s obligations hereunder.

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 to those Lenders or their Affiliates which are counterparties to
any Swap Agreement with the Borrower or any of its Subsidiaries on a pro rata basis in respect of any
obligations of the Borrower or any of its Subsidiaries which arise under any
such Swap Agreement while such Person or its Affiliate is a Lender, but only
while such Person or its Affiliate is a Lender, including any Swap Agreements
between such Persons in existence prior to the date hereof.  No Lender or any Affiliate of a Lender shall
have any voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Swap Agreements.

Section
12.15                          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

 90
 

(including,
without limitation, any Subsidiary of the Borrower, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims,
remedies or privileges hereunder or under any other Loan Document against the
Administrative Agent, any other Agent, the Issuing Bank or any Lender for any
reason whatsoever.  There are no third
party beneficiaries.

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

[SIGNATURES BEGIN
NEXT PAGE]

 91

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

	
  BORROWER:

  	
  LINN ENERGY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kolja Rockov

  
	
   

  	
   

  	
  Kolja Rockov

  
	
   

  	
   

  	
  Executive Vice President and Chief

  
	
   

  	
   

  	
  Financial Officer

  

 

 1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]