CREDIT AGREEMENT

EXHIBIT 10.1

 

CREDIT AGREEMENT

 

ENERGY PARTNERS, LTD.,

as Borrower

GENERAL ELECTRIC CAPITAL CORPORATION,

as Administrative Agent

and CERTAIN FINANCIAL INSTITUTIONS,

as Lenders

* * *

GE CAPITAL MARKETS, INC.

as Sole Lead Arranger and Bookrunner

 

$125,000,000 Revolving Credit Facility

$25,000,000 Term Loan Facility

September 21, 2009

 

TABLE OF CONTENTS

 

 

 

 

 

 

CREDIT AGREEMENT

THIS CREDIT AGREEMENT is made as of September 21, 2009, by and among Energy Partners, Ltd., a Delaware corporation (“ Borrower ”), General Electric Capital Corporation, individually and as administrative agent (“ Administrative Agent ”) and as LC Issuer, and the Lenders referred to below.

W I T N E S S E T H:

In consideration of the mutual covenants and agreements contained herein in consideration of the loans which may hereafter be made by Lenders and the Letters of Credit which may be made available by LC Issuer to Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I— Definitions and References

Section 1.1. Defined Terms . As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1.1 or in the sections and subsections referred to below:

“ Additional Indebtedness ” means Indebtedness for borrowed money of the Borrower other than Indebtedness permitted under Section 7.1.

“ Administrative Agent ” means General Electric Capital Corporation, as administrative agent hereunder, and its successors in such capacity.

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

“ Affiliate ” means, as to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, such Person. A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power:

(a) to vote 20% or more of the securities or other Equity Interests (on a fully diluted basis) having ordinary voting power for the election of directors, the managing general partner or partners or the managing member or members; or

(b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“ Aggregate Revolver Commitments ” means the Revolver Commitments of all the Lenders.

“ Agreement ” means this Credit Agreement as amended, restated, supplemented or otherwise modified from time to time.

 

“ Applicable Lending Office ” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of Base Rate Loans and such Lender’s Eurodollar Lending Office in the case of Eurodollar Loans.

“ Applicable Revolver Percentage ” means with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Revolver Commitments represented by such Lender’s Revolver Commitment at such time. If the commitment of each Lender to make Revolver Loans has been terminated pursuant to Section 8.2 or if the Aggregate Revolver Commitments have expired, then the Applicable Revolver Percentage of each Lender shall be determined based on the percentage such Lender’s Revolver Loans constitute of all Revolver Loans. The initial Applicable Revolver Percentage of each Lender is set forth opposite the name of such Lender on the Lenders Schedule or in the Assignment and Assumption Agreement pursuant to which such Lender becomes a party hereto, as applicable.

“ Applicable Term Percentage ” means with respect to any Lender, the percentage (carried out to the ninth decimal place) of the aggregate outstanding amount of Term Loans represented by the outstanding amount of such Lender’s Term Loan at such time.

“ Applicable Utilization Level ” means on any date the level set forth below that corresponds to the percentage, at the close of business on such day, equivalent to the (i) Total Outstandings divided by (ii) the Borrowing Base (the “ Utilization Percent ”):

 

provided , however , that on any date on or before the later of (i) the date that is one year after the Closing Date and (ii) the date when all Obligations in respect of the Term Loans have been paid in full, the Applicable Utilization Level shall be Level I.

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

“ Asset Disposition ” means (a) the sale, assignment, transfer, exchange or other disposition by any Restricted Person of (i) any Borrowing Base Property or (ii) all or substantially all of its right, title and interest in any other Restricted Person owning any Borrowing Base Property, other than to another Restricted Person in accordance with the terms hereof or (b) the early termination or settlement by any Restricted Person of any Hedging Contracts on which Administrative Agent and Lenders have included in determining the then current Borrowing Base.

 

“ Assignment and Assumption Agreement ” means a document in the form of Exhibit F duly executed by a Lender.

“ Base Rate” means, for any day, a rate per annum equal to the highest of (a) the rate last quoted by The Wall Street Journal as the “base rate” on corporate loans posted by at least 75% of the nation’s largest banks in the United States or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15(519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by Administrative Agent) or any similar release by the Federal Reserve Board (as determined by Administrative Agent), (b) one percent (1.00%) per annum plus the Eurodollar Rate for an amount equal to the Base Rate Loans then outstanding for an Interest Period of three months, and (c) the Federal Funds Rate plus three percent (3.00%) per annum. Changes in the Base Rate resulting from changes in any of the foregoing shall be effective on the effective date of such change in the “base rate”, “bank prime loan” rate, the Federal Funds Rate or the Eurodollar Rate, without notice or demand of any kind.

“ Base Rate Loan ” means a Loan that bears interest based on the Base Rate.

“ Base Rate Margin ” means, on any date, with respect to each Base Rate Loan, the rate per annum set forth below based on the Applicable Utilization Level on such date:

 

Changes in the applicable Base Rate Margin will occur automatically without prior notice as changes in the Applicable Utilization Level occur. Administrative Agent will give notice promptly to Borrower and the Lenders of changes in the Base Rate Margin.

“ Borrower ” means Energy Partners, Ltd., a Delaware corporation.

“ Borrowing ” means a borrowing of new Loans of a single Type (and, in the case of Eurodollar Loans, with the same Interest Period) pursuant to Section 2.2 or a Continuation or Conversion of existing Loans into a single Type (and, in the case of Eurodollar Loans, with the same Interest Period) pursuant to Section 2.3.

“ Borrowing Base ” means, at the particular time in question, either the amount provided for in Section 2.8 or the amount determined by Administrative Agent and Required Lenders (or all Lenders in the case of an increase in the Borrowing Base) in accordance with the provisions of Section 2.9, as reduced by Borrower pursuant to Section 2.10; provided, however, that in no event shall the Borrowing Base ever exceed the Maximum Credit Amount.

 

“ Borrowing Base Deficiency ” has the meaning given to such term in Section 2.7(d).

“ Borrowing Base Properties ” means the oil and gas properties evaluated and approved by Lenders for purposes of establishing the Borrowing Base.

“ Borrowing Notice ” means a written or telephonic request, or a written confirmation, made by Borrower which meets the requirements of Section 2.2.

“ Business Day ” means a day, other than a Saturday or Sunday, on which commercial banks are open for business with the public in New York City. Any Business Day in any way relating to Eurodollar Loans (such as the day on which an Interest Period begins or ends) must also be a day on which, in the judgment of Administrative Agent, significant transactions in dollars are carried out in the interbank eurocurrency market.

“ Capital Lease ” means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

“ Capital Lease Obligation ” means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which should, in accordance with GAAP, appear as a liability on the balance sheet of such Person.

“ Cash Equivalents ” means Investments in:

(a) marketable obligations, maturing within twelve months after acquisition thereof, issued or unconditionally guaranteed by the United States of America or an instrumentality or agency thereof and entitled to the full faith and credit of the United States of America;

(b) demand deposits, and time deposits (including certificates of deposit) maturing within twelve months from the date of deposit thereof, with any office of any Lender or with a domestic office of any national or state bank or trust company which is organized under the Laws of the United States of America or any state therein, which has capital, surplus and undivided profits of at least $500,000,000, and whose long term certificates of deposit are rated at least Aa3 by Moody’s or AA- by S & P;

(c) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in subsection (a) above entered into with any commercial bank meeting the specifications of subsection (b) above;

(d) open market commercial paper, maturing within 270 days after acquisition thereof, which are rated at least P-1 by Moody’s or A-1 by S & P;

(e) money market or other mutual funds (i) that are rated AA or better by S & P or (ii) substantially all of the assets of which comprise securities of the types described in subsections (a) through (d) above; and

 

(f) other similar Investments approved in writing by (a) at any time when there are less than three Lenders, Required Lenders and (b) at any time when there are three or more Lenders, Administrative Agent.

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

“ Change of Control ” means:

(a) an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) other than any of the Equity Investors becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “ option right ”)), directly or indirectly, of more than 50% of the total Equity Interests of Borrower entitled to vote for members of the board of directors or equivalent governing body of Borrower on a fully-diluted basis (and taking into account all such securities that such “person” or “group” has the right to acquire pursuant to any option right); or

(b) an event or series of events by which during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors).

“ Closing Date ” means the date on which all of the conditions precedent set forth in Section 4.1 and, with respect to the initial Borrowing hereunder, Section 4.2 shall have been satisfied or waived.

 

“ Collatera l” means all property of any kind which is subject to a Lien in favor of Lenders (or in favor of Administrative Agent for the benefit of Lenders) or which, under the terms of any Security Document, is purported to be subject to such a Lien, in each case that secures the Secured Obligations.

“ Commitment Fee Rate ” means, on any date, the rate per annum set forth below based on the Applicable Utilization Level on such date:

 

Changes in the applicable Commitment Fee Rate will occur automatically without prior notice as changes in the Applicable Utilization Level occur. Administrative Agent will give notice promptly to Borrower and the Lenders of changes in the Commitment Fee Rate.

“ Commitment Period ” means the period from and including the Closing Date to the earlier of (a) the Revolver Termination Date, and (b) the date of termination of the commitment of each Revolver Lender to make Revolver Loans pursuant to Section 8.2.

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

“ Consolidated EBITDAX ” means, for any period (without duplication), the sum of (1) Consolidated Net Income during such period (excluding extraordinary items that have a characteristic of extraordinary items as that term is defined under GAAP), plus (2) all interest paid or accrued during such period on Indebtedness (including amortization of original issue discount and debt issue costs and the interest component of any non-cash deferred or accrued payment obligations, including, but not limited to, accretion of obligations recorded for abandonment and decommissioning activities pursuant to the requirements of FASB 143 and Capital Lease Obligations) which were deducted in determining such Consolidated Net Income, plus (3) all income taxes which were deducted in determining such Consolidated Net Income, plus (4) all depreciation, amortization (including amortization of good will), depletion, exploration expense and other non-cash charges (including any provision for the reduction in the carrying value of assets recorded in accordance with GAAP and including those resulting from the requirements of FASB 123, 133, 143 or 144, each as amended or revised from time to time) which were deducted in determining such Consolidated Net Income, plus (5) fees and expenses incurred through the Closing Date in connection with the transactions involved in Borrower’s

 

exit from Chapter 11 protection including, without limitation, all professional and advisory fees, in an amount not to exceed $500,000 plus (6) any non-recurring or unusual losses during such period to the extent that same are acceptable to Borrower and (a) at any time when there are less than three Lenders, Required Lenders and (b) at any time when there are three or more Lenders, Administrative Agent, minus (7) all non-cash (other than the accrual of revenue or recording of receivables in the ordinary course of business) items of income which were included in determining such Consolidated Net Income, minus (8) any non-recurring or unusual gains during such period to the extent deemed appropriate by (a) at any time when there are less than three Lenders, Required Lenders and (b) at any time when there are three or more Lenders, Administrative Agent.

“ Consolidated Net Income ” means, for any period, Borrower’s Consolidated Net Income available to common stockholders under GAAP, plus any dividends accrued but unpaid during the period less earnings attributable to any Person (other than a Restricted Person) in which Borrower or any of its Subsidiaries has an ownership interest not actually received from such Person during the period, plus losses attributable to any Person (other than a Restricted Person) in which Borrower or any of its Subsidiaries has an ownership interest not actually paid to such Person.

“ Continuation ” shall refer to the continuation pursuant to Section 2.3 hereof of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the next Interest Period.

“ Continuation/Conversion Notice ” means a written or telephonic request, or a written confirmation, made by Borrower which meets the requirements of Section 2.3.

“ Conversion ” shall refer to a conversion pursuant to Section 2.3 or Article III of one Type of Loan into another Type of Loan.

“ Default ” means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default.

“ Default Rate ” means, at the time in question (a) with respect to any Base Rate Loan, the rate per annum equal to two percent (2%) above the sum of the Base Rate plus the Base Rate Margin then in effect for such Loan and (b) with respect to any Eurodollar Loan, the rate per annum equal to two percent (2%) above the sum of the Eurodollar Rate plus the Eurodollar Margin then in effect for such Loan and provided in each case that no Default Rate charged by any Person shall ever exceed the Highest Lawful Rate.

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

“ Determination Date ” has the meaning given to such term in Section 2.9.

 

“ Devon Escrow Account ” means the escrow account created under that certain Trust Agreement, dated March 31, 2000, between Ocean Energy, Inc. (now Devon Energy Production Company, LP), Borrower, as Buyer, and Chase Bank of Texas, National Association, as Trustee, relative to oil and gas leasehold and other assets and interests located in South Pass 24, 27 & 39 Fields, onshore and offshore, Louisiana.

“ Disclosure Schedule ” means Schedule 1 hereto.

“ Distribution ” means (a) any dividend or other distribution made by a Restricted Person on or in respect of any stock, partnership interest, membership interest, or other Equity Interest in such Restricted Person or any other Restricted Person (including any option or warrant to buy such an Equity Interest), (b) any payment made by a Restricted Person to purchase, redeem, acquire or retire any stock, partnership interest, membership interest, or other Equity Interest in such Restricted Person or any other Restricted Person (including any such option or warrant) or (c) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment (other than the payment of in kind interest) or scheduled sinking fund payment of any Indebtedness in respect of borrowed money of any Restricted Person which is subordinate or junior in right of payment to the Secured Obligations.

“ Domestic Lending Office ” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” below its name on the Lenders Schedule, or such other office as such Lender may from time to time specify to Borrower and Administrative Agent; with respect to LC Issuer, the office, branch, or agency through which it issues Letters of Credit; and, with respect to Administrative Agent, the office, branch, or agency through which it administers this Agreement.

“ Eligible Assignee ” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by (i) Administrative Agent, (ii) in the case of any assignment of a Revolver Commitment, LC Issuer, and (iii) unless an Event of Default has occurred and is continuing, Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include Borrower or any of Borrower’s Affiliates or Subsidiaries.

“ Engineering Report ” means the Initial Engineering Report and each engineering report delivered pursuant to Sections 6.2(f) and (g).

“ Environmental Laws ” means any and all Laws and Permits pertaining to the prevention of pollution, remediation of contamination or restoration of environmental quality, protection of human health or the environment (including natural resources), or workplace health and safety, including without limitation the federal Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 5101 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Oil Pollution Act of

 

1990; the Outer Continental Shelf Liability Act; and all similar Requirements of Law of any Governmental Authority and all amendments to such Requirements of Law and all regulations implementing any of the foregoing in effect in any and all jurisdictions in which any Restricted Person is conducting, or at any time has conducted, business, or where any property of any Restricted Person is or has been located.

“ Environmental Liabilities ” means all Liabilities (including costs of Remedial Actions, natural resource damages and costs and expenses of investigation and feasibility studies) that may be imposed on, incurred by or asserted against any Restricted Person as a result of, or related to, any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law or otherwise, arising under any Environmental Law or in connection with any environmental, health or safety condition or with any Release and resulting from the ownership, lease, sublease or other operation or occupation of property by any Restricted Person, whether on, prior or after the date hereof.

“ EPL Delaware ” means Delaware EPL of Texas, L.L.C., a Delaware limited liability company.

“ EPL Louisiana ” means EPL of Louisiana, L.L.C., a Louisiana limited liability company.

“ EPL Pioneer ” means EPL Pioneer Houston, Inc. a Texas corporation.

“ EPL Pipeline ” means EPL Pipeline, L.L.C., a Delaware limited liability company.

“ Equity Interest ” means shares of capital stock or a partnership, profits, capital, member or other equity interest, or options, warrants or any other rights to substitute for or otherwise acquire the capital stock or a partnership, profits, capital, member or other equity interest of any Person.

“ Equity Investor ” means any owner or holder of Equity Interests of the Borrower immediately after giving effect to Borrower’s confirmed Plan of Reorganization.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statutes or statute, together with all rules and regulations promulgated with respect thereto.

“ ERISA Affiliate ” means each Restricted Person and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with such Restricted Person, are treated as a single employer under Section 414 of the Internal Revenue Code.

“ ERISA Plan ” means any employee pension benefit plan subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person (a) is currently sponsoring, maintaining or contributing to, or (b) was sponsoring, maintaining or contributing to at any time during the six calendar years immediately preceding the date hereof.

 

“ Eurodollar Base Rate ” means, with respect to any Interest Period for any Eurodollar Loan, the rate determined by the Administrative Agent to be the offered rate for deposits in Dollars for the applicable Interest Period appearing on the Reuters Screen LIBOR01 page as of 11:00 a.m. (London time) on the second full Business Day next preceding to the first day of each Interest Period. In the event that such rate does not appear on the Reuters Screen LIBOR01 page at such time, the “ Eurodollar Base Rate ” shall be determined by reference to such other comparable publicly available commercial service for displaying the offered rate for deposit in Dollars in the London interbank market as may be selected by the Administrative Agent and, in the absence of availability, such other method to determine such offered rate as may be selected by the Administrative Agent in its discretion. In no event shall the Eurodollar Base Rate be a rate per annum less than two percent (2.00%).

“ Eurodollar Lending Office ” means, with respect to any Lender, the office of such Lender specified as its “Eurodollar Lending Office” below its name on the Lenders Schedule (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to Borrower and Administrative Agent.

“ Eurodollar Loan ” means a Loan that bears interest based on the Eurodollar Rate.

“ Eurodollar Margin ” means, on any date, with respect to each Eurodollar Loan, the rate per annum set forth below based on the Applicable Utilization Level on such date:

 

Changes in the applicable Eurodollar Margin will occur automatically without prior notice as changes in the Applicable Utilization Level occur. Administrative Agent will give notice promptly to Borrower and the Lenders of changes in the Eurodollar Margin.

“ Eurodollar Rate ” means, with respect to any Interest Period and for any Eurodollar Loan, an interest rate per annum determined as the ratio of (a) the Eurodollar Base Rate with respect to such Interest Period for such Eurodollar Loan to (b) the difference between the number one and the Eurodollar Reserve Requirements with respect to such Interest Period and for such Eurodollar Loan.

“ Eurodollar Reserve Requirements ” means, with respect to any Interest Period and for any Eurodollar Loan, a rate per annum equal to the aggregate, without duplication, of the maximum rates (expressed as a decimal number) of reserve requirements in effect two (2) Business Days prior to the first day of such Interest Period (including basic, supplemental, marginal and emergency reserves) under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve

 

requirements prescribed for eurocurrency funding (currently referred to as “eurocurrency liabilities” in Regulation D of the Federal Reserve Board) maintained by a member bank of the United States Federal Reserve System.

“ Event of Default ” has the meaning given to such term in Section 8.1.

“ Excluded Taxes ” means, with respect to Administrative Agent, any Lender, LC Issuer or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its Applicable Lending Office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 3.7(b), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.5(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.5(a).

“ Existing Credit Agreement ” means that certain Credit Agreement dated April 23, 2007 among Borrower, Bank of America, N.A., as administrative agent, and the other lenders party thereto.

“ Facility ” means, as applicable, either the Revolver Loans or the Term Loans provided for hereunder.

“ Federal Funds Rate ” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to Administrative Agent on such day on such transactions as determined by Administrative Agent.

“ Fiscal Quarter ” means a three-month period ending on March 31, June 30, September 30 or December 31 of any year.

“ Fiscal Year ” means a twelve-month period ending on December 31 of any year.

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

 

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

“ GAAP ” means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of Restricted Persons and their Consolidated Subsidiaries, are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the Initial Financial Statements. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board (or any such successor) in order for such principle or practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder with respect to any Restricted Person or with respect to any Restricted Person and its Consolidated Subsidiaries may be prepared in accordance with such change, but all calculations and determinations to be made hereunder may be made in accordance with such change only after notice of such change is given to each Lender, and Required Lenders, Administrative Agent and Borrower agree to negotiate in good faith in respect of the modification of any covenants hereunder that are affected by such change in order to cause them to measure substantially the same financial performance as the covenants in effect immediately prior to such change.

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

“ Guarantor ” means each of EPL Delaware, EPL Louisiana, EPL Pioneer, EPL Pipeline, and any Person who has guaranteed some or all of the Secured Obligations pursuant to a guaranty listed on the Security Schedule or any other Person who has guaranteed some or all of the Secured Obligations and who has been accepted by Administrative Agent as a Guarantor or any Subsidiary of Borrower which now or hereafter executes and delivers a guaranty to Administrative Agent pursuant to Section 6.15.

“ Hazardous Materials ” means and includes each substance defined, designated or classified as a hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any Environmental Law, radioactive materials, explosives, asbestos or asbestos containing materials, polychlorinated biphenyls, radon, infectious or medical wastes and any petroleum, petroleum products, petroleum substances, crude oil or oil or gas exploration or production wastes.

“ Hedging Contract ” means (a) any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies, bonds, or indexes based on any of the foregoing, (b) any option, futures or forward contract traded on an exchange, and (c) any other derivative agreement or other similar agreement or arrangement.

 

“ Highest Lawful Rate ” means, with respect to each Lender Party to whom Obligations are owed, the maximum nonusurious rate of interest that such Lender Party is permitted under applicable Law to contract for, take, charge, or receive with respect to such Obligations. All determinations herein of the Highest Lawful Rate, or of any interest rate determined by reference to the Highest Lawful Rate, shall be made separately for each Lender Party as appropriate to assure that the Loan Documents are not construed to obligate any Person to pay interest to any Lender Party at a rate in excess of the Highest Lawful Rate applicable to such Lender Party.

“ Immaterial Subsidiary ” means any Subsidiary of the Borrower that does not have direct Indebtedness and does not guarantee any other Indebtedness of the Borrower or another Subsidiary in excess of $250,000, and, as of any applicable date of determination, has (a) assets of less than $250,000 and (b) owns no Oil and Gas Properties.

“ Indebtedness ” of any Person means Liabilities in any of the following categories (without duplication):

(a) Liabilities for borrowed money, including any accrued and unpaid interest thereon;

(b) Liabilities constituting an obligation to pay the deferred purchase price of property or services;

(c) Liabilities evidenced by a bond (other than surety bonds), debenture, note or similar instrument;

(d) Liabilities which (i) would under GAAP be shown on such Person’s balance sheet as a liability, and (ii) are payable more than one (1) year from the date of creation or incurrence thereof (other than reserves for taxes and reserves for contingent obligations) except for liabilities shown on such Person’s balance sheet that arise from the application of FASB 143 or FASB 123, as amended or revised;

(e) Liabilities arising under Hedging Contracts (on a net basis to the extent netting is provided for in the applicable Hedging Contract), excluding any portion thereof which would be accounted for as an interest expense under GAAP;

(f) Liabilities constituting principal under Capital Lease Obligations;

(g) Liabilities arising under conditional sales or other title retention agreements relating to property purchased by such Person;

(h) Liabilities owing under direct or indirect guaranties of Indebtedness of any other Person or otherwise constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Indebtedness of any other Person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase Indebtedness, assets, goods, securities or services) to the extent of the lesser of (i) the

 

amount of such Indebtedness and (ii) the maximum stated amount of such guaranty of Indebtedness, but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection;

(i) Liabilities (for example, repurchase agreements, mandatorily redeemable preferred stock and sale/leaseback agreements) consisting of an obligation to purchase or redeem securities or other property of such Person, if such Liabilities arise out of or in connection with the sale or issuance of the same or similar securities or property;

(j) Liabilities with respect to letters of credit or applications or reimbursement agreements therefor;

(k) Liabilities with respect to banker’s acceptances;

(l) Liabilities with respect to payments received in consideration of oil, gas, or other minerals yet to be acquired or produced at the time of payment (including obligations under “take-or-pay” contracts to deliver gas in return for payments already received and the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment); or

(m) Liabilities with respect to other obligations to deliver goods or services in consideration of advance payments therefor (other than gas balancing arrangements entered into the ordinary course of business);

provided, however, that the “Indebtedness” of any Person shall not include Liabilities that were incurred by such Person on ordinary trade terms to vendors, suppliers, or other Persons providing goods and services for use by such Person in the ordinary course of its business, unless and until such Liabilities are outstanding more than 90 days past the original invoice or billing date therefor (unless such Liabilities are being contested in good faith).

“ Indemnitee ” has the meaning given to such term in Section 10.4(b).

“ Independent Engineers ” means the independent petroleum engineering firms described in clause (i) or (ii) in the definition of Initial Engineering Report or another independent petroleum engineering firm chosen by Borrower and acceptable to Administrative Agent.

“ Initial Borrowing Base ” has the meaning given to such term in Section 2.8.

“ Initial Engineering Report ” means those certain engineering reports concerning oil and gas properties of Borrower prepared by (i) Ryder Scott Company as of December 31, 2008, (ii) Netherland Sewell & Associates, Inc. as of December 31, 2008 and (iii) Staff Engineers as of July 1, 2009.

“ Initial Financial Statements ” means (a) the audited annual Consolidated financial statements of Borrower dated as of December 31, 2008, (b) the unaudited quarterly Consolidated financial statements of Borrower dated as of June 30, 2009, and (c) the pro forma balance sheet of Borrower as of June 30, 2009 after giving effect to the transactions contemplated by this Agreement.

 

“ Insolvent ” means with respect to any Person, that such Person (a) is insolvent (as such term is defined in the United States Bankruptcy Code, Title 11 U.S.C., as amended (the “Code”), and with all terms used in this Section that are defined in the Code having the meanings ascribed to those terms in the text and interpretive case law applicable to the Code), or (b) the sum of such Person’s debts, including absolute and contingent liabilities, the Obligations or guarantees thereof, exceeds the value of such Person’s assets, at a fair valuation, and (c) such Person’s capital is unreasonably small for the business in which such Person is engaged and intends to be engaged. Such Person has incurred (whether under the Loan Documents or otherwise), or intends to incur debts which will be beyond its ability to pay as such debts mature. In determining whether a Person is “Insolvent” all rights of contribution of each Restricted Person against other Restricted Persons under its guaranties of the Secured Obligations, at law, in equity or otherwise shall be taken into account.

“ Insurance Schedule ” means Schedule 3 attached hereto.

“ Interest Expense ” means, for any period of calculation, calculated for Borrower and its Subsidiaries on a Consolidated basis determined in accordance with GAAP, total interest expense (including interest expense pursuant to Capital Lease Obligations) for such period less any interest paid in kind during such period.

“ Interest Payment Date ” means (a) with respect to each Base Rate Loan, the last day of each March, June, September and December, and (b) with respect to each Eurodollar Loan, the last day of the Interest Period that is applicable thereto and, if such Interest Period is six months in length, the date specified by Administrative Agent which is approximately three months after such Interest Period begins; provided that the last day of each calendar month shall also be an Interest Payment Date for each such Loan so long as any Event of Default exists under Section 8.1 (a) or (b).

“ Interest Period ” means, with respect to each Eurodollar Loan, the period specified in the Borrowing Notice or Continuation/Conversion Notice applicable to such Eurodollar Loan, beginning on and including the date specified in such Borrowing Notice or Continuation/ Conversion Notice (which must be a Business Day), and ending three or six months thereafter, as Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (b) any Interest Period which begins on the last Business Day in a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day in a calendar month; and (c) notwithstanding the foregoing, any Interest Period which would otherwise end after the last day of the Commitment Period shall end on the last day of the Commitment Period (or, if the last day of the Commitment Period is not a Business Day, on the next preceding Business Day).

“ Internal Revenue Code ” means the United States Internal Revenue Code of 1986, as amended from time to time and any successor statute or statutes, together with all rules and regulations promulgated with respect thereto.

 

“ Investment ” means any investment, made directly or indirectly, in any Person, whether by purchase, acquisition of Equity Interests, indebtedness or other obligations or securities or by extension of credit, loan, advance, capital contribution or otherwise and whether made in cash, by the transfer of property, or by any other means.

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

“ LC Application ” means any application for a Letter of Credit hereafter made by Borrower to LC Issuer.

“ LC Collateral ” has the meaning given to such term in Section 2.16(a).

“ LC Conditions ” has the meaning given to such term in Section 2.11.

“ LC Issuer ” means General Electric Capital Corporation in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity. Administrative Agent may, with the consent of Borrower and the Lender in question, appoint any Lender hereunder as an LC Issuer in place of or in addition to General Electric Capital Corporation.

“ LC Obligations ” means, at the time in question, the sum of all Matured LC Obligations plus the maximum amounts which LC Issuer might then or thereafter be called upon to advance under all Letters of Credit then outstanding (but excluding any LC Obligations for which Borrower has provided LC Collateral).

“ LC Sublimit ” means $20,000,000.

“ Lender Hedging Obligations ” means all obligations arising from time to time under Hedging Contracts between Borrower or any Guarantor and a counterparty that is a Lender or an Affiliate of a Lender that were entered into prior to the Closing Date or while such counterparty was Lender or an Affiliate of a Lender; provided that if such counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder, Lender Hedging Obligations shall only include such obligations to the extent arising from transactions entered into or in existence at the time such counterparty was a Lender hereunder or an Affiliate of a Lender hereunder.

“ Lender Parties ” means Administrative Agent, LC Issuer, and all Lenders.

“ Lenders ” means each signatory hereto (other than Borrower and any Restricted Person that is a party hereto), including General Electric Capital Corporation in its capacity as a Lender hereunder rather than as Administrative Agent or LC Issuer, and the successors of each such party as Lender hereunder pursuant to Section 10.5.

“ Lenders Schedule ” means Schedule 4 hereto.

 

“ Letter of Credit ” means any letter of credit issued by LC Issuer hereunder at the application of Borrower.

“ Letter of Credit Fee Rate ” means, on any date, with respect to each Letter of Credit, the Eurodollar Margin for such date.

“ Letter of Credit Termination Date ” means the date which is seven (7) days prior to the Revolver Termination Date or if such day is not a Business Day, the next preceding Business Day.

“ Liabilities ” means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or indirect, absolute, fixed or contingent, and whether or not required to be considered pursuant to GAAP.

“ Lien ” means, with respect to any property or assets, any right or interest therein of a creditor to secure Liabilities owed to it or any other arrangement with such creditor which provides for the payment of such Liabilities out of such property or assets or which allows such creditor to have such Liabilities satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic’s or materialman’s lien, or any other charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise, but excluding any right of offset which arises without agreement in the ordinary course of business. “Lien” also means any filed financing statement, any registration of a pledge (such as with an issuer of uncertificated securities), or any other arrangement or action which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists.

“ Loan Documents ” means this Agreement, the Notes, the Security Documents, the Letters of Credit, the LC Applications, and all other agreements, certificates, documents, instruments and writings at any time delivered by a Restricted Person in connection herewith or therewith (exclusive of term sheets and commitment letters).

“ Loans ” means, collectively, the Term Loans and the Revolver Loans.

“ Material Adverse Change ” means a material and adverse change, from the state of affairs presented in the Initial Financial Statements or as represented or warranted in any Loan Document, without giving effect to any change resulting from fresh start accounting, to (a) Borrower’s Consolidated financial condition, (b) Borrower’s Consolidated business, assets, operations, properties, or liabilities (contingent or otherwise), considered as a whole, (c) Borrower’s ability to timely pay the Secured Obligations, (d) Borrower’s or any Guarantor’s ability to perform their respective obligations under the Loan Documents (to the extent a party thereto), or (e) the enforceability of the material terms of any Loan Documents against the Restricted Persons or on the rights and remedies of the Lenders under any Loan Document.

 

“ Matured LC Obligations ” means all amounts paid by LC Issuer on drafts or demands for payment drawn or made under or purported to be made under any Letter of Credit and all other amounts due and owing to LC Issuer under any LC Application for any Letter of Credit, to the extent the same have not been repaid to LC Issuer (with the proceeds of Loans or otherwise).

“ Maximum Credit Amount ” means the amount of $150,000,000.

“ Minimum Collateral Amount ” means Oil and Gas Properties to which are attributable, ninety percent (90%) of the Present Value of the Proved Reserves attributable to all of the Borrowing Base Properties.

“ MMS ” means the U.S. Minerals Management Service, and any Governmental Authority succeeding to any of its principal functions.

“ Monthly Term Repayment ” has the meaning given to such term in Section 2.7(e).

“ Moody’s ” means Moody’s Investors Service, Inc., or its successor.

“ Net Cash Proceeds ” means the remainder of (a) the gross cash proceeds received by any Restricted Person from any Asset Disposition or from the issuance of any Additional Indebtedness less (b) commissions, legal, accounting and other professional fees and expenses, and other usual and customary transaction costs, including, without limitation, indemnification and other post-closing obligations and reserves related to any such Asset Disposition or any such incurrence of Additional Indebtedness, in each case only to the extent paid or payable by a Restricted Person in cash and related to such Asset Disposition or such incurrence of Additional Indebtedness.

“ Notes ” means, collectively, the Revolver Notes and the Term Notes.

“ Obligations ” means all Liabilities from time to time owing by any Restricted Person to any Lender Party under or pursuant to any of the Loan Documents, including all LC Obligations and Liabilities for interest and fees. “Obligation” means any part of the Obligations.

“ Oil and Gas Properties ” means (i) all oil, gas and/or mineral leases, oil, gas or mineral properties, mineral servitudes and/or mineral rights of any kind (including, without limitation, mineral fee interests, lease interests, farmout interests, overriding royalty and royalty interests, net profits interests, oil payment interests, production payment interests and other types of mineral interests), and all oil and gas gathering, treating, storage, processing and handling assets, (ii) all oil and gas gathering treating, storage, processing and handling assets, (iii) all pipelines, and (iv) all platforms, wells, wellhead equipment, pumping units, flowlines, tanks, buildings, injection facilities, saltwater disposal facilities, compression facilities, gathering systems, and other equipment.

“ Organizational Documents ” mean (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint

 

venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“ Other Taxes ” has the meaning specified in Section 3.5(c).

“ Permits ” means any permit, approval, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from any Governmental Authority.

“ Permitted Investments ” means:

(a) Cash Equivalents;

(b) existing Investments described in the Disclosure Schedule;

(c) normal and prudent extensions of credit by Restricted Persons to their customers, suppliers or joint interest partners for buying goods and services in the ordinary course of business or to another Restricted Person in the ordinary course of business, which extensions shall not be for longer periods than those extended by similar businesses operated in a normal and prudent manner;

(d) Investments among Restricted Persons; provided that Investments in the form of extensions of credit to Restricted Persons shall be subordinated to the Secured Obligations upon terms and conditions satisfactory to Required Lenders and Administrative Agent in their sole and absolute discretion;

(e) Investments related to acquisitions by Restricted Persons of oil, gas and/or mineral leases in an amount not to exceed $8,000,000 in the aggregate;

(f) Loans and advances, including advances for travel and moving expenses, to employees, officers and directors of Borrower and other Restricted Persons in the ordinary course of business for bona fide business purposes not in excess of $250,000 at any one time outstanding; and

(g) Investments not described in subsections (a) through (f) above which do not (taking into account all Investments of all Restricted Persons) exceed an aggregate amount of $250,000 during any Fiscal Year.

“ Permitted Liens ” means:

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

(b) landlords’, operators’, carriers’, warehousemen’s, repairmen’s, mechanics’, materialman’s, or other like Liens which do not secure Indebtedness, in each case only to the extent arising in the ordinary course of business and only to the

 

extent securing obligations which are not delinquent or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been maintained in accordance with GAAP;

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

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

(e) Liens securing any Secured Obligations;

(f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any property of 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 that do not materially interfere with the future development of such property or with cash flow from such property as reflected in the most recent Engineering Report;

(g) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings that 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 no action to enforce such Lien has been commenced; and such Liens are covered by a bond or insurance reasonably acceptable to Administrative Agent;

(h) 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 and no such deposit account is intended by Borrower or any of its Subsidiaries to provide collateral to the depository institution;

(i) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislations;

(j) Liens under joint operating agreements, pooling or unitization agreements or similar contractual arrangements arising in the ordinary course of the business of Borrower or its Subsidiaries to secure amounts owing under such agreements and contracts, which amounts are not more than 90 days past due or are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefor;

(k) encumbrances consisting of deed restrictions, zoning restrictions, easements, governmental or environmental permitting and operation restrictions, the exercise by Governmental Authorities or third parties of eminent domain or condemnation rights, or any other similar restrictions on the use of the Oil and Gas Properties, none of which materially impairs the use of such property by Borrower or any Subsidiary in the operation of its business, and none of which is or shall be violated in any material respect by existing proposed operations;

 

(l) the terms and provisions of any of the oil and gas leases and amendments thereto pursuant to which any Restricted Person derives its interest;

(m) Liens securing the Permitted Subordinated Indebtedness subordinated pursuant to the Subordination Agreement;

(n) Liens securing Indebtedness permitted under Section 7.1(f);

(o) Liens arising from the filing of UCC financing statements solely as a precautionary measure in connection with operating leases; and

(p) Liens not otherwise permitted by the foregoing clauses (a) through (o); provided that the aggregate principal or face amount of all such Indebtedness secured under this clause (p) shall not exceed $250,000.

“ Permitted Subordinated Credit Facility ” means that certain Indenture dated of even date herewith among Borrower, Trustee and the guarantors party thereto maturing September 21, 2014 (as such date may be extended pursuant to the terms of such Indenture), which is subject to subordination as provided in the Subordination Agreement.

“ Permitted Subordinated Indebtedness ” means Indebtedness under the Permitted Subordinated Credit Facility that is subordinated to the Secured Obligations pursuant to the Subordination Agreement.

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

“ Petition Date ” means May 1, 2009.

“ Plan of Reorganization ” means that certain Second Amended Joint Plan of Reorganization of Energy Partners, Ltd. And Certain of its Subsidiaries Under Chapter 11 of the Bankruptcy Code, as modified as of September 16, 2009, as may have been further modified or supplemented prior to the Closing Date and as confirmed by the Bankruptcy Court pursuant to the Bankruptcy Code.

“ Present Value ” of any Oil and Gas Property means the present value of the future net revenues attributed to such property in the most recent Engineering Report using a discount rate of nine percent (9%).

“ Projected Oil and Gas Production ” means the projected production of oil or gas (measured by volume unit or BTU equivalent, not sales price) for the term of the contracts or a particular month, as applicable, from Proved Developed Producing Reserves attributable to properties and interests owned by the Restricted Persons that are located in or offshore of the United States, as such production is projected in the Engineering Report most recently delivered, after deducting projected production from any properties or interests sold or under contract for

 

sale that had been included in such report and after adding projected production from any properties or interests that had not been reflected in such report but that are reflected in a separate or supplemental report meeting the requirements of Section 6.2(f) or (g) and otherwise are satisfactory to Administrative Agent.

“ Proved Reserves ” means “Proved Reserves” as defined in the Petroleum Resources Management System as in effect at the time in question (in this definition, the “ PRMS ”) prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers and reviewed and jointly sponsored by the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers (or any generally recognized successor organizations). “ Proved Developed Producing Reserves ” means Proved Reserves that are categorized as “ Developed Producing Reserves ” in the PRMS, “ Proved Developed Nonproducing Reserves ” means Proved Reserves that are categorized as “ Developed Nonproducing Reserves ” in the PRMS, and “ Proved Undeveloped Reserves ” means Proved Reserves that are categorized as “ Undeveloped Reserves ” in the PRMS.

“ Rating Agency ” means either S & P or Moody’s.

“ Register ” means a register maintained at the office of Administrative Agent for the recordation of the names and addresses of the Lenders, the Revolver Commitments and Term Commitments of the Lenders, and the principal amounts of the Loans and LC Obligations owing to each Lender pursuant to the terms of this Agreement from time to time.

“ Regulation D ” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect.

“ Related Person ” means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, agent, trustee, representative, attorney, accountant and each insurance, environmental, legal, financial and other advisor (including those retained in connection with the satisfaction or attempted satisfaction of any condition set forth in Article IV ) and other consultants and agents of or to such Person or any of its Affiliates, together with, if such Person is Administrative Agent, each other Person or individual designated, nominated or otherwise mandated by or helping the Administrative Agent pursuant to and in accordance with Section 9.4 or any comparable provision of any Loan Document.

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

“ Remedial Action ” means all actions required to (a) clean up, remove, treat or in any other way address any Hazardous Material in the indoor or outdoor environment, (b) prevent or minimize any Release so that a Hazardous Material does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care with respect to any Hazardous Material.

“ Required Lenders ” means (a) at any time when there are less than three Lenders, all Lenders and (b) at any time when there are three or more Lenders, Lenders having more than

 

sixty-six and two-thirds percent (66  ² / 3 %) of the sum of (i) the Aggregate Revolver Commitments, or if the Revolver Commitments have terminated, the outstanding Revolver Loans, and (ii) the then outstanding Term Loans, if any; provided that the Revolver Commitment of, and the portion of outstanding Revolver Loans or outstanding Term Loans held by, any Defaulting Lender shall be excluded for the purposes of making a determination of Required Lenders.

“ Requirements of Law ” means, with respect to any Person, collectively, the common law and all federal, state, local, foreign, multinational or international laws, statutes, codes, treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments, writs, injunctions, decrees (including administrative or judicial precedents or authorities) and the interpretation or administration thereof by, and other determinations, directives, requirements or requests of, any Governmental Authority, in each case whether or not having the force of law and that are applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“ Responsible Officer ” means, with respect to Borrower, the President, Chief Executive Officer, Chief Financial Officer, Chief Restructuring Officer, Treasurer, Secretary or any Vice President of Borrower, and with respect to any other Restricted Person, if such Restricted Person is a corporation, the President, Chief Executive Officer, Chief Financial Officer, Chief Restructuring Officer, Treasurer, Secretary or any Vice President of such Restricted Person, if such Restricted Person is a limited liability company, a Manager or officer of such Restricted Person, as applicable, and if such Restricted Person is a limited partnership, the applicable officer of the general partner of such limited partnership.

“ Restricted Person ” means any of Borrower, each Subsidiary of Borrower, and each Guarantor.

“ Revolver Commitment ” means, with respect to any Lender, its obligation to make Revolver Loans to the Borrower pursuant to Section 2.1(a), in an aggregate principal amount at any one time outstanding not to exceed the Revolver Commitment amount set forth opposite such Lender’s name on the Lenders Schedule or in the Assignment and Assumption Agreement pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

“ Revolver Lender ” means any Lender who maintains a Revolver Commitment or has outstanding Revolver Loans.

“ Revolver Loan ” has the meaning specified in Section 2.1(a).

“ Revolver Note ” has the meaning specified in Section 2.1(a).

“ Revolver Termination Date ” means September 21, 2012.

“ S & P ” means Standard & Poor’s Ratings Services (a division of The McGraw Hill Companies), or its successor.

 

“ Scheduled Determination ” means each determination of the Borrowing Base that is not a Special Determination.

“ SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“ Secured Parties ” means the Lenders, the LC Issuers, the Administrative Agent, any holder of a Lender Hedging Obligation, each other Indemnitee and any other holder of any Obligation of any Restricted Person.

“ Secured Obligations ” means all Obligations and all Lender Hedging Obligations.

“ Security Documents ” means all security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing statements, continuation statements, extension agreements, subordination agreements, intercreditor agreements, and other agreements or instruments now, heretofore, or hereafter delivered by any Restricted Person to Administrative Agent in connection with this Agreement or any transaction contemplated hereby to secure or guarantee the payment or performance of any part of the Secured Obligations.

“ Security Schedule ” means Schedule 2 hereto.

“ Special Determinations ” has the meaning given to such term in Section 2.9(c).

“ SPV ” means any special purpose funding vehicle identified as such in a writing by any Lender to the Administrative Agent.

“ Staff Engineers ” means petroleum engineers who are employees of Borrower or of a staffing company that provides its employees to Borrower.

“ Subordination Agreement ” means that certain Subordination Agreement among Borrower, The Bank of New York Mellon Trust Company, N.A., Administrative Agent and the other parties party thereto of even date herewith, in form and substance satisfactory to Administrative Agent.

“ Subsidiary ” means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent or more by such Person, provided that associations, joint ventures or other relationships (a) which are established pursuant to a standard form operating agreement or similar agreement or which are partnerships for purposes of federal income taxation only, (b) which are not corporations or partnerships (or subject to the Uniform Partnership Act) under applicable state Law, and (c) whose businesses are limited to the exploration, development and operation of oil, gas or mineral properties and interests owned directly by the parties in such associations, joint ventures or relationships, shall not be deemed to be “Subsidiaries” of such Person.

“ Taxes ” has the meaning specified in Section 3.5(a).

 

“ Term Commitment ” means its obligation to make a Term Loan on the Closing Date to the Borrower pursuant to Section 2.1(b) in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on the Lenders Schedule.

“ Term Lenders ” means any Lender who maintains a Term Commitment or has outstanding Term Loans.

“ Term Loan ” has the meaning specified in Section 2.1(b).

“ Term Maturity Date ” means September 21, 2010.

“ Term Note ” has the meaning specified in Section 2.1(b).

“ Termination Event ” means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Section 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) or 4043(b)(4) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041(c) of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or condition which reasonably could be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan.

“ Threshold Amount ” means $500,000.

“ Total Funded Debt ” means the categories of Liabilities of Borrower described in clauses (a), (b), (c), (f), (h) and (j) of the definition of “Indebtedness” in Section 1.1 (without duplication).

“ Total Outstandings ” means the Total Revolver Outstandings and the Total Term Outstandings.

“ Total Revolver Outstanding s” means the sum of (1) the aggregate outstanding principal amount of all Revolver Loans after giving effect to any borrowings and prepayments or repayments of Revolver Loans occurring on such date and (2) the existing LC Obligations at such time.

“ Total Term Outstandings ” means the aggregate outstanding principal amount of all Term Loans after giving effect to any prepayments or repayments of Term Loans occurring on such date.

“ Tribunal ” means any government, any arbitration panel, any court or any governmental department, commission, board, bureau, agency or instrumentality of the United States of America or any state, province, commonwealth, nation, territory, possession, county, parish, town, township, village or municipality, whether now or hereafter constituted or existing.

 

“ Trustee ” means The Bank of New York Mellon Trust Company, N.A., and any successor, assignee or replacement thereof.

“ Type ” means, with respect to any Loans, the characterization of such Loans as either Base Rate Loans or Eurodollar Loans.

“ UCC ” means the Uniform Commercial Code in effect in the State of New York from time to time.

“ Unused Borrowing Base ” means, at any time of determination, the Borrowing Base minus the Total Outstandings.

Section 1.2. Exhibits and Schedules; Additional Definitions . All Exhibits and Schedules attached to this Agreement are a part hereof for all purposes. Reference is hereby made to the Security Schedule for the meaning of certain terms defined therein and used but not defined herein, which definitions are incorporated herein by reference.

Section 1.3. Terms Generally; References and Titles . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “ include ,” “ includes ” and “ including ” shall be deemed to be followed by the phrase “without limitation.” The word “ will ” shall be construed to have the same meaning and effect as the word “ shall .” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “ herein ,” “ hereof ” and “ hereunder ,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time and (f) the words “ asset ” and “ property ” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References to any document, instrument, or agreement (a) shall include all exhibits, schedules, and other attachments thereto, and (b) shall include all documents, instruments, or agreements issued or executed in replacement thereof. Titles appearing at the beginning of any subdivisions are for convenience only and do not constitute any part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. The phrases “this section” and “this subsection” and similar phrases refer only to the sections or subsections hereof in which such phrases occur. The word “or” is not exclusive. Accounting terms have the meanings assigned to them by GAAP, as applied by the accounting entity to which they refer. References to “days” shall mean calendar days, unless the term “Business Day” is used. Unless otherwise specified, references herein to any particular Person also refer to its successors and permitted assigns.

 

Section 1.4. Calculations and Determinations . Each determination by a Lender Party of amounts to be paid under Article III or any other matters which are to be determined hereunder by a Lender Party (such as any Eurodollar Rate, Business Day, Interest Period, or Reserve Requirement) shall, in the absence of manifest error, be conclusive and binding. Unless otherwise expressly provided herein or unless Required Lenders otherwise consent all financial statements and reports furnished to any Lender Party hereunder shall be prepared and all financial computations and determinations pursuant hereto shall be made in accordance with GAAP.

Section 1.5. Joint Preparation; Construction of Indemnities and Releases . This Agreement and the other Loan Documents have been reviewed and negotiated by sophisticated parties with access to legal counsel and no rule of construction shall apply hereto or thereto which would require or allow any Loan Document to be construed against any party because of its role in drafting such Loan Document. All indemnification and release provisions of this Agreement shall be construed broadly (and not narrowly) in favor of the Persons receiving indemnification or being released.

ARTICLE II— The Loans and Letters of Credit

Section 2.1. Commitments to Lend; Notes .

(a) Subject to the terms and conditions hereof, each Lender agrees to make loans to Borrower (herein called such Lender’s “ Revolver Loans ”) upon Borrower’s request from time to time during the Commitment Period, provided that (a) Loans of the same Type shall be made by Lenders in accordance with their respective Applicable Revolver Percentage and as part of the same Borrowing, and (b) after giving effect to such Loans, (i) the Total Outstandings do not exceed the Borrowing Base and (ii) the Total Revolver Outstandings do not exceed the Aggregate Revolver Commitments then in effect. Subject to the terms and conditions hereof, Borrower may borrow, repay, and reborrow hereunder. The aggregate amount of all Loans (other than Loans made pursuant to Section 2.13(b)) in any Borrowing must be greater than or equal to $500,000 or any higher integral multiple of $100,000 or must equal the remaining availability under the Borrowing Base. Revolver Loans may be Base Rate Loans or Eurodollar Loans, as further provided herein. The obligation of Borrower to repay to each Lender the aggregate amount of all Revolver Loans made by such Lender, together with interest accruing in connection therewith, shall be evidenced by a single promissory note (herein called such Lender’s “ Revolver Note ”) made by Borrower payable to the order of such Lender in the form of Exhibit A-1 with appropriate insertions.

(b) Subject to the terms and conditions hereof, on the Closing Date, each Lender agrees to make a loan to Borrower (herein called such Lender’s “ Term Loans ”) in an aggregate amount not to exceed such Lender’s Term Commitment. Amounts borrowed under this Section 2.1(b) and repaid or prepaid may not be reborrowed. Term Loans may be Base Rate Loans or Eurodollar Loans, as further provided herein. The obligation of Borrower to repay to each

 

Lender the aggregate amount of all Term Loans made by such Lender, together with interest accruing in connection therewith, shall be evidenced by a single promissory note (herein called such Lender’s “ Term Note ”) made by Borrower payable to the order of such Lender in the form of Exhibit A-2 with appropriate insertions.

(c) The amount of principal owing on any Lender’s Note at any given time shall be the aggregate amount of all Revolver Loans or Term Loans, as applicable, theretofore made by such Lender minus all payments of principal theretofore received by such Lender on such Note. Interest on each Note shall accrue and be due and payable as provided herein. Each Note shall be due and payable as provided herein, and shall be due and payable in full on the earlier to occur of (i) the termination of the Revolver Commitment or the acceleration of the Term Loans, as applicable, pursuant to Section 8.1 and (ii) (A) the Revolver Termination Date, in the case of Revolver Notes and (B) the Term Maturity Date, in the case of Term Notes.

Section 2.2. Requests for New Loans . Borrower must give to Administrative Agent written or electronic notice (or telephonic notice promptly confirmed in writing) of any requested Borrowing of new Loans to be advanced by Lenders. Each such notice constitutes a “ Borrowing Notice ” hereunder and must:

(a) specify (i) the aggregate amount of any such Borrowing of new Base Rate Loans and the date on which such Base Rate Loans are to be advanced, or (ii) the aggregate amount of any such Borrowing of new Eurodollar Loans, the date on which such Eurodollar Loans are to be advanced (which shall be the first day of the Interest Period which is to apply thereto), and the length of the applicable Interest Period; and

(b) be received by Administrative Agent not later than 10:00 a.m., New York City time, on (i) the Business Day preceding the day on which any such Base Rate Loans are to be made, or (ii) the third Business Day preceding the day on which any such Eurodollar Loans are to be made.

Each such written request or confirmation must be made in the form and substance of the “Borrowing Notice” attached hereto as Exhibit B, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by Borrower as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Borrowing Notice, Administrative Agent shall give each Lender prompt notice of the terms thereof. If all conditions precedent to such new Loans have been met, each Lender will on the date requested promptly remit to Administrative Agent the amount of such Lender’s new Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Loans have been neither met nor waived as provided herein, Administrative Agent shall promptly make such Loans available to Borrower. Unless Administrative Agent shall have received notice from a Revolver Lender prior to the proposed date of any Borrowing that such Revolver Lender will not make available to Administrative Agent such Revolver Lender’s share of such Borrowing, Administrative Agent may assume that such Revolver Lender has made such share available on such date in accordance with this Section 2.2 and may, in reliance upon such assumption, make available to Borrower a corresponding amount. In such event, if a Revolver Lender has not in fact made its share of the applicable Borrowing available to Administrative Agent, then the applicable Revolver Lender

 

and the Borrower severally agree to pay to 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 Administrative Agent, at (i) in the case of a payment to be made by such Revolver Lender, the greater of the Federal Funds Rate and a rate determined by Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by Borrower, the interest rate applicable to Base Rate Loans. If Borrower and such Revolver Lender shall pay such interest to Administrative Agent for the same or an overlapping period, Administrative Agent shall promptly remit to Borrower the amount of such interest paid by Borrower for such period. If such Revolver Lender pays its Applicable Revolver Percentage of the applicable Borrowing to Administrative Agent, then the amount so paid shall constitute such Lender’s Revolver Loan included in such Borrowing. Any payment by Borrower shall be without prejudice to any claim Borrower may have against a Revolver Lender that shall have failed to make such payment to Administrative Agent.

Section 2.3. Conversion and Continuation Options .

(a) Option . Borrower may elect (i) in the case of any Eurodollar Loan, (A) to continue such Eurodollar Loan or any portion thereof for an additional Interest Period on the last day of the Interest Period applicable thereto and (B) to convert such Eurodollar Loan or any portion thereof into a Base Rate Loan at any time on any Business Day, subject to the payment of any breakage costs required by Section 3.3, and (ii) in the case of Base Rate Loans, to convert such Base Rate Loans or any portion thereof into Eurodollar Loans at any time on any Business Day upon 3 Business Days’ prior notice; provided, however, that, (x) for each Interest Period, the aggregate amount of Eurodollar Loans having such Interest Period must be an integral multiple of $500,000 and (y) no Conversion in whole or in part of Base Rate Loans to Eurodollar Loans and no Continuation in whole or in part of Eurodollar Loans shall be permitted at any time at which (1) an Event of Default shall be continuing and the Administrative Agent or the Required Lenders shall have determined in their sole discretion not to permit such Conversions or Continuations or (2) such Continuation or Conversion would be made during a suspension imposed by Section 2.17.

(b) Procedure . Each such election shall be made by giving the Administrative Agent at least 3 Business Days’ prior notice in substantially the form of Exhibit C (a “ Notice of Conversion or Continuation ”) duly completed. Administrative Agent shall promptly notify each Lender of its receipt of a Notice of Conversion or Continuation and of the options selected therein. If Administrative Agent does not receive a timely Notice of Conversion or Continuation from Borrower containing a permitted election to continue or convert any Eurodollar Loan, then, upon the expiration of the applicable Interest Period, such Loan shall be automatically converted to a Base Rate Loan. Each partial Conversion or Continuation shall be allocated ratably among the Lenders in the applicable Facility in accordance with their Applicable Revolver Percentage or Applicable Term Percentage, as applicable.

Section 2.4. Use of Proceeds . Borrower shall use the proceeds of the Loans to (i) partially repay the Existing Credit Agreement, (ii) repay certain payables and expenses that existed on or before the Petition Date, (iii) pay fees and expenses incurred pursuant to this Agreement and the transactions related thereto and occurring in connection therewith and (iv)

 

provide working capital for its operations and for other general business purposes. Borrower shall use all Letters of Credit for its general corporate purposes. In no event shall the funds from any Loan or any Letter of Credit be used directly or indirectly by any Person for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any “margin stock” (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock. Borrower represents and warrants that Borrower is not engaged principally, or as one of Borrower’s important activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock.

Section 2.5. Interest Rates and Fees; Payment Dates .

(a) Rate . All Loans and the outstanding amount of all other Obligations (other than pursuant to Lender Hedging Obligations) shall bear interest, in the case of Loans, on the unpaid principal amount thereof from the date such Loans are made and, in the case of such other Obligations, from the date such other Obligations are due and payable until, in all cases, paid in full, except as otherwise provided in clause (c) below, as follows: (i) in the case of Base Rate Loans, at a rate per annum equal to the sum of the Base Rate and the Base Rate Margin, each as in effect from time to time, (ii) in the case of Eurodollar Loans, at a rate per annum equal to the sum of the Eurodollar Rate and the Eurodollar Margin, each as in effect for the applicable Interest Period, and (iii) in the case of other Obligations, at a rate per annum equal to the sum of the Base Rate and the Base Rate Margin for Revolver Loans that are Base Rate Loans, each as in effect from time to time.

(b) Payments . Interest accrued shall be payable in arrears (i) if accrued on the principal amount of any Loan, (A) at maturity (whether by acceleration or otherwise), and (B)(1) if such Loan is a Base Rate Loan, on the last day of each calendar quarter commencing on the first such day following the making of such Loan, (2) if such Loan is a Eurodollar Loan, on the last day of each Interest Period applicable to such Loan and, if applicable and without duplication, on each date during such Interest Period occurring every 3 months from the first day of such Interest Period and (ii) if accrued on any other Obligation, on demand from any time after the time such Obligation is due and payable (whether by acceleration or otherwise).

(c) Default Interest . Notwithstanding the rates of interest specified in clause (a) above or elsewhere in any Loan Document, effective immediately upon (A) the occurrence of any Event of Default under Section 8.1(a), (b), (j)(i), (j)(ii), or (j)(iii), or (B) the delivery of a notice by the Administrative Agent or the Required Lenders to the Borrower during the continuance of any other Event of Default and, in each case, for as long as such Event of Default shall be continuing, the principal balance of all Obligations (including any Obligation that bears interest by reference to the rate applicable to any other Obligation) then due and payable shall bear interest at the Default Rate, payable on demand or, in the absence of demand, on the date that would otherwise be applicable.

(d) Unused Commitment Fee . Borrower agrees to pay to each Revolver Lender a commitment fee on the actual daily amount by which (i) such Revolver Lender’s Applicable Revolver Percentage of (A) the Borrowing Base then in effect less (B) the Total Term Outstandings at such time exceeds (ii) such Revolver Lender’s Applicable Revolver Percentage

 

of the Total Revolver Outstandings at such time from the date hereof through the Revolver Termination Date at a rate per annum equal to the Commitment Fee Rate, payable in arrears (x) on the last day of each calendar quarter and (y) on the Revolver Termination Date. Notwithstanding anything contained herein to the contrary, at any time that a Revolver Lender shall be a Defaulting Lender hereunder, such commitment fees shall cease to accrue for the benefit of any such Defaulting Lender.

(e) Letter of Credit Fees . Borrower agrees to pay the fees set forth in Section 2.14.

(f) Principal Payment Fees . Borrower will pay to Administrative Agent, for the account of each Lender, a prepayment fee on the principal amount of each prepayment of (i) Term Loans under Section 2.6 or Section 2.7 (other than the Monthly Term Repayment) which, in either case, results from the refinancing of such Term Loans and (ii) the Revolver Loans in connection with any reduction in the Borrowing Base, termination of any part of the Aggregate Revolver Commitments, or refinancing of such Revolver Loans, in each case if such prepayment occurs prior to the date that is six months prior to the Revolving Termination Date, equal to one percent (1.0%) of the principal amount so repaid.

(g) Additional Fees . In addition to all other amounts due to Administrative Agent under the Loan Documents (but without duplication), Borrower will pay fees to Administrative Agent as described in that certain letter agreement dated as of August 28, 2009 between Administrative Agent and Borrower.

(h) Payment Dates . On each Interest Payment Date relating to Base Rate Loans, Borrower shall pay to the Lenders all unpaid interest which has accrued on the Base Rate Loans to but not including such Interest Payment Date. On each Interest Payment Date relating to a Eurodollar Loan, Borrower shall pay to Lenders all unpaid interest which has accrued on such Eurodollar Loan to but not including such Interest Payment Date.

Section 2.6. Optional Prepayments . Borrower may, (a) upon one Business Days’ notice to Administrative Agent with respect to any Base Rate Loan and (b) upon three Business Days’ notice to Administrative Agent with respect to any Eurodollar Loan, from time to time, subject to Sections 2.5(f) and 3.2, prepay the Loans, in whole or in part, provided (i) that the aggregate amounts of all partial prepayments of principal on the Loans equals $500,000 or any higher integral multiple of $500,000, (ii) that Borrower does not make any prepayments which would reduce the unpaid principal balance of any Loan to less than $100,000 without first either (1) terminating this Agreement or (2) providing assurance satisfactory to Administrative Agent in its discretion that Lenders’ legal rights under the Loan Documents are in no way adversely affected by such reduction, and (iii) that if Borrower prepays any Eurodollar Loan on any day other than the last day of the Interest Period applicable thereto, it shall pay to Lenders any amounts due under Section 3.2. Each prepayment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal or interest prepaid pursuant to this section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such prepayment.

 

Section 2.7. Mandatory Prepayments

(a) Within one Business Day of the consummation by any Restricted Person of any Asset Disposition, the Borrower shall make a mandatory prepayment of the Loans in an amount, if any, required to eliminate any Borrowing Base Deficiency existing after giving effect to such Asset Disposition. Notwithstanding the foregoing, in the event a Default or Event of Default is in existence on the date of the consummation of any Asset Disposition, all Net Cash Proceeds from such Asset Disposition shall be applied as a mandatory prepayment of the Loans contemporaneously upon the consummation of any such Asset Disposition.

(b) Contemporaneously upon the issuance by any Restricted Person of any Additional Indebtedness, the Borrower shall make a mandatory prepayment of the Loans in an amount equal to the Net Cash Proceeds received from such issuance.

(c) If at any time the Total Outstandings exceeds the Maximum Credit Amount (whether due to a reduction in the Maximum Credit Amount in accordance with this Agreement, or otherwise), Borrower shall immediately upon demand prepay the principal of the Loans (and after all Loans are repaid in full, provide LC Collateral in accordance with Section 2.16(a)) in an amount at least equal to such excess.

(d) If at any time the Total Outstandings is less than the Maximum Credit Amount but in excess of the Borrowing Base (such excess being herein called a “ Borrowing Base Deficiency ”), Borrower shall:

(i) if such Borrowing Base Deficiency results from any sale, assignment or the other disposition of any Borrowing Base Property (without waiving the requirement of Required Lenders’ consent to any sale, assignment or other disposition in violation of any Loan Document), contemporaneously with the consummation of such disposition, deliver an aggregate amount at least equal to such Borrowing Base Deficiency to Administrative Agent for the prepayment of the principal of the Loans;

(ii) in all other instances, within ten (10) Business Days after Administrative Agent gives notice of the Borrowing Base Deficiency to Borrower, either:

A. give written notice to Administrative Agent electing to prepay the principal of the Loans (and, if the Total Outstandings exceeds the Borrowing Base after all Loans are repaid in full, provide LC Collateral in accordance with Section 2.16(a)) in an aggregate amount sufficient to eliminate such Borrowing Base Deficiency (or, if the Total Outstandings exceeds the Borrowing Base after the Loans have been paid in full, pay to LC Issuer LC Collateral as required under Section 2.16(a)), such prepayment to be made in full on or before the thirtieth (30th) day after delivery of such notice to Administrative Agent from Borrower;

B. give written notice to Administrative Agent electing to prepay the principal of the Loans (and after all Loans are repaid in full, provide LC Collateral in accordance with Section 2.16(a)) in two installments in an aggregate amount at least equal to such Borrowing Base Deficiency, with the first such installment equal to or in excess of one-half of such Borrowing Base Deficiency, and with the first such installment to be paid within sixty (60) days after the

 

giving of such notice by Administrative Agent to Borrower of such Borrowing Base Deficiency and the second installment to be in an aggregate amount sufficient to eliminate such Borrowing Base Deficiency in full and to be due and payable within 120 days after the giving of such notice by Administrative Agent to Borrower; provided, however, Borrower shall have demonstrated to the satisfaction of Administrative Agent on or before the date of the first such payment that Borrower has sufficient available cash from its Projected Oil and Gas Production to make such payments;

C. give written notice to Administrative Agent that Borrower desires to provide (or cause to be provided by other current or future Restricted Persons) Administrative Agent with deeds of trust, mortgages, chattel mortgages, security agreements, financing statements and other security documents in form and substance similar to the Security Documents previously delivered to Administrative Agent (with any changes required to conform to changes in Law or changes in the type of Collateral covered thereby), and otherwise satisfactory to Administrative Agent, granting, confirming, and perfecting first and prior liens or security interests in Collateral acceptable to Required Lenders subject to no liens other than Permitted Liens, to the extent needed to allow Required Lenders to increase the Borrowing Base (as they in their reasonable discretion deem consistent with prudent oil and gas banking industry lending standards at the time) to an amount which eliminates such Borrowing Base Deficiency, and such Security Documents shall be executed and delivered to Administrative Agent within thirty (30) days after Administrative Agent confirms to Borrower what Collateral shall be required. If, prior to any such specification by Administrative Agent, Required Lenders determine that the giving of such Security Documents will not serve to eliminate such Borrowing Base Deficiency, then, within five Business Days after receiving notice of such determination from Administrative Agent, Borrower will elect to make, and thereafter make, the prepayments specified in either of the preceding subsections (A) or (B) of this subsection (b)(ii); or

D. eliminate such Borrowing Base Deficiency through a combination of prepayments of the Loans or submission of additional Collateral as set forth in clauses (A) and (C) above in this subsection (d)(ii).

(e) Beginning on the date that is one calendar month after the Closing Date and on the same date of each month thereafter until, but excluding, the Term Maturity Date, Borrower shall repay the Term Loans in a principal amount of $2,083,333.33 (the “ Monthly Term Repayment ”), and on the Term Maturity Date, Borrower shall repay the remaining outstanding principal amount of the Term Loans.

(f) Each prepayment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal or interest prepaid pursuant to this section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such prepayment. All mandatory prepayments under subsections (a) through (d) of this Section 2.7 shall be applied as provided in Section 3.1(f).

 

Section 2.8. Initial Borrowing Base . During the period from the date hereof to the first Determination Date the Borrowing Base shall be $70,000,000.

Section 2.9. Subsequent Determinations of Borrowing Base .

(a) (i) By December 1, 2009 and (ii) April 1 and October 1 of each year beginning April 1, 2010, Borrower shall furnish to each Lender all information, reports and data which Administrative Agent has then requested concerning Restricted Persons’ businesses and properties (including their Oil and Gas Properties and interests and the reserves and production relating thereto), together with, as applicable, the Engineering Report as of December 31 of the immediately preceding year described in Section 6.2(f) or as of June 30 of such year described in Section 6.2(g); provided, however, that the information provided by Borrower in connection with the December 1, 2009 determination of the Borrowing Base shall relate to Restricted Persons’ businesses and properties as of October 1, 2009. Within thirty days after receiving such information, reports and data, or as promptly thereafter as practicable, Administrative Agent shall determine the amount of a proposed Borrowing Base; and Administrative Agent shall then deliver to each Lender such proposed Borrowing Base. Within fifteen days after the Lenders’ receipt of such proposed Borrowing Base, or as promptly thereafter as practicable, Required Lenders shall agree on an amount for the Borrowing Base (provided that all Lenders must agree on any increase in the Borrowing Base), which need not be equal to such proposed Borrowing Base. Required Lenders shall determine the amount of the Borrowing Base based upon the loan collateral value which they in their discretion assign to the Present Value of the various Oil and Gas Properties of Restricted Persons that will constitute Borrowing Base Properties at the time in question and based upon such other credit factors (including without limitation the assets, liabilities, cash flow, hedged and unhedged exposure to price, foreign exchange rate, and interest rate changes, business, properties, prospects, management and ownership of Restricted Persons) as they in their discretion deem significant. If Required Lenders (or all Lenders in the case of an increase in the Borrowing Base) have not approved the Borrowing Base within the fifteen day period after their receipt of such proposed Borrowing Base, Administrative Agent shall poll Lenders to ascertain the highest Borrowing Base then acceptable to a number of Lenders sufficient to constitute Required Lenders (or all Lenders in the case of an increase in the Borrowing Base) and such amount shall then become the Borrowing Base. Administrative Agent shall by notice to Borrower designate such amount as the new Borrowing Base available to Borrower hereunder, which designation shall take effect immediately on the date such notice is sent (herein called a “ Determination Date ”) and shall remain in effect until but not including the next date as of which the Borrowing Base is redetermined. I T IS EXPRESSLY UNDERSTOOD THAT L ENDERS AND A DMINISTRATIVE A GENT HAVE NO OBLIGATION TO AGREE UPON OR DESIGNATE THE B ORROWING B ASE AT ANY PARTICULAR AMOUNT , WHETHER IN RELATION TO THE M AXIMUM C REDIT A MOUNT OR OTHERWISE , AND THAT L ENDERS ’ COMMITMENTS TO ADVANCE FUNDS HEREUNDER IS DETERMINED BY REFERENCE TO THE B ORROWING B ASE FROM TIME TO TIME IN EFFECT , WHICH B ORROWING B ASE SHALL BE USED FOR CALCULATING COMMITMENT FEES UNDER S ECTION  2.5 AND , TO THE EXTENT PERMITTED BY L AW AND REGULATORY AUTHORITIES , FOR THE PURPOSES OF CAPITAL ADEQUACY DETERMINATION AND REIMBURSEMENTS UNDER S ECTION 3.2.

 

(b) If Borrower does not furnish all such information, reports and data by the date specified in the first sentence of subsection (a) of this section, Administrative Agent may nonetheless determine the Borrowing Base at any amount that Required Lenders determine and may redetermine the Borrowing Base from time to time thereafter (provided that all Lenders must agree to any increase in the Borrowing Base) until each Lender receives all such information, reports and data, whereupon Required Lenders (or all Lenders, as applicable) shall designate a new Borrowing Base as described above.

(c) In addition to the redeterminations of the Borrowing Base pursuant to subsections (a) and (b) of this section, Borrower and Administrative Agent (or Administrative Agent at the request of Required Lenders) may each request additional determinations (“ Special Determinations ”) of the Borrowing Base from time to time; provided, that Administrative Agent (or Administrative Agent at the request of Required Lenders) may not request more than two (2) Special Determinations in any calendar year and Borrower may not request more than one (1) Special Determination in any calendar year. In the event Administrative Agent (or Administrative Agent at the request of Required Lenders) requests such a Special Determination, Administrative Agent shall promptly deliver notice of such request to Borrower and Borrower shall, within thirty (30) days following the date of such request, deliver to Lenders an Engineering Report prepared by Staff Engineers and, within sixty (60) days following the date of such request, audited by Independent Engineers (or, at Borrower’s option, prepared by Independent Engineers) as of the last day of the calendar month preceding the date of such request and such other information which Administrative Agent shall have requested. In the event Borrower requests a Special Determination, Borrower shall deliver written notice of such request to Lenders which shall include (i) an Engineering Report prepared by Staff Engineers as of a date not more than thirty (30) days prior to the date of such request (or, in the case of a request made on the 31 ^st day of any calendar month, thirty-one (31) days), (ii) the amount of the Borrowing Base requested by Borrower and to become effective on the Determination Date applicable to such Special Determination and (iii) such other information which Administrative Agent shall have requested. Upon receipt of such Engineering Report and other information, Administrative Agent shall, subject to approval of Required Lenders, or all Lenders in the event of a proposed increase in the Borrowing Base, redetermine the Borrowing Base in accordance with the procedure set forth in subsection (a) of this section, which Borrowing Base shall become effective on the Determination Date (or as soon thereafter as Administrative Agent and Required Lenders, or all Lenders in the event of a proposed increase in the Borrowing Base, approve such Borrowing Base and provide notice thereof to Borrower).

(d) The Borrowing Base shall reduce simultaneously with the completion by any Restricted Person of any Asset Disposition (other than Asset Dispositions permitted by Section 7.5) by the lesser of (i) the Borrowing Base value (which shall be the Borrowing Base value assigned thereto by the Administrative Agent and approved by the Required Lenders in the most recent Redetermination and provided to Borrower and the Lenders in the notice made on each Determination Date) of the Borrowing Base Properties or Hedging Contracts, if any, which are subject to such Asset Disposition, and (ii) the Net Cash Proceeds received by any Restricted Person from such Asset Disposition.

 

(e) The Borrowing Base shall reduce simultaneously with the issuance by any Restricted Person of any Additional Indebtedness in an amount equal to the Net Cash Proceeds received by such Restricted Person from such issuance.

(f) On any day when Borrower makes any optional or mandatory prepayment of a Term Loan for any reason, the Borrowing Base then in effect shall be reduced by an amount equal to the principal amount of such prepayment made on such day.

Section 2.10. Borrower’s Reduction of Borrowing Base . Until the termination of the Commitment Period, Borrower may, at any time, reduce the Borrowing Base from the amount designated by Administrative Agent to any lesser amount. To exercise such option, Borrower must send notice to Administrative Agent of the amount of the Borrowing Base chosen by Borrower. Any choice by Borrower of a Borrowing Base shall be effective as of the fifth Business Day following Administrative Agent’s receipt of Borrower’s notice and shall continue in effect until the next date as of which the Borrowing Base is redetermined.

Section 2.11. Letters of Credit . Subject to the terms and conditions hereof, Borrower may at any time during the Commitment Period request LC Issuer to issue, increase the amount of or otherwise amend or extend, one or more Letters of Credit, provided that, after taking such Letter of Credit into account:

(a) (i) the Total Outstandings do not exceed the Borrowing Base at such time and (ii) the Total Revolver Outstandings do not exceed the Aggregate Revolver Commitments at such time;

(b) the aggregate amount of LC Obligations at such time does not exceed the LC Sublimit;

(c) the expiration date of such Letter of Credit (as extended, if applicable) is prior to the Letter of Credit Termination Date;

(d) such Letter of Credit is to be used for general business purposes of Borrower or a Restricted Person;

(e) such Letter of Credit is not directly or indirectly used to assure payment of or otherwise support any Indebtedness of any Person other than Indebtedness of any Restricted Person to the extent such Indebtedness relates to the Borrowing Base Properties;

(f) the issuance of such Letter of Credit will be in compliance with all applicable governmental restrictions, policies, and guidelines and will not subject LC Issuer to any cost which is not reimbursable under Article III;

(g) the form and terms of such Letter of Credit are acceptable to LC Issuer in its sole and absolute discretion; and

(h) all other conditions in this Agreement to the issuance of such Letter of Credit have been satisfied.

 

LC Issuer will honor any such request if the foregoing conditions (a) through (h) (the “ LC Conditions ”) have been met as of the date of issuance of such Letter of Credit. LC Issuer may choose to honor any such request for any other Letter of Credit but has no obligation to do so and may refuse to issue any other requested Letter of Credit for any reason which LC Issuer in its sole discretion deems relevant. Borrower may also at any time during the Commitment Period request that LC Issuer extend the expiration date of an existing Letter of Credit or modify an existing Letter of Credit (other than increase or extension) and LC Issuer will honor such request if the LC Conditions are met and no Default exists at the time of such request; provided that in the case of any such modification (other than an increase or extension), LC issuer shall have approved such modification.

Section 2.12. Requesting Letters of Credit .

(a) Borrower must make written application for any Letter of Credit or amendment or extension of any Letter of Credit at least five (5) Business Days (or such shorter period as LC Issuer may in its discretion from time to time agree) before the date on which Borrower desires for LC Issuer to issue such Letter of Credit. By making any such written application, unless otherwise expressly stated therein, Borrower shall be deemed to have represented and warranted that the LC Conditions described in Section 2.11 will be met as of the date of issuance of such Letter of Credit. Each such written application for a Letter of Credit must be made in writing in the form customarily used by LC Issuer, the terms and provisions of which are hereby incorporated herein by reference (or in such other form as may mutually be agreed upon by LC Issuer and Borrower).

(b) If Borrower so requests in any applicable LC Application, the LC Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “ Auto-Extension Letter of Credit ”); provided that any such Auto-Extension Letter of Credit must permit the LC Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “ Non-Extension Notice Date ”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the LC Issuer, Borrower shall not be required to make a specific request to the LC Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, Revolver Lenders shall be deemed to have authorized (but may not require) LC Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Termination Date; provided , however , that LC Issuer shall not permit any such extension if (A) LC Issuer has determined that it would not be permitted, or would have no obligation at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of Section 2.11 or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five (5) Business Days before the Non-Extension Notice Date (1) from Administrative Agent that Required Lenders have elected not to permit such extension or (2) from Administrative Agent, any Lender or Borrower that one or more of the applicable conditions specified in Section 4.2 is not then satisfied, and in each such case directing the LC Issuer not to permit such extension.

(c) Two (2) Business Days after the LC Conditions for a Letter of Credit have been met as described in Section 2.11 (or if LC Issuer otherwise desires to issue such Letter of Credit

 

earlier), LC Issuer will issue such Letter of Credit at LC Issuer’s office. If any provisions of any LC Application conflict with any provisions of this Agreement, the provisions of this Agreement shall govern and control. Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with Borrower’s instructions or other irregularity, Borrower will immediately notify LC Issuer.

Section 2.13. Reimbursement and Participations .

(a) Reimbursement by Borrower . Each Matured LC Obligation shall constitute a loan by LC Issuer to Borrower. Borrower promises to pay to LC Issuer, or to LC Issuer’s order, on demand, the full amount of each Matured LC Obligation, together with interest thereon (i) at the rate applicable to Base Rate Loans to and including the first Business Day after such demand is made by LC Issuer and (ii) at the Default Rate applicable to Base Rate Loans on each day thereafter. The obligation of Borrower to reimburse LC Issuer for each Matured LC Obligation shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement (including any LC Application) under all circumstances, including the following: (i) any lack of validity or enforceability of such Letter of Credit or any other agreement or instrument relating thereto; (ii) the existence of any claim, counterclaim, set-off, defense or other right that Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), LC Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit; (iv) any payment by LC Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. Without limiting the generality of the foregoing, it is expressly agreed that the absolute and unconditional nature of Borrower’s obligations under this section to reimburse LC Issuer for each drawing under a Letter of Credit will not be excused by the gross negligence or willful misconduct of LC Issuer. However, the foregoing shall not be construed to excuse LC Issuer from liability to Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by Borrower to the extent permitted by applicable Law) suffered by Borrower that are caused by LC Issuer’s gross negligence or willful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.

(b) Letter of Credit Advances . If the beneficiary of any Letter of Credit makes a draft or other demand for payment thereunder then Borrower may, during the interval between the making thereof and the honoring thereof by LC Issuer, request Revolver Lenders to make Revolvers Loans to Borrower in the amount of such draft or demand, which Revolver Loans shall be made concurrently with LC Issuer’s payment of such draft or demand and shall be immediately used by LC Issuer to repay the amount of the resulting Matured LC Obligation. Such a request by Borrower shall be made in compliance with all of the provisions hereof, provided that for the purposes of the first sentence of Section 2.1(a), the amount of such Revolver Loans shall be considered, but the amount of the Matured LC Obligation to be concurrently paid by such Revolver Loans shall not be considered.

 

(c) Participation by Lenders . LC Issuer irrevocably agrees to grant and hereby grants to each Revolver Lender, and — to induce LC Issuer to issue Letters of Credit hereunder — each Revolver Lender irrevocably agrees to accept and purchase and hereby accepts and purchases from LC Issuer, on the terms and conditions hereinafter stated and for such Revolver Lender’s own account and risk, an undivided interest equal to such Revolver Lender’s Applicable Revolver Percentage of LC Issuer’s obligations and rights under each Letter of Credit issued hereunder and the amount of each Matured LC Obligation paid by LC Issuer thereunder. Each Revolver Lender unconditionally and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid under any Letter of Credit for which LC Issuer is not reimbursed in full by Borrower in accordance with the terms of this Agreement and the related LC Application (including any reimbursement by means of concurrent Loans or by the application of LC Collateral), such Revolver Lender shall (in all circumstances and without set-off or counterclaim) pay to LC Issuer on demand, in immediately available funds at LC Issuer’s address for notices hereunder, such Revolver Lender’s Applicable Revolver Percentage of such Matured LC Obligation (or any portion thereof which has not been reimbursed by Borrower). Each Revolver Lender’s obligation to pay LC Issuer pursuant to the terms of this subsection is irrevocable and unconditional. If any amount required to be paid by any Revolver Lender to LC Issuer pursuant to this subsection is paid by such Revolver Lender to LC Issuer within three (3) Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover from such Revolver Lender, on demand, interest thereon calculated from such due date at the Federal Funds Rate. If any amount required to be paid by any Revolver Lender to LC Issuer pursuant to this subsection is not paid by such Lender to LC Issuer within three (3) Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover from such Revolver Lender, on demand, interest thereon calculated from such due date at the Default Rate applicable to Base Rate Loans.

(d) Distributions to Participants . Whenever LC Issuer has in accordance with this section received from any Revolver Lender payment of such Revolver Lender’s Applicable Revolver Percentage of any Matured LC Obligation, if LC Issuer thereafter receives any payment of such Matured LC Obligation or any payment of interest thereon (whether directly from Borrower or by application of LC Collateral or otherwise, and excluding only interest for any period prior to LC Issuer’s demand that such Revolver Lender make such payment of its Applicable Revolver Percentage), LC Issuer will distribute to such Revolver Lender its Applicable Revolver Percentage of the amounts so received by LC Issuer; provided, however, that if any such payment received by LC Issuer must thereafter be returned by LC Issuer, such Revolver Lender shall return to LC Issuer the portion thereof which LC Issuer has previously distributed to it.

(e) Calculations . A written advice setting forth in reasonable detail the amounts owing under this section, submitted by LC Issuer to Borrower or any Revolver Lender from time to time, shall be conclusive, absent manifest error, as to the amounts thereof.

Section 2.14. Letter of Credit Fees . In consideration of LC Issuer’s issuance of any Letter of Credit, Borrower agrees to pay (a) to Administrative Agent, for the account of all

 

Revolver Lenders in accordance with their respective Applicable Revolver Percentage, a letter of credit issuance fee at a rate equal to the Letter of Credit Fee Rate then in effect (which shall be increased by two percent (2%) per annum during any period in which interest on the Loans accrues at the Default Rate), and (b) to such LC Issuer for its own account, a letter of credit fronting fee at a rate equal to one-quarter percent (.250%) per annum times the face amount of such Letter of Credit (but in no event less than $500 per annum). In addition, Borrower will pay to LC Issuer the LC Issuer’s customary fees for issuance, amendment and drawing of each Letter of Credit. The letter of credit fee and the letter of credit fronting fee will be calculated on the undrawn face amount of each Letter of Credit outstanding on each day at the above-applicable rates and will be due and payable in arrears on the last day of each Fiscal Quarter and at the end of the Commitment Period.

Section 2.15. No Duty to Inquire .

(a) Drafts and Demands . LC Issuer is authorized and instructed to accept and pay drafts and demands for payment under any Letter of Credit without requiring, and without responsibility for, any determination as to the existence of any event giving rise to said draft, either at the time of acceptance or payment or thereafter. LC Issuer is under no duty to determine the proper identity of anyone presenting such a draft or making such a demand (whether by tested telex or otherwise) as the officer, representative or agent of any beneficiary under any Letter of Credit, and payment by LC Issuer to any such beneficiary when requested by any such purported officer, representative or agent is hereby authorized and approved. Borrower releases each Lender Party from, and agrees to hold each Lender Party harmless and indemnified against, any liability or claim in connection with or arising out of the subject matter of this section, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by any Lender Party, provided only that no Lender Party shall be released from or entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by or results from its own individual gross negligence or willful misconduct, as determined in a final judgment.

(b) Extension of Maturity . If the maturity of any Letter of Credit is extended by its terms or by Law or governmental action, if any extension of the maturity or time for presentation of drafts or any other modification of the terms of any Letter of Credit is made at the request of any Restricted Person, or if the amount of any Letter of Credit is increased at the request of any Restricted Person, this Agreement shall be binding upon all Restricted Persons with respect to such Letter of Credit as so extended, increased or otherwise modified, with respect to drafts and property covered thereby, and with respect to any action taken by LC Issuer, LC Issuer’s correspondents, or any Lender Party in accordance with such extension, increase or other modification.

(c) Transferees of Letters of Credit . If any Letter of Credit provides that it is transferable, LC Issuer shall have no duty to determine the proper identity of anyone appearing as transferee of such Letter of Credit, nor shall LC Issuer be charged with responsibility of any nature or character for the validity or correctness of any transfer or successive transfers, and payment by LC Issuer to any purported transferee or transferees as determined by LC Issuer is hereby authorized and approved, and Borrower releases each Lender Party from, and agrees to

 

hold each Lender Party harmless and indemnified against, any liability or claim in connection with or arising out of the foregoing, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by any Lender Party, provided only that no Lender Party shall be released from or entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by or results from its own individual gross negligence or willful misconduct, as determined in a final judgment.

Section 2.16. LC Collateral .

(a) LC Obligations in Excess of Borrowing Base . If, after the making of all mandatory prepayments required under Section 2.7, the outstanding LC Obligations will exceed the Borrowing Base, then in addition to prepayment of the entire principal balance of the Loans required under Section 2.7 Borrower will immediately pay to LC Issuer an amount equal to such excess. LC Issuer will hold such amount as security for the remaining LC Obligations (all such amounts held as security for LC Obligations being herein collectively called “ LC Collateral ”) and the other Secured Obligations, and such Collateral may be applied from time to time to any Matured LC Obligations or other Secured Obligations which are due and payable. Neither this subsection nor the following subsection shall, however, limit or impair any rights which LC Issuer may have under any other document or agreement relating to any Letter of Credit, LC Collateral or LC Obligation, including any LC Application, or any rights which any Lender Party may have to otherwise apply any payments by Borrower and any LC Collateral under Section 3.1.

(b) Acceleration of LC Obligations . If the Secured Obligations or any part thereof become immediately due and payable pursuant to Section 8.1 then, unless Required Lenders otherwise specifically elect to the contrary (which election may thereafter be retracted by Required Lenders at any time), all LC Obligations shall become immediately due and payable without regard to whether or not actual drawings or payments on the Letters of Credit have occurred, and Borrower shall be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC Obligations which are then outstanding, which amount shall be held by LC Issuer as LC Collateral securing the remaining LC Obligations and the other Secured Obligations, and such LC Collateral may be applied from time to time to any Matured LC Obligations or any other Secured Obligations which are due and payable.

(c) Investment of LC Collateral . Pending application thereof, all LC Collateral shall be invested by LC Issuer in such Cash Equivalents as LC Issuer may choose in its sole discretion. All interest on (and other proceeds of) such Cash Equivalents (other than Investments) shall be reinvested or applied to Matured LC Obligations or other Secured Obligations which are due and payable. When all Secured Obligations have been satisfied in full, including all LC Obligations, all Letters of Credit have expired or been terminated, and all of Borrower’s reimbursement obligations in connection therewith have been satisfied in full, LC Issuer shall release any remaining LC Collateral. Borrower hereby assigns and grants to LC Issuer a continuing security interest in all LC Collateral paid by it to LC Issuer, all Investments purchased with such LC Collateral, and all proceeds thereof to secure its Matured LC Obligations and its Secured Obligations under this Agreement, each Note, and the other Loan Documents, and Borrower agrees that such LC Collateral, Investments and proceeds shall be

 

subject to all of the terms and conditions of the Security Documents. Borrower further agrees that LC Issuer shall have all of the rights and remedies of a secured party under the Uniform Commercial Code as adopted in the State of New York with respect to such security interest and that an Event of Default under this Agreement shall constitute a default for purposes of such security interest.

(d) Payment of LC Collateral . When Borrower is required to provide LC Collateral for any reason and fails to do so on the day when required, LC Issuer or Administrative Agent may without prior notice to Borrower or any other Restricted Person provide such LC Collateral (whether by application of proceeds of other Collateral, by transfers from other accounts maintained with LC Issuer, or otherwise) using any available funds of Borrower or any other Person also liable to make such payments, and LC Issuer or Administrative Agent will give notice thereof to Borrower or such other Person, as the case may be, promptly after such application or transfer; provided , however, the failure to give such notice shall not affect the validity of such application or transfer. Any such amounts which are required to be provided as LC Collateral and which are not provided on the date required shall, for purposes of each Security Document, be considered past due Secured Obligations owing hereunder, and LC Issuer is hereby authorized to exercise its respective rights under each Security Document to obtain such amounts.

Section 2.17. Suspension of Eurodollar Rate Option . Notwithstanding any provision to the contrary in this Article II, the following shall apply:

(a) Interest Rate Inadequate or Unfair . In the event that the Required Lenders notify Administrative Agent that the Eurodollar Rate for any Interest Period will not adequately reflect the cost to the Lenders of making or maintaining such Loans for such Interest Period, Administrative Agent shall promptly so notify Borrower and the Lenders, whereupon the obligation of each Lender to make or to continue Eurodollar Loans shall be suspended as provided in clause (c)  below until the Administrative Agent shall notify Borrower that the Required Lenders have determined that the circumstances causing such suspension no longer exist.

(b) Illegality . If any Lender determines that the introduction of, or any change in or in the interpretation of, any Requirement of Law after the date of this Agreement shall make it unlawful, or any Governmental Authority shall assert that it is unlawful, for any Lender or its Applicable Lending Office to make Eurodollar Loans or to continue to fund or maintain Eurodollar Loans, then, on notice thereof and demand therefor by such Lender to Borrower through Administrative Agent, the obligation of such Lender to make or to continue Eurodollar Loans shall be suspended as provided in clause (c)  below until such Lender shall, through the Administrative Agent, notify Borrower that it has determined that it may lawfully make Eurodollar Loans.

(c) Effect of Suspension . If the obligation of any Lender to make or to continue Eurodollar Loans is suspended, (A) the obligation of such Lender to convert Base Rate Loans into Eurodollar Loans shall be suspended, (B) such Lender shall make a Base Rate Loan at any time such Lender would otherwise be obligated to make a Eurodollar Loan, (C) Borrower may revoke any pending Notice of Borrowing or Notice of Conversion or Continuation to make or

 

continue any Eurodollar Loan or to convert any Base Rate Loan into a Eurodollar Loan and (D) each Eurodollar Loan of such Lender shall automatically and immediately (or, in the case of any suspension pursuant to clause (a)  above, on the last day of the current Interest Period thereof) be converted into a Base Rate Loan; provided, that, notwithstanding the foregoing to the contrary, Borrower shall not be required to pay any costs described in Section 3.2 in connection with any such mandatory Conversion.

Section 2.18. Obligations of Lenders Several . The obligations of Lenders hereunder to make Loans, to fund participations in Letters of Credit and to make payments pursuant to Section 2.2 are several and not joint. The failure of any Lender to make any Loan; to fund any such participation or to make any payment under Section 10.4(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loans, to purchase its participation, or to make its payment under Section 10.4(c).

ARTICLE III— Payments to Lenders

Section 3.1. General Procedures

(a) Procedure . Borrower shall make each payment under any Loan Document not later than 12:00 p.m. (noon), New York City time, on the day when due to Administrative Agent by wire transfer to the following account (or at such other account or by such other means to such other address as Administrative Agent shall have notified Borrower in writing within a reasonable time prior to such payment) in immediately available Dollars and without setoff or counterclaim:

Bank Name: Deutsche Bank Trust Company America

Bank Address: 60 Wall Street, 28th, New York, NY 10005

ABA: 021001033

Account Name: GECC EFS/T&I Depository Account

Account Number: 50278772

Ref: EF25232 - Energy Partners, Ltd

Administrative Agent shall promptly thereafter cause to be distributed immediately available funds relating to the payment of principal, interest or fees to the Lenders, in accordance with the application of payments set forth in this Section. The Lenders shall make any payment under any Loan Document in immediately available Dollars and without setoff or counterclaim. Each Revolver Lender shall make each payment for the account of any LC Issuer (A) if the notice or demand therefor was received by such Revolver Lender prior to 12:00 p.m. (noon), New York City time, on any Business Day, on the next Business Day and (B) otherwise, on the next Business Day following such receipt. Payments received by the Administrative Agent after 12:00 p.m. (noon), New York City time, shall be deemed to be received on the next Business Day.

(b) Computations of Interests and Fees . All computations of interest and of fees shall be made by Administrative Agent on the basis of a year of 360 days (or, in the case of Base Rate

 

Loans whose interest rate is calculated based on the rate set forth in clause (a)  of the definition of “Base Rate”, 365/366 days), in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest and fees are payable. Each determination of an interest rate or the amount of a fee hereunder shall be made by Administrative Agent (including determinations of a Eurodollar Rate or Base Rate in accordance with the definitions of “Eurodollar Rate” and “Base Rate”, respectively) and shall be conclusive, binding and final for all purposes, absent manifest error.

(c) Payment Dates . Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, the due date for such payment shall be extended to the next succeeding Business Day without any increase in such payment as a result of additional interest or fees; provided , however , that such interest and fees shall continue accruing as a result of such extension of time.

(d) Advancing Payments . Unless Administrative Agent shall have received notice from Borrower to the Lenders prior to the date on which any payment is due hereunder that Borrower will not make such payment in full, Administrative Agent may assume that the Borrower has made such payment in full to Administrative Agent on such date and Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that Borrower shall not have made such payment in full to Administrative Agent, each Lender shall repay to Administrative Agent on demand such amount distributed to such Lender together with interest thereon (at the Federal Funds Rate for the first Business Day and thereafter, at the rate applicable to Base Rate Loans under the applicable Facility) for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent.

(e) Application of Optional Prepayments . Unless otherwise provided in this Section or elsewhere in any Loan Document, all payments and any other amounts received by Administrative Agent from or for the benefit of Borrower shall be applied to repay the Obligations the Borrower designates; provided that all prepayments of Term Loans shall be applied in inverse order of maturity.

(f) Application of Mandatory Prepayments . Subject to the provisions of clause (g) below with respect to the application of payments during the continuance of an Event of Default, any payment made by Borrower to Administrative Agent pursuant to clauses (a) through (d) of Section 2.7 or any other prepayment of the Obligations required to be applied in accordance with this clause (f) shall be applied first, to repay the outstanding principal balance of the Term Loans, in inverse order of maturity, then to the outstanding principal balance of the Revolver Loans, second, to provide cash collateral to the extent and in the manner in Section 2.16 and, then, any excess shall be retained by the Borrower.

(g) Application of Payments During an Event of Default . Borrower hereby irrevocably waives, and agrees to cause each Restricted Person to waive, the right to direct the application during the continuance of an Event of Default of any and all payments in respect of any Secured Obligation and any proceeds of Collateral and agrees that, notwithstanding the provisions of clause (e) above, Administrative Agent may, and, upon either (A) the direction of

 

the Required Lenders or (B) the termination of the Revolver Commitment or the acceleration of any Obligation pursuant to Section 8.2, shall, apply all payments in respect of any Secured Obligation and all other proceeds of Collateral (i) first, to pay Secured Obligations in respect of any cost or expense reimbursements, fees or indemnities then due to Administrative Agent, (ii) second, to pay Secured Obligations in respect of any cost or expense reimbursements, fees or indemnities then due to the Lenders and the LC Issuer, (iii) third, to pay interest then due and payable in respect of the Loans and LC Obligations, (iv) fourth, to repay the outstanding principal amounts of the Term Loans, in inverse order of maturity, then to the outstanding principal balance of the Revolver Loans and LC Obligations, to provide cash collateral for Letters of Credit in the manner and to the extent described in Section 2.16 and to pay amounts owing with respect to Lender Hedging Obligations and (v) fifth, to the ratable payment of all other Secured Obligations.

(h) Application of Payments Generally . All payments that would otherwise be allocated to the Lenders pursuant to this Section shall instead be allocated first, to repay interest on any portion of the Loans that Administrative Agent may have advanced on behalf of any Lender and on any LC Obligation, in each case for which Administrative Agent or, as the case may be, the LC Issuer has not then been reimbursed by such Lender or Borrower, second to pay the outstanding principal amount of the foregoing obligations and third, to repay the outstanding principal balance of the Term Loans, in inverse order of maturity, then to the outstanding principal balance of the Revolver Loans. All repayments of any Loans shall be applied first, to repay such Loans outstanding as Base Rate Loans and then, to repay such Loans outstanding as Eurodollar Loans, with those Eurodollar Loans having earlier expiring Interest Periods being repaid prior to those having later expiring Interest Periods. If sufficient amounts are not available to repay all outstanding Secured Obligations described in any priority level set forth in this Section, the available amounts shall be applied, unless otherwise expressly specified herein, to such Secured Obligations ratably based on the p