10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:  000-51719

LINN ENERGY, LLC

(Exact name of registrant as specified in its charter)

Delaware	65-1177591
(State or other jurisdiction of  incorporation or organization)	(I.R.S. Employer Identification No.)
600 Travis Street, Suite 5100
Houston, Texas	77002
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code

(281) 840-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Units Representing Limited Liability Company Interests	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes         x           No           o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes         o            No           x

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.              Yes         x           No           o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.           o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x     Accelerated filer  o     Non-accelerated filer  o     Smaller Reporting Company  o

Indicate by check-mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes         o            No           x

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $1,974,449,832 on June 29, 2007, based on $32.91 per unit, the last reported sales price of the units on The NASDAQ Global Market on such date.

As of January 31, 2008, there were 114,632,034 units outstanding.

Documents Incorporated By Reference:

Certain information called for in Items 10, 11, 12, 13 and 14 of Part III are incorporated by reference from the registrant’s definitive proxy statement for the annual meeting of unitholders to be held on May 29, 2008.

TABLE OF CONTENTS

		Page
	Glossary of Terms	ii
	Part I
Item 1.	Business and Properties	1
Item 1A.	Risk Factors	17
Item 1B.	Unresolved Staff Comments	26
Item 2.	Properties	27
Item 3.	Legal Proceedings	27
Item 4.	Submission of Matters to a Vote of Security Holders	27
	Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Selected Financial Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 8.	Financial Statements and Supplementary Data	52
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	91
Item 9A.	Controls and Procedures	91
Item 9B.	Other Information	91
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance	92
Item 11.	Executive Compensation	92
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	92
Item 13.	Certain Relationships and Related Transactions, and Director Independence	92
Item 14.	Principal Accounting Fees and Services	92
	Part IV
Item 15.	Exhibits and Financial Statement Schedules	93
	Signatures	94

i

GLOSSARY OF TERMS

As commonly used in the oil and gas industry and as used in this Annual Report on Form 10-K, the following terms have the following meanings:

ARO.  Asset retirement obligation.

Bbl.  One stock tank barrel or 42 United States gallons liquid volume.

Bcf.  One billion cubic feet.

Bcfe.  One billion cubic feet equivalent, determined using a ratio of six Mcf of gas to one Bbl of oil, condensate or natural gas liquids.

Btu.  One British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

Development well.  A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.

Dth.  One decatherm, equivalent to one million British thermal units.

Developed acres.  Acres spaced or assigned to productive wells.

Dry hole or well.  A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production would exceed production expenses and taxes.

Field.  An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.

FERC.  Federal Energy Regulatory Commission.

Gross acres or gross wells.  The total acres or wells, as the case may be, in which a working interest is owned.

LIBOR.  London Interbank Offered Rate.

MBbls.  One thousand barrels of oil or other liquid hydrocarbons.

Mcf.  One thousand cubic feet.

Mcfe.  One thousand cubic feet equivalent, determined using the ratio of six Mcf of gas to one Bbl of oil, condensate or natural gas liquids.

MMBbls.  One million barrels of oil or other liquid hydrocarbons.

MMboe.  One million barrels of oil equivalent determined using a ratio of six Mcf of gas to one Bbl of oil, condensate or natural gas liquids.

MMBtu.  One million British thermal units.

MMcf.  One million cubic feet.

MMcfe.  One million cubic feet equivalent, determined using a ratio of six Mcf of gas to one Bbl of oil, condensate or natural gas liquids.

MMcfe/d.  One MMcfe per day.

MMMBtu.  One billion British thermal units.

Net acres or net wells.  The sum of the fractional working interests owned in gross acres or gross wells, as the case may be.

NGL.  Natural gas liquids, which are the hydrocarbon liquids contained within gas.

NYMEX.  The New York Mercantile Exchange.

Oil.  Crude oil, condensate and natural gas liquids.

PEPL.  Panhandle Eastern Pipeline.

ii

Productive well.  A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceeds production expenses and taxes.

Proved developed reserves.  Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.  Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery are included in “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.

Proved reserves.  Proved oil and gas reserves are the estimated quantities of gas, natural gas liquids and oil which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made.  Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based on future conditions.  The definition of proved reserves is in accordance with the Securities and Exchange Commission’s definition set forth in Regulation S-X Rule 4-10(a) and its subsequent staff interpretations and guidance.

Proved undeveloped drilling location.  A site on which a development well can be drilled consistent with spacing rules for purposes of recovering proved undeveloped reserves.

Proved undeveloped reserves or PUDs.  Reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.  Reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled.  Proved reserves for other undrilled units are claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation.  Estimates for proved undeveloped reserves are not attributed to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir.

Recompletion.  The completion for production of an existing wellbore in another formation from that which the well has been previously completed.

Reservoir.  A porous and permeable underground formation containing a natural accumulation of economically productive oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reserves.

Royalty interest.  An interest that entitles the owner of such interest to a share of the mineral production from a property or to a share of the proceeds therefrom.  It does not contain the rights and obligations of operating the property and normally does not bear any of the costs of exploration, development and operation of the property.

SEC.  Securities and Exchange Commission.

Standardized Measure.  Standardized Measure, or standardized measure of discounted future net cash flows relating to proved oil and gas reserve quantities, is the present value of estimated future net revenues to be generated from the production of proved reserves, determined in accordance with the rules and regulations of the Securities and Exchange Commission (using prices and costs in effect as of the date of estimation) without giving effect to non-property related expenses such as general and administrative expenses, debt service and future income tax expenses or to depreciation, depletion and amortization and discounted using an annual discount rate of 10%.  The Company’s Standardized Measure does not include future income tax expenses because the reserves are owned by its subsidiaries, which are not subject to income taxes.

Successful well.  A well capable of producing oil, gas and/or NGL in commercial quantities.

Undeveloped acreage.  Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether such acreage contains proved reserves.

Unproved resources.  Resources that are considered less certain to be recovered than proved reserves.  Unproved resources may be further sub-classified to denote progressively increasing uncertainty of recoverability.

Working interest.  The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and a share of production.

Workover.  Maintenance on a producing well to restore or increase production.

iii

Part I

Item 1.    Business and Properties

This Annual Report on Form 10-K contains forward-looking statements based on expectations, estimates and projections as of the date of this filing.  These statements by their nature are subject to risks, uncertainties and assumptions and are influenced by various factors.  As a consequence, actual results may differ materially from those expressed in the forward-looking statements.  For more information see “Forward-Looking Statements” included at the end of this Item 1. “Business and Properties” and see also Item 1A. “Risk Factors.”

References

When referring to Linn Energy, LLC (“Linn Energy” or the “Company”), the intent is to refer to Linn Energy and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made.

A reference to a “Note” herein refers to the accompanying Notes to Consolidated Financial Statements contained in Part II. Item 8. “Financial Statements and Supplementary Data.”

Overview

Linn Energy is an independent oil and gas company focused on the development and acquisition of long life properties which complement its asset profile in producing basins within the United States.  Linn Energy began operations in March 2003 and completed its initial public offering (“IPO”) in January 2006.

The Company’s oil, gas and NGL properties are currently located in three regions in the United States:

·Mid-Continent, which includes the core operating areas Texas Panhandle and Oklahoma;

·Appalachian Basin, which includes fields in West Virginia and Pennsylvania; and

·Western, which includes the Brea Olinda Field of the Los Angeles Basin in California.

Proved reserves at December 31, 2007 were 1,616.1 Bcfe, of which approximately 64% were gas, 20% were oil and 16% were NGL.  Approximately 73% were classified as proved developed, with a total Standardized Measure value of $3.46 billion.  At December 31, 2007, the Company operated 5,638, or 77%, of its 7,305 gross productive wells.  Average proved reserves-to-production ratio, or average reserve life, is approximately 22 years, based on the December 31, 2007 reserve report and annualized production for the fourth quarter ended December 31, 2007.

In January 2008, the Company completed two acquisitions of oil and gas properties in the Mid-Continent and Appalachian Basin regions.  See “Recent Developments” below for additional details about these acquisitions.  On a pro forma basis, including these two acquisitions, total proved reserves at December 31, 2007 were 1,945.5 Bcfe, of which approximately 55% were gas, 32% were oil and 13% were NGL.

The Company’s primary goal is to provide stability and growth of distributions for the long-term benefit of its unitholders.  The following is a summary of the key elements of the Company’s business strategy that support this goal:

·acquire long life, high quality properties;

·efficiently operate and develop acquired properties; and

·capture cash flow margin through commodity price and interest rate hedging.

The Company’s business strategy is discussed in more detail below.

1

Item 1.    Business and Properties - Continued

Strategy

Acquire Long Life, High Quality Properties

The Company’s acquisition program targets oil and gas properties which offer high quality, long life production with predictable decline curves as well as lower-risk development opportunities.  The Company evaluates acquisitions based on reserve base, decline curve, reserve life, field cash flow and costs of development and operations.

The following provides a summary of acquisitions of working and royalty interests the Company has completed from inception through the date of this report:

Year	# of Acquisitions	Gross Wells(1)	Operating Region	Aggregate Contract Price
				(in millions)
2003	4	498	Appalachian Basin	$	52.0
2004	2	698	Appalachian Basin	25.9
2005	3	718	Appalachian Basin	124.5
2006	5	1,430	Mid-Continent, Appalachian Basin and Western	451.7
2007	8	4,505	Mid-Continent, Appalachian Basin and Western	2,678.9
2008	2	2,450	Mid-Continent and Appalachian Basin	566.9
	24	10,299		$	3,899.9

(1) Gross wells do not include approximately 1,800 wells associated with royalty interest acquisitions.

From inception through the date of this report, the Company has completed 24 acquisitions of working and royalty interests in oil and gas properties and related gathering and pipeline assets.  Total acquired proved reserves were approximately 1.9 Tcfe at an acquisition cost of approximately $2.11 per Mcfe.  See Note 2 for additional details about the Company’s acquisitions.

The Company finances acquisitions with a combination of proceeds from the issuance of its units, bank borrowings and cash flow from operations.  During 2007, the Company completed three private placements of its units, with gross proceeds of $2.12 billion.  During 2006, the Company completed one additional private placement, with gross proceeds of $305.0 million.  See “Recent Developments” below and also Note 4 for additional details about the Company’s private placement of units.

Efficiently Operate and Develop Acquired Properties

The Company has centralized the operation of its acquired properties into defined operating regions to minimize operating costs and maximize production and capital efficiency.  The Company maintains a large inventory of drilling and optimization projects within each region to achieve organic growth from its capital development program.

The Company seeks to be the operator of its properties so that it can develop drilling programs and optimization projects that not only replace production, but add value through reserve and production growth and future operational synergies.  The Company’s development program is focused on lower-risk, repeatable drilling opportunities to maintain and/or grow long-term cash flow.  Many of the Company’s wells are completed in multiple producing zones with commingled production and long economic lives.  The number, types and location of wells the Company drills vary depending on its capital budget, the cost of each well, anticipated production and the estimated recoverable reserves attributable to each well.  In addition, the Company seeks to deliver attractive financial returns by leveraging its purchasing power, experienced workforce and scalable infrastructure.  For 2008, the Company estimates its total drilling and development capital expenditures will be between $250.0 million and $300.0 million.  This estimate is under continuous review and is subject to on-going adjustment.

2

Item 1.    Business and Properties - Continued

Capture Cash Flow Margin Through Commodity Price and Interest Rate Hedging

The Company has derivative contracts in place covering a significant portion of its forecasted production volumes through 2012, or five years, to capture cash flow margins and provide long-term cash flow predictability to pay distributions and manage its business.  Currently, the Company utilizes swaps and puts to hedge oil and gas production and oil puts to hedge NGL production.  Swap contracts establish a fixed price and put options set a price floor with the potential for realized commodity price upside beyond the hedge price floor.  For 2008, the Company’s production is approximately 97% hedged.  As of February 22, 2008, puts represent 25%, 27%, 36%, 40% and 16% of annual hedged volume for all commodities for the each of the years ended December 31, 2008 through December 31, 2012.

In addition, the Company enters into interest rate hedges to minimize the effects of fluctuations in interest rates.  Currently, the Company utilizes LIBOR swaps to convert its borrowing rate on indebtedness under its credit facility from a floating to fixed rate.  As of February 1, 2008, the Company has swapped LIBOR on approximately 61% of its outstanding debt at a fixed rate of 4.20% for 2008 and 5.06% for 2009 and 2010.  For additional details about the Company’s interest rate swap agreements and commodity derivative contracts, see Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”  See also Note 8 and Note 9.

Recent Developments

Acquisitions

On January 31, 2008, the Company completed the acquisition of certain oil and gas properties, effective October 1, 2007, located primarily in the Mid-Continent region from Lamamco Drilling Company for a contract price of $552.2 million, subject to purchase price adjustments.  The acquired reserves are approximately 88% oil and over 70% proved developed with a low base decline rate of approximately 5% and a reserve life index of over 34 years.  This acquisition provides a large inventory of approximately 800 development projects which the Company anticipates will create future organic growth opportunities.  The acquisition was financed with a combination of borrowings under the Company’s credit facility and proceeds from a term loan entered into at closing.  See Note 2 for additional details.

On January 4, 2008, the Company completed the acquisition of certain gas properties, effective November 1, 2007, located in the Appalachian Basin from K V Oil and Gas, Inc. for contract consideration of 600,000 units (approximately $14.7 million), subject to purchase price adjustments.

Distributions

In January 2008, the Company’s Board of Directors declared a cash distribution of $0.63 per unit with respect to the fourth quarter of 2007.  The distribution totaled approximately $72.2 million and was paid on February 14, 2008 to unitholders of record as of the close of business on February 8, 2008.  This distribution represents a 10.5% increase in the Company’s annualized cash distribution rate, to $2.52 per unit, from $2.28 per unit for the third quarter of 2007.

3

Item 1.    Business and Properties - Continued

Private Placements

During 2007 and 2006, the Company closed four private placements of units to groups of institutional investors.

Date Issued	Gross Proceeds		Units Issued	Date Converted to Units (1)	Date Registered With SEC	Date Lock-Up Expired (2)
	(in thousands)
August 2007:
Units	$	416,000	12,999,989		December 2007	February 14, 2008
D Units	1,084,000		34,997,005	November 2007	December 2007	February 14, 2008
	$	1,500,000	47,996,994
June 2007:
Units	$	260,000	7,761,194		December 2007	February 14, 2008
February 2007:
Units	$	172,904	6,650,144		December 2007	December 14, 2007
C Units	187,096		7,465,946	April 2007	December 2007	December 14, 2007
	$	360,000	14,116,090
October 2006:
Units	$	116,228	5,534,687		December 2007	December 14, 2007
B Units	188,772		9,185,965	January 2007	December 2007	December 14, 2007
	$	305,000	14,720,652

(1)	Not applicable for units.
(2)	Lock-up expiration date represents date investors were allowed to sell or transfer units per terms of purchase agreements.

The proceeds from the private placements, net of expenses, were used to finance acquisitions and to repay indebtedness under the Company’s credit facility. See Note 4 for additional details about the private placements.

Operating Regions

Mid-Continent

The Mid-Continent is the Company’s largest region, and as noted above, includes two key core operating areas.  First, the Texas Panhandle area, which consists of shallow oil and gas production from the Brown Dolomite formation at depths of approximately 3,200 feet and the Deep Granite Wash formation which produces at depths ranging from 8,900 feet to 16,000 feet.  The second core area is located primarily in Oklahoma.  Producing depths range from 6,000 feet to 20,000 feet in this area.

Texas Panhandle proved reserves represented approximately 33%, of total proved reserves at December 31, 2007, of which 53% were proved developed reserves.  This area produced 71.6 MMcfe/d, or 36%, of the Company’s fourth quarter 2007 production.  During 2007, the Company invested approximately $104.0 million to drill in the Texas Panhandle.  During 2008, the Company anticipates spending 60% to 65% of its total capital budget for development activities in this area.

The Oklahoma proved reserves represented approximately 41%, of total proved reserves at December 31, 2007, of which 83% were proved developed reserves.  This area produced 92.7 MMcfe/d, or 46%, of the Company’s fourth quarter 2007 production.  During 2007, the Company invested approximately $40.0 million to drill in Oklahoma.  During 2008, the Company anticipates spending 25% to 30% of its total capital budget for development activities in this area.

In order to more efficiently transport its gas to market, the Company owns and operates a network of gas gathering systems comprised of approximately 800 miles of pipeline and associated compression and metering facilities which connect to numerous sales outlets in the Texas Panhandle.

4

Item 1.    Business and Properties - Continued

Appalachian Basin

The Appalachian Basin includes fields in West Virginia and Pennsylvania.  Appalachian Basin proved reserves represented approximately 12%, of total proved reserves at December 31, 2007, of which 75% were proved developed reserves.  This region produced 24.3 MMcfe/d, or 12%, of the Company’s fourth quarter 2007 production.  During 2007, the Company invested approximately $34.3 million to drill in the Appalachian Basin.  During 2008, the Company anticipates spending 10% to 12% of its total capital budget for development activities in the Appalachian Basin region.

The proximity of the Company’s properties in this region to major United States consuming markets allows the Company to receive premium pricing on this production.  In order to more efficiently transport its gas to market, the Company owns and operates a network of gas gathering systems comprised of approximately 1,000 miles of pipeline and associated compression and metering facilities which connect to numerous sales outlets on seven interstate and six intrastate pipelines in the Appalachian Basin.  During 2007, the Company invested approximately $17.2 million to expand its network of pipeline in this region.

The Company also performs limited gas gathering activities for others on non-jurisdictional gathering systems, primarily in Pennsylvania.  The Company aggregates these volumes with production and sells all the gas through meters to the same purchasers.  These revenues are collected and distributed to the third party producers in the normal course of business.

Western

Western consists of the Brea Olinda Field of the Los Angeles Basin in California.  The Brea Olinda Field was discovered in 1880 and produces from the shallow Pliocene formation to the deeper Miocene formation.  Western proved reserves represented approximately 14%, of total proved reserves at December 31, 2007, of which 86% were proved developed reserves.  This region produced 11.6 MMcfe/d, or 6%, of the Company’s fourth quarter 2007 production.  During 2007, the Company invested approximately $2.4 million to drill in this region.  During 2008, the Company anticipates spending less than 5% of its total capital budget for development activities in the Western region.

The Western region also includes the operation of a gas processing facility which processes produced gas from Company and third party wells.  Processed gas is utilized to generate electricity which is used in the field to power equipment, resulting in reduced operating costs.  Revenues are also generated from the sale of excess power and associated NGL.

Drilling and Acreage

The following sets forth the wells drilled during the periods indicated (“gross” refers to the total wells in which the Company had a working interest and “net” refers to gross wells multiplied by its working interest):

	Year Ended December 31,
	2007	2006	2005
Gross wells:
Productive	247	154	110
Non-productive	6	5	—
Total	253	159	110
Net development wells:
Productive	213	147	105
Non-productive	6	5	—
Total	219	152	105
Net exploratory wells:
Productive	—	—	—
Non-productive	—	—	—
Total	—	—	—

The totals above do not include 25 lateral segments added to existing vertical wellbores in the Texas Panhandle core operating area.  All of the non-productive wells in 2007 were due to mechanical failures.  The information should not be considered indicative of future performance, nor should it be assumed that there is necessarily any correlation

5

Item 1.    Business and Properties - Continued

between the number of productive wells drilled, quantities of reserves found or economic value.  Productive wells are those that produce commercial quantities of oil, gas or NGL, regardless of whether they generate a reasonable rate of return.  At December 31, 2007, the Company had 10 (9 net) wells in process.

The following sets forth information, as of December 31, 2007, relating to the Company’s drilling locations and net acres of leasehold interests in its three operating regions at that date:

	Mid- Continent (1)	Appalachian Basin	Western	Total (2)
Proved undeveloped	852	404	2	1,258
Other locations	2,359	1,076	6	3,441
Total drilling locations	3,211	1,480	8	4,699
Leasehold interests-net acres	765,488	182,186	3,961	951,635

(1)	Does not include approximately 800 proved and other locations acquired in January 2008 with the Company’s acquisition of properties from Lamamco.  See “Recent Developments” above.
(2)	Does not include optimization projects.

As shown in the table above, as of December 31, 2007, the Company had 1,258 proved undeveloped drilling locations (specific drilling locations as to which the independent engineering firm, DeGolyer and MacNaughton, assigned proved undeveloped reserves as of such date) and the Company had identified 3,441 additional unproved drilling locations (specific drilling locations as to which DeGolyer and MacNaughton has not assigned any proved reserves) on acreage that the Company has under existing leases.  As successful development wells frequently result in the reclassification of adjacent lease acreage from unproved to proved, the Company expects that a significant number of its unproved drilling locations will be reclassified as proved drilling locations prior to the actual drilling of these locations.

Productive Wells

The following table sets forth information relating to the productive wells in which the Company owned a working interest as of December 31, 2007.  Productive wells consist of producing wells and wells capable of production, including wells awaiting pipeline or other connections to commence deliveries.  “Gross” wells refers to the total number of producing wells in which the Company has an interest, and “net” wells refers to the sum of its fractional working interests owned in gross wells.  The number of wells below do not include approximately 1,800 productive wells in which the Company owns a royalty interest only.

	Gas Wells		Oil Wells		Total Wells
	Gross	Net	Gross	Net	Gross	Net
Operated (1)	4,133	3,421	1,505	1,406	5,638	4,827
Non-operated (2)	1,413	231	254	27	1,667	258
Total (3)	5,546	3,652	1,759	1,433	7,305	5,085

(1)	10 operated wells had multiple completions at December 31, 2007.
(2)	3 non-operated wells had multiple completions at December 31, 2007.
(3)	Does not include approximately 2,450 gross wells acquired in January 2008.  See “Recent Developments” above.

6

Item 1.    Business and Properties - Continued

Developed and Undeveloped Acreage

The following sets forth information as of December 31, 2007, relating to leasehold acreage:

	Developed Acreage		Undeveloped Acreage		Total Acreage
	Gross	Net	Gross	Net	Gross	Net
Operated	968,486	604,391	356,793	215,288	1,325,279	819,679
Non-operated	641,397	100,506	57,456	31,450	698,853	131,956
Total	1,609,883	704,897	414,249	246,738	2,024,132	951,635

Production, Price and Cost History

The Company’s gas production is primarily sold under market sensitive price contracts, which typically sell at differentials to the NYMEX or PEPL gas prices due to the Btu content and the proximity to major consuming markets.  The Company’s gas production is sold to purchasers under percentage-of-proceeds contracts, percentage-of-index contracts or spot price contracts.  By the terms of the percentage-of-proceeds contracts, the Company receives a percentage of the resale price received by the purchaser for sales of residual gas and NGL recovered after transportation and processing of gas.  These purchasers sell the residual gas and NGL based primarily on spot market prices.  Under percentage-of-index contracts, the price per MMBtu the Company receives for gas is tied to indexes published in Gas Daily or Inside FERC Gas Market Report.  Although exact percentages vary daily, as of December 31, 2007, approximately 85% of the Company’s gas production was sold under short-term contracts at market-sensitive or spot prices.  The remainder was sold under long-term contracts.

The Company’s oil and NGL production is primarily sold under market sensitive percentage-of-index contracts and percentage-of-proceeds contracts and as of December 31, 2007, approximately 60% of its oil production and 95% of its NGL production was sold under long-term contracts.

As discussed in the “Strategy” section above, the Company enters into derivative transactions in the form of hedging arrangements to reduce the impact of commodity price volatility on its cash flow from operations.  By removing price volatility from a significant portion of its production, the Company has mitigated, but not eliminated, potential effects of fluctuating oil, gas and NGL prices on its cash flow from operations for those periods.

7

Item 1.    Business and Properties - Continued

The following sets forth information regarding net production of oil, gas and NGL and certain price information for each of the periods indicated:

	Year Ended December 31,
	2007		2006		2005
Production:
Gas production (MMcf)	27,001		8,599		4,720
Oil production (MBbls)	1,271		370		20
NGL production (MBbls)	992		—		—
Total production (MMcfe)	40,579		10,818		4,839
Average daily production (MMcfe/d)	111.2		29.6		13.3
Weighted average prices (hedged): (1)
Gas (Mcf)	$	8.19	$	9.79	$	6.45
Oil (Bbl) (2)	$	66.15	$	58.68	$	52.55
NGL (Bbl)	$	56.75	$	—	$	—
Total (Mcfe)	$	8.91	$	9.79	$	6.51
Weighted average prices (unhedged): (3)
Gas (Mcf)	$	6.62	$	7.17	$	9.24
Oil (Bbl) (2)	$	66.51	$	50.68	$	52.55
NGL (Bbl)	$	55.51	$	—	$	—
Total (Mcfe)	$	7.84	$	7.43	$	9.23
Average unit costs per Mcfe of production:
Operating expenses	$	2.18	$	1.67	$	1.52
General and administrative expenses (4)	$	1.41	$	3.70	$	0.69
Depreciation, depletion and amortization	$	2.41	$	2.23	$	1.51

(1)	Includes the effect of realized gains on derivatives of $43.2 million and $25.5 million and realized losses of $13.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.
(2)	Oil production in California is sold pursuant to a long-term contract at 79% of NYMEX, and with gravity increase due to NGL being mixed into the oil stream, prices realized average approximately 82% of NYMEX.
(3)	Does not include the effect of realized gains and losses on derivatives.
(4)	The measure for the years ended December 31, 2007 and 2006 includes approximately $13.9 million and $21.6 million of unit-based compensation and unit warrant expense, respectively.  The measure for the year ended December 31, 2006 includes $2.0 million of IPO bonuses paid to certain executive officers.  General and administrative expenses excluding these amounts were $1.07 per Mcfe and $1.51 per Mcfe for the years ended December 31, 2007 and 2006, respectively.  This is a non-GAAP measure used by Company management to analyze its performance.

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Item 1.    Business and Properties - Continued

Reserve Data

Proved Reserves

Proved oil and gas reserves are the estimated quantities of oil, gas and NGL which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made.  Prices include consideration of changes in existing prices provided by contractual arrangements, but not escalations based on future conditions.  For additional information regarding estimates of oil, gas and NGL reserves, including estimates of proved and proved developed reserves, the standardized measure of discounted future cash flows and the changes in discounted future cash flows, see Supplemental Oil and Gas Data (Unaudited) in Item 8. “Financial Statements and Supplementary Data.”

The following presents estimated net proved oil, gas and NGL reserves and the present value of estimated proved reserves at December 31, 2007, 2006 and 2005, based on reserve reports prepared by independent engineers DeGolyer and MacNaughton at December 31, 2007 and 2006 and a reserve report prepared by independent engineers Schlumberger Data and Consulting Services at December 31, 2005.  The Standardized Measure values shown are not intended to represent the market value of estimated oil, gas and NGL reserves at such dates.

	December 31,
	2007			2006			2005
Reserve data: (1)
Estimated net proved reserves:
Gas (Bcf)	1,028.9			274.0			191.9
Oil (MMBbls)	54.8			30.0			0.2
NGL (MMBbls)	43.1			—			—
Total (Bcfe)	1,616.1			454.1			193.2
Proved developed (Bcfe)	1,172.1			314.1			125.2
Proved undeveloped (Bcfe)	444.0			140.0			68.0
Proved developed reserves as a % of total proved reserves	72.5		%	69.2		%	64.8		%
Standardized measure (in millions) (2)	$	3,458.2		$	552.3		$	552.1
Representative oil and gas prices at period end:
Gas — NYMEX per MMBtu	$	6.80		$	5.64		$	10.08
Oil — NYMEX West Texas Intermediate per Bbl	$	95.92		$	61.05		$	57.98

(1)	Excludes reserves of approximately 329.4 Bcfe based on internal Company estimates for the January 2008 acquisitions discussed in “Recent Developments” above.
(2)	Does not give effect to derivative contracts.  For additional details about the Company’s derivative contracts, see Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”  See also Note 8 and Note 9.

The data in the above table are estimates.  Oil and gas reserve engineering is inherently a subjective process of estimating underground accumulations of oil and gas that cannot be measured exactly.  The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment.  Accordingly, reserve estimates may vary from the quantities of oil and gas that are ultimately recovered.

These reserve estimates are reviewed and approved by Company senior engineering staff and management, with final approval by its Chief Operating Officer.  The process performed by the independent engineers to prepare reserve amounts included their estimation of reserve quantities, future producing rates, future net revenue and the present value of such future net revenue.  The independent engineering firms also prepared estimates with respect to reserve categorization, using the definitions for proved reserves set forth in Regulation S-X Rule 4-10(a) and subsequent SEC staff interpretations and guidance.  In the conduct of their preparation of the reserve estimates, the independent engineering firms did not independently verify the accuracy and completeness of information and data furnished by the Company with respect to ownership interests, oil and gas production, well test data, historical costs of operation and development, product prices, or any agreements relating to current and future operations of the properties and sales of production.  However, if in the course of their work, something came to their attention which brought into question the validity or sufficiency of any such information or data, they did not rely on such information or data until they had satisfactorily resolved their questions relating thereto.  Their estimates of reserves conform to the guidelines of the SEC, including the criteria of “reasonable certainty,” as it pertains to expectations

9

Item 1.    Business and Properties - Continued

about the recoverability of reserves in future years, under existing economic and operating conditions.  The Company has not filed reserve estimates with any Federal authority or agency, with the exception of the SEC, since the last fiscal year ended.

Future prices received for production may vary, perhaps significantly, from the prices assumed for purposes of the estimate of Standardized Measure.  The Standardized Measure shown should not be construed as the market value of the reserves at the dates shown.  The 10% discount factor required to be used pursuant to Statements of Financial Accounting Standards (“SFAS”) No. 69, “Disclosures about Oil and Gas Producing Activities,” when calculating discounted future net cash flows, may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the Company or the oil and gas industry.  The Standardized Measure, no matter what discount rate is used, is materially affected by assumptions as to timing of future production, which may prove to be inaccurate.

Oil, Gas and NGL Sales - Operational Overview

General

The Company seeks to be the operator of its properties so that it can control the drilling programs that not only replace production, but add value through the growth of reserves and future operational synergies.  Many of the Company’s wells are completed in multiple producing zones with commingled production and long economic lives.

Principal Customers

For the year ended December 31, 2007, sales of oil, gas and NGL to Duke Energy Corporation, Dominion Resources, Inc. and ConocoPhillips accounted for approximately 21%, 20% and 12%, respectively, of the Company’s total volumes, or 53% in the aggregate.  If the Company were to lose any one of its major oil and gas purchasers, the loss could temporarily cease or delay production and sale of its oil and gas in that particular purchaser’s service area.  If the Company were to lose a purchaser, it believes it could identify a substitute purchaser.  However, if one or more of these large gas purchasers ceased purchasing oil and gas altogether, it could have a detrimental effect on the oil and gas market in general and on the volume of oil and gas that it is able to sell.

Competition

The oil and gas industry is highly competitive.  The Company encounters strong competition from other independent operators and master limited partnerships in acquiring properties, contracting for drilling and other related services and securing trained personnel.

The Company is also affected by competition for drilling rigs and the availability of related equipment.  In the past, the oil and gas industry has experienced shortages of drilling rigs, equipment, pipe and personnel, which has delayed development drilling and has caused significant price increases.  The Company is unable to predict when, or if, such shortages may occur or how they would affect its drilling program.

Operating Hazards and Insurance

The oil and gas industry involves a variety of operating hazards and risks that could result in substantial losses from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations.

In addition, the Company may be liable for environmental damages caused by previous owners of property it purchases and leases.  As a result, the Company may incur substantial liabilities to third parties or governmental entities, the payment of which could reduce or eliminate funds available for acquisitions, development or distributions, or result in the loss of properties.

10

Item 1.    Business and Properties - Continued

In accordance with customary industry practices, the Company maintains insurance against some, but not all, potential losses.  The Company cannot provide assurance that any insurance it obtains will be adequate to cover any losses or liabilities.  The Company cannot predict the continued availability of insurance or the availability of insurance at premium levels that justify its purchase.  The Company has elected to self-insure for trucks and vehicles licensed to operate on public highways and roads.  The Company may elect to self-insure for additional items if it is determined that the cost of available insurance is excessive relative to the risks presented.  In addition, pollution and environmental risks generally are not fully insurable.  The occurrence of an event not fully covered by insurance could have a material adverse effect on the Company’s financial position and results of operations.

The Company participates in a substantial percentage of wells on a non-operated basis, and may be accordingly limited in its ability to control the risks associated with oil, gas and NGL operations.

Title to Properties

Prior to the commencement of drilling operations, the Company conducts a thorough title examination and performs curative work with respect to significant defects.  To the extent title opinions or other investigations reflect title defects on those properties, the Company is typically responsible for curing any title defects at its expense prior to commencing drilling operations.  Prior to completing an acquisition of producing gas leases, the Company performs title reviews on the most significant leases and, depending on the materiality of properties, the Company may obtain a title opinion or review previously obtained title opinions.  As a result, the Company has obtained title opinions on a significant portion of its oil and gas properties and believes that it has satisfactory title to its producing properties in accordance with standards generally accepted in the oil and gas industry.  Oil and gas properties are subject to customary royalty and other interests, liens for current taxes and other burdens which do not materially interfere with the use of or affect the carrying value of the properties.

Seasonal Nature of Business

Seasonal weather conditions and lease stipulations can limit the drilling and producing activities and other operations in certain regions of the United States that the Company operates in (primarily in parts of the Appalachian Basin and the Mid-Continent).  These seasonal anomalies can pose challenges for meeting the well drilling objectives and increase competition for equipment, supplies and personnel during the spring and summer months, which could lead to shortages and increase costs or delay operations.

The demand for gas typically decreases during the summer months and increases during the winter months.  Seasonal anomalies such as mild winters or hot summers sometimes lessen this fluctuation.  In addition, certain gas users utilize gas storage facilities and purchase some of their anticipated winter requirements during the summer, which can also lessen seasonal demand fluctuations.  The demand for crude oil is generally determined at a global level, based on supply shortage concerns driven primarily by natural disasters such as hurricanes and by political instability in certain oil producing regions of the world.

Environmental Matters and Regulation

The Company’s operations are subject to stringent federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection.  The Company’s operations are subject to the same environmental laws and regulations as other companies in the oil and gas industry.  These laws and regulations may:

· require the acquisition of various permits before drilling commences;

· require the installation of expensive pollution control equipment;

· restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities;

· limit or prohibit drilling activities on lands lying within wilderness, wetlands and other protected areas;

· require remedial measures to prevent pollution from former operations, such as pit closure and plugging of abandoned wells;

· impose substantial liabilities for pollution resulting from operations; and

· with respect to operations affecting federal lands or leases, require preparation of a Resource Management Plan, an Environmental Assessment, and/or an Environmental Impact Statement.

11

Item 1.    Business and Properties - Continued

These laws, rules and regulations may also restrict the rate of oil and gas production below the rate that would otherwise be possible.  The regulatory burden on the oil and gas industry increases the cost of doing business and consequently affects profitability.  Additionally, Congress and federal and state agencies frequently revise environmental laws and regulations, and any changes that result in more stringent and costly waste handling, disposal and clean-up requirements for the oil and gas industry could have a significant impact on operating costs.

The environmental laws and regulations applicable to the Company and its operations include, among others, the following United States federal laws and regulations:

· Clean Air Act, and its amendments, which governs air emissions;

· Clean Water Act, which governs discharges to waters of the United States;

· Comprehensive Environmental Response, Compensation and Liability Act, which imposes liability where hazardous releases have occurred or are threatened to occur (commonly known as “Superfund”);

· Energy Independence and Security Act of 2007, which prescribes new fuel economy standards and other energy saving measures;

· National Environmental Policy Act, which governs oil and gas production activities on federal lands;

· Resource Conservation and Recovery Act, which governs the management of solid waste;

· Safe Drinking Water Act, which governs the underground injection and disposal of wastewater; and

· U.S. Department of Interior regulations, which impose liability for pollution cleanup and damages.

In addition, the Kyoto Protocol to the United Nations Framework Convention on Climate Change (“Kyoto Protocol”) requires Annex I countries, including Canada and the United Kingdom, to reduce their emissions of carbon dioxide and other greenhouse gases.  As a result of the ratification of the Kyoto Protocol and the adoption of legislation or other regulatory initiatives designed to implement its objectives by the national and regional governments, reductions in greenhouse gases from crude oil and natural gas producers may be required which could result in, among other things, increased operating and capital expenditures for those producers.  Until such legislation or other regulatory initiatives are finalized, the impact of the Kyoto Protocol and any such legislation adopted as a result of its ratification remains uncertain.

Various states regulate the drilling for, and the production, gathering and sale of, oil and gas, including imposing production taxes and requirements for obtaining drilling permits.  States also regulate the method of developing new fields, the spacing and operation of wells and the prevention of waste of oil and gas resources.  States may regulate rates of production and may establish maximum daily production allowables from gas wells based on market demand or resource conservation, or both.  States do not regulate wellhead prices or engage in other similar direct economic regulation, but there can be no assurance that they will not do so in the future.  The effect of these regulations may be to limit the amounts of oil, gas and NGL that may be produced from the Company’s wells and to limit the number of wells or locations it can drill.  The oil and gas industry is also subject to compliance with various other federal, state and local regulations and laws.  Some of those laws relate to occupational safety, resource conservation and equal opportunity employment.

The Company believes that it substantially complies with all current applicable environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on its financial condition or results of operations.  However, the Company cannot predict how future environmental laws and regulations may impact its properties or operations.  For the year ended December 31, 2007, the Company did not incur any material capital expenditures for installation of remediation or pollution control equipment at any of the Company’s facilities.  The Company is not aware of any environmental issues or claims that will require material capital expenditures during 2008 or that will otherwise have a material impact on its financial position or results of operations.

12

Item 1.    Business and Properties - - Continued

Executive Officers of the Company

Name	Age	Position with the Company
Michael C. Linn	56	Chairman and Chief Executive Officer
Mark E. Ellis	52	President and Chief Operating Officer
Kolja Rockov	37	Executive Vice President and Chief Financial Officer
Lisa D. Anderson	47	Senior Vice President and Chief Accounting Officer
Charlene A. Ripley	44	Senior Vice President, General Counsel and Corporate Secretary
Arden L. Walker, Jr.	48	Senior Vice President - Operations and Chief Engineer

Michael C. Linn is the Chairman and Chief Executive Officer of the Company and has served in such capacity since December 2007.  Prior to that, from June 2006 to December 2007, Mr. Linn served as Chairman, President and Chief Executive Officer and from March 2003 to June 2006, he was the President, Chief Executive Officer and Director.  From 2000 to 2003 Mr. Linn was President of Allegheny Interests, Inc., a private oil and gas investment company.  From 1980 to 1999, Mr. Linn served as General Counsel (1980-1982), Vice President (1982-1987), President (1987-1990) and CEO (1990-1999) of Meridian Exploration, a private Appalachian Basin oil and gas company that was sold to Columbia Natural Gas Company in 1999.  Both Allegheny Interests and Meridian Exploration were wholly owned by Mr. Linn and his family.  Mr. Linn is the immediate past Chairman of the Independent Petroleum Association of America, the largest national trade association of independent oil and gas producers.  He currently sits on the Boards of the National Petroleum Council and the American Exploration and Production Council and is a member of the oil and gas industry’s 25 Year Club.  He was recently appointed as a Texas representative to the Legal and Regulatory Affairs Committee of the Interstate Oil and Gas Compact Commission.  He is also Chairman of the Houston Wildcatters Committee of the Texas Alliance of Energy Producers.  Mr. Linn regularly appears on behalf of the industry before state and federal agencies, such as the Department of Energy, Department of the Treasury, Federal Energy Regulatory Commission and the Environmental Protection Agency.  In addition, he has testified on behalf of the industry before various committees and subcommittees of the U.S. House of Representatives and the U.S. Senate and is regularly quoted and has published various articles for trade publications and newspapers.  He is also a frequent guest on radio and television programs representing the industry.  His civic affiliations include memberships on the Boards of Small Steps and the Youth Development Center, in addition to memberships on the American Art Committee of the Museum of Fine Arts Houston and the Corporate Committee of Texas Children’s Hospital.

Mark E. Ellis is the President and Chief Operating Officer and has served in such capacity since December 2007.  From December 2006 to December 2007, Mr. Ellis was the Executive Vice President and Chief Operating Officer of the Company.  Mr. Ellis has over 28 years of experience in the oil and gas industry, most recently serving as President, Lower 48 for ConocoPhillips from April 2006 to November 2006.  Prior to joining ConocoPhillips, Mr. Ellis served as Senior Vice President of North American Production for Burlington Resources from September 2004 to April 2006.  He served as President of Burlington Resources Canada Ltd. in Calgary from October 2000 to September 2004.  Mr. Ellis joined Burlington Resources in 1985 and also held the positions of Vice President of the San Juan Division, Vice President and Chief Engineer and Manager of Acquisitions.  He began his career at The Superior Oil Company, where he served in several engineering positions in the Onshore and Offshore divisions.  Mr. Ellis is a member of the Society of Petroleum Engineers and a past board member of the New Mexico Oil & Gas Association, the Board of Governors of the Canadian Association of Petroleum Producers and served on the Foundation Board of the Alberta Children’s Hospital.  Mr. Ellis currently serves on the Board of The Center for Hearing and Speech in Houston, Industry Board of Petroleum Engineering at Texas A&M University and the Visiting Committee of Petroleum Engineering at the Colorado School of Mines.

Kolja Rockov is the Executive Vice President and Chief Financial Officer.  Mr. Rockov has over 15 years of experience in the oil and gas finance industry. From October 2004 until he joined Linn Energy in March 2005, Mr. Rockov served as a Managing Director in the Energy Group at RBC Capital Markets, where he was primarily responsible for investment banking coverage of the U.S. exploration and production sector.  From September 2000 until October 2004, Mr. Rockov was a Director at RBC Capital Markets.  Prior to September 2000, Mr. Rockov held various senior positions with Dain Rauscher Wessels and Rauscher Pierce Refsnes, Inc., predecessors of RBC Capital Markets.

13

Item 1.    Business and Properties - - Continued

Lisa D. Anderson has been the Senior Vice President and Chief Accounting Officer since July 2006.  Ms. Anderson oversees the Company’s accounting, financial reporting, information technology, treasury, tax and internal control functions.  Her career spans over 25 years of financial accounting and consulting experience and includes previous leadership positions with international risk consulting firms and as an audit partner with a major international accounting firm, where she specialized in the oil and gas industry.  Before joining the Company, she was the Managing Director leading the Financial Reporting Risk Services practice for Protiviti from November 2005 until July 2006.  She served as a Managing Director with Jefferson Wells from January 2002 to August 2005.  Prior to 2002, she was an Assurance Partner with KPMG LLP.  Ms. Anderson is a Certified Public Accountant and a Certified Internal Auditor.  She is a member of the American Institute of Certified Public Accountants, Texas Society of CPAs and the Institute of Internal Auditors.  In addition, she has served on the Presidential Advisory and the Educational Curriculum Committees of the Texas Society of Certified Public Accountants and currently serves on the Board of the Greater Houston Convention and Visitors Bureau.

Charlene A. Ripley is the Senior Vice President, General Counsel and Corporate Secretary and has served in that position since April 2007.  Prior to joining the Company, Ms. Ripley held the position of Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer at Anadarko Petroleum Corporation from 2006 until April 2007 and served as Vice President, General Counsel and Corporate Secretary from 2004 until 2006, Vice President and General Counsel from 2003 to 2004 and Vice President, General Counsel and Secretary of Anadarko Canada Corporation and its predecessor companies since 1998.  She served as Senior Counsel for Norcen Energy Resources Limited from 1997 to 1998.

Arden L. Walker, Jr. is the Senior Vice President - Operations and Chief Engineer of the Company.  Mr. Walker joined the Company in February 2007 to oversee its Western operations, which includes California, Oklahoma and Texas.  In addition, Mr. Walker serves in the capacity of chief engineer for the Company and is responsible for the Company’s reserve review and booking processes.  From April 2006 until he joined the Company in February 2007, Mr. Walker served as Asset Development Manager, San Juan Business Unit for ConocoPhillips Company.  From June 2004 to April 2006, Mr. Walker served as General Manager, Asset Development in San Juan Division for Burlington Resources.  From January 2002 until June 2004, Mr. Walker served as Business Development Manager in San Juan Division for Burlington Resources.  Mr. Walker began his career with El Paso Exploration Company in 1982 and has served in a broad range of engineering, business development and management positions with Burlington Resources since that time.  Mr. Walker is a member of the Society of Petroleum Engineers, Independent Petroleum Association of America and California Independent Petroleum Association.

14

Item 1.    Business and Properties - Continued

Employees

As of December 31, 2007, the Company employed approximately 525 personnel.  None of the employees are represented by labor unions or covered by any collective bargaining agreement.  The Company believes that its relationship with its employees is satisfactory.

Principal Executive Offices

The Company is a Delaware limited liability company with headquarters in Texas.  The principal executive offices are located at 600 Travis Street, Suite 5100, Houston, Texas 77002.  The main telephone number is (281) 840-4000.

Company Website

The Company’s internet address is www.linnenergy.com.  The Company makes available free of charge on or through its website Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.  Information on the Company’s website should not be considered a part of, or incorporated by reference into, this Annual Report on Form 10-K.

The SEC maintains an internet website that contains these reports at www.sec.gov.  Any materials that the Company files with the SEC may be read or copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Information concerning the operation of the Public Reference Room may be obtained by calling the SEC at (800) 732-0330.

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond the Company’s control.  These statements may include statements about the Company’s:

· business strategy;

· acquisition strategy;

· financial strategy;

· drilling locations;

· oil, gas and NGL reserves;

· realized oil, gas and NGL prices;

· production volumes;

· lease operating expenses, general and administrative expenses and finding and development costs;

· future operating results; and

· plans, objectives, expectations and intentions.

All of these types of statements, other than statements of historical fact included in this Annual Report on Form 10-K, are forward-looking statements.  These forward-looking statements may be found in Part I. Item 1. “Business and Properties;” Part I. Item 1A. “Risk Factors;” Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and other items within this Annual Report on Form 10-K.  In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology.

The forward-looking statements contained in this Annual Report on Form 10-K are largely based on Company expectations, which reflect estimates and assumptions made by Company management.  These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors.  Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control.  In addition, management’s assumptions may prove to be inaccurate.  The Company cautions that the forward-looking statements contained in this Annual Report on

15

Item 1.    Business and Properties - Continued

Form 10-K are not guarantees of future performance, and it cannot assure any reader that such statements will be realized or the forward-looking statements or events will occur.  Actual results may differ materially from those anticipated or implied in forward-looking statements due to factors listed in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K.  The forward-looking statements speak only as of the date made, and other than as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Securities Act Disclaimer

This Form 10-K does not constitute an offer to sell or the solicitation of an offer to buy any securities.

16

Item 1A. Risk Factors

Our business has many risks.  Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our units are described below.  This information should be considered carefully, together with other information in this report and other reports and materials we file with the SEC.

Risks Related to Our Business

We may not have sufficient cash flow from operations to pay the quarterly distribution at the current distribution level and future distributions to our unitholders may fluctuate from quarter to quarter.

We may not have sufficient cash flow from operations each quarter to pay the quarterly distribution at the current distribution level.  Under the terms of our limited liability company agreement, the amount of cash otherwise available for distribution will be reduced by our operating expenses and any cash reserve amounts that our Board of Directors establishes to provide for future operations, future capital expenditures, future debt service requirements and future cash distributions to our unitholders.  The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

·produced volumes of oil, gas and NGL;

·prices at which oil, gas and NGL production is sold;

·level of our operating costs;

·payment of interest, which depends on the amount of our indebtedness and the interest payable thereon; and

·level of our capital expenditures.

In addition, the actual amount of cash we will have available for distribution will depend on other factors, some of which are beyond our control, including:

·availability of borrowings under our credit facility to pay distributions;

·the costs of acquisitions, if any;

·fluctuations in our working capital needs;

·timing and collectibility of receivables;

·restrictions on distributions contained in our credit facility;

·prevailing economic conditions; and

·the amount of cash reserves established by our Board of Directors for the proper conduct of our business.

As a result of these factors, the amount of cash we distribute to our unitholders in any quarter may fluctuate significantly from quarter to quarter and may be significantly less than the current distribution level.

We actively seek to acquire oil and gas properties.  Acquisitions involve potential risks that could adversely impact our future growth and our ability to increase or pay distributions.

Any acquisition involves potential risks, including, among other things:

·the risk that reserves expected to support the acquired assets may not be of the anticipated magnitude or may not be developed as anticipated;

·inaccurate assumptions about revenues and costs, including synergies;

·significant increases in our indebtedness and working capital requirements;

·an inability to transition and integrate successfully or timely the businesses we acquire;

·the cost of transition and integration of data systems and processes;

·the potential environmental problems and costs;

·the assumption of unknown liabilities;

·limitations on rights to indemnity from the seller;

·the diversion of management’s attention from other business concerns;

17

Item 1A. Risk Factors - Continued

·increased demands on existing personnel and on our corporate structure;

·customer or key employee losses of the acquired businesses; and

·the failure to realize expected growth or profitability.

The scope and cost of these risks may ultimately be materially greater than estimated at the time of the acquisition.  Further, our future acquisition costs may be higher than those we have achieved historically.  Any of these factors could adversely impact our future growth and our ability to increase or pay distributions.

If we do not make future acquisitions on economically acceptable terms, then our growth and ability to increase distributions will be limited.

Our ability to grow and to increase distributions to our unitholders is partially dependent on our ability to make acquisitions that result in an increase in available cash flow per unit.  We may be unable to make such acquisitions because we are:

·unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them;

·unable to obtain financing for these acquisitions on economically acceptable terms; or

·outbid by competitors.

In any such case, our future growth and ability to increase distributions will be limited.  Furthermore, even if we do make acquisitions that we believe will increase available cash flow per unit, these acquisitions may nevertheless result in a decrease in available cash flow per unit.

We have significant indebtedness under our credit facility and term loan.  These facilities have substantial restrictions and financial covenants and we may have difficulty obtaining additional credit, which could adversely affect our operations and our ability to pay distributions to our unitholders.

We have significant indebtedness under our credit facility and term loan.  As of January 31, 2008, we had an aggregate of approximately $1.99 billion outstanding under our credit facility and term loan (with additional borrowing capacity of approximately $314.5 million).  As a result of our indebtedness, we will use a portion of our cash flow to pay interest and principal when due, which will reduce the cash available to finance our operations and other business activities and could limit our flexibility in planning for or reacting to changes in our business and the industry in which we operate.  The amount of our indebtedness may also cause us to be more vulnerable to economic downturns and adverse developments in our business.  Our ability to access the capital markets to raise capital on favorable terms will be affected by our debt level and by adverse market conditions resulting from, among other things, general economic conditions, contingencies and uncertainties that are difficult to predict and impossible to control.  Such a development could adversely affect our ability to obtain financing for working capital, capital expenditures or acquisitions or to refinance existing indebtedness.

We depend on these facilities for future capital needs and to fund our distributions.  The credit facility and term loan restrict our ability to obtain additional financing, make investments, lease equipment, sell assets and engage in business combinations.  We also are required to comply with certain financial covenants and ratios.  Our ability to comply with these restrictions and covenants in the future is uncertain and will be affected by the levels of cash flow from our operations and events or circumstances beyond our control.  Our failure to comply with any of the restrictions and covenants could result in a default, which could cause all of our existing indebtedness to be immediately due and payable.

As noted above, we depend on our credit facility for future capital needs.  In addition, we have drawn on our credit facility to fund or partially fund quarterly cash distribution payments, since we use operating cash flows for investing activities and borrow as cash is needed.  Absent such borrowing, we would have at times experienced a shortfall in cash available to pay our declared quarterly cash distribution amount.  If there is a default under our credit facility, we would be unable to make borrowings to fund distributions.

Availability under our credit facility is determined semi-annually at the discretion of the lenders and is based in part on oil, gas and NGL prices.  The lenders can unilaterally adjust the borrowing base and the borrowings permitted to be outstanding under the credit facility.  Any increase in the borrowing base requires the consent of all the lenders. 

18

Item 1A. Risk Factors - Continued

Outstanding borrowings in excess of the borrowing base must be repaid immediately, or we must pledge other properties as additional collateral.  We do not currently have any substantial unpledged properties, and we may not have the financial resources in the future to make any mandatory principal prepayments required under the credit facility.  Significant declines in our production or significant declines in realized oil, gas or NGL prices for prolonged periods and resulting decreases in our borrowing base may force us to reduce or suspend distributions to our unitholders.

Increases in interest rates could adversely affect the demand for our units.

An increase in interest rates may cause a corresponding decline in demand for equity investments, in particular for yield-based equity investments such as our units.  Any such reduction in demand for our units resulting from other more attractive investment opportunities may cause the trading price of our units to decline.

Our hedging activities could result in financial losses or could reduce our income, which may adversely affect our ability to pay distributions to our unitholders.

To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in the prices of oil, gas and NGL, we enter into hedging arrangements for a significant portion of our production.  If we experience a sustained material interruption in our production or if we are unable to perform our drilling activity as planned, we might be forced to satisfy all or a portion of our hedging obligations without the benefit of the cash flow from our sale of the underlying physical commodity, resulting in a substantial reduction of our liquidity.

If commodity prices decline significantly for a prolonged period, our cash flow from operations will decline, and we may have to lower our distribution or may not be able to pay distributions at all.

Our revenue, profitability and cash flow depend upon the prices of and demand for oil, gas and NGL.  The oil, gas and NGL market is very volatile and a drop in prices can significantly affect our financial results and impede our growth.  Changes in oil, gas and NGL prices have a significant impact on the value of our reserves and on our cash flow.  Prices for these commodities may fluctuate widely in response to relatively minor changes in the supply of and demand for them, market uncertainty and a variety of additional factors that are beyond our control, such as:

·the domestic and foreign supply of and demand for oil, gas and NGL;

·      the price and level of foreign imports;

·the level of consumer product demand;

·weather conditions;

·overall domestic and global economic conditions;

·political and economic conditions in oil and gas producing countries, including those in the Middle East and South America;

·the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain price and production controls;

·the impact of the U.S. dollar exchange rates on oil, gas and NGL prices;

·technological advances affecting energy consumption;

·domestic and foreign governmental regulations and taxation;

·the impact of energy conservation efforts;

·the proximity and capacity of pipelines and other transportation facilities; and

·the price and availability of alternative fuels.

In the past, the prices of oil, gas and NGL have been extremely volatile, and we expect this volatility to continue.  If commodity prices decline significantly for a prolonged period, our cash flow from operations will decline, and we may have to lower our distribution or may not be able to pay distributions at all.

19

Item 1A. Risk Factors - Continued

Future price declines or downward reserve revisions may result in a write-down of our asset carrying values.

Declines in oil, gas and NGL prices may result in our having to make substantial downward adjustments to our estimated proved reserves.  If this occurs, or if our estimates of development costs increase, production data factors change or drilling results deteriorate, accounting rules may require us to write-down, as a non-cash charge to earnings, the carrying value of our properties for impairments.  We are required to perform impairment tests on our assets periodically and whenever events or changes in circumstances warrant a review of our assets.  To the extent such tests indicate a reduction of the estimated useful life or estimated future cash flows of our assets, the carrying value may not be recoverable and therefore would require a write-down.  We may incur impairment charges in the future, which could have a material adverse effect on our results of operations in the period incurred and on our ability to borrow funds under our credit facility, which in turn may adversely affect our ability to make cash distributions to our unitholders.

Unless we replace our reserves, our reserves and production will decline, which would adversely affect our cash flow from operations and our ability to make distributions to our unitholders.

Producing oil, gas and NGL reservoirs are characterized by declining production rates that vary depending upon reservoir characteristics and other factors.  The overall rate of decline for our production will change if production from our existing wells declines in a different manner than we have estimated and can change when we drill additional wells, make acquisitions and under other circumstances.  Thus, our future oil, gas and NGL reserves and production and, therefore, our cash flow and income, are highly dependent on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves.  We may not be able to develop, find or acquire additional reserves to replace our current and future production at acceptable costs, which would adversely affect our cash flow from operations and our ability to make distributions to our unitholders.

Our estimated reserves are based on many assumptions that may prove to be inaccurate.  Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.

No one can measure underground accumulations of oil, gas and NGL in an exact way.  Reserve engineering requires subjective estimates of underground accumulations of oil, gas and NGL and assumptions concerning future oil, gas and NGL prices, production levels, and operating and development costs.  As a result, estimated quantities of proved reserves and projections of future production rates and the timing of development expenditures may prove to be inaccurate.  Independent petroleum engineering firms prepare estimates of our proved reserves.  Some of our reserve estimates are made without the benefit of a lengthy production history, which are less reliable than estimates based on a lengthy production history.  Also, we make certain assumptions regarding future oil, gas and NGL prices, production levels, and operating and development costs that may prove incorrect.  Any significant variance from these assumptions by actual figures could greatly affect our estimates of reserves, the economically recoverable quantities of oil, gas and NGL attributable to any particular group of properties, the classifications of reserves based on risk of recovery and estimates of the future net cash flows.  Numerous changes over time to the assumptions on which our reserve estimates are based, as described above, often result in the actual quantities of oil, gas and NGL we ultimately recover being different from our reserve estimates.

The present value of future net cash flows from our proved reserves is not necessarily the same as the current market value of our estimated oil, gas and NGL reserves.  We base the estimated discounted future net cash flows from our proved reserves on prices and costs in effect on the day of estimate.  However, actual future net cash flows from our oil and gas properties also will be affected by factors such as:

·actual prices we receive for oil, gas and NGL;

·the amount and timing of actual production;

·the timing and success of development activities;

·supply of and demand for oil, gas and NGL; and

·changes in governmental regulations or taxation.

20

Item 1A. Risk Factors - Continued

In addition, the 10% discount factor, required to be used pursuant to Statement of Accounting Standard No. 69 when calculating discounted future net cash flows, may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the oil and gas industry in general.

Our development operations require substantial capital expenditures, which will reduce our cash available for distribution.  We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to a decline in our reserves.

The oil and gas industry is capital intensive.  We make and expect to continue to make substantial capital expenditures in our business for the development, production and acquisition of oil, gas and NGL reserves.  These expenditures will reduce our cash available for distribution.  We intend to finance our future capital expenditures with cash flow from operations and our financing arrangements.  Our cash flow from operations and access to capital are subject to a number of variables, including:

·our proved reserves;

·the level of oil, gas and NGL we are able to produce from existing wells;

·the prices at which we are able to sell our oil, gas and NGL; and

·our ability to acquire, locate and produce new reserves.

If our revenues or the borrowing base under our credit facility decrease as a result of lower oil, gas and NGL prices, operating difficulties, declines in reserves or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations at current levels.  Our credit facility restricts our ability to obtain new financing.  If additional capital is needed, we may not be able to obtain debt or equity financing on terms favorable to us, or at all.  If cash generated by operations or available under our credit facility is not sufficient to meet our capital requirements, the failure to obtain additional financing could result in a curtailment of our development operations, which in turn could lead to a possible decline in our reserves.

We may decide not to drill some of the prospects we have identified, and locations that we decide to drill may not yield oil, gas and NGL in commercially viable quantities.

Our prospective drilling locations are in various stages of evaluation, ranging from a prospect that is ready to drill to a prospect that will require additional geological and engineering analysis.  Based on a variety of factors, including future oil, gas and NGL prices, the generation of additional seismic or geological information, the availability of drilling rigs and other factors, we may decide not to drill one or more of these prospects.  As a result, we may not be able to increase or maintain our reserves or production, which in turn could have an adverse effect on our business, financial condition or results of operations.

The cost of drilling, completing and operating a well is often uncertain, and cost factors can adversely affect the economics of a well.  Our efforts will be uneconomic if we drill dry holes or wells that are productive but do not produce enough oil, gas and NGL to be commercially viable after drilling, operating and other costs.  If we drill future wells that we identify as dry holes, our drilling success rate would decline, which could have an adverse effect on our business, financial condition or results of operations.

Our business depends on gathering and transportation facilities.  Any limitation in the availability of those facilities would interfere with our ability to market the oil, gas and NGL we produce, and could reduce our cash available for distribution and adversely impact expected increases in oil, gas and NGL production from our drilling program.

The marketability of our oil, gas and NGL production depends in part on the availability, proximity and capacity of gathering and pipeline systems.  The amount of oil, gas and NGL that can be produced and sold is subject to limitation in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage to the gathering or transportation system, or lack of contracted capacity on such systems.  The curtailments arising from these and similar circumstances may last from a few days to several months.  In many cases, we are provided only with limited, if any, notice as to when these circumstances will arise and their duration.  In addition, some of our wells are drilled in locations that are not serviced by gathering and transportation pipelines, or the gathering and transportation pipelines in the area may not have sufficient capacity to transport

21

Item 1A. Risk Factors - Continued

additional production.  As a result, we may not be able to sell the oil, gas and NGL production from these wells until the necessary gathering and transportation systems are constructed.  Any significant curtailment in gathering system or pipeline capacity, or significant delay in the construction of necessary gathering and transportation facilities, would interfere with our ability to market the oil, gas and NGL we produce, and could reduce our cash available for distribution and adversely impact expected increases in oil and gas production from our drilling program.

We depend on certain key customers for sales of our oil, gas and NGL.  To the extent these and other customers reduce the volumes they purchase from us or delay payment, our revenues and cash available for distribution could decline.  Further, a general increase in non-payment could have an adverse impact on our financial condition and results of operations.

For the year ended December 31, 2007, Duke Energy Corporation, Dominion Resources, Inc. and ConocoPhillips accounted for approximately 21%, 20% and 12%, respectively, of our total volumes, or 53% in the aggregate.  For the year ended December 31, 2006, Dominion Resources, Inc. and ConocoPhillips accounted for approximately 53%, and 14%, respectively, of our total volumes, or 67% in the aggregate.  To the extent these and other customers reduce the volumes of oil, gas or NGL that they purchase from us, our revenues and cash available for distribution could decline.

Many of our leases are in areas that have been partially depleted or drained by offset wells.

Our key project areas are located in some of the most active drilling areas of the producing basins in the United States.  As a result, many of our leases are in areas that have already been partially depleted or drained by earlier offset drilling.  This may inhibit our ability to find economically recoverable quantities of reserves in these areas.

Our identified drilling location inventories are scheduled out over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling, resulting in temporarily lower cash from operations, which may impact our ability to pay distributions.

Our management has specifically identified and scheduled drilling locations as an estimation of our future multi-year drilling activities on our existing acreage.  As of December 31, 2007, we had identified 4,699 drilling locations, of which 1,258 were proved undeveloped locations and 3,441 were other locations.  These identified drilling locations represent a significant part of our growth strategy.  Our ability to drill and develop these locations depends on a number of factors, including the availability of capital, seasonal conditions, regulatory approvals, oil, gas and NGL prices, costs and drilling results.  In addition, DeGolyer and MacNaughton has not estimated proved reserves for the 3,441 other drilling locations we have identified and scheduled for drilling, and therefore there may be greater uncertainty with respect to the success of drilling wells at these drilling locations.  Our final determination on whether to drill any of these drilling locations will be dependent upon the factors described above as well as, to some degree, the results of our drilling activities with respect to our proved drilling locations.  Because of these uncertainties, we do not know if the numerous drilling locations we have identified will be drilled within our expected timeframe or will ever be drilled or if we will be able to produce oil, gas and NGL from these or any other potential drilling locations.  As such, our actual drilling activities may materially differ from those presently identified, which could adversely affect our business.

Drilling for and producing oil, gas and NGL are high risk activities with many uncertainties that could adversely affect our financial condition or results of operations and, as a result, our ability to pay distributions to our unitholders.

Our drilling activities are subject to many risks, including the risk that we will not discover commercially productive reservoirs.  Drilling for oil, gas and NGL can be uneconomic, not only from dry holes, but also from productive wells that do not produce sufficient revenues to be commercially viable.  In addition, our drilling and producing operations may be curtailed, delayed or canceled as a result of other factors, including:

·the high cost, shortages or delivery delays of equipment and services;

·unexpected operational events;

·adverse weather conditions, particularly seasonal weather conditions in the spring;

·facility or equipment malfunctions;

22

Item 1A. Risk Factors - Continued

·title problems;

·pipeline ruptures or spills;

·compliance with environmental and other governmental requirements;

·unusual or unexpected geological formations;

·loss of drilling fluid circulation;

·formations with abnormal pressures;

·fires;

·blowouts, craterings and explosions; and

·uncontrollable flows of oil, gas and NGL or well fluids.

Any of these events can cause increased costs or restrict our ability to drill the wells and conduct the operations which we currently have planned.  Any delay in the drilling program or significant increase in costs could impact our ability to generate sufficient cash flow to pay quarterly distributions to our unitholders at the current distribution level.  Increased costs could include losses from personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution, environmental contamination, loss of wells and regulatory penalties. We ordinarily maintain insurance against certain losses and liabilities arising from our operations.  However, it is impossible to insure against all operational risks in the course of our business.  Additionally, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented.  Losses could therefore occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage.  The occurrence of an event that is not fully covered by insurance could have a material adverse impact on our business activities, financial condition and results of operations.

Because we handle oil, gas and NGL and other hydrocarbons, we may incur significant costs and liabilities in the future resulting from a failure to comply with new or existing environmental regulations or an accidental release of hazardous substances into the environment.

The operations of our wells, gathering systems, turbines, pipelines and other facilities are subject to stringent and complex federal, state and local environmental laws and regulations.  These include, for example:

·the federal Clean Air Act and comparable state laws and regulations that impose obligations related to air emissions;

·the federal Clean Water Act and comparable state laws and regulations that impose obligations related to discharges of pollutants into regulated bodies of water;

·the federal Resource Conservation and Recovery Act (“RCRA”), and comparable state laws that impose requirements for the handling and disposal of waste from our facilities; and

·the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), also known as “Superfund,” and comparable state laws that regulate the cleanup of hazardous substances that may have been released at properties currently or previously owned or operated by us or at locations to which we have sent waste for disposal.

Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations.  Certain environmental statutes, including the RCRA, CERCLA and analogous state laws and regulations, impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances have been disposed of or otherwise released.  Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances or other waste products into the environment.

There is an inherent risk that we may incur environmental costs and liabilities due to the nature of our business and the substances we handle.  For example, an accidental release from one of our wells or gathering pipelines could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage, and fines or penalties for related violations of environmental laws or regulations.  Moreover, the possibility exists that stricter laws, regulations or enforcement policies could significantly increase our compliance costs and the cost of any remediation that may become necessary.  We may not be able to recover these costs from insurance.  For a more

23

Item 1A. Risk Factors - Continued

detailed discussion of environmental and regulatory matters impacting our business, see Part I. Item 1. “Business and Properties - Environmental Matters and Regulation.”

We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of doing business.

Our operations are regulated extensively at the federal, state and local levels.  Environmental and other governmental laws and regulations have increased the costs to plan, design, drill, install, operate and abandon oil and gas wells.  Under these laws and regulations, we could also be liable for personal injuries, property damage and other damages.  Failure to comply with these laws and regulations may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties.  Moreover, public interest in environmental protection has increased in recent years, and environmental organizations have opposed, with some success, certain drilling projects.

Part of the regulatory environment in which we operate includes, in some cases, legal requirements for obtaining environmental assessments, environmental impact studies and/or plans of development before commencing drilling and production activities.  In addition, our activities are subject to the regulations regarding conservation practices and protection of correlative rights.  These regulations affect our operations and limit the quantity of oil, gas and NGL we may produce and sell.  A major risk inherent in our drilling plans is the need to obtain drilling permits from state and local authorities.  Delays in obtaining regulatory approvals or drilling permits, the failure to obtain a drilling permit for a well or the receipt of a permit with unreasonable conditions or costs could have a material adverse effect on our ability to develop our properties.  Additionally, the regulatory environment could change in ways that might substantially increase the financial and managerial costs of compliance with these laws and regulations and, consequently, adversely affect our ability to pay distributions to our unitholders.  For a description of the laws and regulations that affect us, see Part I. Item 1. “Business and Properties - Environmental Matters and Regulation.”

As of December 31, 2007, we concluded that our disclosure controls and procedures were effective.  If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.  As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our units.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be harmed.  We cannot be certain that our efforts to maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.  For additional information, see Part II. Item 9A. “Controls and Procedures” in this Annual Report on Form 10-K for the year ended December 31, 2007.

Any failure to develop or maintain effective internal controls, or difficulties encountered in implementing or improving our internal controls, could harm our operating results or cause us to fail to meet certain reporting obligations.  Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our units.

24

Item 1A. Risk Factors - Continued

Risks Related to Our Structure

Our management may have conflicts of interest with the untiholders.  Our limited liability company agreement limits the remedies available to our unitholders in the event unitholders have a claim relating to conflicts of interest.

Conflicts of interest may arise between our management on one hand, and the Company and our unitholders on the other hand, related to the divergent interests of our management.  Situations in which the interests of our management may differ from interests of our non-affiliated unitholders include, among others, the following situations:

·our limited liability company agreement gives our Board of Directors broad discretion in establishing cash reserves for the proper conduct of our business, which will affect the amount of cash available for distribution.  For example, our management will use its reasonable discretion to establish and maintain cash reserves sufficient to fund our drilling program;

·our management team determines the timing and extent of our drilling program and related capital expenditures, asset purchases and sales, borrowings, issuances of additional membership interests and reserve adjustments, all of which will affect the amount of cash that we distribute to our unitholders; and

·Affiliates of our directors are not prohibited from investing or engaging in other businesses or activities that compete with the Company.

We do not have the same flexibility as other types of organizations to accumulate cash and equity to protect against illiquidity in the future.

Unlike a corporation, our limited liability company agreement requires us to make quarterly distributions to our unitholders of all available cash reduced by any amounts of reserves for commitments and contingencies, including capital and operating costs and debt service requirements.  The value of our units may decrease in direct correlation with decreases in the amount we distribute per unit.  Accordingly, if we experience a liquidity problem in the future, we may have difficulty issuing more equity to recapitalize.

Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states.  If the IRS were to treat us as a corporation for federal income tax purposes or we were to become subject to entity-level taxation for state tax purposes, taxes paid, if any, would reduce the amount of cash available for distribution.

The anticipated after-tax economic benefit of an investment in our units depends largely on our being treated as a partnership for federal income tax purposes.  We have not requested, and do not plan to request, a ruling from the IRS on this or any other tax matter that affects us.

If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rates, currently at a maximum rate of 35%, and would likely pay state income tax at varying rates.  Distributions would generally be taxed again as corporate distributions, and no income, gain, loss, deduction or credit would flow through to unitholders.  Because a tax may be imposed on us as a corporation, our cash available for distribution to our unitholders could be reduced.  Therefore, treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our units.

Current law or our business may change so as to cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to entity-level taxation.  In addition, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships and limited liability companies to entity-level taxation through the imposition of state income, franchise or other forms of taxation.  For example, beginning in 2008, we will be required to pay Texas franchise tax at a maximum effective rate of 0.7% of our gross income apportioned to Texas in the prior year.  Imposition of such a tax on us by Texas and, if applicable, by any other state, will reduce the cash available for distribution to our unitholders.

25

Item 1A. Risk Factors - Continued

Our unitholders may have more complex tax reporting and may be required to pay taxes on income even if they do not receive any cash distributions from us.

Our unitholders are required to pay federal income taxes and, in some cases, state and local income taxes on their share of our taxable income, whether or not they receive cash distributions from us.  Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from their share of our taxable income.  Furthermore, distributions to unitholders in excess of the total net taxable income they were allocated, decreases their tax basis, which will become ordinary taxable income to them if the unit is later sold at a price greater than their tax basis, even if the price received is less than their original cost.

In addition to federal income taxes, our unitholders will likely be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property now or in the future, even if they do not reside in any of those jurisdictions.  Our unitholders will likely be required to file foreign, state and local income tax returns and pay state and local income taxes in some or all of these jurisdictions.  Further, our unitholders may be subject to penalties for failure to comply with those requirements.  In 2007, we have done business and owned assets in West Virginia, Pennsylvania, New York, Virginia, California, Oklahoma, Kansas, New Mexico, Illinois, Indiana, and Texas.  As we make acquisitions or expand our business, we may do business or own assets in other states in the future.  It is the responsibility of each unitholder to file all United States federal, state and local tax returns that may be required of such unitholder.  Our counsel has not rendered an opinion on the state or local tax consequences of an investment in our units.

Item 1B.   Unresolved Staff Comments

None.

26

Item 2.    Properties

Information concerning proved reserves, production, wells, acreage and related matters are contained in Part I.  Item 1.  “Business and Properties.”

The Company’s obligations under its credit facility are secured by mortgages on its oil and gas properties.  See Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 7 for additional information concerning the credit facility.

Offices

The Company’s principal corporate office is located at 600 Travis, Suite 5100, Houston, Texas 77002.  The Company maintains additional offices in California, Kansas, Oklahoma, Pennsylvania, Texas and West Virginia.

Item 3.      Legal Proceedings

Although the Company may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business, the Company is not currently a party to any material legal proceedings.  In addition, the Company is not aware of any material legal or governmental proceedings against it, or contemplated to be brought against it, under the various environmental protection statutes to which it is subject.

Item 4.      Submission of Matters to a Vote of Security Holders

A special meeting of Company unitholders was held on November 1, 2007.  The matters voted on at the meeting and the results are set forth below.

1.To vote upon (a) a change in terms of the Company’s Class D units to provide that each Class D unit converts automatically into a unit and (b) the issuance of 34,997,005 units upon such conversion.

Votes For	Votes Against or Withheld	Abstentions
48,064,105	106,238	49,018

27

Part II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company’s units are listed on The NASDAQ Global Select Market (“NASDAQ”) under the symbol “LINE” and began trading on January 13, 2006, after pricing of its initial public offering.  At the close of business on January 31, 2008, there were approximately 411 unitholders of record.

The following presents the range of high and low last reported sales prices per unit, as reported by NASDAQ, for the quarters indicated.  In addition, distributions declared during each quarter are presented.

	Unit Price Range				Cash Distribution Declared
Quarter	High		Low		PerUnit
2007:
October 1 - December 31	$	30.79	$	22.88	$	0.57
July 1 - September 30	$	37.80	$	31.64	$	0.57
April 1 - June 30	$	39.61	$	32.47	$	0.52
January 1 - March 31	$	35.05	$	30.16	$	0.52
2006:
October 1 - December 31	$	33.46	$	21.21	$	0.43
July 1 - September 30	$	24.10	$	20.08	$	0.40
April 1 - June 30	$	21.00	$	18.72	$	0.32
January 13 - March 31	$	22.35	$	19.55	$	—

Distributions

The Company’s limited liability company agreement requires it to make quarterly distributions to untiholders of all “available cash.”  Available cash means, for each fiscal quarter, all cash on hand at the end of the quarter less the amount of cash reserves established by the Board of Directors to:

·      provide for the proper conduct of business (including reserves for future capital expenditures, future debt service requirements, and for anticipated credit needs);

·      comply with applicable laws, debt instruments or other agreements;

·      plus all cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter for which the determination is being made.  Working capital borrowings are borrowings that will be made under the Company’s credit facility and in all cases are used solely for working capital purposes or to pay distributions to unitholders.

See Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources” for a discussion on the payment of future distributions.

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Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Continued

Unitholder Return Performance Presentation

The performance graph below compares the total unitholder return on the Company’s units, with the total return of the Standard & Poor’s 500 Index (the “S&P 500 Index”) and the Alerian MLP Index, a weighted composite of 50 prominent energy master limited partnerships.  Total return includes the change in the market price, adjusted for reinvested dividends or distributions, for the period shown on the performance graph and assumes that $100 was invested in the Company at the last reported sale price of units as reported by NASDAQ ($22.00) on January 13, 2006 (the day trading of the units commenced), and in the S&P 500 Index and the Alerian MLP Index on the same date.  The results shown in the graph below are not necessarily indicative of future performance.

	January 13, 2006	December 31, 2007
Linn Energy, LLC	$100	$128(1)
Alerian MLP Index	$100	$136
S&P 500 Index	$100	$118

(1)Based on the last reported sale price of the Company’s units as reported by NASDAQ on December 31, 2007 ($25.03).

Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate this Form 10-K or future filings with SEC, in whole or in part, the preceding performance information shall not be deemed to be “soliciting material” or to be “filed” with the SEC or incorporated by reference into any filing except to the extent this performance presentation is specifically incorporated by reference therein.

Securities Authorized for Issuance Under Equity Compensation Plans

See the information incorporated by reference under Part III. Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” regarding securities authorized for issuance under the Company’s equity compensation plans, which information is incorporated by reference into this Item 5.

Sales of Unregistered Securities

None not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.  See Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for discussion of these matters.

29

Item 6.    Selected Financial Data

The selected financial data set forth below should be read in conjunction with Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Item 8. “Financial Statements and Supplementary Data.”

Because of rapid growth through acquisitions and development of properties, the Company’s historical results of operations and period-to-period comparisons of these results and certain other financial data may not be meaningful or indicative of future results.

	Year Ended December 31,												Period from March 14, 2003 (Inception) - December 31,
	2007			2006			2005			2004			2003
	(dollars and units in thousands)
Statement of operations data:
Oil, gas and NGL sales	$	318,226		$	80,393		$	44,645		$	19,502		$	2,379
Gain (loss) on oil and gas derivatives (1)	(345,537		)	103,308			(76,193		)	(11,004		)	(1,437		)
Total revenues	(7,237		)	191,058			(26,481		)	9,178			946
Operating income (loss)	(266,743		)	103,931			(48,864		)	(1,204		)	(1,197		)
Depreciation, depletion and amortization	97,964			24,173			7,294			3,656			562
Interest expense	62,130			25,857			8,043			3,530			517
Net income (loss)	(364,349		)	79,185			(56,351		)	(4,816		)	(1,688		)
Net income (loss) per unit — basic	(5.29		)	2.64			(2.75		)	(0.23		)	(0.06		)
Net income (loss) per unit — diluted	(5.29		)	2.61			(2.75		)	(0.23		)	(0.06		)
Distributions declared per unit	2.18			1.15			—			—			—
Weighted average units outstanding	68,916			28,281			20,518			20,518			27,813
Cash flow data:
Net cash provided by (used in):
Operating activities (2)	$	(44,814	)	$	(6,805	)	$	(29,518	)	$	10,351		$	(135	)
Investing activities	(2,892,420		)	(551,631		)	(150,898		)	(61,373		)	(35,344		)
Financing activities	2,932,080			553,990			189,269			31,167			57,521
Capital expenditures	2,896,958			551,737			150,849			63,594			32,863
Balance sheet data:
Total assets	$	3,796,569		$	905,912		$	280,924		$	105,425		$	79,177
Long-term debt	1,443,830			428,237			207,695			72,750			41,518
Unitholders’ capital (deficit)	2,026,641			450,954			(46,831		)	9,520			14,336
Operating data:
Production:
Gas (MMcf)	27,001			8,599			4,720			3,110			304
Oil (MBbls)	1,271			370			20			10			31
NGL (MBbls)	992			—			—			—			—
Total (MMcfe)	40,579			10,818			4,839			3,112			492
Average daily production (MMcfe/d)	111.2			29.6			13.3			8.5			2.3
Estimated Net Proved Reserves:
Gas (Bcf)	1,028.9			274.0			191.9			118.9			68.9
Oil (MMBbls)	54.8			30.0			0.2			0.1			0.2
NGL (MBbls)	43.1			—			—			—			—
Total (Bcfe)	1,616.1			454.1			193.2			119.8			69.8
Total Weighted Average Prices:
Hedged (Mcfe) (3)	$	8.91		$	9.79		$	6.51		$	5.55		$	5.17
Unhedged (Mcfe) (3)	$	7.84		$	7.43		$	9.23		$	6.27		$	4.84

(1)During 2005, the Company canceled (before their original settlement date) a portion of out-of-the-money gas swaps and realized a loss of $38.3 million.  The Company subsequently hedged similar volumes at higher prices.  The remaining 2005 loss relates to losses on derivative positions settled in 2005 at scheduled maturity dates that were not related to the cancellation of out-of-the-money gas hedges.

(2)Includes premiums paid for derivatives of approximately $279.3 million, $49.8 million and $1.6 million for the years ended December 31, 2007, 2006 and 2005, respectively.

(3)Hedged amounts include the effect of realized gains and losses on derivatives and unhedged amounts do not.

30

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis should be read in conjunction with the “Selected Historical Consolidated Financial and Operating Data” and the financial statements and related notes included elsewhere in this Annual Report on Form 10-K.  The following discussion contains forward-looking statements that reflect the Company’s future plans, estimates, beliefs and expected performance.  The forward-looking statements are dependent upon events, risks and uncertainties that may be outside the Company’s control.  The Company’s actual results could differ materially from those discussed in these forward-looking statements.  Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, gas and NGL, production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Annual Report on Form 10-K, particularly in Part I. Item 1A. “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur.

A reference to a “Note” herein refers to the accompanying Notes to Consolidated Financial Statements contained in Item 8. “Financial Statements and Supplementary Data.”

Executive Summary

Linn Energy is an independent oil and gas company focused on the development and acquisition of long life properties which complement its asset profile in producing basins within the United States.

Proved reserves at December 31, 2007 were 1,616.1 Bcfe, of which approximately 64% were gas, 20% were oil and 16% were NGL.  Approximately 73% were classified as proved developed, with a total Standardized Measure value of $3.46 billion.  At December 31, 2007, the Company operated 5,638, or 77%, of its 7,305 gross productive wells.  Average proved reserves-to-production ratio, or average reserve life, is approximately 22 years, based on the December 31, 2007 reserve report and annualized production for the fourth quarter ended December 31, 2007.

During the year ended December 31, 2007, the Company completed eight acquisitions of working and royalty interests in oil and gas properties.  In January 2008, the Company completed two additional acquisitions of oil and gas properties.  On a pro forma basis, including these two acquisitions, total proved reserves at December 31, 2007 were 1,945.5 Bcfe, of which approximately 55% were gas, 32% were oil and 13% were NGL.

Acquisitions

The following provides a summary of acquisitions of working and royalty interests the Company has completed from January 1, 2007 through the date of this report:

Date	Gross Wells (1)	Operating Region	Aggregate Contract Price
			(in millions)
January 2007	51	Appalachian Basin	$	33.0
February 2007	4	Appalachian Basin	5.9
February 2007	851	Mid-Continent	415.0
April 2007	300	Western	10.0
June 2007	514	Mid-Continent	90.5
August 2007	2,685	Mid-Continent	2,050.0
October 2007	100	Mid-Continent	22.5
October 2007	—	Mid-Continent	52.0
January 2008	2,312	Mid-Continent	552.2
January 2008	138	Appalachian Basin	14.7
	6,955		$	3,245.8

(1)Gross wells do not include approximately 1,800 wells associated with royalty interest acquisitions.

From inception through the date of this report, the Company has completed 24 acquisitions of working and royalty interests in oil and gas properties and related gathering and pipeline assets.  Total acquired proved

31

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

reserves were approximately 1.9 Tcfe at an acquisition cost of approximately $2.11 per Mcfe.  See Note 2 for additional details about the Company’s acquisitions.

The Company finances acquisitions with a combination of proceeds from the issuance of its units, bank borrowings and cash flow from operations.  During 2007, the Company completed three private placements of its units, with gross proceeds of $2.12 billion.  During 2006, the Company completed one additional private placement, with gross proceeds of $305.0 million.  See “Private Placements” below and also Note 4 for additional details about the Company’s private placement of units.

Private Placements

During 2007 and 2006, the Company closed four private placements of units to groups of institutional investors.

Date Issued	Gross Proceeds		Units Issued	Date Converted to Units (1)	Date Registered With SEC	Date Lock-Up Expired (2)
	(in thousands)
August 2007:
Units	$	416,000	12,999,989		December 2007	February 14, 2008
D Units	1,084,000		34,997,005	November 2007	December 2007	February 14, 2008
	$	1,500,000	47,996,994
June 2007:
Units	$	260,000	7,761,194		December 2007	February 14, 2008
February 2007:
Units	$	172,904	6,650,144		December 2007	December 14, 2007
C Units	187,096		7,465,946	April 2007	December 2007	December 14, 2007
	$	360,000	14,116,090
October 2006:
Units	$	116,228	5,534,687		December 2007	December 14, 2007
B Units	188,772		9,185,965	January 2007	December 2007	December 14, 2007
	$	305,000	14,720,652

(1)Not applicable for units.

(2)Lock-up expiration date represents date investors were allowed to sell or transfer units per terms of purchase agreements.

The proceeds from the private placements, net of expenses, were used to finance acquisitions and to repay indebtedness under the Company’s credit facility.  See Note 4 for additional details about the private placements.

Operating Regions

The Company’s oil, gas and NGL properties are currently located in three regions in the United States:

·Mid-Continent, which includes the core operating areas Texas Panhandle and Oklahoma;

·Appalachian Basin, which includes fields in West Virginia and Pennsylvania; and

·Western, which includes the Brea Olinda Field of the Los Angeles Basin in California.

Mid-Continent

The Mid-Continent is the Company’s largest region, and as noted above, includes two key core operating areas.  First, the Texas Panhandle area, which consists of shallow oil and gas production from the Brown Dolomite formation at depths of approximately 3,200 feet and the Deep Granite Wash formation which produces at depths ranging from 8,900 feet to 16,000 feet.  This area produced 71.6 MMcfe/d, or 36%, of the Company’s fourth quarter 2007 production.  The second core area is located primarily in Oklahoma.  Producing depths range from 6,000 feet

32

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

to 20,000 feet in this area.  This area produced 92.7 MMcfe/d, or 46%, of the Company’s fourth quarter 2007 production.  During 2007, the Company invested approximately $40.0 million to drill in Oklahoma.

In order to more efficiently transport its gas to market, the Company owns and operates a network of gas gathering systems comprised of approximately 800 miles of pipeline and associated compression and metering facilities which connect to numerous sales outlets in the Texas Panhandle.

Appalachian Basin

The Appalachian Basin includes fields in West Virginia and Pennsylvania.  This region produced 24.3 MMcfe/d, or 12%, of the Company’s fourth quarter 2007 production.  During 2007, the Company invested approximately $34.3 million to drill in the Appalachian Basin.  The proximity of the Company’s properties in this region to major United States consuming markets allows the Company to receive premium pricing on this production.

The Company also performs limited gas gathering activities for others on non-jurisdictional gathering systems, primarily in Pennsylvania.  The Company aggregates these volumes with production and sells all the gas through meters to the same purchasers.  These revenues are collected and distributed to the third party producers in the normal course of business.

Western

Western consists of the Brea Olinda Field of the Los Angeles Basin in California.  The Brea Olinda Field was discovered in 1880 and produces from the shallow Pliocene formation to the deeper Miocene formation.  This region produced 11.6 MMcfe/d, or 6%, of the Company’s fourth quarter 2007 production.  During 2007, the Company invested approximately $2.4 million to drill in this region.

The Western region also includes the operation of a gas processing facility which processes produced gas from Company and third party wells.  Processed gas is utilized to generate electricity which is used in the field to power equipment, resulting in reduced operating costs.  Revenues are also generated from the sale of excess power.

33

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Results of Operations - Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

The following provides selected financial and operating data for the years indicated:

	Year Ended December 31,
	2007			2006			Variance
	(in thousands)
Revenues:
Gas sales	$	178,627		$	61,641		$	116,986
Oil sales	84,538			18,752			65,786
NGL sales	55,061			—			55,061
Total oil, gas and NGL sales	318,226			80,393			237,833
Gain (loss) on oil and gas derivatives	(345,537		)	103,308			(448,845		)
Natural gas marketing revenues	15,537			5,598			9,939
Other revenues	4,537			1,759			2,778
Total revenues	$	(7,237	)	$	191,058		$	(198,295	)
Expenses:
Operating expenses	$	88,527		$	18,099		$	70,428
Natural gas marketing expenses	12,596			4,862			7,734
General and administrative expenses	57,188			39,993			17,195
Data license expenses	3,231			—			3,231
Depreciation, depletion and amortization	97,964			24,173			73,791
Total expenses	$	259,506		$	87,127		$	172,379
Other income and (expenses)	$	(94,033	)	$	(28,148	)	$	(65,885	)

	Year Ended December 31,
	2007		2006		Variance
Production:
Gas production (MMcf)	27,001		8,599		214.0	%
Oil production (MBbls)	1,271		370		243.5	%
NGL production (MBbls)	992		—		—
Total production (MMcfe)	40,579		10,818		275.1	%
Average daily production (MMcfe/d)	111.2		29.6		275.7	%
Weighted average prices (hedged): (1)
Gas (Mcf)	$	8.19	$	9.79	(16.3	)%
Oil (Bbl) (2)	$	66.15	$	58.68	12.7	%
NGL (Bbl)	$	56.75	$	—	—
Weighted average prices (unhedged): (3)
Gas (Mcf)	$	6.62	$	7.17	(7.7	)%
Oil (Bbl) (2)	$	66.51	$	50.68	31.2	%
NGL (Bbl)	$	55.51	$	—	—
Average unit costs per Mcfe of production:
Operating expenses	$	2.18	$	1.67	30.5	%
General and administrative expenses (4)	$	1.41	$	3.70	(61.9	)%
Depreciation, depletion and amortization	$	2.41	$	2.23	8.1	%

(1)Includes the effect of realized gains of $43.2 million and $25.5 million on derivatives for the years ended December 31, 2007 and 2006, respectively.

(2)Oil production in California is sold pursuant to a long-term contract at 79% of NYMEX, and with gravity increase due to NGL being mixed into the oil stream, prices realized average approximately 82% of NYMEX.

(3)Does not include the effect of realized gains on derivatives.

(4)The measure for the years ended December 31, 2007 and 2006 includes approximately $13.9 million and $21.6 million, respectively, of unit-based compensation and unit warrant expense.  The year ended December 31, 2006 also includes approximately $2.0 million of IPO bonuses.  Excluding these amounts, general and administrative expenses for the years ended December 31, 2007 and 2006 were $1.07 per Mcfe and $1.51 per Mcfe, respectively.  This is a non-GAAP measure used by Company management to analyze its performance.

34

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Revenues

Gas, oil and NGL sales increased 296%, to approximately $318.2 million for the year ended December 31, 2007, from $80.4 million for the year ended December 31, 2006.

The increase in revenue from gas, oil and NGL sales was primarily attributable to increased production as a result of acquisitions and drilling.  Total production increased to 40,579 MMcfe during the year ended December 31, 2007, from 10,818 MMcfe during the year ended December 31, 2006.  The increase in production was due primarily to production from oil and gas properties acquired during 2007 and 2006 and by the drilling of new wells.  The Company drilled 253 wells during 2007, compared to 159 wells during 2006.

Gas production increased to 27,001 MMcf during the year ended December 31, 2007, from 8,599 MMcf during the year ended December 31, 2006, with the 2007 acquisitions in the Mid-Continent region (see Note 2) contributing approximately 15,734 MMcf from the respective closing dates of the acquisitions.  The increase in production was slightly offset by a reduction in the weighted average gas price, from $7.17 per Mcf during the year ended December 31, 2006, to $6.62 per Mcf during the year ended December 31, 2007, which caused gas revenues to decrease approximately $4.8 million.

Oil production increased to 1,271 MBbls during the year ended December 31, 2007, from 370 MBbls during the year ended December 31, 2006, due to the acquisitions in the Western and Mid-Continent regions.  The acquisitions in the Mid-Continent also increased NGL production to 992 MBbls during the year ended December 31, 2007, from zero during the comparative period of the prior year.  The increase in the weighted average price of oil for the period, from $50.68 per Bbl to $66.51 per Bbl, contributed approximately $5.9 million to the increase in oil revenues.

Hedging Activities

During the year ended December 31, 2007, the Company had commodity pricing derivative contracts for approximately 82% of its gas production and 86% of its oil and NGL production, which resulted in realized gains of $43.2 million (greater revenues than would have been achieved at unhedged prices).  During the year ended December 31, 2006, the Company had approximately 108% of its gas production and 50% of its oil production hedged, which resulted in realized gains of $25.5 million.  Unrealized losses on derivatives in the amount of $388.7 million for the year ended December 31, 2007, and unrealized gains of $77.8 million for the year ended December 31, 2006, were also recorded.  Unrealized gains and losses result from changes in market valuations of derivatives as future commodity price expectations change compared to the contract price on the derivative.  During 2007, expected future oil and gas prices increased, which reduced the market value of the derivatives.  Such market value adjustment, if realized in the future, would be offset by higher actual prices for production.  Since the Company has hedged a significant portion of its oil and gas production at fixed prices, it may not realize the benefit of future increases in commodity prices.  However, the Company utilizes put contracts as a significant percentage of its hedging portfolio.  Puts not only protect against declines in commodity prices, but also preserve commodity upside.  See Note 9 for details regarding derivatives in place through December 31, 2013.

Expenses

Operating expenses, which include expenses such as lease operating, labor, field office, vehicle, supervision, transportation, maintenance, tools, supplies, and production and ad valorem taxes, increased to $88.5 million for the year ended December 31, 2007, from $18.1 million for the year ended December 31, 2006.  Production taxes, which are a function of volumes and revenues generated from production, increased to $17.8 million for the year ended December 31, 2007, from $2.0 million in 2006.  Ad valorem taxes, which are based on the value of reserves and vary by location, increased to $8.2 million for the year ended December 31, 2007, from $1.6 million in 2006.  Operating expenses also increased due to costs associated with the 2007 acquisitions in the Mid-Continent region, including expenses associated with the addition of approximately 150 field and direct field support employees.  In addition, the number of producing wells, which increased by over 4,000 gross wells as a result of the acquisitions completed in 2007 and the drilling of 253 wells during the year ended December 31, 2007, and 612 wells from inception through December 31, 2007, also contributed to the increased operating expenses.

35

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Average operating expenses per equivalent unit of production increased to $2.18 for the year ended December 31, 2007, compared to $1.67 for the year ended December 31, 2006.  Operating expenses per Mcfe increased due to material and labor costs and the changing mix of production beginning in the third quarter of 2006 to include oil and NGL, which have higher operating costs than gas wells.  During 2007, the Company also incurred costs for workover and maintenance of its wells to enhance future production and/or offset decline. Operating expenses per Mcfe also increased by $0.09 due to turnover of purchased inventory valued at acquisition cost instead of cost to produce.

General and administrative expenses include the costs of employees and executive officers, related benefits, office leases, professional fees and other costs not directly associated with field operations.  General and administrative expenses increased to approximately $57.2 million for the year ended December 31, 2007, from $40.0 million for the year ended December 31, 2006.  The increase in general and administrative expenses was primarily due to costs incurred to support the Company’s rapid growth through acquisitions and position the Company for future growth.  In conjunction with expansion and development of the organization during 2007, the Company hired approximately 150 employees (including approximately 100 corporate, administrative and support employees with the Mid-Continent acquisition) and as a result, salaries and benefits expense increased approximately $13.5 million over 2006.  Costs to perform the necessary functions associated with being a growing company were $14.2 million during 2007, compared to $6.1 million during 2006.  These costs include expenses for recruitment of key management team members, acquisition related data conversion and integration, public partnership tax reporting, audit fees, legal fees, proxy and printing costs and other professional fees, including costs related to compliance with Section 404 of the Sarbanes-Oxley Act of 2002.  In addition, acquisition costs that are not eligible for capitalization, including internal and indirect costs for completed acquisitions, as well as direct costs associated with acquisition efforts that have not reached fruition, contributed to the increase.  The increase in general and administrative expenses was partially offset by lower employee unit-based compensation expense, which decreased to $9.5 million (exclusive of amounts associated with certain of the new employees) during the year ended December 31, 2007, from $21.6 million during 2006.  Unit-based compensation expense incurred during the year ended December 31, 2006 was higher compared to that incurred in 2007, primarily due to expense associated with unit awards granted in conjunction with the Company’s IPO in January 2006.  General and administrative expenses are presented net of approximately $0.9 million and $1.1 million during the years ended December 31, 2007 and 2006, respectively, which represent expense reimbursements from other working interest owners.

The Company incurred expenses of approximately $3.2 million for initial, one-time data license fees during the year ended December 31, 2007.  These expenses primarily represent fees for access to 3-D seismic and other data libraries in the Mid-Continent to enable the Company to maximize drilling opportunities in that region.

Depreciation, depletion and amortization increased to approximately $98.0 million for the year ended December 31, 2007, from $24.2 million for the year ended December 31, 2006.  Of this increase, approximately $37.9 million was as a result of depletion related to the Mid-Continent acquisition in August 2007.  The properties acquired in the Mid-Continent acquisitions earlier in 2007 contributed approximately $12.4 million to the increase.  Although total depreciation, depletion and amortization increased during 2007 due to higher total production levels, the reserves in the acquired Texas, Oklahoma and California properties have lower depletion rates than the reserves in the Appalachian Basin.  Depreciation, depletion and amortization expenses include impairment expense of $3.3 million and $1.0 million for the years ended December 31, 2007 and 2006, respectively.

Other income and (expenses) increased to a net expense of $94.0 million for the year ended December 31, 2007, compared to a net expense of $28.1 million for the year ended December 31, 2006, primarily due to increased interest expense from increased debt levels associated with borrowings to fund the Mid-Continent acquisition and drilling.  Cash payments for interest increased to $57.3 million for the year ended December 31, 2007, compared to $24.1 million for the year ended December 31, 2006.  The Company’s interest rate swaps were not designated as cash flow hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, (“SFAS 133”), even though they reduce exposure to changes in interest rates (see Note 8).  Therefore, the changes in fair values of these instruments were recorded as a loss of approximately $29.5 million and a gain of approximately $82,000 for the years ended December 31, 2007 and 2006, respectively.  These amounts are non-cash items.

36

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Income tax was an expense of approximately $3.6 million for the year ended December 31, 2007 and a benefit of approximately $3.4 million for the year ended December 31, 2006.  The Company is a limited liability company treated as a partnership for federal and state income tax purposes.  Certain of the Company’s subsidiaries are Subchapter C-corporations subject to corporate income taxes.  The Company’s taxable subsidiaries generated net operating losses for the year ended December 31, 2006.  Management has subsequently recovered expenses through an intercompany charge for services from Linn Operating, Inc. to Linn Energy, which resulted in a corresponding tax expense in the year ended December 31, 2007.

37

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Results of Operations - Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

The following provides selected financial and operating data for the years indicated:

	Year Ended December 31,
	2006			2005			Variance
				(in thousands)
Revenues:
Gas sales	$	61,641		$	43,594		$	18,047
Oil sales	18,752			1,051			17,701
Total oil and gas sales	80,393			44,645			35,748
Gain (loss) on oil and gas derivatives (1)	103,308			(76,193		)	179,501
Natural gas marketing revenues	5,598			4,722			876
Other revenues	1,759			345			1,414
Total revenues	$	191,058		$	(26,481	)	$	217,539
Expenses:
Operating expenses	$	18,099		$	7,356		$	10,743
Natural gas marketing expenses	4,862			4,401			461
General and administrative expenses	39,993			3,332			36,661
Depreciation, depletion and amortization	24,173			7,294			16,879
Total expenses	$	87,127		$	22,383		$	64,744
Other income and (expenses)	$	(28,148	)	$	(7,413	)	$	(20,735	)

	Year Ended December 31,
	2006		2005		Variance
Production:
Gas production (MMcf)	8,599		4,720		82.2	%
Oil production (MBbls)	370		20		1750.0	%
Total production (MMcfe)	10,818		4,839		123.6	%
Average daily production (MMcfe/d)	29.6		13.3		122.6	%
Weighted average prices (hedged): (1)
Gas (Mcf)	$	9.79	$	6.45	51.8	%
Oil (Bbl) (2)	$	58.68	$	52.55	11.7	%
Weighted average prices (unhedged): (3)
Gas (Mcf)	$	7.17	$	9.24	(22.4	)%
Oil (Bbl) (2)	$	50.68	$	52.55	(3.6	)%
Average unit costs per Mcfe of production:
Operating expenses	$	1.67	$	1.52	9.9	%
General and administrative expenses (4)	$	3.70	$	0.69	436.2	%
Depreciation, depletion and amortization	$	2.23	$	1.51	47.7	%

(1)During the year ended December 31, 2005, the Company cancelled (before the original settlement date) a portion of out-of-the money gas swaps and realized a loss of $38.3 million.  The Company subsequently hedged similar volumes at higher prices.  Weighted average prices (hedged), include the effect of realized gains of $25.5 million and realized losses $13.1 million (excluding the $38.3 million loss) on derivatives for the years ended December 31, 2006 and 2005, respectively.

(2)Oil production in California is sold pursuant to a long-term contract at 79% of NYMEX, and with gravity increase due to NGL being mixed into the oil stream, prices realized average approximately 82% of NYMEX.

(3)Does not include the effect of realized gains on derivatives.

(4)The measure for the year ended December 31, 2006 includes approximately $21.6 million of unit-based compensation expense and approximately $2.0 million of IPO bonuses.  Excluding these amounts, general and administrative expenses for the year ended December 31, 2006 was $1.51 per Mcfe.  This is a non-GAAP measure used by Company management to analyze its performance.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Revenues

Oil and gas sales increased to approximately $80.4 million for the year ended December 31, 2006, from $44.6 million for the year ended December 31, 2005.

The increase in revenue from oil and gas sales was primarily attributable to increased production.  Total production increased to 10,818 MMcfe during the year ended December 31, 2006, from 4,839 MMcfe during the year ended December 31, 2005.  Oil production increased to 370 MBbls during the year ended December 31, 2006, from 20 MBbls during the year ended December 2005, primarily due to the acquisition of Blacksand in August 2006.  Gas production increased to 8,599 MMcf during the year ended December 31, 2006, from 4,720 MMcf during the year ended December 31, 2005.  The increase in gas production was due to the drilling of new wells and production added by the acquisitions of oil and gas properties during 2006 and 2005.  The company drilled 159 wells during 2006 and 110 wells in 2005.

Hedging Activities

During the year ended December 31, 2006, the Company entered into commodity pricing derivative contracts for approximately 108% of gas production and 50% of oil production, which resulted in revenues that were $25.5 million greater than the Company would have achieved at unhedged prices.  During the year ended December 31, 2005, the Company entered into commodity pricing derivative contracts for approximately 84% of oil and gas production, which resulted in revenues that were $13.1 million less than the Company would have achieved at unhedged prices.  During the year ended December 31, 2005, the Company canceled (before its original settlement date) a portion of out-of-the-money gas hedges and realized a loss of $38.3 million, then subsequently hedged similar volumes at higher prices.  Unrealized gain on derivatives in the amount of $77.8 million for the year ended December 31, 2006 and unrealized losses on derivatives in the amounts of $24.8 million for the year ended December 31, 2005 were also recorded.  Unrealized gains and losses result from oil and gas price fluctuations as compared to the settlement price on the derivative.

Expenses

Operating expenses include expenses such as lease operating, labor, field office, vehicle, supervision, transportation, maintenance, tools, supplies, and production and ad valorem taxes.  Production taxes are a function of volumes and revenues generated from production.  Ad valorem taxes vary by location and are based on the value of reserves.  Operating expenses increased to $18.1 million for the year ended December 31, 2006, from $7.4 million for the year ended December 31, 2005, due to the increase in the number of producing wells as a result of the acquisitions completed in both 2006 and 2005 and the drilling of 159 wells during 2006 and 110 wells during 2005.  From inception through December 31, 2006, the Company drilled 359 wells and acquired 3,344 wells.

General and administrative expenses include the costs of employees and executive officers, related benefits, office leases, professional fees and other costs not directly associated with field operations.  General and administrative expenses increased to $40.0 million, for the year ended December 31, 2006, from $3.3 million for the year ended December 31, 2005.  The increase in general and administrative expenses was due to the recognition of unit-based compensation expense of $21.6 million during the year ended December 31, 2006, compared to none during the year ended December 31, 2005.  In addition, acquisition costs that are not eligible for capitalization, including internal and indirect costs for completed acquisitions, as well as direct costs associated with acquisition efforts that have not reached fruition, contributed to the increase.  Costs to support rapidly growing operations and position the Company for future growth include increasing staffing levels to manage the 359 wells drilled and 3,344 wells acquired from inception in 2003 through December 31, 2006, recruiting key management team members and performing the functions associated with being a public company, which totaled approximately $6.1 million in 2006 (the year of IPO).  General and administrative expenses are presented net of approximately $1.1 million and $1.2 million during the year ended December 31, 2006 and 2005, respectively, which represent expense reimbursements from other working interest owners.

39

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Depreciation, depletion and amortization increased to $24.2 million for the year ended December 31, 2006, from $7.3 million for the year ended December 31, 2005.  Of this increase, approximately $4.8 million was as a result of depletion related to the properties that were acquired in the Western and Mid-Continent regions in the third quarter of 2006.  In addition, the depletion rate for oil and gas properties in the Appalachia Basin increased 37.4% in the fourth quarter of 2006, due to a downward revision of estimated reserves from the prior year.  The Company also recorded $1.0 million of impairments during the year ended December 31, 2006.

Other income and (expenses) increased to a net expense of $28.1 million for the year ended December 31, 2006, compared to a net expense of $7.4 million for the year ended December 31, 2005, primarily due to increased debt levels associated with acquisitions and drilling.  Cash payments for interest increased to $24.1 million for the year ended December 31, 2006, from $6.5 million for the year ended December 31, 2005.  Interest rate swaps were not designated as cash flow hedges under SFAS 133, even though they reduce exposure to changes in interest rates.  Therefore, the changes in fair values of these instruments were recorded as gains of approximately $82,000 and $1.0 million for the years ended December 31, 2006 and 2005, respectively.  These amounts are non-cash gains.

Income tax was a benefit of approximately $3.4 million for the year ended December 31, 2006.  Income tax expense was approximately $74,000 for the year ended December 31, 2005.  Linn Energy is a limited liability company, and is taxed substantially as a partnership; however, the Company’s taxable subsidiaries generated net operating losses for the year ended December 31, 2006.  The increase in realizable net operating loss income tax benefit currently realizable was the result of a 2006 backlog of expenses reported by the taxable subsidiaries on behalf of the consolidated Company.  Such losses were realized in 2007 since the strategy of the corporate structure for the taxable subsidiaries is to recover costs rather than generate significant profits and the forecast of loss generation is not expected to turn around in the foreseeable future.

Liquidity and Capital Resources

The Company has utilized public and private equity, proceeds from bank borrowings and cash flow from operations for capital resources and liquidity.  To date, the primary use of capital has been for the acquisition and development of oil and gas properties. The Company manages its working capital and cash requirements to borrow only as needed from its credit facility. At December 31, 2007, the Company’s total current liabilities exceeded current assets by $59.6 million due to a $65.3 million current payable for post-closing settlement costs for an oil and gas acquisition. The Company has $354.5 in available borrowing to meet such obligations at December 31, 2007.

As the Company pursues growth, it continually monitors the capital resources available to meet future financial obligations and planned capital expenditures.  The Company’s future success in growing reserves and production will be highly dependent on the capital resources available and its success in drilling for or acquiring additional reserves.  The Company actively reviews acquisition opportunities on an ongoing basis.  If the Company were to make significant additional acquisitions for cash, it would need to borrow additional amounts under the credit facility, if available, or obtain additional debt or equity financing.  The credit facility imposes certain restrictions on the Company’s ability to obtain additional debt financing.  Based upon current expectations, the Company believes liquidity and capital resources will be sufficient for the conduct of its business and operations.

Statements of Cash Flows — Operating Activities

At December 31, 2007, the Company had $1.4 million cash and cash equivalents compared to $6.6 million at December 31, 2006.  Cash used by operating activities for the year ended December 31, 2007 was approximately $44.8 million, compared to cash provided by operating activities of $6.8 million for the year ended December 31, 2006.  The decrease in cash provided by operating activities was primarily due to premiums paid for derivatives of approximately $279.3 million.  The premiums paid were for derivative contracts that hedge 284,985 MMcfe of future production for $2.68 billion of oil and gas property acquisitions (see Note 2) for up to five years.  These hedges are expected to provide or stabilize the Company’s future cash flow and were funded through the Company’s credit facility.  See Note 9 for additional details about commodity derivatives.

As part of its overall strategy, the Company regularly enters into long-term commodity derivative contracts in the form of swaps and puts to hedge its future production.  The Company’s intent is to hold these contracts to maturity.  As is common in the marketplace, the Company at times is required to pay cash premiums to enter into such contracts.  The majority of the Company’s premiums to date have been paid on put contracts, since these contracts contain optionality related to changes in future prices that allow the Company to realize increased cash flows should future prices increase.  The derivative contracts “hedge” the Company’s future production as the contracts provide the Company with a minimum realizable cash flow related to its hedged future production.  The Company typically enters into additional put and swap contracts in conjunction with the acquisition of oil and gas properties, since its future production

40

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

increases at that time.  In order to hedge the significant increase in production anticipated as a result of its August 2007 and January 2008 acquisitions (see Note 2), the Company purchased additional commodity derivative contracts in the third and fourth quarters of 2007 and paid premiums of approximately $226.3 million for these contracts.  The Company expects to purchase additional derivative contracts in the future, as it acquires additional oil and gas properties.  The amount of derivative contracts the Company enters into in the future will be directly related to expected production from future acquisitions, and cannot be predicted at this time.  See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” for details about derivatives the Company entered into subsequent to December 31, 2007.

Statements of Cash Flows — Investing Activities

Cash used in investing activities was approximately $2.89 billion for the year ended December 31, 2007, compared to $551.6 million for the year ended December 31, 2006.  The increase in cash used in investing activities was primarily due to an increase in acquisition activity during the year ended December 31, 2007, compared to the same period of the prior year.

The total cash used in investing activities for the year ended December 31, 2007 includes $2.03 billion for the August 2007 acquisition of properties in the Mid-Continent, $555.5 million for the February, June and October 2007 acquisitions in the Mid-Continent and $38.6 million for the acquisitions of certain gas properties in West Virginia (see Note 2).  Other acquisitions, including acquisitions of additional working interests in current wells, were approximately $41.5 million and property, plant and equipment purchases were $17.9 million.  The total for the year ended December 31, 2007 also includes $185.5 million for the drilling and development of oil and gas properties and pipeline costs.  For 2008, the Company estimates its total drilling and development capital expenditures will be between $250.0 million and $300.0 million.  This estimate is under continuous review and is subject to on-going adjustment.

Statements of Cash Flows — Financing Activities

Cash provided by financing activities was approximately $2.93 billion for the year ended December 31, 2007, compared to $554.0 million for the year ended December 31, 2006.

The Company recorded gross proceeds of $2.12 billion from three private placements of its units during the year ended December 31, 2007.  The net proceeds of approximately $2.09 billion were used to finance the Mid-Continent acquisitions, the acquisitions of certain gas properties in West Virginia, and to repay indebtedness under the Company’s credit facility.  During the year ended December 31, 2007, total proceeds from the issuance of debt were $1.3 billion and total repayments of debt were $283.1 million.

Distributions

Under the limited liability company agreement, Company unitholders are entitled to receive a quarterly distribution of available cash to the extent there is sufficient cash from operations after establishment of cash reserves and payment of fees and expenses.  The following provides a summary of distributions paid by the Company during the year ended December 31, 2007:

Date Paid	Period Covered by Distribution	Distribution Per Unit		Total Distribution
				(in thousands)
November 2007	July 1 - September 30, 2007	$	0.57	$	64,798
August 2007	April 1 - June 30, 2007	$	0.57	37,419
May 2007	January 1 - March 31, 2007	$	0.52	30,001
February 2007	October 1 - December 31, 2006	$	0.52	22,745
				$	154,963

41

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

In January 2008, the Company’s Board of Directors declared a cash distribution of $0.63 per unit with respect to the fourth quarter of 2007.  The distribution totaled approximately $72.2 million and was paid on February 14, 2008 to unitholders of record as of the close of business on February 8, 2008.  This distribution represents a 10.5% increase in the Company’s annualized cash distribution rate, to $2.52 per unit, from $2.28 per unit for the third quarter of 2007.

Private Placements

See “Executive Summary” above and Note 4 for details about the Company’s private placements.

Credit Facility

At December 31, 2007, the Company had a $1.8 billion Third Amended and Restated Credit Agreement (“Credit Facility”) and a maturity of August 2010.  In connection with its Credit Facility, the Company paid approximately $9.3 million in financing fees, which were deferred and are amortized over the life of the Credit Facility.  In addition, during the year ended December 31, 2007, the Company wrote off deferred financing fees related to its prior credit facility of approximately $2.8 million.  On January 31, 2008, the Credit Facility was amended to increase the amount available for borrowing to $1.9 billion, all of which is conforming, effective until April 1, 2008, at which point the borrowing base will be redetermined in accordance with the terms of the Credit Facility.  At January 31, 2008, the Company had $314.5 million available for borrowing under its Credit Facility.

The borrowing base under the Credit Facility will be redetermined semi-annually by the lenders in their sole discretion, based on, among other things, reserve reports as prepared by reserve engineers taking into account the oil and gas prices at such time.  The Company’s obligations under the Credit Facility are secured by mortgages on its oil and gas properties as well as a pledge of all ownership interests in its operating subsidiaries.  The Company is required to maintain the mortgages on properties representing at least 80% of its oil and gas properties.  Additionally, the obligations under the Credit Facility are guaranteed by all of the Company’s operating subsidiaries and may be guaranteed by any future subsidiaries.

At the Company’s election, interest on borrowings under the Credit Facility is determined by reference to either LIBOR plus an applicable margin between 1.00% and 2.25% per annum or the alternate base rate (“ABR”) plus an applicable margin between 0% and 0.75% per annum.  Interest is generally payable quarterly for ABR loans and at the applicable maturity date for LIBOR loans.

The Credit Facility contains various covenants that limit the Company’s ability to incur indebtedness, enter into interest rate swaps, grant certain liens, make certain loans, acquisitions, capital expenditures and investments, make distributions other than from available cash, merge or consolidate, or engage in certain asset dispositions, including a sale of all or substantially all of its assets.  The Credit Facility also contains covenants that require the Company to maintain Adjusted EBITDA to interest expense and current liquidity financial ratios.  The Company is in compliance with all financial and other covenants of its Credit Facility.

As noted above, the Company depends on its Credit Facility for future capital needs.  In addition, the Company has drawn on the Credit Facility to fund or partially fund quarterly cash distribution payments, since it uses operating cash flows for investing activities and borrows as cash is needed.  Absent such borrowing, the Company would have at times experienced a shortfall in cash available to pay the declared quarterly cash distribution amount.  If there is a default under the Credit Facility, the Company would be unable to make borrowings to fund distributions.

Term Loan

On January 31, 2008, in order to fund a portion of the January 2008 acquisition of oil and gas properties in the Mid-Continent (see “Recent Developments” above), the Company entered into a $400.0 million Second Lien Term Loan Agreement with a maturity of July 31, 2009 (“Term Loan”).  In connection with the Term Loan, the Company paid financing fees of approximately $6.0 million, which were deferred and amortized over the life of the Term Loan.  The Company’s obligations under the Term Loan are secured by a second priority lien on all oil and gas properties as well as a second priority pledge on all ownership interests in its operating subsidiaries.  The Company’s obligations under the Term Loan are guaranteed by all the Company’s operating subsidiaries and may be guaranteed

42

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

by any future subsidiaries.  Covenants under the Term Loan are substantially similar to those under the Credit Facility.  Interest is determined by reference to LIBOR plus an applicable margin of 5.0% for the first twelve months and 7.5% for the remaining period until maturity or a domestic bank rate plus an applicable margin of 3.5% for the first twelve months and 6.0% for the remaining period until maturity.

Off-Balance Sheet Arrangements

At December 31, 2007, the Company did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on its financial position or results of operations.

Contingencies

During the years ended December 31, 2007, 2006, and 2005 no significant payments were made to settle any of the Company’s legal proceedings.  The Company regularly analyzes current information and accrues for probable liabilities on the disposition of certain matters, as necessary.  Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

43

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Commitments and Contractual Obligations

The following summarizes, as of December 31, 2007, certain long-term contractual obligations that are reflected in the consolidated balance sheet and/or disclosed in the accompanying notes thereto:

	Payments Due
Contractual Obligations	Total		2008		2009 — 2010		2011 — 2012		2013 and Beyond
					(in thousands)
Long-term debt obligations:
Long-term notes payable	$	1,521	$	691	$	501	$	47	$	282
Credit Facility	1,443,000		—		1,443,000		—		—
Interest on Credit Facility computed at 7.02%	261,688		101,299		160,389		—		—
Operating lease obligations:
Office, property and equipment leases	15,947		2,752		5,696		4,933		2,566
Other noncurrent liabilities:
Asset retirement obligations	29,073		—		—		204		28,869
Other:
Derivative instruments	69,961		6,148		48,582		5,568		9,663
Drilling and other contracts	24,136		8,206		15,827		103		—
Total	$	1,845,326	$	119,096	$	1,673,995	$	10,855	$	41,380

Capital Structure

The Company’s capitalization is presented below:

	December 31,
	2007		2006
	(in thousands)
Cash and cash equivalents	$	1,441	$	6,595
Credit facility	$	1,443,000	$	425,750
Other noncurrent debt	830		2,487
	1,443,830		428,237
Total unitholders’ capital	2,026,641		450,954
Total capitalization	$	3,470,471	$	879,191

44

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

Non-GAAP Financial Measure

Adjusted EBITDA

The Company defines Adjusted EBITDA as net income (loss) plus:

·Net operating cash flow from acquisitions, effective date through closing date;

·Interest expense, net of amounts capitalized;

·Depreciation, depletion and amortization;

·Write-off of deferred financing fees and other;

·(Gain) loss on sale of assets;

·Accretion of asset retirement obligation;

·Unrealized (gain) loss on derivatives;

·Unit-based compensation and unit warrant expense;

·Data license expenses;

·IPO cash bonuses; and

·Income tax (benefit) provision.

Adjusted EBITDA is a significant performance metric used by Company management to indicate (prior to the establishment of any reserves by its Board of Directors) the cash distributions the Company expects to pay unitholders.  Specifically, this financial measure indicates to investors whether or not the Company is generating cash flow at a level that can sustain or support an increase in its quarterly distribution rates.  Adjusted EBITDA is also a quantitative metric used throughout the investment community with respect to publicly-traded partnerships and limited liability companies.

The following presents a reconciliation of consolidated net income (loss) to Adjusted EBITDA:

	Year Ended December 31,
	2007			2006			2005
	(in thousands)
Net income (loss)	$	(364,349	)	$	79,185		$	(56,351	)
Plus:
Net operating cash flow from acquisitions, effective date through closing date (1)	67,417			712			—
Interest expense, net of amounts capitalized	62,130			25,494			7,040
Depreciation, depletion and amortization	97,964			24,173			7,294
Write-off of deferred financing fees and other	3,460			3,342			381
(Gain) loss on sale of assets	813			72			39
Accretion of asset retirement obligation	1,014			314			172
Unrealized (gain) loss on derivatives	418,281			(77,776		)	24,776
Realized loss on canceled gas derivatives (2)	—			—			38,281
Unit-based compensation expense and unit warrant expense	13,921			21,643			—
Data license expenses	3,231			—			—
IPO cash bonuses	—			2,039			—
Income tax (benefit) provision (3)	3,573			(3,402		)	74
Adjusted EBITDA	$	307,455		$	75,796		$	21,706

(1)Includes net operating cash flow from acquisitions through the date of this report, including the Mid-Continent IV acquisition (see Note 2).

(2)During the year ended December 31, 2005, the Company canceled (before their original settlement date) a portion of out-of-the-money gas swaps and realized a loss of $38.3 million.  The Company subsequently hedged similar volumes at higher prices.

(3)The Company’s taxable subsidiaries generated net operating losses during the year ended December 31, 2006.  Management subsequently recovered expenses through an intercompany charge for services from Linn Operating, Inc. to Linn Energy, which resulted in a corresponding tax expense during the year ended December 31, 2007.

45

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

As noted above, Adjusted EBITDA is non-GAAP performance measure used by Company management to indicate the cash distributions the Company expects to pay unitholders.  On the consolidated statements of cash flows, net cash used by operating activities for the year ended December 31, 2007, was approximately $44.8 million and includes approximately $279.3 million invested in derivatives.  Net cash used by operating activities for the year ended December 31, 2006, was approximately $6.8 million and includes $49.8 million invested in derivatives.  Net cash used by operating activities for the year ended December 31, 2005 was approximately $29.5 million and includes a $38.3 million realized loss on cancelled out-of-the-money gas swaps.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations is based upon the consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).  The preparation of these financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used.  The Company evaluates its estimates and assumptions on a regular basis.  The Company bases estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates and assumptions used in the preparation of financial statements.  Below, the Company has provided expanded discussion of its more significant accounting policies, estimates and judgments.  These accounting policies reflect more significant estimates and assumptions used in the preparation of financial statements.  See Note 1 for a discussion of additional accounting policies and estimates made by Company management.

Oil and Gas Reserves

The Company’s estimates of proved reserves are based on the quantities of oil, gas and NGL that engineering and geological analyses demonstrate, with reasonable certainty, to be recoverable from established reservoirs in the future under current operating and economic parameters.  The independent engineering firm DeGolyer and MacNaughton prepared a reserve and economic evaluation of all of the Company properties on a well-by-well basis as of December 31, 2007.

Reserves and their relation to estimated future net cash flows impact the Company’s depletion and impairment calculations.  As a result, adjustments to depletion and impairment are made concurrently with changes to reserve estimates.  The Company prepares its reserve estimates, and the projected cash flows derived from these reserve estimates, in accordance with SEC guidelines.  The independent engineering firm described above adheres to the same guidelines when preparing their reserve reports.  The accuracy of the reserve estimates is a function of many factors including the following: the quality and quantity of available data, the interpretation of that data, the accuracy of various mandated economic assumptions and the judgments of the individuals preparing the estimates.

The Company’s proved reserve estimates are a function of many assumptions, all of which could deviate significantly from actual results.  As such, reserve estimates may materially vary from the ultimate quantities of oil, gas and NGL eventually recovered.

Oil and Gas Properties/Property and Equipment

Proved Oil and Gas Properties

The Company accounts for oil and gas properties under the successful efforts method.  Under this method, all acquisition and development costs of proved properties are capitalized and amortized on a unit-of-production basis over the remaining life of the proved reserves and proved developed reserves, respectively.

The Company evaluates the impairment of its proved oil and gas properties on a field-by-field basis whenever events or changes in circumstances indicate an asset’s carrying amount may not be recoverable.  The carrying amount of proved oil and gas properties are reduced to fair value when the expected undiscounted future cash flows

46

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

are less than the asset’s net book value.  Cash flows are determined based upon reserves using prices, costs and discount factors consistent with those used for internal decision making.  The underlying commodity prices embedded in the Company’s estimated cash flows are the product of a process that begins with the Henry Hub forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that management believes will impact realizable prices.  Although prices used are likely to approximate market, they do not necessarily represent current market prices.  Costs of retired, sold or abandoned properties that constitute a part of an amortization base are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized currently.  Gains or losses from the disposal of other properties are recognized currently.  Expenditures for maintenance and repairs necessary to maintain properties in operating condition are expensed as incurred.  Major replacements are capitalized.  Estimated dismantlement and abandonment costs for oil and gas properties are capitalized, net of salvage, at their estimated net present value and amortized on a unit-of-production basis over the remaining life of the related proved developed reserves.

Unproved Oil and Gas Properties

Unproved properties consist of costs incurred to acquire unproved leasehold as well as costs incurred to acquire unproved resources.  Unproved leasehold costs are capitalized and amortized on a composite basis if individually insignificant, based on past success, experience and average lease-term lives.  Unamortized leasehold costs related to successful exploratory drilling are reclassified to proved properties and depleted on a unit-of-production basis.  The carrying value of the Company’s unproved resources, which were acquired in connection with business acquisitions, was determined using the market-based weighted average cost of capital rate, subjected to additional project-specific risking factors.  Because these reserves do not meet the definition of proved reserves, the related costs are not classified as proved properties.  As the unproved resources are developed and proven, the associated costs are reclassified to proved properties and depleted on a unit-of-production basis.  The Company assesses unproved resources for impairment annually by comparing book value to fair value, which is determined using discounted estimates of future cash flows.

Other Property and Equipment

Other property and equipment includes gas gathering systems, pipelines, buildings, data processing and telecommunications equipment, office furniture and equipment, and other fixed assets.  These items are recorded at cost and are depreciated using the straight-line method based on expected lives ranging from 3 to 39 years for the individual asset or group of assets.

Goodwill

Goodwill represents the excess of the cost of an acquired business over the net amounts assigned to assets acquired and liabilities assumed.  Goodwill is not amortized to earnings but is tested annually during the fourth quarter or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  At December 31, 2007, goodwill on the Company’s consolidated balance sheet of $64.4 million represents goodwill recorded in the fourth quarter of 2007 in connection with the Company’s Mid-Continent III acquisition (see Note 2).  Future changes in goodwill may result from, among other things, finalization of preliminary purchase price allocations, impairments, or future acquisitions.

Revenue Recognition

Sales of oil, gas and NGL are recognized when oil, gas or NGL has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable.  Virtually all of the Company’s contract pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of oil, gas and NGL, and prevailing supply and demand conditions, so that prices fluctuate to remain competitive with other available suppliers.

The Company has elected the entitlements method to account for gas imbalances.  Gas imbalances occur when the Company sells more or less than its entitled ownership percentage of total gas production.  Under the entitlements method, any amount received in excess of the Company’s share is treated as a liability.  If the Company receives

47

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

less than its entitled share, the underproduction is recorded as a receivable.  At December 31, 2007, the Company had a gas imbalance receivable of approximately $6.6 million, which is included in accounts receivable — trade, net, on the consolidated balance sheet.  The Company did not have any significant gas imbalance positions at December 31, 2006.

The Company engages in the purchase, gathering and transportation of third-party natural gas and subsequently markets such gas to independent purchasers under separate arrangements.  As such, the Company separately reports third-party marketing sales and natural gas marketing expenses.  Marketing margins related to the Company’s production are included in oil, gas and NGL sales.

The Company generates electricity with excess gas, which it uses to serve certain of its operating facilities in Brea, California.  Any excess electricity is sold to the California wholesale power market.  This revenue is included in other revenues on the consolidated statements of operations.

Asset Retirement Obligations

The Company has the obligation to plug and abandon oil and gas wells and related equipment at the end of production operations.  Estimated asset retirement costs are recognized when the obligation is incurred, and are amortized over proved developed reserves using the units of production method.  Asset retirement costs are estimated by the Company’s engineers using existing regulatory requirements and anticipated future inflation rates.  Revisions in estimated liabilities can result from revisions of estimated inflation rates, escalating retirement costs and changes in the estimated timing of settling asset retirement obligations (see Note 11).

Derivative Instruments

The Company uses derivative financial instruments to achieve a more predictable cash flow from its oil, gas and NGL production by reducing its exposure to price fluctuations.  As of December 31, 2007, these transactions were in the form of swaps and puts.  A put option requires the Company to pay the counterparty a premium equal to the fair value of the option at the purchase date and receive from the counterparty the excess, if any, of the fixed floor over the floating market price.  Additionally, the Company uses derivative financial instruments in the form of interest rate swaps to mitigate its interest rate exposure.

The Company accounts for these activities pursuant to SFAS 133.  This statement establishes accounting and reporting standards requiring that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded at fair value and included in the balance sheet as assets or liabilities.  The Company accounts for its derivatives at fair value as an asset or liability and the change in the fair value of the derivatives is included in earnings since none of the Company’s commodity or interest rate derivatives are designated as hedges under SFAS 133.  See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for discussion regarding the Company’s sensitivity analysis for the Company’s financial instruments and interest rate swaps.

Purchase Accounting

The establishment of the asset base through the date of this report has included 22 acquisitions of working interests in oil and gas properties.  These acquisitions have been accounted for using the purchase method of accounting as prescribed in SFAS No. 141, “Business Combinations.”  See Note 2 for additional details about acquisitions.

In connection with a business combination, the acquiring company must allocate the cost of the acquisition to assets acquired and liabilities assumed based on fair values as of the acquisition date.  The purchase price allocations are based on independent appraisals, discounted cash flows, quoted market prices and estimates by management.  In addition, when appropriate, the Company reviews comparable purchases and sales of oil and gas properties within the same regions, and uses that data as a proxy for fair market value; i.e., the amount a willing buyer and seller would enter into in exchange for such properties.  Any excess of purchase price over amounts assigned to assets and liabilities is recorded as goodwill.  The amount of goodwill recorded in any particular business combination can vary significantly depending upon the value attributed to assets acquired and liabilities assumed.

48

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operation - Continued

The Company made various assumptions in estimating the fair values of assets acquired and liabilities assumed.  The most significant assumptions related to the estimated fair values assigned to proved and unproved oil and gas properties.  To estimate the fair values of these properties, the Company prepared estimates of oil and gas reserves.  The Company estimated future prices to apply to the estimated reserve quantities acquired, and estimated future operating and development costs, to arrive at estimates of future net revenues.  For estimated proved reserves, the future net revenues were discounted using a market-based weighted average cost of capital rate determined appropriate at the time of the acquisition.  The market-based weighted average cost of capital rate was subjected to additional project-specific risking factors.  To compensate for the inherent risk of estimating and valuing unproved properties, the discounted future net revenues of probable and possible reserves were reduced by additional risk-weighting factors.

Deferred taxes must be recorded for any differences between the assigned values and tax bases of assets and liabilities.  Estimated deferred taxes are based on available information concerning the tax basis of assets acquired and liabilities assumed and loss carryforwards at the acquisition date, although such estimates may change in the future as additional information becomes known.

While the estimates of fair value for the assets acquired and liabilities assumed have no effect on cash flows, they can have an effect on the future results of operations.  Generally, higher fair values assigned to oil and gas properties result in higher future depreciation, depletion and amortization expense, which results in a decrease in future net earnings.  Also, a higher fair value assigned to oil and gas properties, based on higher future estimates of oil and gas prices, could increase the likelihood of an impairment in the event of lower commodity prices or higher operating costs than those originally used to determine fair value.  An impairment would have no effect on cash flows but would result in a decrease in net income for the period in which the impairment is recorded.

Unit-Based Compensation

The Company accounts for unit-based compensation pursuant to SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”).  SFAS 123R requires an entity to recognize the grant-date fair-value of stock options and other equity-based compensation issued to employees in the income statement and eliminates the alternative to use the intrinsic value method of accounting that was provided under the original provisions of SFAS 123, which resulted in no compensation expense recorded in the financial statements related to the issuance of equity awards to employees.  It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires companies to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees.  The Company also follows the guidance in Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based Payment,” which contains the express views of the SEC staff regarding the interaction between SFAS 123R and certain SEC rules and regulations and provides the staff’s views regarding the valuation of share-based payment arrangements for public companies.  The Company recorded no unit-based compensation expense for the year ended December 31, 2005, as there were no unit-based payments made during that year.  See Note 6 for additional details about the Company’s accounting for unit-based compensation.

New Accounting Pronouncements

There have been no new accounting standards that materially affected the Company this period; however, see Note 15 for details regarding FIN 48.

See Note 1 for details regarding the Company’s change in accounting policy related to the balance sheet presentation of derivative instruments in accordance with the provisions of FASB Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts.”

49

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about potential exposure to market risks.  The term “market risk” refers to the risk of loss arising from adverse changes in oil, gas and NGL prices and interest rates.  The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses.  This forward-looking information provides indicators of how the Company views and manages its ongoing market risk exposures.  All of the Company’s market risk sensitive instruments were entered into for purposes other than speculative trading.

A reference to a “Note” herein refers to the accompanying Notes to Consolidated Financial Statements contained in Item 8. “Financial Statements and Supplementary Data.”

Commodity Price Risk

The Company’s major market risk exposure is in the pricing applicable to oil, gas and NGL production.  Realized pricing is primarily driven by the spot market prices applicable to production and the prevailing price for oil, gas and NGL.  Pricing for oil, gas and NGL production has been historically volatile and unpredictable, and this volatility is expected to continue in the future.  The prices the Company receives for production depend on many factors outside of its control.

The Company enters into hedging arrangements with respect to a portion of its projected production through various transactions that hedge the future prices received.  See Note 9 for additional details.  These transactions may include price swaps whereby the Company will receive a fixed price for production and pay a variable market price to the contract counterparty.  At the settlement date, the Company receives the excess, if any, of the fixed NYMEX or PEPL price floor over the floating rate.  Additionally, the Company has put options for which it pays the counterparty the fair value at the purchase date.  These hedging activities are intended to support commodity prices at targeted levels and to manage exposure to oil, gas and NGL price fluctuations.

At December 31, 2007, the fair value of hedges that settle during the next twelve months was an asset of approximately $22.3 million and a liability of approximately $3.9 million for a net asset of approximately $18.4 million, which the Company is owed by counterparties.  A 10% increase in the index oil and gas prices above the December 31, 2007 prices for the next twelve months would result in a reduction in the value of the hedges of approximately $53.9 million; conversely, a 10% decrease in the index oil and gas prices would result in an increase of approximately $56.5 million.

50

Item 7A. Quantitative and Qualitative Disclosures About Market Risk- Continued

The following table summarizes, as of February 22, 2008, and for the periods indicated, derivatives in place through December 31, 2013.

	February 22 - December 31, 2008			Year 2009			Year 2010			Year 2011			Year 2012			Year 2013
Gas Positions:
Fixed Price Swaps:
Hedged Volume (MMMBtu)	41,134			49,271			42,086			38,741			34,066			—
Average Price ($/MMBtu)	$	8.48		$	8.32		$	8.14		$	8.08		$	8.45		$	—
Puts:
Hedged Volume (MMMBtu)	5,883			6,960			6,960			6,960			—			—
Average Price ($/MMBtu)	$	8.07		$	7.50		$	7.50		$	7.50		$	—		$	—
PEPL Puts: (1)
Hedged Volume (MMMBtu)	3,212			5,334			10,634			13,259			5,934			—
Average Price ($/MMBtu)	$	7.85		$	7.85		$	7.85		$	7.85		$	7.85		$	—
Total:
Hedged Volume (MMMBtu)	50,229			61,565			59,680			58,960			40,000			—
Average Price ($/MMBtu)	$	8.39		$	8.19		$	8.02		$	7.96		$	8.36		$	—
Oil Positions:
Fixed Price Swaps:
Hedged Volume (MBbls)	2,364			2,437			2,150			2,073			2,025			900
Average Price ($/Bbl)	$	82.42		$	78.07		$	78.28		$	79.65		$	77.65		$	72.22
Puts: (2)
Hedged Volume (MBbls)	1,557			1,843			2,250			2,352			500			—
Average Price ($/Bbl)	$	73.34		$	72.13		$	70.56		$	69.11		$	77.73		$	—
Total:
Hedged Volume (MBbls)	3,921			4,280			4,400			4,425			2,525			900
Average Price ($/Bbl)	$	78.81		$	75.51		$	74.33		$	74.05		$	77.66		$	72.22
Gas Basis Differential Positions:
PEPL Basis Swaps: (3)
Hedged Volume (MMMBtu)	30,122			34,666			29,366			26,741			34,066			—
Hedged Differential ($/MMBtu)	$	(0.95	)	$	(0.95	)	$	(0.95	)	$	(0.95	)	$	(0.95	)	$	—

(1)Settle on the PEPL spot price of gas to hedge basis differential associated with gas production in the Mid-Continent region.

(2)The Company utilizes oil puts to hedge revenues associated with its NGL production.

(3)Represents a swap of the basis between NYMEX and the PEPL spot price of gas of $(0.95) per MMBtu for the volumes hedged.

Interest Rate Risk

At December 31, 2007, the Company had long-term debt outstanding of $1.44 billion under its Credit Facility, which incurred interest at floating rates in accordance the Credit Facility agreement.  See Note 7 for additional details about the Credit Facility.  As of December 31, 2007, the interest rate based on LIBOR was approximately 7.02%.  A 1% increase in LIBOR would result in an estimated $12.5 million increase in annual interest expense associated with the Credit Facility.

The Company has entered into interest rate swap agreements based on LIBOR to minimize the effect of fluctuations in interest rates.  If LIBOR is lower than the fixed rate in the contract, the Company is required to pay the counterparties the difference, and conversely, the counterparties are required to pay the Company if LIBOR is higher than the fixed rate in the contract.  See Note 8 for additional details.

51

Item 8.    Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS and SUPPLEMENTARY DATA

	Page
Management’s Report on Internal Control Over Financial Reporting	53
Report of Independent Registered Public Accounting Firm (Financial Statements)	54
Report of Independent Registered Public Accounting Firm (Internal Control Over Financial Reporting)	55
Consolidated Balance Sheets, as of December 31, 2007 and 2006	56
Consolidated Statements of Operations, for the years ended December 31, 2007, 2006 and 2005	57
Consolidated Statements of Unitholders’ Capital (Deficit), for the years ended December 31, 2007, 2006 and 2005	58
Consolidated Statements of Cash Flows, for the years ended December 31, 2007, 2006 and 2005	59
Notes to Consolidated Financial Statements	60
Supplemental Oil and Gas Data (Unaudited)	85
Supplemental Quarterly Data (Unaudited)	90

52

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not detect or prevent misstatements.  Projections of any evaluation of the effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or processes may deteriorate.

As of December 31, 2007, our management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on the assessment, management determined that we maintained effective internal control over financial reporting as of December 31, 2007, based on those criteria.  The Companyacquired oil and gas properties from Dominion Resources, Inc. in August 2007 (“Dominion Acquisition”) and excluded from our assessment of the effectiveness of internal control over financial reporting as of December 31, 2007, Dominion Acquisition’s internal control over financial reporting associated with total assets of $2.2 billion and total revenues of $106.1 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2007.

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007, which is included herein.

/s/ Linn Energy, LLC

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Unitholders
Linn Energy, LLC:

We have audited the accompanying consolidated balance sheets of Linn Energy, LLC and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, unitholders’ capital (deficit), and cash flows for each of the years in the three-year period ended December 31, 2007.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Linn Energy, LLC and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Linn Energy, LLC’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Houston, Texas

February 28, 2008

54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Unitholders

Linn Energy, LLC:

We have audited Linn Energy, LLC’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Linn Energy, LLC’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.  Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audit also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Linn Energy, LLC maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Linn Energy, LLC’s management, in conducting its assessment of internal control over financial reporting as of December 31, 2007, has excluded its oil and gas properties and related assets in the Mid-Continent, which were acquired on August 31, 2007 from Dominion Resources, Inc. and certain affiliates (Dominion), as permitted by the Securities and Exchange Commission. Dominion’s total assets were $2.2 billion, or approximately 59% of Linn Energy, LLC’s total assets, as of December 31, 2007, and Dominion’s total revenues were $106.1 million, or approximately 33% of Linn Energy, LLC’s total oil, gas and natural gas liquid sales, for the year ended December 31, 2007.  Our audit of internal control over financial reporting of Linn Energy, LLC also excluded an evaluation of the internal control over financial reporting of Dominion.

We also have audited, in accordance with the standards the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Linn Energy, LLC as of December 31, 2007 and 2006, and the related consolidated statements of operations, unitholders’ capital (deficit) and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated February 28, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Houston, Texas

February 28, 2008

55

LINN ENERGY, LLC

CONSOLIDATED BALANCE SHEETS

	December 31,
	2007			2006
	(in thousands, except unit amounts)
Assets
Current assets:
Cash and cash equivalents	$	1,441		$	6,595
Accounts receivable — trade, net	138,716			19,124
Inventories	2,350			578
Derivative instruments	26,100			37,353
Other current assets	3,418			5,562
Total current assets	172,025			69,212
Oil and gas properties and equipment (successful efforts method)	3,618,741			766,638
Less accumulated depreciation, depletion and amortization	(127,265		)	(33,349		)
	3,491,476			733,289
Property and equipment, net	32,024			20,754
Other noncurrent assets:
Deposit for oil and gas properties	27,619			20,086
Derivative instruments	—			60,503
Goodwill	64,419			—
Other noncurrent assets, net	9,006			2,068
	101,044			82,657
Total assets	$	3,796,569		$	905,912
Liabilities and Unitholders’ Capital
Current liabilities:
Accounts payable and accrued expenses	$	162,058		$	12,759
Joint interest payable	50,444			1,839
Accrued interest payable	5,802			2,084
Derivative instruments	6,148			—
Other current liabilities	7,141			873
Total current liabilities	231,593			17,555
Noncurrent liabilities:
Credit facility	1,443,000			425,750
Derivative instruments	63,813			423
Asset retirement obligations	29,073			8,594
Other noncurrent liabilities	2,449			2,636
Total noncurrent liabilities	1,538,335			437,403
Unitholders’ capital:
113,815,914 units and 33,617,187 units issued and outstanding at December 31, 2007 and 2006, respectively	2,374,660			246,034
9,185,965 Class B units issued and outstanding at December 31, 2006	—			188,590
Accumulated income (loss)	(348,019		)	16,330
	2,026,641			450,954
Total liabilities and unitholders’ capital	$	3,796,569		$	905,912

The accompanying notes are an integral part of these consolidated financial statements.

56

LINN ENERGY, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2007			2006			2005
	(in thousands, except per unit amounts)
Revenues:
Oil, gas and natural gas liquid sales	$	318,226		$	80,393		$	44,645
Gain (loss) on oil and gas derivatives	(345,537		)	103,308			(76,193		)
Natural gas marketing revenues	15,537			5,598			4,722
Other revenues	4,537			1,759			345
	(7,237		)	191,058			(26,481		)
Expenses:
Operating expenses	88,527			18,099			7,356
Natural gas marketing expenses	12,596			4,862			4,401
General and administrative expenses	57,188			39,993			3,332
Data license expenses	3,231			—			—
Depreciation, depletion and amortization	97,964			24,173			7,294
	259,506			87,127			22,383
	(266,743		)	103,931			(48,864		)
Other income and (expenses):
Interest expense, net of amounts capitalized	(62,130		)	(25,857		)	(8,043		)
Gain (loss) on interest rate swaps	(28,081		)	363			1,003
Other expenses, net	(3,822		)	(2,654		)	(373		)
	(94,033		)	(28,148		)	(7,413		)
Income (loss) before income taxes	(360,776		)	75,783			(56,277		)
Income tax benefit (provision)	(3,573		)	3,402			(74		)
Net income (loss)	$	(364,349	)	$	79,185		$	(56,351	)
Net income (loss) per unit:
Units — basic	$	(5.29	)	$	2.64		$	(2.75	)
Units — diluted	$	(5.29	)	$	2.61		$	(2.75	)
Class B units — basic	$	—		$	2.64		$	—
Class B units — diluted	$	—		$	2.61		$	—
Weighted average units outstanding:
Units — basic	68,916			28,281			20,518
Units — diluted	68,916			30,385			20,518
Class B units — basic	—			1,737			—
Class B units — diluted	—			1,737			—
Distributions declared per unit	$	2.18		$	1.15		$	—

The accompanying notes are an integral part of these consolidated financial statements.

57

LINN ENERGY, LLC

CONSOLIDATED STATEMENTS OF UNITHOLDERS’ CAPITAL (DEFICIT)

	Unitholders’ Capital			Accumulated Income (Loss)			Treasury Units (at Cost)			Total Unitholders’ Capital (Deficit)
	(in thousands)
Balance as of December 31, 2004	$	16,024		$	(6,504	)	$	—		$	9,520
Net loss	—			(56,351		)	—			(56,351		)
Balance as of December 31, 2005	16,024			(62,855		)	—			(46,831		)
Sale of initial public offering units, net of offering expense of $4,339	225,139			—			13,671			238,810
Sale of private placement units, net of expense of $348	304,652			—			—			304,652
Redemption of member units	—			—			(114,449		)	(114,449		)
Cancellation of member units	(100,778		)	—			100,778			—
Distribution to members	(32,056		)	—			—			(32,056		)
Unit-based compensation expense	21,643			—			—			21,643
Net income	—			79,185			—			79,185
Balance as of December 31, 2006	434,624			16,330			—			450,954
Sale of private placement units, net of expense of $34,334	2,085,666			—			—			2,085,666
Issuance of units	2,842			—			—			2,842
Purchase of units	—			—			(7,399		)	(7,399		)
Cancellation of member units	(7,399		)	—			7,399			—
Distribution to members	(154,963		)	—			—			(154,963		)
Unit-based compensation and unit warrant expense	13,921			—			—			13,921
Exercise of unit options	(31		)	—			—			(31		)
Net loss	—			(364,349		)	—			(364,349		)
Balance as of December 31, 2007	$	2,374,660		$	(348,019	)	$	—		$	2,026,641

The accompanying notes are an integral part of these consolidated financial statements.

58

LINN ENERGY, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31
	2007			2006			2005
	(in thousands)
Cash flow from operating activities:
Net income (loss)	$	(364,349	)	$	79,185		$	(56,351	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization	97,964			24,173			7,294
Amortization and write-off of deferred financing fees and other	5,142			4,548			875
Accretion of asset retirement obligation	1,014			314			172
Unit-based compensation and unit warrant expense	13,921			21,643			—
Deferred income tax	3,360			(3,434		)	—
Mark-to-market on derivatives:
Total (gains) losses	373,618			(103,390		)	75,207
Cash settlements	40,784			20,442			(51,417		)
Premiums paid for derivatives	(279,313		)	(49,807		)	(1,628		)
Changes in assets and liabilities:
Increase in accounts receivable	(106,227		)	(371		)	(12,208		)
(Increase) decrease in inventory and other assets	3,286			2,833			(399		)
Increase (decrease) in accounts payable and accrued expenses	104,709			678			3,396
Increase (decrease) in joint interest payable	48,605			(4,243		)	3,589
Increase in accrued interest payable	3,718			636			1,036
Increase (decrease) in other liabilities	8,954			(12		)	916
Net cash used in operating activities	(44,814		)	(6,805		)	(29,518		)
Cash flow from investing activities:
Acquisition of oil and gas properties	(2,665,924		)	(469,274		)	(122,065		)
Additions to oil and gas properties	(185,534		)	(46,963		)	(27,145		)
Deposit for oil and gas properties	(27,610		)	(20,086		)	—
Purchases of property and equipment	(17,890		)	(15,414		)	(1,639		)
Proceeds from sales of property and equipment	4,538			—			—
Other investing activities	—			106			(49		)
Net cash used in investing activities	(2,892,420		)	(551,631		)	(150,898		)
Cash flow from financing activities:
Proceeds from sale of units	2,120,000			548,149			—
Redemption of member units	(7,399		)	(114,449		)	—
Proceeds from issuance of debt	1,298,000			584,000			275,295
Principal payments on debt	(283,108		)	(425,743		)	(80,690		)
Distribution to members	(154,963		)	(32,056		)	—
Offering costs	(34,334		)	(1,210		)	(3,532		)
Financing fees and other	(6,116		)	(4,701		)	(1,804		)
Net cash provided by financing activities	2,932,080			553,990			189,269
Net increase (decrease) in cash and cash equivalents	(5,154		)	(4,446		)	8,853
Cash and cash equivalents:
Beginning	6,595			11,041			2,188
Ending	$	1,441		$	6,595		$	11,041

The accompanying notes are an integral part of these consolidated financial statements.

59

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)Basis of Presentation and Significant Accounting Policies

(a)Nature of Business

Linn Energy, LLC (“Linn Energy” or the “Company”) is an independent oil and gas company focused on the development and acquisition of long life properties which complement its asset profile in producing basins within the United States.  Linn Energy began operations in March 2003 and was formed as a Delaware limited liability company in April 2005.  The Company completed its initial public offering (“IPO”) in January 2006 and its units representing limited liability company interests (“units”) are listed on The NASDAQ Global Select Market under the symbol “LINE.”

(b)Principles of Consolidation and Reporting

The Company presents its financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”).  The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All significant intercompany transactions and balances have been eliminated upon consolidation.  Certain amounts in the consolidated financial statements and notes thereto have been reclassified to conform to the 2007 financial statement presentation.

(c)Use of Estimates

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with GAAP.  Actual results could differ from those estimates.  The estimates that are particularly significant to the financial statements include estimates of oil, gas and natural gas liquid (“NGL”) reserves, future cash flows from oil and gas properties, depreciation, depletion and amortization, asset retirement obligations, the fair value of derivatives and unit-based compensation expense.

(d)Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid short-term investments with original maturities of three months or less to be cash equivalents.

The Company manages its working capital and cash requirements to borrow only as needed from its credit facility.  At December 31, 2007, the Company had approximately $5.2 million of outstanding checks, the balance of which is included in other current liabilities on the consolidated balance sheet.

(e)Inventories

Materials, supplies and commodity inventories are valued at the lower of average cost or market, determined by the first-in-first-out method.

(f)Oil and Gas Properties/Property and Equipment

Proved Oil and Gas Properties

The Company accounts for oil and gas properties under the successful efforts method.  Under this method, all acquisition and development costs of proved properties are capitalized and amortized on a unit-of-production basis over the remaining life of the proved reserves and proved developed reserves, respectively.

The Company evaluates the impairment of its proved oil and gas properties on a field-by-field basis whenever events or changes in circumstances indicate an asset’s carrying amount may not be recoverable.  The carrying amount of proved oil and gas properties are reduced to fair value when the expected undiscounted future cash flows are less than the asset’s net book value.  Cash flows are determined based upon reserves using prices, costs and discount factors consistent with those used for internal decision making.  The underlying commodity prices embedded in the Company’s estimated cash flows are the product of a process that begins with the Henry Hub forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that management believes will impact realizable prices.  Costs of retired, sold or abandoned properties

60

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

that constitute a part of an amortization base are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized currently.  Gains or losses from the disposal of other properties are recognized currently.  Expenditures for maintenance and repairs necessary to maintain properties in operating condition are expensed as incurred.  Major replacements are capitalized.  Estimated dismantlement and abandonment costs for oil and gas properties are capitalized at their estimated net present value and amortized on a unit-of-production basis over the remaining life of the related proved developed reserves.

The Company recorded impairment on oil and gas properties of approximately $3.3 million and $1.0 million for the years ended December 31, 2007 and 2006, respectively, which is included in depreciation, depletion and amortization expense on the consolidated statements of operations.

Unproved Oil and Gas Properties

Unproved properties consist of costs incurred to acquire unproved leasehold as well as costs incurred to acquire unproved resources.  Unproved leasehold costs are capitalized and amortized on a composite basis if individually insignificant, based on past success, experience and average lease-term lives.  Unamortized leasehold costs related to successful exploratory drilling are reclassified to proved properties and depleted on a unit-of-production basis.  The carrying value of the Company’s unproved resources, which were acquired in connection with business acquisitions, was determined using the market-based weighted average cost of capital rate, subjected to additional project-specific risking factors.  Because these reserves do not meet the definition of proved reserves, the related costs are not classified as proved properties.  As the unproved resources are developed and proven, the associated costs are reclassified to proved properties and depleted on a unit-of-production basis.  The Company assesses unproved resources for impairment annually by comparing book value to fair value, which is determined using discounted estimates of future cash flows.

Other Property and Equipment

Other property and equipment includes gas gathering systems, pipelines, buildings, data processing and telecommunication equipment, office furniture and equipment, and other fixed assets.  These items are recorded at cost and are depreciated using the straight-line method based on expected lives ranging from 3 to 39 years for the individual asset or group of assets.

(g)Goodwill

Goodwill represents the excess of the cost of an acquired business over the net amounts assigned to assets acquired and liabilities assumed.  The Company accounts for goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.”  Goodwill is not amortized to earnings but is tested annually during the fourth quarter or whenever events or changes in circumstances indicate that the carrying value may not be recoverable (see Note 3).

(h)Revenue Recognition

Sales of oil and gas and NGL are recognized when oil, gas or NGL has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable.  Virtually all of the Company’s contract pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of oil, gas and NGL, and prevailing supply and demand conditions, so that prices fluctuate to remain competitive with other available suppliers.

Revenues are presented on a gross basis on the consolidated statements of operations.  Production taxes are included in operating expenses on the consolidated statements of operations and were approximately $17.8 million, $2.0 million and $0.7 million for the years ended December 31, 2007, 2006 and 2005, respectively.

61

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The Company has elected the entitlements method to account for gas imbalances.  Gas imbalances occur when the Company sells more or less than its entitled ownership percentage of total gas production.  Under the entitlements method, any amount received in excess of the Company’s share is treated as a liability.  If the Company receives less than its entitled share, the underproduction is recorded as a receivable.  At December 31, 2007, the Company had a gas imbalance receivable of approximately $6.6 million, which is included in accounts receivable — trade, net, on the consolidated balance sheet.  The Company did not have any significant gas imbalance positions at December 31, 2006.

The Company engages in the purchase, gathering and transportation of third-party natural gas and subsequently markets such gas to independent purchasers under separate arrangements.  As such, the Company separately reports third-party marketing sales and natural gas marketing expenses.

The Company generates electricity with excess gas, which it uses to serve certain of its operating facilities in Brea, California.  Any excess electricity is sold to the California wholesale power market.  These amounts are included in other revenues on the consolidated statements of operations.

(i)Restricted Cash

Restricted cash of $0.5 million is included in other noncurrent assets on the consolidated balance sheet at December 31, 2007, and represents cash the Company has deposited into a separate account and designated for asset retirement obligations in accordance with contractual agreements.

(j)Derivative Instruments

The Company uses derivative financial instruments to achieve a more predictable cash flow from its oil, gas and NGL production by reducing its exposure to price fluctuations.  As of December 31, 2007, these transactions were in the form of swaps and puts.  Additionally, the Company uses derivative financial instruments in the form of interest rate swaps to mitigate its interest rate exposure.  The Company accounts for these activities pursuant to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, (“SFAS 133”).  This statement establishes accounting and reporting standards requiring that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded at fair value and included in the balance sheet as assets or liabilities.

The Company accounts for its derivatives at fair value as an asset or liability and the change in the fair value of the derivatives is included in earnings since none of the Company’s commodity or interest rate derivatives are designated as hedges under the provisions of SFAS 133.   See Note 8 and Note 9 for additional details about the Company’s derivative financial instruments.

(k)Unit-Based Compensation

SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) requires the recognition of compensation expense, over the requisite service period, in an amount equal to the fair value of unit-based payments granted to employees and non-employee directors.  The fair value of the unit-based payments, excluding liability awards, is computed at the date of grant and will not be remeasured.  The fair value of liability awards is remeasured at each reporting date through the settlement date with the change in fair value recognized as compensation expense over that period.  The Company currently does not have any awards accounted for as liability awards.  SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation costs to be reported as financing cash flow, rather than as an operating cash flow as required under prior guidance.  This requirement will reduce net operating cash flows and increase net financing cash flows in periods in which such tax deduction exists.  The Company had no excess tax deductions for any periods presented.

The Company has made a policy decision, in accordance with the provisions of SFAS 123R, to recognize compensation cost for service-based awards on a straight-line basis over the requisite service period.  The Company did not issue any unit-based compensation awards prior to January 

62

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

2006.  See Note 6 for a discussion of the Company’s accounting for unit-based compensation expense.

(l)Deferred Financing Fees

The Company incurred legal and bank fees related to the issuance of debt (see Note 7).  At December 31, 2007 and 2006, net deferred financing fees of approximately $8.3 million and $1.6 million, respectively, are included in other noncurrent assets on the consolidated balance sheets.  These debt issuance costs are amortized over the life of the debt agreement.  For the years ended December 31, 2007, 2006 and 2005, amortization expense of $1.5 million, $1.1 million and $0.5 million, respectively, is included in interest expense on the consolidated statements of operations.  Deferred financing fees of approximately $2.8 million, $3.3 million and $0.4 million were written-off in connection with refinancings during the years ended December 31, 2007, 2006 and 2005, respectively, and are included in other expenses, net on the consolidated statements of operations.

(m)Fair Value of Financial Instruments

The carrying values of the Company’s receivables, payables and debt are estimated to be substantially the same as their fair values at December 31, 2007 and 2006.  See Note 8 and Note 9 for details about the fair value of the Company’s derivative financial instruments.

(n)Unitholders’ Capital

The operations of the Company are governed by the provisions of a limited liability company agreement executed by and among its members.  The agreement includes specific provisions with respect to the maintenance of the capital accounts of each of the Company’s unitholders.

Pursuant to applicable provisions of the Delaware Limited Liability Company Act (the “Delaware Act”) and the Second Amended and Restated Limited Liability Company Agreement of Linn Energy, LLC (the “Agreement”), unitholders have no liability for the debts, obligations and liabilities of the Company, except as expressly required in the Agreement or the Delaware Act.  Pursuant to the terms of the Agreement, unitholders are entitled to vote on the following matters:

· the annual election of the Company’s Board of Directors;

· specified amendments to the Agreement;

· the merger of the Company or the sale of all or substantially all of the Company’s assets; and

· the dissolution of the Company.

The Company will remain in existence unless and until dissolved in accordance with the terms of the Agreement.

(o)Income Taxes

The Company is a limited liability company treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the unitholders.  As such, no recognition of federal or state income taxes for the Company or its subsidiaries that are organized as limited liability companies have been provided for in the accompanying financial statements, except as described below.

Certain of the Company’s subsidiaries are Subchapter C-corporations subject to corporate income taxes, which are accounted for under the provisions of SFAS No. 109 “Accounting for Income Taxes” (“SFAS 109”), which uses the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities

63

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

of a change in tax rates is recognized in income in the period that includes the enactment date.  See Note 15 for detail of amounts recorded in consolidated financial statements.

(p)Recently Issued Accounting Standards

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS 141R”).  Under Statement 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed at the acquisition date fair value with limited exceptions.  Statement 141R will change the accounting treatment for certain specific items, including acquisition costs, which will be expensed as incurred, and acquired contingent liabilities, which will be recorded at fair value at the acquisition date.  SFAS 141R also includes new disclosure requirements.  SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2008, with earlier adoption prohibited.  The Company will implement SFAS 141R as related to acquisitions that occur after January 1, 2009.

In June 2007, the Financial Accounting Standards Board (“FASB”) ratified the consensus in Emerging Issues Task Force Issue 06-11 (“EITF 06-11”).  EITF 06-11 is effective for fiscal years beginning after December 15, 2007 and requires, among other things, recognition as an increase to additional paid-in capital the realized income tax benefit from dividends or dividend equivalents that are paid to employees and charged to retained earnings.  The Company does not believe that the adoption of EITF 06-11 will have a material impact on its results of operations or financial position.

In April 2007, the FASB issued Staff Position No. 39-1, “Amendment of FASB Interpretation No. 39” (“FSP No. FIN 39-1”).  The terms “conditional contracts” and “exchange contracts” have been replaced with the more general term “derivative contracts.”  In addition, FSP No. FIN 39-1 permits the offsetting of recognized fair values for the right to reclaim cash collateral or the obligation to return cash collateral against fair values of derivatives under certain circumstances, such as under master netting arrangements.  Additional disclosure is also required regarding a company’s accounting policy with respect to offsetting fair value amounts.  The guidance in FSP No. FIN 39-1 is effective for fiscal years beginning after November 15, 2007, with early application allowed.  The effects of initial adoption should be recognized as a change in accounting principle through retrospective application for all periods presented.  At December 31, 2007, the Company changed its accounting policy related to the balance sheet presentation of derivative instruments.  In accordance with the provisions of FASB Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts,” the Company presents derivative instruments on a net basis, when right of offset exists, in the consolidated balance sheets.  Amounts on the consolidated balance sheet at December 31, 2006 were reclassified to conform to current year presentation.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which provides guidance for using fair value to measure assets and liabilities.  SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value and clarifies that for items that are not actively traded, such as certain kinds of derivatives, fair value should reflect the price in a transaction with a market participant, including an adjustment for risk, not just the mark-to-market value.  SFAS 157 also requires expanded disclosure of the effect on earnings for items measured using unobservable data.  The provisions of SFAS 157 are applicable to financial assets effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, and are applicable to non-financial assets effective for fiscal years beginning after November 15, 2008.  The Company is currently evaluating the impact the adoption of SFAS 157 will have on its results of operations and financial position.

64

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(2)Acquisitions and Dispositions

The Company accounts for its acquisitions using the purchase method of accounting as prescribed in SFAS No. 141, “Business Combinations.”  The following provides a summary of the Company’s acquisitions during 2007 and 2006, as well as acquisitions subsequent to December 31, 2007.

On February 1, 2007, effective January 1, 2007, the Company completed the acquisition of certain oil and gas properties and related assets in the Mid-Continent from Stallion Energy LLC, acting as general partner for Cavallo Energy, LP, for a contract price of $415.0 million (“Mid-Continent I”).  The Mid-Continent I acquisition was financed with a combination of a private placement of units (see Note 4) and borrowings under the Company’s credit facility (see Note 7).

On June 12, 2007, effective April 1, 2007, the Company completed the acquisition of certain oil and gas properties in the Mid-Continent for a contract price of $90.5 million (“Mid-Continent II”).  The acquisition was financed with borrowings under the Company’s credit facility (see Note 7).

On August 31, 2007, effective July 1, 2007, the Company completed the acquisition of certain oil and gas properties in the Mid-Continent for a contract price of $2.05 billion from Dominion Resources, Inc. and certain affiliates (“Dominion”) (“Mid-Continent III”).  On August 31, 2007, the Company completed the private placement of $1.5 billion of units and Class D units to a group of institutional investors (see Note 4).  The Company funded the Mid-Continent III acquisition with the net proceeds from the private placement, together with borrowings under its credit facility (see Note 7).

The following presents the preliminary purchase accounting for the Mid-Continent I, Mid-Continent II and Mid-Continent III acquisitions, based on estimates of fair value (estimates of fair value for Mid-Continent III are preliminary):

	Mid-Continent I			Mid-Continent II			Mid-Continent III
	(in thousands)
Cash	$	411,287		$	90,179		$	2,022,606
Estimated transaction costs	2,996			366			10,140
Estimated pending closing adjustments	(363		)	(1,440		)	18,299
	413,920			89,105			2,051,045
Fair value of liabilities assumed	1,706			1,034			33,245
Total purchase price	$	415,626		$	90,139		$	2,084,290

The following presents the allocations of the purchase prices for the Mid-Continent I, Mid-Continent II and Mid-Continent III acquisitions based on estimates of fair value (estimates of fair value for Mid-Continent III are preliminary):

	Mid-Continent I		Mid-Continent II		Mid-Continent III
	(in thousands)
Current assets	$	—	$	644	$	12,831
Oil and gas properties	414,888		89,495		2,003,179
Property, plant and equipment	738		—		3,861
Goodwill	—		—		64,419
	$	415,626	$	90,139	$	2,084,290

65

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The purchase prices and purchase price allocations above are based on reserve reports, published market prices and estimates by management.  The most significant assumptions are related to the estimated fair values assigned to proved oil and gas properties.  To estimate the fair values of these properties, the Company utilized preliminary estimates of oil, gas and NGL reserves prepared by the independent engineering firm, DeGolyer and MacNaughton.  The Company estimated future prices to apply to the estimated reserve quantities acquired, and estimated future operating and development costs, to arrive at estimates of future net revenues.  The Company also reviewed comparable purchases and sales of oil and gas properties within the same regions.  The purchase prices and the allocations of the purchase prices are preliminary.  Items pending III completion include final closing adjustments for all three acquisitions and for the Mid-Continent III acquisition include completion of independent appraisals of fixed assets, and additional analysis related to the fair value of proved and unproved oil and gas reserves, including discounted cash flows and market-based data.  The purchase prices and purchase price allocations will be finalized within one year of the acquisition dates.

The following unaudited pro forma financial information presents a summary of Linn Energy’s consolidated results of operations for the years ended December 31, 2007 and 2006, assuming the Mid-Continent I, Mid-Continent II and Mid-Continent III acquisitions had been completed as of January 1, 2006, including adjustments to reflect the allocation of the purchase prices to the acquired net assets.  The pro forma financial information also assumes that the acquisitions of California assets from affiliated entities of Blacksand Energy, LLC and Oklahoma assets from Kaiser-Francis Oil Company were completed as of January 1, 2006.  The California and Oklahoma acquisitions were completed in 2006 and the revenues and expenses are included in the consolidated results of the Company effective August 1, 2006 and September 1, 2006, respectively.  The revenues and expenses of the Mid-Continent I and Mid-Continent II assets are included in the consolidated results of the Company as of February 1, 2007 and June 12, 2007, respectively.  The revenues and expenses of the Mid-Continent III assets are included in the consolidated results of the Company effective September 1, 2007.  The pro forma financial information is not necessarily indicative of the results of operations if the acquisitions had been effective as of these dates.

	Years Ended December 31,
	2007			2006
	(in thousands, except per unit amounts)
Total revenues	$	219,656		$	659,180
Total operating expenses	$	385,709		$	332,932
Net income (loss)	$	(294,600	)	$	230,128
Net income (loss) per unit:
Units — basic	$	(4.27	)	$	2.95
Units — diluted	$	(4.27	)	$	2.94
Class B units — basic	$	—		$	2.95
Class B units — diluted	$	—		$	2.94

The unaudited pro forma condensed combined statements of operations present net income (loss) per unit allocated to the units and the Class B units on an equal basis for the year ended December 31, 2006.  In January 2007 the Class B units were converted into units on a one-to-one basis; therefore, pro forma net income (loss) per unit assumes that the units and Class B units share equally in the pro forma net income (loss) of the Company.  See Note 4 for additional details.

In addition, during 2007, the Company completed the following other transactions:

· January 2007 — gas properties located in the Appalachian Basin for a contract price of $39.0 million

66

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

· March 2007 — sold certain oil and gas properties located in New York for cash of approximately $2.5 million and recorded a gain of approximately $0.9 million; the gain is included in other revenues on the consolidated statements of operations

· April 2007 — net profits interest in oil and gas properties in California for a contract price of $10.0 million

· October 2007 — oil and gas properties located in the Mid-Continent for a contract price of $22.5 million

· October 2007 — asset acquisition of a royalty interest in oil and gas properties located primarily in the Mid-Continent for a contract price of $52.0 million

Subsequent Event — Acquisitions

On January 31, 2008, the Company completed the acquisition of certain oil and gas properties, effective October 1, 2007, located primarily in the Mid-Continent region from Lamamco Drilling Company (“Lamamco”) for a contract price of $552.2 million, subject to purchase price adjustments (“Mid-Continent IV”).  The purchase price includes a payment of $27.6 million paid by the Company to the seller in December 2007.  At December 31, 2007, this amount is reported separately on the consolidated balance sheet within other noncurrent assets, along with related acquisition costs incurred prior to year end.  The acquisition was financed with a combination of borrowings under the Company’s credit facility and proceeds from a term loan entered into at closing (see Note 7).

The following presents the preliminary purchase accounting for the Mid-Continent IV acquisition, based on preliminary estimates of fair value:

	Mid-Continent IV
	(in thousands)
Cash	$	547,325
Estimated transaction costs and adjustments	(3,955		)
	543,370
Fair value of liabilities assumed	1,825
Total purchase price	$	545,195

The following presents the preliminary allocations of the purchase price for the Mid-Continent IV acquisition, based on preliminary estimates of fair value:

	Mid-Continent IV
	(in thousands)
Current assets	$	8,064
Oil and gas properties	537,605
Property, plant and equipment	469
Accounts payable and accrued expenses	(943		)
	$	545,195

The preliminary purchase price allocation is based on preliminary information and estimates by management as final appraisals of assets acquired and liabilities assumed are not yet complete.  The purchase price allocation will be completed within one year of the acquisition date.  In January 2008, the

67

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Company also acquired gas properties located in the Appalachian Basin for contract consideration of 600,000 units (equal to a fair value of approximately $14.7 million), subject to purchase price adjustments.

(3)Goodwill

The entire goodwill balance of $64.4 million at December 31, 2007 is related to the Mid-Continent III acquisition in August 2007 (see Note 2).  The goodwill is associated with the Company gaining a significant interest in the Mid-Continent region, increasing its opportunity for growth and enhancing its position as a leading North American oil and gas producer.  The Company also obtained the expertise of an experienced workforce, increased purchasing power and gained greater marketing flexibility in optimizing sales and accessing key market information.  The Company is a limited liability company and treated as a partnership for tax purposes (see Note 15); therefore, for tax purposes, the goodwill is not deductible by the Company.

The provisions of SFAS No. 142 require that a two-step impairment test be performed annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.  The first step of the test for impairment compares the book value of the Company’s reporting unit to its estimated fair value.  The second step of the goodwill impairment test, which is only required when the net book value of the reporting unit exceeds the fair value, compares the implied fair value of goodwill to its book value to determine if an impairment is required.  The fair value is determined using a combination of the income approach and the market approach.  Under the income approach, the fair value is estimated based on the present value of expected future cash flows.  Under the market approach, the fair value is estimated based on market multiples of reserves and production for comparable companies as well as recent comparable transactions.

The income approach is dependent on a number of factors including estimates of forecasted revenue and costs, proved reserves, as well as the success of future development of unproved resources, appropriate discount rates and other variables.  Downward revisions of estimated reserve quantities, increases in future cost estimates, divestiture of a significant component or depressed oil, gas and NGL prices could lead to an impairment of all or a portion of goodwill in future periods.  Under the market approach, the Company makes certain judgments about the selection of comparable companies, comparable recent company and asset transactions and transaction premiums.  Although the Company bases its fair value estimate on assumptions it believes to be reasonable, those assumptions are inherently unpredictable and uncertain.

The following reflects the changes in the carrying amount of goodwill during the year:

	(in thousands)
December 31, 2006	$	—
Mid-Continent III acquisition	64,419
December 31, 2007	$	64,419

(4)Unitholders’ Capital

Private Placements

In August 2007, the Company closed its private placement of $1.5 billion of units to a group of institutional investors, consisting of 34,997,005 Class D units at a price of $30.97 per unit and 12,999,989 units at a price of $32.00 per unit.  Proceeds, net of expenses, were $1.48 billion and were used to fund the August 2007 acquisition of certain oil and gas properties in the Mid-Continent (see Note 2).  The Class D units were converted to units on a one-for-one basis in November 2007.

In June 2007, the Company closed its private placement of $260.0 million of units to a group of institutional investors, consisting of 7,761,194 units at a price of $33.50 per unit.  Proceeds, net of expenses, were $255.2 million and were used to repay indebtedness under the Company’s Credit Facility.

68

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

In February 2007, the Company closed its private placement of $360.0 million of units to a group of institutional investors, consisting of 7,465,946 Class C units at a price of $25.06 per unit, and 6,650,144 units at a price of $26.00 per unit.  Proceeds, net of expenses, were $353.1 million and were used to finance the February 2007 acquisition of certain oil and gas properties in Texas and the acquisitions of certain gas properties in West Virginia (see Note 2).  The Class C units were converted into units on a one-for-one basis in April 2007.

In October 2006, the Company closed its private placement of $305.0 million of units to a group of institutional investors, consisting of 9,185,965 Class B units at a price of $20.55 per unit, and 5,534,687 units at a price of $21.00 per unit.  Proceeds, net of expenses were $304.7 million and were used to repay indebtedness.  The Class B units were converted into units on a one-for-one basis in January 2007.

Registration of Units

In connection with each of its private placements, the Company agreed to file a Registration Statement with the SEC covering the units and underlying units.  Registration Statements covering all the units issued through the private placements noted above were filed and declared effective by the SEC during December 2007.

In December 2007, the Company was required to pay purchasers in the June 2007 private placement approximately $0.7 million in liquidated damages as specified in the registration rights agreement because the registration effectiveness deadline in the agreement was not achieved.  This payment is included in general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2007.

Distributions

Under the limited liability company agreement, Company unitholders are entitled to receive a quarterly distribution of available cash to the extent there is sufficient cash from operations after establishment of cash reserves and payment of fees and expenses.  The following provides a summary of distributions paid by the Company during the years ended December 31, 2007 and 2006:

Date Paid	Period Covered by Distribution	Distribution Per Unit		Total Distribution
				(in thousands)
November 2007	July 1 - September 30, 2007	$	0.57	$	64,798
August 2007	April 1 - June 30, 2007	$	0.57	37,419
May 2007	January 1 - March 31, 2007	$	0.52	30,001
February 2007	October 1 - December 31, 2006	$	0.52	22,745
	Total 2007			$	154,963
November 2006	July 1 - September 30, 2006	$	0.43	$	12,197
August 2006	April 1 - June 30, 2006	$	0.40	11,033
May 2006	January 13 - March 31, 2006	$	0.32	8,826
	Total 2006			$	32,056

In January 2008, the Company’s Board of Directors declared a cash distribution of $0.63 per unit with respect to the fourth quarter of 2007.  The distribution totaled approximately $72.2 million and was paid on February 14, 2008 to unitholders of record as of the close of business on February 8, 2008.  This distribution represents a 10.5% increase in the Company’s annualized cash distribution rate, to $2.52 per unit, from $2.28 per unit for the third quarter of 2007.

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Cancellation of Units

In January 2007, the Company purchased 226,561 restricted units from an employee for $7.4 million (market price on the day of purchase) in conjunction with the vesting of restricted unit awards.  The proceeds were used to fund the employee’s payroll taxes on the award, and the Company cancelled the units.

Issuance of Units

In October 2007, the Company issued 77,381 units in connection with the acquisition of royalty interests in certain oil and gas properties.

Subsequent to December 31, 2007, in January 2008, the Company issued 600,000 units in connection with the acquisition of certain gas properties in the Appalachian Basin (see Note 2).

Initial Public Offering

In 2006, the Company completed its IPO of 12,450,000 units representing limited liability interest in the Company at $21.00 per unit, for net proceeds, after underwriting discounts of $18.3 million and offering expenses of $4.3 million, of $238.8 million, of which $122.0 million was used to reduce indebtedness and $114.4 million was used to redeem a portion of membership interests in the Company and units held by certain holders and approximately $2.0 million was used to pay bonuses to certain executive officers of the Company.

(5)Business and Credit Concentrations

Cash

The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured amounts.  The Company has not experienced any losses in such accounts.  The Company believes it is not exposed to any significant credit risk on its cash.

Revenue and Trade Receivables

The Company has a concentration of customers who are engaged in oil and gas purchasing, transportation and/or refining within the United States.  This concentration of customers may impact the Company’s overall exposure to credit risk, either positively or negatively, in that the customers may be similarly affected by changes in economic or other conditions.  The Company’s customers consist primarily of major oil and gas purchasers and the Company generally does not require collateral, since it has not experienced credit losses on such sales.  The Company routinely assesses the recoverability of all material trade and other receivables to determine collectibility and accrues an allowance when, based on management’s judgment, it is probable that a receivable will not be collected and the amount can be reasonably estimated.  The balance in the Company’s allowance for doubtful accounts was $100,000 at December 31, 2007 and 2006.

For the year ended December 31, 2007, the Company’s three largest customers represented 19%, 18% and 15% of the Company’s sales.  For the year ended December 31, 2006, the Company’s two largest customers represented 54% and 17% of the Company’s sales.  The Company’s three largest customers represented approximately 48%, 14%, and 10% of the Company’s sales for the year ended December 31, 2005.

At December 31, 2007, three customers’ trade accounts receivable from oil, gas and NGL sales accounted for more than 10% of the Company’s total trade accounts receivable.  As of December 31, 2007, trade accounts receivable from the Company’s three largest customers represented approximately 22%, 13% and 12% of the Company’s receivables.  At December 31, 2006, three customers’ trade accounts receivable from oil and gas sales accounted for more than 10% of the Company’s total trade accounts receivable.  As

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of December 31, 2006, trade accounts receivable from the Company’s three largest customers represented approximately 41%, 22% and 16% of the Company’s receivables.

(6)Unit-Based Compensation and Other Benefit Plans

Incentive Plan Summary

The Linn Energy, LLC Long-Term Incentive Plan (the “Plan”) became effective in December 2005.  The Plan, which is administered by the Compensation Committee of the Board of Directors, permits the granting of unit grants, unit options, restricted units, phantom units and unit appreciation rights to employees, consultants and non-employee directors under the terms of the Plan.  The unit options and restricted units vest ratably over one to three years from the grant date of the award, unless other contractual arrangements are made.  The contractual life of unit options is ten years.  Unit awards were issued for the first time in January 2006, in conjunction with the Company’s IPO.

The Plan limits the number of units that may be delivered pursuant to awards to 3.9 million units, provided that no more than 1.5 million units may be issued as restricted units.  The Board of Directors and the Compensation Committee of the Board of Directors have the right to alter or amend the Plan or any part of the Plan from time to time, including increasing the number of units that may be granted, subject to unitholder approval as required by the exchange upon which the units are listed at that time.  However, no change in any outstanding grant may be made that would materially reduce the benefits to the participant without the consent of the participant.

Upon exercise or vesting of an award of, or settled in, units, the Company will issue new units, acquire units on the open market or directly from any person or use any combination of the foregoing, at the Compensation Committee’s discretion.  If the Company issues new units upon exercise or vesting of an award of, or settled in, units, the total number of units outstanding will increase.  To date, the Company has issued awards of unit grants, unit options, restricted units and phantom units.  The Plan provides for all of the following types of awards:

Unit Grants  A unit grant is a unit that vests immediately upon issuance.

Unit Options  A unit option is a right to purchase a unit at a specified price at terms determined by the Compensation Committee.  Unit options will have an exercise price that will not be less than the fair market value of the units on the date of grant, and in general, will become exercisable over a vesting period but may accelerate upon the achievement of specified financial objectives, or upon a change in control of the Company.  If a grantee’s employment or relationship terminates for any reason, the grantee’s unvested unit options will be automatically forfeited unless the option agreement or the Compensation Committee provides otherwise.

Restricted Units  A restricted unit is a unit that vests over a period of time and that during such time is subject to forfeiture, and may contain such terms as the Compensation Committee shall determine, including the period over which restricted units (and distributions related to such units) will vest.  The Company intends the restricted units under the plan to serve as a means of incentive compensation for performance and not primarily as an opportunity to participate in the equity appreciation of its units.  Therefore, plan participants will not pay any consideration for the restricted units they receive.  If a grantee’s employment, consulting relationship or membership on the Board of Directors terminates for any reason, the grantee’s unvested restricted units will be automatically forfeited unless the Compensation Committee or the terms of the award agreement provide otherwise.

Phantom Units/Unit Appreciation Rights  These awards may be settled in units, cash or a combination thereof.  Such grants will contain terms as determined by the Compensation Committee, including the period or terms over which phantom units will vest.  If a grantee’s employment or service relationship terminates for any reason, the grantee’s phantom units or unit appreciation rights will be automatically forfeited unless, and to the extent, the Compensation

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Committee or the terms of the award agreement provide otherwise.  While phantom units require no payment from the grantee, unit appreciation rights will have an exercise price that will not be less than the fair market value of the units on the date of grant.  At December 31, 2007, the Company had 21,000 phantom units issued and outstanding.  To date, the Company has not issued unit appreciation rights.

Securities Authorized for Issuance Under the Plan

As of December 31, 2007, approximately 1,077,021 units were issuable under the Plan pursuant to outstanding award or other agreements and an additional 916,572 units were reserved for future issuance under the Plan.

Accounting for Unit-Based Compensation

The Company recognizes as expense, beginning at the grant date, the fair value of unit options and other equity-based compensation issued to employees and non-employee directors.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period using the straight-line method in the Company’s consolidated statements of operations.

For the years ended, December 31, 2007 and 2006, the Company recorded unit-based compensation expense of approximately $12.5 million and $21.6 million, respectively, as a charge against income before income taxes, included in general and administrative expense on the consolidated statement of operations.  No related income tax benefit was recognized due to non-deductibility and recognition of a valuation allowance for resulting net operating losses.

Restricted/Unrestricted Units

The fair value of unrestricted unit grants and restricted units issued is determined based on the fair market value of the Company units on the date of grant.  This value is amortized over the vesting period, which varied from one month to three years from the date of grant.  A summary of the status of the non-vested units as of December 31, 2007, is presented below:

	Number of Non-vested Units		Weighted Average Grant Date Fair Value
Non-vested units at December 31, 2006	1,124,690		$	23.19
Granted	577,700		$	31.16
Vested	(863,570	)	$	22.44
Forfeited	(5,000	)	$	32.35
Non-vested units at December 31, 2007	833,820		$	29.43

The weighted-average grant-date fair value of unrestricted unit grants and restricted units granted during 2006 was $22.98.

As of December 31, 2007, there was approximately $14.4 million of unrecognized compensation cost related to non-vested restricted units.  The cost is expected to be recognized over a weighted average period of approximately 1.4 years.  The total fair value of units that vested during the period was approximately $19.4 million and $2.4 million for the years ended December 31, 2007 and 2006, respectively.  The aggregate intrinsic value of vested units as of December 31, 2007 was approximately $24.5 million.

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Changes in Unit Options and Unit Options Outstanding

The following provides information related to unit option activity for the year ended December 31, 2007:

	Number of Units Underlying Options		Weighted Average Exercise Price Per Unit		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life in Years
Outstanding at December 31, 2006	930,500		$	24.24	$	3.68
Granted	93,000		$	29.07	$	4.59
Exercised	(14,562	)	$	23.81	$	5.71
Forfeited	(11,917	)	$	25.11	$	4.79
Outstanding at December 31, 2007	997,021		$	24.68	$	4.67	8.62
Exercisable at December 31, 2007	327,564		$	23.92	$	4.63	8.48

The weighted-average grant-date fair value of options granted during 2006 was $3.59.  The total intrinsic value of options exercised during 2007 was $95,000.  No options were exercised during 2006.

As of December 31, 2007, there was approximately $2.3 million of total unrecognized compensation cost related to non-vested unit options.  The cost is expected to be recognized over a weighted average period of approximately 1.4 years.  In addition, the exercisable unit options at December 31, 2007 have an aggregate intrinsic value of approximately $0.8 million and all outstanding unit options have an aggregate intrinsic value of approximately $2.2 million.  The total fair value of all options that vested was approximately $1.5 million and $76,000 for the years ended December 31, 2007 and 2006, respectively.  No options expired during the years ended December 31, 2007 or 2006.

The fair value of unit-based compensation for unit options was estimated on the date of grant using a Black-Scholes pricing model based on certain assumptions.  The Company’s determination of the fair value of unit-based payment awards is affected by the Company’s unit price as well as assumptions regarding a number of complex and subjective variables.  The Company’s employee unit options have various restrictions including vesting provisions and restrictions on transfers and hedging, among others, and often are expected to be exercised prior to their contractual maturity.

Expected volatilities used in the estimation of fair value have been determined using available volatility data for the Company as well as an average of volatility computations of other identified peer companies in the oil and gas industry.  Expected distributions are estimated based on the Company’s distribution rate at the date of grant.  Historical data of the Company and other identified peer companies is used to estimate expected term because, due to the limited period of time its equity units have been publicly traded, the Company does not have sufficient historical exercise data to compute a reasonable estimation.  Forfeitures are estimated using historical Company data and are revised, if necessary, in subsequent periods if actual forfeitures differ from estimates.  All employees granted awards have been determined to have similar behaviors for purposes of determining the expected term used to estimate fair value.  The risk-free rate for periods within the expected term of the unit option is based on the U.S. Treasury yield curve in effect at the time of grant.  The fair values of the unit option grants were based upon the following assumptions:

	2007	2006
Expected volatility	30.40% - 35.58%	29.70% - 31.30%
Expected distributions	6.51% - 10.67%	7.20% - 8.50%
Risk free rate	3.53% - 5.18%	4.31% - 5.04%
Expected term	5.0 years	5.0 years

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Although the fair value of unit option grants is determined in accordance with SFAS 123R using a Black-Scholes option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

Non-Employee Grants

In February 2007, the Company granted an aggregate 150,000 unit warrants to certain individuals in connection with an acquisition transition services agreement.  The unit warrants have an exercise price of $25.50 per unit warrant, are fully exercisable at December 31, 2007, and expire ten years from issuance.  In accordance with SFAS 123R, the Company computed the fair value of the unit warrants using the Black-Scholes model.  At December 31, 2007, the aggregate fair value of the unit warrants was approximately $1.4 million and the expense was recognized over the five-month term of the agreement through June 30, 2007.  For the year ended December 31, 2007, the Company recorded this amount in general and administrative expenses on the consolidated statement of operations.

Defined Contribution Plan

The Company sponsors a 401(k) defined contribution plan for eligible employees.  Company contributions to the 401(k) plan consist of a discretionary matching contribution equal to 100% of the first 4% of eligible compensation contributed by the employee on a before-tax basis.  The Company contributed approximately $0.8 million, $0.2 million and $0.1 million during the years ended December 31, 2007, 2006 and 2005, respectively, to the 401(k) plan’s trustee account.  The 401(k) plan funds are held in a trustee account on behalf of the plan participants.

(7)Debt

Credit Facility

At December 31, 2007, the Company had a $1.8 billion Third Amended and Restated Credit Agreement (“Credit Facility”) with a maturity of August 2010.  On January 31, 2008, the Credit Facility was amended to increase the amount available for borrowing to $1.9 billion, all of which is conforming, effective until April 1, 2008, at which point the borrowing base will be redetermined in accordance with the terms of the Credit Facility.

The borrowing base under the Credit Facility will be redetermined semi-annually by the lenders in their sole discretion, based on, among other things, reserve reports as prepared by reserve engineers taking into account the oil and gas prices at such time.  The Company’s obligations under the Credit Facility are secured by mortgages on its oil and gas properties as well as a pledge of all ownership interests in its operating subsidiaries.  The Company is required to maintain the mortgages on properties representing at least 80% of its oil and gas properties.  Additionally, the obligations under the Credit Facility are guaranteed by all of the Company’s operating subsidiaries and may be guaranteed by any future subsidiaries.

At the Company’s election, interest on borrowings under the Credit Facility is determined by reference to either LIBOR plus an applicable margin between 1.00% and 2.25% per annum or the alternate base rate (“ABR”) plus an applicable margin between 0% and 0.75% per annum.  Interest is generally payable quarterly for ABR loans and at the applicable maturity date for LIBOR loans.

The Credit Facility contains various covenants that limit the Company’s ability to incur indebtedness, enter into interest rate swaps, grant certain liens, make certain loans, acquisitions, capital expenditures and investments, make distributions other than from available cash, merge or consolidate, or engage in certain asset dispositions, including a sale of all or substantially all of its assets.  The Credit Facility also contains covenants that require the Company to maintain Adjusted EBITDA to interest expense and current liquidity financial ratios.  The Company is in compliance with all financial and other covenants of its Credit Facility.

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LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

As of December 31, 2007 and 2006, the Credit Facility consisted of the following:

	December 31,
	2007		2006
	(in thousands)
Total (1)	$	1,443,000	$	425,750
Less current maturities	—		—
	$	1,443,000	$	425,750

(1)   Variable rate of 7.02% and 7.125% at December 31, 2007 and 2006, respectively

At December 31, 2007, the Company also had $2.5 million outstanding letters of credit, which reduce its borrowing availability under the Credit Facility.  At December 31, 2007, available borrowing under Credit Facility was $354.5 million.

Subordinated Bridge Loan

In August 2006, in order to fund a portion of the acquisitions of oil and gas properties (see Note 2), the Company entered into a $250.0 million subordinated bridge loan.  Interest was determined by reference to LIBOR plus an applicable margin of 4.00% per annum; or a domestic bank rate plus an applicable margin of 2.50% per annum.  In October 2006, the subordinated bridge loan was repaid in full with proceeds from the Company’s private placement of units (see Note 4).

Term Loan

On January 31, 2008, in order to fund a portion of the January 2008 acquisition of oil and gas properties in the Mid-Continent (see Note 2), the Company entered into a $400.0 million Second Lien Term Loan Agreement with a maturity of July 31, 2009 (“Term Loan”).  In connection with the Term Loan, the Company paid financing fees of approximately $6.0 million, which were deferred and amortized over the life of the Term Loan.  The Company’s obligations under the Term Loan are secured by a second priority lien on all oil and gas properties as well as a second priority pledge on all ownership interests in its operating subsidiaries.  The Company’s obligations under the Term Loan are guaranteed by all the Company’s operating subsidiaries and may be guaranteed by any future subsidiaries.  Covenants under the Term Loan are substantially similar to those under the Credit Facility. Interest is determined by reference to LIBOR plus an applicable margin of 5.0% for the first twelve months and 7.5% for the remaining period until maturity or a domestic bank rate plus an applicable margin of 3.5% for the first twelve months and 6.0% for the remaining period until maturity.

Other Notes Payable

The Company has notes payable for a building, vehicles and equipment, which are secured by the respective asset and expire at various dates from 2008 through 2024.  At December 31, 2007 and 2006, the balance in notes payable included in other noncurrent liabilities on the consolidated balance sheets was $0.8 million and $2.5 million, respectively.  The current portion included in other current liabilities on the consolidated balance sheets was $0.7 million and $0.9 million, respectively.  At December 31, 2007 and 2006, notes payable includes approximately $1.1 million and $1.0 million, respectively, of notes payable on which interest was imputed at 7.0%.

(8)Interest Rate Swaps

The Company has entered into interest rate swap agreements based on LIBOR to minimize the effect of fluctuations in interest rates.  If LIBOR is lower than the fixed rate in the contract, the Company is required to pay the counterparties the difference, and conversely, the counterparties are required to pay the Company if LIBOR is higher than the fixed rate in the contract.  The Company did not designate the interest rate swap

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LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

agreements as cash flow hedges under SFAS 133; therefore, the changes in fair value of these instruments are recorded in current earnings.

The following summarizes the Company’s interest rate swaps outstanding:

	December 31,
	2007			2006
	(in thousands)
Total liabilities	$	30,070		$	423
Less total assets	(142		)	(44		)
	$	29,928		$	379

Unrealized gains (losses) due to the change in the fair value of approximately $(29.5) million, $82,000 and $1.0 million for the years ended December 31, 2007, 2006 and 2005, respectively, are recorded in gain (loss) on interest rate swaps in the consolidated statements of operations.

Realized gains (losses) of approximately $1.5 million, $0.3 million and $17,000 for the years ended December 31, 2007, 2006 and 2005, respectively, are recorded in gain (loss) on interest rate swaps in the consolidated statements of operations.

The following presents the outstanding notional amounts and maximum number of months outstanding of interest rate swaps:

	December 31,
	2007		2006
	(in thousands, except months)
Notional amount	$	1,212,000	$	50,000
Maximum number of months outstanding	36		24

The following presents the settlement terms of the interest rate swaps:

	Notional Amount		Fixed Rate
	(in thousands)
Settles monthly, October 2007 - January 2008	$	985,000	4.79	%
Settles monthly, January 2008 - January 2009	$	177,000	3.50	%
Settles monthly, January 2008 - January 2009	$	985,000	4.25	%
Settles monthly, January 2009 - January 2010	$	227,000	4.89	%
Settles monthly, January 2009 - January 2011	$	985,000	5.10	%
Settles quarterly, January 2008 - December 2008	$	50,000	5.79	%

(9)Commodity Derivatives

The Company sells oil, gas and NGL in the normal course of its business and utilizes derivative instruments to minimize the variability in cash flows due to price movements in oil, gas and NGL.  The Company enters into derivative instruments such as swap contracts and put options to hedge a portion of its forecasted oil, gas and NGL sales.  Oil derivatives are used to hedge oil and NGL sales.

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LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The following table summarizes open positions as of December 31, 2007 and represents, as of such date, derivatives in place through December 31, 2013, on annual production volumes.

	Year 2008			Year 2009			Year 2010			Year 2011			Year 2012			Year 2013
Gas Positions:
Fixed Price Swaps:
Hedged Volume (MMMBtu)	45,247			49,271			42,086			38,741			34,066			—
Average Price ($/MMBtu)	$	8.48		$	8.32		$	8.14		$	8.08		$	8.45		$	—
Puts:
Hedged Volume (MMMBtu)	6,463			6,960			6,960			6,960			—			—
Average Price ($/MMBtu)	$	8.07		$	7.50		$	7.50		$	7.50		$	—		$	—
PEPL Puts: (1)
Hedged Volume (MMMBtu)	3,854			5,334			10,634			13,259			5,934			—
Average Price ($/MMBtu)	$	7.85		$	7.85		$	7.85		$	7.85		$	7.85		$	—
Total:
Hedged Volume (MMMBtu)	55,564			61,565			59,680			58,960			40,000			—
Average Price ($/MMBtu)	$	8.39		$	8.19		$	8.02		$	7.96		$	8.36		$	—
Oil Positions:
Fixed Price Swaps:
Hedged Volume (MBbls)	1,413			1,587			1,300			1,223			1,175			900
Average Price ($/Bbl)	$	73.00		$	72.89		$	73.87		$	75.99		$	72.41		$	72.22
Puts: (2)
Hedged Volume (MBbls)	1,671			1,843			2,250			2,352			500			—
Average Price ($/Bbl)	$	72.86		$	72.13		$	70.56		$	69.11		$	77.73		$	—
Total:
Hedged Volume (MBbls)	3,084			3,430			3,550			3,575			1,675			900
Average Price ($/Bbl)	$	72.92		$	72.48		$	71.77		$	71.46		$	74.00		$	72.22
Gas Basis Differential Positions:
PEPL Basis Swaps: (3)
Hedged Volume (MMMBtu)	36,146			34,666			29,366			26,741			34,066			—
Hedged Differential ($/MMBtu)	$	(0.95	)	$	(0.95	)	$	(0.95	)	$	(0.95	)	$	(0.95	)	$	—

(1)Settle on the PEPL spot price of gas to hedge basis differential associated with gas production in the Mid-Continent region.

(2)The Company utilizes oil puts to hedge revenues associated with its NGL production.

(3)Represents a swap of the basis between NYMEX and the PEPL spot price of gas of $(0.95) per MMBtu for the volumes hedged.

The following presents the outstanding notional amounts and maximum number of months outstanding of oil and gas derivatives:

	December 31,
	2007	2006
Outstanding notional amounts of gas hedges (MMMBtu)	275,769	31,503
Maximum number of months gas hedges outstanding	59	35
Outstanding notional amounts of oil hedges (MBbls)	16,214	8,700
Maximum number of months oil hedges outstanding	72	60

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LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Settled derivatives on gas production for the year ended December 31, 2007 included a volume of 25,933 MMMBtu at an average contract price of $8.44.  Settled derivatives on oil and NGL production for the year ended December 31, 2007 included a volume of 1,952 MBbls at an average contract price of $69.09.  The gas derivatives are settled based on the closing NYMEX future price of gas or on the published PEPL spot price of gas on the settlement date, which occurs on the third day preceding the production month.  The oil transactions are settled based on the average month’s daily NYMEX price of light oil and settlement occurs on the final day of the production month.

Realized gains (losses) of approximately $43.2 million, $25.5 million and $(51.4) million for the years ended December 31, 2007, 2006 and 2005, respectively, are recorded in gain (loss) on oil and gas derivatives in the consolidated statements of operations.

By using derivative instruments to hedge exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk.  Credit risk is the failure of the counterparty to perform under the terms of the derivative contract.  When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk.  The Company minimizes the credit risk in derivative instruments by entering into transactions with credit-worthy counterparties.

Subsequent to December 31, 2007 the Company entered into additional hedging contracts (see Note 12).

(10)Property and Equipment

Property and equipment consists of the following:

	December 31,
	2007			2006
	(in thousands)
Land	$	1,052		$	308
Buildings and leasehold improvements	8,510			2,759
Vehicles	7,405			3,097
Aircraft	—			5,890
Drilling and other equipment	12,313			8,611
Furniture and office equipment	8,127			1,966
	37,407			22,631
Less accumulated depreciation	(5,383		)	(1,877		)
	$	32,024		$	20,754

Depreciation expense on the above assets for the years ended December 31, 2007, 2006 and 2005 was approximately $3.8 million, $1.4 million and $0.9 million, respectively.

(11)Asset Retirement Obligations

Asset retirement obligations (“ARO”), associated with retiring tangible long-lived assets, are recognized as a liability in the period in which a legal obligation is incurred and becomes determinable.  This liability is offset by a corresponding increase in the carrying amount of the underlying asset.  The cost of the tangible asset, including the initially recognized ARO, is depleted such that the cost of the ARO is recognized over the useful life of the asset.  The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value.  The fair value of ARO is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate (7.0%, 7.0% and 5.8% for the years ended December 31, 2007, 2006 and 2005, respectively).

Inherent in the fair value calculation of ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and

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LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

changes in legal, regulatory, environmental and political environments.  To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the asset balance.

The following presents a reconciliation of the ARO liability:

	December 31,
	2007		2006
	(in thousands)
ARO at beginning of year	$	8,594	$	5,443
Liabilities added related to acquisitions and drilling	15,922		2,837
Current year accretion expense	1,014		314
Revision of estimates	3,543		—
ARO at end of year	$	29,073	$	8,594

(12)Commitments and Contingencies

The Company would have increased exposure to oil, gas and NGL price fluctuations on underlying sale contracts should the counterparties to the Company’s derivative instruments or the counterparties to the Company’s oil, gas and NGL marketing contracts not perform.  Such non-performance is not anticipated.  There were no counterparty default losses during the years ended December 31, 2007, 2006 or 2005.

From time to time the Company is a party to various legal proceedings or is subject to industry rulings that could bring rise to claims in the ordinary course of business.  The Company is not currently a party to any litigation or pending claims that it believes would have a material adverse effect on the Company’s business, financial condition, results of operations or liquidity.

On December 31, 2007, the Company entered into hedging contracts to reduce oil price risk exposures related to its acquisition from Lamamco (see Note 2).  The contracts cover approximately 229,000 Bbls of oil for 2008 and 250,000 Bbls per year from 2009 through 2012.  The contracts included a deal-contingent option to enter into oil swaps upon consummation of the acquisition for which the Company paid commitment fees and premiums totaling approximately $1.3 million to the counterparty, Lehman Brothers Holding, Inc. (a related party to the Company, see Note 16) in January 2008.  This amount is included in other noncurrent liabilities on the consolidated balance sheet at December 31, 2007.  The Company’s commitment to enter into the swaps was contingent on the closing of the acquisition.

(13)Earnings Per Unit

Basic earnings per unit is computed in accordance with SFAS No. 128, “Earnings Per Share” (“SFAS 128”) by dividing net earnings attributable to unitholders by the weighted average number of units outstanding during each period.  Diluted earnings per unit is computed by adjusting the average number of units outstanding for the dilutive effect, if any, of unit equivalents.  The Company uses the treasury stock method to determine the dilutive effect.  At December 31, 2006, the Company had two classes of units outstanding:  (i) units representing limited liability company interests (“units”) listed on The NASDAQ Global Market under the symbol “LINE” and (ii) Class B units.

In accordance with SFAS 128, dual presentation of basic and diluted earnings per unit has been presented in the consolidated statements of operations for the year ended December 31, 2006 for each class of units issued and outstanding at that date, units and Class B units.  Net income per unit was allocated to the units and the Class B units on an equal basis.  Certain existing holders of Linn Energy units totaling over 50% committed in advance to vote at a unitholder meeting in favor of the conversion of Class B units to units and the Class B units were converted to units on a one-for-one basis in January 2007; therefore, the Class B units share equally with the units in the net income of the Company.  Since the Class B units were converted to units in January

79

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

2007, they share equally in the February 2007 distributions and all future distributions.  The Company made no distributions to Class B unitholders during the period the Class B units were outstanding.

For the periods prior to the Company’s IPO, equivalent units were calculated by adjusting pre-IPO members’ membership interests by the exchange ratio to reflect the exchange of pre-IPO membership interests for post-IPO units and cash immediately prior to completion of the IPO (see Note 4).

The following reconciliation presents the impact on the unit amounts of potential common units and the earnings per unit amounts:

	Year Ended December 31,
	2007			2006		2005
	(in thousands, except per unit amounts)
Net income (loss)	$	(364,349	)	$	79,185	$	(56,351	)
Weighted average units outstanding:
Basic units outstanding	68,916			28,281		20,518
Dilutive effect of unit equivalents (1)	—			2,104		—
Diluted units outstanding	68,916			30,385		20,518
Weighted average Class B units outstanding:
Basic Class B units outstanding	—			1,737		—
Dilutive effect of unit equivalents	—			—		—
Diluted Class B units outstanding	—			1,737		—
Net income (loss) per unit:
Units – basic	$	(5.29	)	$	2.64	$	(2.75	)
Units – diluted	$	(5.29	)	$	2.61	$	(2.75	)
Class B units – basic	$	—		$	2.64	$	—
Class B units – diluted	$	—		$	2.61	$	—

(1)Excludes the effect of average anti-dilutive common stock equivalents related to unit options and warrants and unvested restricted units of 434,821 and 234,016 for the years ended December 31, 2007 and 2006, respectively.  All equivalent units were anti-dilutive for the year ended December 31, 2007 as the Company reported a net loss from operations.

(14)Operating Leases

The Company leases office space and other property and equipment under lease agreements expiring on various dates through 2015.  The Company recognized expense under operating leases of approximately $1.2 million, $0.5 million and $0.4 million for the years ended December 31, 2007, 2006 and 2005, respectively.

80

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

As of December 31, 2007, future minimum lease payments were as follows:

	(in thousands)
2008	$	2,752
2009	2,839
2010	2,857
2011	2,559
2012	2,374
Thereafter	2,566
	$	15,947

(15)Income Taxes

The Company is treated as a partnership for federal and state income tax purposes.  As such, it is not a taxable entity and does not directly pay federal and state income tax.  Its taxable income or loss, which may vary substantially from the net income or net loss reported in the consolidated statements of operations, is includable in the federal and state income tax returns of each unitholder.  Accordingly, no recognition has been given to federal and state income taxes for the operations of the Company except as described below.  The aggregate difference in the basis of net assets for financial and tax reporting purposes cannot be readily determined as the Company does not have access to information about each unitholder’s tax attributes in the Company.

Certain of the Company’s subsidiaries are Subchapter C-corporations subject to corporate income taxes.  The income tax provision attributable to the Company’s taxable subsidiaries’ losses before income taxes consisted of the following:

	Year Ended December 31,
	2007			2006			2005
	(in thousands)
Current taxes:
Federal	$	(145	)	$	—		$	—
State	(68		)	(32		)	—
Deferred taxes:
Federal	(3,147		)	2,999			(57		)
State	(213		)	435			(17		)
Total	$	(3,573	)	$	3,402		$	(74	)

As of December 31, 2007 and 2006, the Company’s taxable entities had approximately $6.4 million and $10.1 million, respectively, of net operating loss carryforwards for federal income tax purposes, which will begin expiring in 2025.

Income tax expense differed from amounts computed by applying the federal income tax rate of 35% to pre-tax income as a result of the following:

	Year Ended December 31,
	2007		2006		2005
Federal statutory rate	35.0	%	(35.0	)%	34.0	%
State, net of federal tax benefit	(0.1	)	0.4		––
Income (loss) from non-taxable entities	(35.1	)	50.6		(34.0	)
Non-deductible compensation	(0.3	)	(9.1	)	––
Other items	(0.4	)	(2.3	)	(0.1	)
Income tax benefit (provision)/effective rate	(0.9	)%	4.6	%	(0.1	)%

81

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Significant components of the deferred tax assets and liabilities were as follows:

	December 31,
	2007			2006
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	2,449		$	4,227
Unit-based compensation	3,762			1,766
Other	285			358
Valuation allowance	(4,249		)	(2,318		)
Total deferred tax assets	2,247			4,033
Deferred tax liabilities:
Property and equipment principally due to differences in depreciation	(2,247		)	(673		)
Total deferred tax liabilities	(2,247		)	(673		)
Net deferred tax assets (liabilities)	$	—		$	3,360

Net deferred tax liabilities were classified in the consolidated balance sheets as follows:

	2007			2006
	(in thousands)
Deferred tax asset	$	2,247		$	4,033
Deferred tax liability	(2,247		)	(673		)
Net deferred tax assets (liabilities)	$	—		$	3,360

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is not more likely than not that the Company will realize the benefits of these deductible differences at December 31, 2007; therefore, the Company has recorded a valuation allowance against the deferred tax asset.

The Company adopted Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”) on January 1, 2007.  FIN 48 requires that the Company recognize only the impact of income tax positions that, based on their merits, are more likely than not to be sustained upon audit by a taxing authority.  It also requires expanded financial statement disclosure of such positions.

In evaluating its current tax positions in order to identify any material uncertain tax positions, the Company developed a policy in identifying uncertain tax positions that considers support for each tax position, industry standards, tax return disclosures and schedules and the significance of each position.  As of December 31, 2007, the Company had no material uncertain tax positions.

82

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(16)Related Party Transactions

Lehman Brothers Holding, Inc.

At December 31, 2007, on an aggregate basis, a group of certain direct or indirect wholly owned subsidiaries of Lehman Brothers Holding, Inc. (“Lehman”) owned over 10% of the Company’s outstanding units, acquired during 2006 and 2007 in the Company’s private placements of units (see Note 4).  As such, Lehman is considered a related party under the provisions of SFAS No. 57 “Related Party Disclosures.”  Lehman subsidiaries provide certain services to the Company, including participation in the Company’s Credit Facility (see Note 7) and sale of commodity derivative instruments (see Note 9), which were all consummated on terms equivalent to those that prevail in arm’s-length transactions.

In conjunction with its private placement of units, the Company received proceeds from Lehman of approximately $378.7 million and $46.0 million during the years ended December 31, 2007 and 2006, respectively.

During the year ended December 31, 2007, the Company paid Lehman underwriting fees of approximately $13.5million.  In addition, during the years ended December 31, 2007 and 2006, the Company paid distributions on units to Lehman of approximately $15.2 million and $0.4 million, respectively.  During the year ended December 31, 2007, the Company purchased approximately $226.3 million in oil and gas put and swap contracts from Lehman.

During the year ended December 31, 2007, the Company paid Lehman, through the administrator of its Credit Facility, interest on borrowings under its Credit Facility of approximately $1.3 million and financing fees of approximately $0.1 million.  During the year ended December 31, 2006, the Company paid Lehman interest on borrowings under its Credit Facility of approximately $0.8 and financing fees of approximately $42,000.

The following sets forth the amounts due to or from Lehman as of the respective balance sheet dates included in the accompanying consolidated financial statements:

	December 31,
	2007		2006
	(in thousands)
Assets:
Current oil and gas derivative assets	$	14,226	$	2,218
Noncurrent oil and gas derivative assets	$	—	$	3,538
Liabilities:
Accrued interest payable – Credit Facility	$	162	$	79
Other current liabilities	$	1,278	$	—
Credit Facility	$	40,404	$	15,966
Noncurrent oil and gas derivative liabilities	$	7,028	$	—

Other

Eric P. Linn, brother of the Company’s Chairman and Chief Executive Officer, serves as President of a wholly owned subsidiary of the Company.  Mr. Linn was paid a base salary of $0.2 million, $0.2 million and $0.1 million, during the years ended December 31, 2007, 2006 and 2005, respectively, which is included in operating expenses on the consolidated statements of operations.

During 2007, Quantum Energy Partners sold all Linn Energy units previously held and is no longer considered a related party to the Company.

83

LINN ENERGY, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

During the year ended December 31, 2007, the Company made payments of approximately $0.2 million to a company owned by a member of its Board of Directors.  The payments reflect purchases of gas and are included in natural gas marketing expenses on the consolidated statement of operations.  The expenses were consummated on terms equivalent to those that prevail in arm’s-length transactions.

During the year ended December 31, 2006, the Company made payments of approximately $0.4 million to a company owned by one of its senior executives.  The payments reflect reimbursement for maintenance and hourly usage fees for business use of an aircraft that was partially owned by the senior executive.  These costs are included in general and administrative expense on the consolidated statement of operations.  The fees and expenses associated with the reimbursements were consummated on terms equivalent to those that prevail in arm’s-length transactions.  In the third quarter of 2006, the Company purchased an ownership interest in an airplane for corporate travel from a third party; therefore, these reimbursements will not be ongoing.  Simultaneous with this transaction, the senior executive was able to fully liquidate the investment in the aircraft owned by his company.

(17)         Supplemental Disclosures to the Consolidated Statements of Cash Flows

	Year Ended December 31,
	2007			2006			2005
	(in thousands)
Supplemental disclosure of cash flow information:
Cash payments for interest	$	57,348		$	24,147		$	6,510
Supplemental disclosures of non-cash investing activities:
In connection with the purchase of oil and gas properties, liabilities were assumed as follows:
Fair value of assets acquired	$	2,726,376		$	472,499		$	123,514
Cash paid	(2,665,924		)	(469,274		)	(122,065		)
Liabilities assumed, net	$	60,452		$	3,225		$	1,449

84

LINN ENERGY, LLC

SUPPLEMENTAL OIL AND GAS DATA (Unaudited)

(A)Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities

Costs incurred in oil and gas property acquisition and development are presented below:

	Year Ended December 31,
	2007		2006		2005
	(in thousands)
Property acquisition costs: (1)
Proved	$	2,422,983	$	450,232	$	118,489
Unproved	148,284		4,062		579
Development costs (2)	189,466		47,112		27,145
Gas compression plant and pipelines	91,370		15,232		4,043
Total costs incurred	$	2,852,103	$	516,638	$	150,256

⁽¹⁾     Property acquisition costs include costs incurred to purchase, lease, or otherwise acquire a property (see Note 2).

⁽²⁾     Development costs include costs incurred to gain access to and prepare development well locations for drilling, to drill and equip development wells and to provide facilities to extract, treat and gather oil and gas.  Additionally, development costs include asset retirement costs of $3.9 million, $0.1 million and $0.3 million during the years ended December 31, 2007, 2006 and 2005, respectively (see Note 11).

(B)Oil and Gas Capitalized Costs

Aggregate capitalized costs related to oil and gas production activities with applicable accumulated depreciation, depletion and amortization are presented below:

	December 31,
	2007			2006
	(in thousands)
Proved properties:
Leasehold acquisition	$	3,095,400		$	672,417
Development	254,251			64,785
Unproved properties	156,908			8,624
Gas compression plant and pipelines	112,182			20,812
	3,618,741			766,638
Less accumulated depletion, depreciation and amortization	(127,265		)	(33,349		)
Net capitalized costs	$	3,491,476		$	733,289

85

LINN ENERGY, LLC

SUPPLEMENTAL OIL AND GAS DATA (Unaudited) - Continued

(C)Results of Oil and Gas Producing Activities

The results of operations for oil and gas producing activities (excluding corporate overhead and interest costs) are presented below:

	Year Ended December 31,
	2007			2006		2005
	(in thousands)
Revenues:
Oil, gas and NGL sales, excluding natural gas marketing revenues	$	318,226		$	80,393	$	44,645
Gain (loss) on oil and gas derivatives	(345,537		)	103,308		(76,193		)
Net oil, gas and NGL sales	(27,311		)	183,701		(31,548		)
Expenses:
Production costs	88,527			18,099		7,356
Depreciation, depletion and amortization	94,127			22,714		7,022
Total expenses	182,654			40,813		14,378
Results of operations for oil and gas producing activities (excluding corporate overhead and interest costs)	$	(209,965	)	$	142,888	$	(45,926	)

Production costs include those costs incurred to operate and maintain productive wells and related equipment, including such costs as labor, repairs, maintenance, materials, supplies, fuel consumed, insurance and production taxes.

Depreciation, depletion and amortization expense includes those costs associated with capitalized acquisition and development costs and support equipment.  For the years ended December 31, 2007 and 2006, depreciation, depletion and amortization expense also includes approximately $3.3 million and $1.0 million, respectively, of impairment recorded on oil and gas properties (see Note 1).

There is no tax provision included in the results of oil and gas producing activities because the Company’s taxable subsidiaries do not own any of the Company’s oil and gas interests (see Note 15).

86

LINN ENERGY, LLC

SUPPLEMENTAL OIL AND GAS DATA (Unaudited) - Continued

(D)Net Proved Oil and Gas Reserves

The proved reserves of oil and gas of the Company have been prepared by the independent engineering firm DeGolyer and MacNaughton at December 31, 2007 and 2006.  The independent engineering firm, Schlumberger Data and Consulting Services, prepared the estimated reserves at December 31, 2005.  These reserve estimates have been prepared in compliance with the SEC rules based on year-end prices.  An analysis of the change in estimated quantities of oil and gas reserves, all of which are located within the United States, is shown below:

	Year Ended December 31, 2007
	Gas (MMcf)		Oil (MBbls)		NGL (MBbls)		Total (MMcfe)
Proved developed and undeveloped reserves:
Beginning of year	274,006		30,010		—		454,066
Revisions of previous estimates	(25,418	)	6,496		163		14,531
Purchase of minerals in place	737,583		17,823		41,741		1,094,967
Sales of minerals in place	(1,505	)	(1	)	—		(1,511	)
Extensions and discoveries	71,191		1,694		2,213		94,633
Production	(27,001	)	(1,271	)	(992	)	(40,579	)
End of year	1,028,856		54,751		43,125		1,616,107
Proved developed reserves:
Beginning of year	166,007		24,675		—		314,057
End of year	762,115		42,791		25,546		1,172,142

	Year Ended December 31, 2006
	Gas (MMcf)		Oil (MBbls)		Total (MMcfe)
Proved developed and undeveloped reserves:
Beginning of year	191,856		226		193,210
Revisions of previous estimates	(37,239	)	370		(35,018	)
Purchase of minerals in place	84,951		29,784		263,655
Extensions and discoveries	43,037		—		43,037
Production	(8,599	)	(370	)	(10,818	)
End of year	274,006		30,010		454,066
Proved developed reserves:
Beginning of year	123,865		226		125,220
End of year	166,007		24,675		314,057

	Year Ended December 31, 2005
	Gas (MMcfe)
Proved developed and undeveloped reserves:
Beginning of year	119,760
Revisions of previous estimates	2,415
Purchase of minerals in place	53,976
Extensions and discoveries	21,898
Production	(4,839	)
End of year	193,210
Proved developed reserves:
Beginning of year	74,366
End of year	125,220

87

LINN ENERGY, LLC

SUPPLEMENTAL OIL AND GAS DATA (Unaudited) - Continued

For the years ended December 31, 2007 and 2006 the tables above include changes in estimated quantities of oil and NGL reserves shown in Mcf equivalents at a rate of one barrel per six Mcf.  Net oil production included above represents approximately 3% of total production in 2005.

The 14,531 MMcfe positive revision of previous estimates during the year ended December 31, 2007 was due to a combination of reasons including higher oil and gas prices, higher operating costs, asset performance and changes to future scheduled capital projects.  The 35,018 MMcfe negative revision of previous estimate during the year ended December 31, 2006 was due primarily to a decrease in gas prices.  The 2,415 MMcfe positive revision of previous estimates during the year ended December 31, 2005 was due primarily to an increase in gas prices.

Extensions and discoveries of 94,633 MMcfe, 43,037 MMcfe and 21,898 MMcfe during the years ended December 31, 2007, 2006 and 2005, respectively, were primarily due to the drilling of 253 wells during 2007, 159 wells during 2006 and 110 wells during 2005, which increased the Company’s proved reserves.

The Company made eight, five and three acquisitions of working and royalty interests during the years ended December 31, 2007, 2006 and 2005, respectively, with total proved reserves of 1,094,967 MMcfe, 263,655 MMcfe and 53,976 MMcfe, respectively.

(E)Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Reserves

Information with respect to the standardized measure of discounted future net cash flows relating to proved reserves is summarized below.  Future cash inflows are computed by applying year-end prices relating to the Company’s proved reserves to the year-end quantities of those reserves.  Future production, development, site restoration and abandonment costs are derived based on current costs assuming continuation of existing economic conditions.  There are no future income tax expenses because the Company is a non-taxable entity (see Note 15).

	December 31,
	2007			2006			2005
	(in thousands)
Future estimated revenues	$	13,974,496		$	3,053,772		$	2,041,930
Future estimated production costs	(3,482,336		)	(868,564		)	(332,839		)
Future estimated development costs	(720,170		)	(239,328		)	(96,542		)
Future net cash flows	9,771,990			1,945,880			1,612,549
10% annual discount for estimated timing of cash flows	(6,313,751		)	(1,393,620		)	(1,060,474		)
Standardized measure of discounted future estimated net cash flows	$	3,458,239		$	552,260		$	552,075

Representative oil and gas prices at period end:
Gas – NYMEX per MMBtu	$	6.80	$	5.64	$	10.08
Oil – NYMEX West Texas Intermediate per Bbl	$	95.92	$	61.05	$	57.98

88

LINN ENERGY, LLC

SUPPLEMENTAL OIL AND GAS DATA (Unaudited) - Continued

The following summarizes the principal sources of change in the standardized measure of discounted future estimated net cash flows:

	Year Ended December 31,
	2007			2006			2005
	(in thousands)
Sales of oil and gas production, net of production costs	$	(229,699	)	$	(62,294	)	$	(37,676	)
Changes in estimated future development costs	5,411			(2,173		)	55,125
Net changes in prices and production costs	83,597			(536,672		)	135,701
Purchase and sale of minerals in place	2,493,768			508,107			64,361
Extensions, discoveries, and improved recovery, less related costs	176,693			17,872			192,412
Development costs incurred during the period	91,273			47,112			26,406
Revisions of previous quantity estimates	23,481			(10,747		)	1,026
Change in discount	55,226			55,208			21,503
Changes in production rates and other	206,229			(16,228		)	(121,817		)
	$	2,905,979		$	185		$	337,041

It is necessary to emphasize that the data presented should not be viewed as representing the expected cash flow from, or current value of, existing proved reserves since the computations are based on a large number of estimates and arbitrary assumptions.  Reserve quantities cannot be measured with precision and their estimation requires many judgmental determinations and frequent revisions.  The required projection of production and related expenditures over time requires further estimates with respect to pipeline availability, rates of demand and governmental control.  Actual future prices and costs are likely to be substantially different from the current prices and costs utilized in the computation of reported amounts.  Any analysis or evaluation of the reported amounts should give specific recognition to the computational methods utilized and the limitations inherent therein.

89

LINN ENERGY, LLC

SUPPLEMENTAL QUARTERLY DATA (Unaudited)

(A)Quarterly Financial Data

	Quarters Ended
	March 31			June 30			September 30			December 31
	(in thousands, except per unit amounts)
2007
Oil, gas and natural gas liquid sales	$	39,204		$	49,217		$	75,062		$	154,743
Gain (loss) on oil and gas derivatives	(60,441		)	(17,707		)	(65,440		)	(201,949		)
Total revenues	(17,369		)	33,788			18,479			(42,135		)
Total expenses (1)	36,275			41,068			72,194			109,969
Net loss	$	(67,847	)	$	(17,126	)	$	(76,222	)	$	(203,154	)
Net loss per unit:
Units – basic	$	(1.35	)	$	(0.29	)	$	(0.94	)	$	(2.01	)
Units – diluted	$	(1.35	)	$	(0.29	)	$	(0.94	)	$	(2.01	)

	Quarters Ended
	March 31		June 30		September 30		December 31
	(in thousands, except per unit amounts)
2006
Oil and gas sales	$	16,375	$	13,529	$	23,506	$	26,983
Gain on oil and gas derivatives	24,246		12,895		57,396		8,771
Total revenues	42,128		27,974		82,257		38,699
Total expenses (1)	17,147		15,166		17,989		36,825
Net income (loss)	$	21,977	$	10,239	$	53,057	$	(6,088	)
Net income (loss) per unit:
Units – basic	$	0.84	$	0.37	$	1.92	$	(0.16	)
Units – diluted	$	0.84	$	0.36	$	1.89	$	(0.16	)

(1)Includes operating, natural gas marketing, general and administrative, data license expenses and depreciation, depletion and amortization.

90

Item 9.      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, and the Company’s Audit Committee of the Board of Directors, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company carried out an evaluation under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report.  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2007.

Management’s Annual Report on Internal Control Over Financial Reporting

See Management’s Report on Internal Control Over Financial Reporting under Item 8 of this Form 10-K.

Changes in the Company’s Internal Control Over Financial Reporting

The Company’s management is also responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.  The Company’s internal controls were designed to provide reasonable assurance as to the reliability of its financial reporting and the preparation and presentation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not detect or prevent misstatements.  Projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Except for the potential changes noted in the following paragraph relating to the acquisition of certain oil and gas properties during 2007, there were no changes in the Company’s internal controls over financial reporting during the fourth quarter of 2007 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company completed an acquisition of oil and gas properties in the Mid-Continent in August 2007.  Company management continues to integrate internal controls and enhanced reporting related to the financial performance of the acquired operations with the Company’s internal control over financial reporting.  This integration may lead to changes in these controls in future fiscal periods, but management does not yet know whether these changes will materially affect the Company’s internal control over financial reporting.  Management expects the integration process to be completed during 2008.

Item 9B.   Other Information

None.

91

Part III

Item 10.   Directors, Executive Officers and Corporate Governance

A list of the Company’s executive officers and biographical information appears in Part I. Item 1. “Business and Properties” in this Form 10-K.  Information about Company Directors may be found under the caption “Election of Directors” of the Proxy Statement for the Annual Meeting of Unitholders to be held on May 29, 2008 (the “2008 Proxy Statement”).  That information is incorporated herein by reference.

The information in the 2008 Proxy Statement set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference.

The information required by this item regarding audit committee related matters, codes of ethics and committee charters is incorporated by reference from the 2008 Proxy Statement under the caption “Corporate Governance.”

Item 11.   Executive Compensation

Information required by this item is incorporated herein by reference to the 2008 Proxy Statement.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item is incorporated herein by reference to the 2008 Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following summarizes information regarding the number of units that are available for issuance under all of the Company’s equity compensation plans as of December 31, 2007:

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Unit Options, Warrants and Rights (1)	Weighted-Average Exercise Price of Outstanding Unit Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	1,077,021	$25.36	916,572
Equity compensation plans not approved by security holders	—	—	—
Total	1,077,021	$25.36	916,572

(1)Includes 80,000 unit options awarded under employment agreements for which the grant date for expense recognition occurred in January 2008.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

Information required by this item is incorporated herein by reference to the 2008 Proxy Statement.

Item 14.   Principal Accounting Fees and Services

Information required by this item is incorporated herein by reference to the 2008 Proxy Statement.

92

Part IV

Item 15.   Exhibits and Financial Statement Schedules

(a) - 2.  Financial and Statement Schedules:

All schedules are omitted for the reason that they are not required or the information is otherwise supplied under Part II. Item 8. “Financial Statements and Supplementary Data.”

(a) - 3.  Exhibits Filed:

The exhibits required to be filed by this item are set forth in the Index to Exhibits accompanying this report.

93

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LINN ENERGY, LLC
Date: February 28, 2008	By:	/s/ MICHAEL C. LINN
		Michael C. Linn
		Chairman and Chief Executive Officer
Date: February 28, 2008	By:	/s/ LISA D. ANDERSON
		Lisa D. Anderson
		Senior Vice President and Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ MICHAEL C. LINN	Chairman and Chief Executive Officer	February  28, 2008
Michael C. Linn	(Principal Executive Officer)
/s/ KOLJA ROCKOV	Executive Vice President and Chief Financial Officer	February 28, 2008
Kolja Rockov	(Principal Financial Officer)
/s/ LISA D. ANDERSON	Senior Vice President and Chief Accounting Officer	February 28, 2008
Lisa D. Anderson	(Principal Accounting Officer)
/s/ GEORGE A. ALCORN	Independent Director	February 28, 2008
George A. Alcorn
/s/ TERRENCE S. JACOBS	Independent Director	February 28, 2008
Terrence S. Jacobs
/s/ JOSEPH P. McCOY	Independent Director	February 28, 2008
Joseph P. McCoy
/s/ JEFFREY C. SWOVELAND	Independent Director	February 28, 2008
Jeffrey C. Swoveland

94

INDEX TO EXHIBITS

Exhibit Number			Description
2.	1†	—	Purchase and Sale Agreement, dated December 20, 2007, between Lamamco Drilling Company, as Seller and Linn Energy Holdings, LLC, as Purchaser
2.	2†	—	Amendment to Purchase and Sale Agreement, dated as of January 31, 2008, between Lamamco Drilling Company, as Seller and Linn Energy Holdings, LLC, as Purchaser
2.	3	—	Amended and Restated Mid-Continent Onshore Package Purchase Agreement, dated August 30, 2007, between Dominion Exploration & Production, Inc., Dominion Oklahoma Texas Exploration & Production, Inc., LDNG Texas Holdings, LLC, and DEPI Texas Holdings, LLC, as Sellers, and Linn Energy, LLC, as Purchaser (incorporated herein by reference to Exhibit 2.1 to Current Report on Form 8-K filed on September 5, 2007)
3.	1	—	Certificate of Formation of Linn Energy Holdings, LLC (now Linn Energy, LLC) (incorporated herein by reference to Exhibit 3.1 to Registration Statement on Form S-1 (File No. 333-125501) filed by Linn Energy, LLC on June 3, 2005)
3.	2	—	Certificate of Amendment to Certificate of Formation of Linn Energy Holdings, LLC (now Linn Energy, LLC) (incorporated herein by reference to Exhibit 3.2 to Registration Statement on Form S-1 (File No. 333-125501) filed by Linn Energy, LLC on June 3, 2005)
3.	3	—	Second Amended and Restated Limited Liability Company Agreement of Linn Energy, LLC dated January 19, 2006 (incorporated herein by reference to Exhibit 3.3 to Annual Report on Form 10-K for the year ended December 31, 2006, filed on March 30, 2007)
3.	4	—	Amendment No. 1 to Second Amended and Restated Limited Liability Company Agreement of Linn Energy, LLC dated October 24, 2006 (incorporated herein by reference to Exhibit 3.4 to Annual Report on Form 10-K for the year ended December 31, 2006, filed on March 30, 2007)
3.	5	—	Amendment No. 2 to Second Amended and Restated Limited Liability Company Agreement of Linn Energy, LLC dated February 1, 2007 (incorporated herein by reference to Exhibit 3.5 to Annual Report on Form 10-K for the year ended December 31, 2006, filed on March 30, 2007)
3.	6	—	Amendment No. 3 to Second Amended and Restated Limited Liability Company Agreement of Linn Energy, LLC dated August 31, 2007 (incorporated herein by reference to Exhibit 4.1 to Current Report on Form 8-K, filed on September 5, 2007)
4.	1	—	Form of specimen unit certificate for the units of Linn Energy, LLC (incorporated herein by reference to Exhibit 4.1 to the Annual Report on Form 10-K for the year ended December 31, 2005, filed on May 31, 2006)
10.	1*	—	Form of Linn Energy, LLC Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to Amendment No. 4 to Registration Statement on Form S-1 filed on December 14, 2005)
10.	2*	—	First Amendment to Linn Energy, LLC Long-Term Incentive Plan dated January 18, 2007 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 19, 2007)
10.	3*	—	Second Amendment to Linn Energy, LLC Long-Term Incentive Plan dated March 21, 2007 (incorporated herein by reference to Exhibit 10.3 to Annual Report on Form 10-K for the year ended December 31, 2006, filed on March 30, 2007)
10.	4†	—	Form of Executive Unit Option Agreement pursuant to the Linn Energy, LLC Long-Term Incentive Plan
10.	5†	—	Form of Executive Restricted Unit Agreement pursuant to the Linn Energy, LLC Long-Term Incentive Plan
10.	6*	—	Form of Phantom Unit Grant Agreement for Independent Directors pursuant to the Linn Energy, LLC Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 9, 2006)
10.	7*	—	Amended and Restated Employment Agreement, dated effective as of December 14, 2005 between Linn Operating, Inc. and Michael C. Linn (incorporated herein by reference to Exhibit 10.12 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-125501) filed on December 14, 2005)

95

Exhibit Number			Description
10.	8*	—	Second Amended and Restated Employment Agreement, dated as of September 15, 2005 between Linn Operating, Inc. and Kolja Rockov (incorporated herein by reference to Exhibit 10.12 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-125501) filed on October 31, 2005)
10.	9*	—	Employment Agreement, dated effective as of December 18, 2006 between Linn Operating, Inc. and Mark E. Ellis (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on November 29, 2006)
10.	10*	—	Employment Agreement, dated effective as of April 3, 2006 between Linn Operating, Inc. and Thomas A. Lopus (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 18, 2006)
10.	11*	—	Employment Agreement, dated effective as of July 7, 2006 between Linn Operating, Inc. and Lisa D. Anderson (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on July 13, 2006)
10.	12*†	—	Employment Agreement, dated effective March 22, 2007 between Linn Operating, Inc. and Charlene A. Ripley
10.	13*†	—	Employment Agreement, dated effective February 7, 2007 between Linn Operating, Inc. and Arden L. Walker, Jr.
10.	14	—	Third Amended and Restated Credit Agreement dated as of August 31, 2007 among Linn Energy, LLC as Borrower, BNP Paribas, as Administrative Agent, and the Lenders and agents Party thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 5, 2007)
10.	15†	—	First Amendment, dated November 2, 2007, to Third Amended and Restated Credit Agreement among Linn Energy, LLC, as borrower, BNP Paribas, as administrative agent, and the lenders and agents party thereto
10.	16†	—	Second Amendment, dated January 31, 2008, to Third Amended and Restated Credit Agreement among Linn Energy, LLC, as borrower, BNP Paribas, as administrative agent, and the lenders and agents party thereto
10.	17	—	Third Amended and Restated Guaranty and Pledge Agreement dated as of August 31, 2007 made by Linn Energy, LLC and each of the other Obligors in favor of BNP Paribas, as Administrative Agent (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on September 5, 2007)
10.	18†	—	Second Lien Term Loan Agreement dated as of January 31, 2008 among Linn Energy, LLC as Borrower, BNP Paribas, as Administrative Agent, and the lenders and agents party thereto
10.	19†	—	Second Lien Guaranty and Pledge Agreement dated as of January 31, 2008 made by Linn Energy, LLC and each of the other Obligors in favor of BNP Paribas, as Administrative Agent
10.	20	—	Class B Unit and Unit Purchase Agreement, dated as of October 24, 2006 by and between Linn Energy, LLC and the Purchasers named therein (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on October 25, 2006)
10.	21	—	Registration Rights Agreement dated as of October 24, 2006 by and among Linn Energy, LLC and the Purchasers named therein (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on October 25, 2006)
10.	22	—	Class C Unit and Unit Purchase Agreement, dated as of February 1, 2007 by and among the Company and the Purchasers named therein (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on February 5, 2007)
10.	23	—	Registration Rights Agreement dated February 1, 2007, by and among the Company and the Purchasers named therein (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on February 5, 2007)
10.	24	—	Class D Unit and Unit Purchase Agreement, dated as of June 29, 2007 by and among the Company and the Purchasers named therein (incorporated herein by reference to Exhibit 10.17 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 14, 2007)

96

Exhibit Number			Description
10.	25	—	Registration Rights Agreement dated August 31, 2007, by and among the Company and the Purchasers named therein (incorporated herein by reference to Exhibit 10.3 to Current Report on Form 8-K filed on September 5, 2007)
21.	1†	—	Significant Subsidiaries of Linn Energy, LLC
23.	1†	—	Consent of KPMG LLP for Linn Energy, LLC
23.	2†	—	Consent of DeGolyer and MacNaughton Data and Consulting Services
23.	3†	—	Consent of Schlumberger Technology Corporation
31.	1†	—	Section 302 Certification of Michael C. Linn, Chairman and Chief Executive Officer of Linn Energy, LLC
31.	2†	—	Section 302 Certification of Kolja Rockov, Executive Vice President and Chief Financial Officer of Linn Energy, LLC
32.	1†	—	Section 906 Certification of Michael C. Linn, Chairman and Chief Executive Officer of Linn Energy, LLC
32.	2†	—	Section 906 Certification of Kolja Rockov, Executive Vice President and Chief Financial Officer of Linn Energy, LLC

†  Filed herewith.

*  Management Contract or Compensatory Plan or Arrangement required to be filed as an exhibit hereto pursuant to Item 601 of Regulation S-K.

97

EX-2.1

Exhibit 2.1

Execution Version

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

LAMAMCO DRILLING COMPANY

AS SELLER

AND

LINN ENERGY HOLDINGS, LLC

AS BUYER

TABLE OF CONTENTS

		Page
ARTICLE I PURCHASE AND SALE		1
1.1	Purchase and Sale of Assets	1
1.2	Excluded Assets	3
1.3	Purchase Price	3
1.4	Adjusted Purchase Price	3
1.5	Effective Date	4
1.6	Treatment of Certain Assets	4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER		4
2.1	General	4
2.2	Existence and Qualification	5
2.3	Power	5
2.4	Authorization and Enforceability	5
2.5	No Conflicts	5
2.6	Liability for Brokers’ Fees	5
2.7	Litigation	6
2.8	Tax Matters	6
2.9	Commitments, Abandonments or Proposals	6
2.10	Compliance with Laws	7
2.11	Environmental	7
2.12	Contracts	8
2.13	Payments for Production	8
2.14	Imbalances	8
2.15	Consents and Preferential Purchase Rights	8
2.16	Equipment	8
2.17	Payout Balances	8
2.18	Condemnation	9
2.19	Bankruptcy	9
2.20	Investment Company	9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER		10
3.1	Existence and Qualification	10
3.2	Power	11
3.3	Authorization and Enforceability	11
3.4	No Conflicts	11
3.5	Consents, Approvals, or Waivers	11
3.6	Financing	11
3.7	Accredited Investor; Investment Intent	11
3.8	Liability for Brokers’ Fees	11
3.9	Litigation	12
3.10	Limitation	12
3.11	Bankruptcy	12

i

3.12	Qualification	12
ARTICLE IV TITLE MATTERS		13
4.1	Access to Title Information	13
4.2	Title Warranty	13
4.3	Title Defects	14
4.4	Title Benefit	15
4.5	Notice of and Remedies for Material Title Defects	15
4.6	Preferential Purchase Rights	16
4.7	Consents to Assign	17
ARTICLE V BUYER’S INVESTIGATION OF PHYSICAL CONDITIONS AND SELLER’S DISCLAIMER		18
5.1	Inspection	18
5.2	Investigation	18
5.3	Disclaimer	18
5.4	Indemnity Regarding Access	19
ARTICLE VI BUYER’S INVESTIGATION OF ENVIRONMENTAL CONDITIONS		19
6.1	Inspection and Assessment of Environmental Condition(s)	19
6.2	Notice of and Remedies for Material Environmental Condition(s)	19
ARTICLE VII INDEMNIFICATION AND LITIGATION		20
7.1	Assumption and Indemnification	20
7.2	Retained and Assumed Litigation	22
7.3	Seller Retained Liabilities	22
7.4	Survival of Provisions	22
7.5	Exclusive Remedy	23
7.6	Limitation on Seller’s Indemnity Obligations	23
7.7	Notification of Claim	24
ARTICLE VIII ADDITIONAL COVENANTS OF THE PARTIES		24
8.1	Operations	24
8.2	Successor Operator	25
8.3	Contract Operating, Marketing and Financial Services Agreement	25
8.4	Casualty Loss	25
8.5	Right to Market Production	25
8.6	Hart-Scott-Rodino Act	26
8.7	Financial Statements	26
8.8	Transfer Taxes	27
8.9	Other Taxes	27
8.10	Cooperation	28
8.11	Updated Exhibits and Schedules	28
8.12	Notification of Breaches	28
ARTICLE IX DISPUTE RESOLUTION		29
9.1	Arbitration	29

ii

9.2	Waiver of Certain Damages	29
ARTICLE X PROCEEDS, ROYALTY OBLIGATIONS, EXPENSES AND TAXES		30
10.1	Accounting for Production and Proceeds of Production	30
10.2	Royalty Obligations; Expenses	30
10.3	Joint Billing Audits, Credits and Advances	30
10.4	Payments on Behalf of Others	30
10.5	Filing of Tax Returns	30
10.6	Holdco and Subco Formation and Assignment	31
ARTICLE XI CONDITIONS OF CLOSING		32
11.1	Representations	32
11.2	Performance	32
11.3	Pending Matters	32
11.4	Expiration of HSR Waiting Period	32
11.5	Evidence of Bonding. Buyer shall deliver to Seller	33
11.6	Financial Statements	33
ARTICLE XII CLOSING		33
12.1	Date and Place of Closing	33
12.2	Closing Obligations	33
12.3	Files	34
ARTICLE XIII TERMINATION OF AGREEMENT		34
13.1	Grounds for Termination	34
13.2	Effect of Termination	35
ARTICLE XIV CONTINUING OBLIGATIONS		36
14.1	Post-Closing Settlement	36
14.2	Further Assurances	37
14.3	Gas Imbalances	38
14.4	Recording	38
14.5	Confidentiality	38
14.6	Preservation of Books and Records	38
14.7	Financial Statements	39
ARTICLE XV EMPLOYEE MATTERS		39
15.1	Continuing Employees	39
15.2	No Obligation to Hire Seller Employees	39
15.3	Interview, Screening, and Offers to Seller Employees	40
15.4	Employee Benefits	40
15.5	Control of Seller Employees	41
15.6	Solicitation of Continuing Employees	41
15.7	Waiver of Restrictions on Continuing Employees	42
15.8	No Third Party Beneficiaries	42

iii

ARTICLE XVI MISCELLANEOUS		42
16.1	Definitions	42
16.2	Use of Seller’s Name	46
16.3	Integrations, Amendment and Modification	46
16.4	Descriptive Headings	46
16.5	Governing Law	46
16.6	Binding Effect; Assignment	46
16.7	Notices	47
16.8	DTPA Waiver	47
16.9	Waiver	47
16.10	References	48
16.11	Conspicuousness	48
16.12	Counterparts	48
16.13	Invalid Provisions	48
16.14	Complete Agreement	48

iv

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of this 20th day of December, 2007, by and between LAMAMCO DRILLING COMPANY, hereinafter referred to as “Seller,” and LINN ENERGY HOLDINGS, LLC, hereinafter referred to as “Buyer.”

RECITALS

Buyer desires to purchase and Seller desires to sell all of Seller’s right, title and interest in and to the Assets defined herein pursuant to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:

ARTICLE I

PURCHASE AND SALE

1.1Purchase and Sale of Assets  Subject to the terms and conditions of this Agreement, Seller shall sell and Buyer shall purchase as of the Effective Date (as hereinafter defined) the following described properties, rights and interests, whether real or personal, recorded or unrecorded, movable or immovable, tangible or intangible (collectively, the “Assets”):

(a)           All right, title and interest of Seller in and to, or otherwise derived from, the oil and gas leases, oil, gas and mineral leases, subleases and other leaseholds, carried interests, farmout rights, options and other properties and interests described in Exhibit A (and any ratifications, extensions and amendments thereof, whether or not the same are described on Exhibit A), subject to such depth limitations and other restrictions as may be set forth on Exhibit A (the “Leases”), together with all rights, title and interests of Seller in and to the lands covered by the Leases or lands unitized or pooled communitized or consolidated therewith (the “Lands”);

(b)           All right, title and interest of Seller in and to any and all oil, gas, water, carbon dioxide, or injection wells located on the Lands, whether producing, shut-in, or temporarily abandoned, including the interests in the wells shown on Exhibit A attached hereto (the “Wells”);

(c)           All leasehold interests of Seller in or to any pools or units that include any Lands or all or a part of any Leases or include any Wells, including those pools or units shown on Exhibit A (the “Units”; the Units, together with the Leases, Lands and Wells, being hereinafter referred to as the “Properties”), and including all leasehold interests of Seller in production from any such Unit, whether such Unit production comes from Wells located on or off of a Lease, and all tenements and appurtenances belonging to the Leases and Units;

1

(d)           All right, title and interest of Seller in all equipment, machinery, fixtures, facilities, and other tangible personal property and improvements located on the Properties or used or held for use primarily in connection with the operation of the Properties, including, but not limited to pumps, well equipment (surface and subsurface), saltwater disposal wells, lines and facilities, sulfur recovery facilities, compressors, compressor stations, dehydration facilities, treating facilities, pipeline gathering lines, flow lines, transportation lines (including long lines and laterals), valves, meters, separators, tanks, tank batteries, buildings, roads, and other fixtures (collectively, the “Equipment”);

(e)           All right, title and interest of Seller in and to all oil, condensate, natural gas, natural gas liquids, and other minerals produced from or attributable to the Properties, from and after the Effective Date, including “line fill” and inventory below the pipeline connection in tanks;

(f)            All right, title and interest of Seller in and to, or otherwise derived from, all contracts and agreements related to the Properties including, but not limited to, unit agreements, pooling agreements, areas of mutual interest, farmout agreements, farmin agreements, saltwater disposal agreements, water injection agreements, line well injection agreements, road use agreements, drilling contracts, operating agreements, well service contracts, production sales contracts, gas balancing agreements, storage or warehouse agreements, supplier contracts, service contracts, insurance contracts, construction agreements, division orders, and transfer orders, only insofar as such relate to the Properties, and only to the extent that such contracts are assignable, (collectively, the “Contracts”);

(g)           All right, title and interest of Seller in and to, or otherwise derived from, surface use agreements, easements, rights of way, licenses, authorizations, permits, and similar rights and interests applicable to, or used in connection with the Properties (collectively, the “Surface Contracts”); provided, however, that Seller expressly retains a right to use such surface use agreements, easements, rights of way, licenses, authorizations, permits, and similar rights and interests in the event and to the extent such rights relate to Properties in which Seller retains any rights or interests.

(h)           All right, title, and interest of Seller in and to all lease files, land files, well files, gas and oil sales contract files, gas processing files, division order files, abstracts, title opinions, land surveys, non-confidential logs, maps, engineering data and reports, reserve studies and evaluations (insofar as they cover and exist within the boundaries of the Lands); and files and all other books, records, data, files, maps and accounting records related primarily to the Assets, or used or held for use primarily in connection with the maintenance or operation thereof, but excluding (i) any books, records, data, files, maps and accounting records to the extent disclosure or transfer is restricted by third-party agreement or applicable law and the necessary consents to transfer are not obtained, (ii) attorney-client privileged communications and work product of Seller’s legal counsel (other than title opinions) and (iii) records relating to the negotiation and consummation of the sale of the Assets (subject to such exclusions, the “Records”), provided, however, that Seller may retain the originals of such files and other records as Seller has determined may be required for litigation, Tax, accounting, and auditing purposes and provide Buyer with copies thereof.

2

(i)            All right, title and interest of Seller in and to the real property described on Exhibit A.

(j)            All right, title and interest of Seller in the vehicles, as currently outfitted, described on Schedule 1.1(j).

1.2Excluded Assets  Notwithstanding anything herein to the contrary, the Properties, Records and Assets do not include, and there is hereby excepted and reserved unto Seller, (i) the items listed on Exhibit B and (ii) any and all geophysical, seismic and other technical data and interpretations whose transfer is restricted by applicable Law or third party agreement (collectively, the “Excluded Assets”).

1.3Purchase Price.

(a)           Purchase Price.  The aggregate purchase price for the Assets shall be $552,192,653.00 (“Purchase Price”), which shall be subject to adjustments as provided for herein. Buyer shall pay Seller five percent (5%) of the Purchase Price upon execution of this Agreement (the “Performance Guarantee Deposit”), with the balance of the Purchase Price to be paid at Closing as hereafter provided. If the transactions contemplated hereby are consummated as provided in this Agreement, the Performance Guarantee Deposit shall be applied to payment of the Purchase Price at Closing. If the transaction set forth in this Agreement is not consummated, the Performance Guarantee Deposit shall be retained or returned by Seller as per Article XIII. For federal income tax purposes, the interest earned on the Performance Guarantee Deposit shall be reported by Buyer, if the Performance Guarantee Deposit is applied to the Purchase Price or returned to Buyer, and by Seller, if the Performance Guarantee Deposit is retained by Seller in accordance with Article XIII.

(b)           Purchase Price Allocation.  The parties hereto agree to (i) allocate the Adjusted Purchase Price in accordance with the allocation schedule attached as Exhibit C hereto, and (ii) treat and report the transactions contemplated by this Agreement in all respects consistent with Exhibit C for purposes of any Taxes unless otherwise required by applicable law. Seller and Buyer shall duly prepare and timely file such reports and information as may be prescribed under Section 1060 of the Code, including Form 8594, and any similar returns or reports required under other applicable law to report the allocation of the Adjusted Purchase Price in accordance with Exhibit C. If, contrary to the intent of the parties hereto as expressed in this Section 1.3(b), any Taxing Authority makes or proposes an allocation different from the allocation determined under this Section 1.3(b), Buyer and Seller shall cooperate with each other in good faith to contest such Taxing Authority’s allocation (or proposed allocation), provided, however, that, after consultation with the party adversely affected by such allocation (or proposed allocation), the other party hereto may file such protective claims or Tax Returns as may be reasonably required to protect its interests.

3

1.4Adjusted Purchase Price  The net price that the Buyer will pay for the Assets (“Adjusted Purchase Price”) shall be the Purchase Price as set forth in Section 1.3 above, adjusted in the following manner:

(a)           Less or plus, as applicable, any amounts determined to be a price adjustment pursuant to Article IV hereof for Material Title Defects or Material Title Benefits;

(b)           Less an amount equal to the Allocated Value of the Assets with respect to which preferential purchase rights have been exercised, as determined under Section 4.6 hereof;

(c)           Less an amount equal to the Allocated Value of the Assets with respect to which required consents to assign were not obtained and a price adjustment is required under Section 4.7 hereof;

(d)           Less an amount equal to any purchase price adjustment required under Article VI hereof;

(e)           Less amounts attributable to Casualty Loss as set forth in Section 8.4, if any;

(f)            Less (if a negative amount) or plus (if a positive amount) the Hedge Adjustment Amount;

(g)           If the Closing Date is later than the Target Closing Date solely as a result of the failure of the Buyer to fulfill its obligations under Sections 11.1(b), 11.2, and 11.5, plus the Closing Date Interest Amount; and

(h)           Less or plus any other amounts mutually agreed upon by the parties hereto.

1.5Effective Date  Only in the event Closing occurs, the Assignment and Bill of Sale of the Assets shall be effective as of October 1, 2007, 7:00 a.m. local time where the Assets are located (“Effective Date”).

1.6Treatment of Certain Assets  Any or all of the Contracts, Surface Contracts, and Equipment not directly associated with the wellhead, related to the operation of Seller-Operated Assets (collectively “Operating Assets”) may be assigned from Seller to any one of Buyer’s Affiliates, including Linn Operating, Inc., at Buyer’s option.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

2.1           General.

(a)           Any representation “to the knowledge of Seller” or “to Seller’s knowledge” is limited to matters within the actual knowledge of the individuals listed on Schedule 2.1(a) (“Seller Knowledge Individuals”).

(b)           Inclusion of a matter on a Schedule to a representation or warranty which addresses matters having a Material Adverse Effect shall not be deemed an indication that such

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matter does, or may, have a Material Adverse Effect. Matters may be disclosed on a Schedule to this Agreement for purposes of information only.

(c)           Subject to the foregoing provisions of this Section 2.1, the disclaimers and waivers contained in Section 5.3 and the other terms and conditions of this Agreement, Seller represents and warrants to Buyer the matters set out in Section 2.2 through 2.22 are true and correct as of the date hereof.

2.2Existence and Qualification  Seller is a general partnership duly organized, validly existing and in good standing under the laws of the State of Oklahoma and is duly qualified to do business where the Assets are located, except where the failure to so qualify would not have a Material Adverse Effect.  All of the general partners of Seller are listed on Schedule 2.2 and are referred to herein as the “General Partners.”

2.3Power  Seller has the legal power to enter into and perform this Agreement and consummate the transactions contemplated by this Agreement.

2.4Authorization and Enforceability  The execution, delivery and performance of this Agreement, and the performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary partnership action on the part of Seller, including the consent of the General Partners. This Agreement has been duly executed and delivered by Seller (and all documents required hereunder to be executed and delivered by Seller at Closing will be duly executed and delivered by Seller) and this Agreement constitutes, and at the Closing such documents will constitute, the valid and binding obligations of Seller, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

2.5No Conflicts  The execution, delivery and performance of this Agreement by Seller, and the transactions contemplated by this Agreement will not (i) violate any provision of the formation documents or partnership agreement of Seller, (ii) result in default (with due notice or lapse of time or both) or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or agreement to which Seller is a party or which affect the Assets, (iii) violate any judgment, order, ruling, or decree applicable to Seller as a party in interest, (iv) violate any Laws applicable to Seller or the Assets, except for (a) rights to consent by, required notices to, and filings with or other actions by any Governmental Authority where the same are not required prior to the assignment of oil and gas interests, require any filing with, notification of or consent, approval or authorization of any Governmental Authority and (b) any matters described in clauses (ii), (iii) or (iv) above which would not have a Material Adverse Effect.

2.6Liability for Brokers’ Fees  Buyer shall not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Seller, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.

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2.7Litigation  Except as set forth on Schedule 2.7, no investigation, proceeding, action, suit, or other legal proceeding of any kind or nature before any Governmental Authority or arbitrator (including any take-or-pay claims) is pending or threatened with respect to the Assets, Seller (with respect to any of the Assets), or either of them, or with respect to the ownership, operation, development, maintenance, or use of any thereof.

2.8           Tax Matters.

(a)           (1) All Tax Returns required to be filed on or before the date hereof by the Seller with respect to any of the Assets have been duly and timely filed (within any applicable extension periods) with the appropriate Taxing Authority; (2) all such Tax Returns are true, correct and complete in all material respects; (3) all Taxes shown to be due on such Tax Returns (and any other Taxes owed) have been paid in full or will be timely paid in full by the due date thereof; (4) all Tax withholding and deposit requirements imposed on or with respect to any of the Assets have been satisfied in full in all respects; (5) there are no liens on any of the Assets that arose in connection with any failure (or alleged failure) to pay any Tax; (6) to Seller’s knowledge, there is no claim or examination pending or threatened by any Taxing Authority in connection with any such Tax; (7) none of such Tax Returns are now under audit or examination by any Taxing Authority; (8) the Assets are not subject to Taxes in any jurisdiction in which Seller has not filed Tax Returns.

(b)           All of the Assets that are subject to property tax have been properly listed and described on the property tax rolls of the appropriate taxing jurisdiction for all periods prior to Closing and none of the Assets constitute omitted property for property tax purposes.

(c)           None of the Assets is held in an arrangement or entity other than Seller that is treated as a partnership for income Tax purposes.

(d)           There are no joint operating agreements to which Seller is a party and for which there has not been made a valid election out of Subchapter K of the Code.

(e)           With respect to the Assets located in Texas, Seller represents and warrants that the tangible personal property being transferred to Buyer constitutes the entire operating assets of a separate division, branch or identifiable segment of Seller’s business.

2.9Commitments, Abandonments or Proposals  Except as set forth on Schedule 2.9: (a) Seller has incurred no expenses, and has made no commitments to make expenditures in connection with the ownership or operation of the Assets after the Effective Date, other than routine expenses incurred in the normal operation of existing wells on the Properties in accordance with generally accepted practices in the oil and gas industry; (b) Seller has not abandoned any wells (or removed any material items of equipment, except those replaced by items of materially equal suitability and value) on the Properties since the Effective Date; and (c) no proposals are currently outstanding by Seller or other working interest owners to drill additional wells, or to deepen, plug back, or rework existing wells, or to conduct other operations for which consent is required under the applicable operating agreement, or to conduct any other operations other than normal operation of existing wells on the Properties, or to abandon any wells, on the Properties.

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2.10         Compliance with Laws  Except as disclosed on Schedule 2.10, the Seller-Operated Assets are, and Seller’s operation of the Seller-Operated Assets has been and currently is and the other Assets are and the operation of the other Assets has been and currently is, in substantial compliance with the provisions and requirements of all Laws of all Governmental Authorities having jurisdiction with respect to the Assets, or the ownership, operation, development, maintenance, or use of any thereof, except where such non-compliance as would not, individually or in the aggregate, have a Material Adverse Effect.

2.11         Environmental.

Except as set forth on Schedule 2.11:

(a)           There are no material violations of Environmental Laws that arise from events occurring at or conditions existing on the Properties on or before the Closing, which have not been corrected or remediated, and for which all applicable fines or penalties have not been paid in full, in compliance with the requirements of any Governmental Authority having jurisdiction.

(b)           Within the last five years, neither Seller nor any of its Affiliates has received any written notifications of any proceedings pending or threatened in writing against Seller or the Properties, alleging that Seller or the Properties are in violation of, or otherwise subject to liability under, any Environmental Law, other than any such notifications that Seller has resolved in accordance with Environmental Laws.

(c)           Within the last five years, there has been no written claim against Seller asserting liability for exposure of any Person or property (such as livestock, cattle, horses, pigs, goats, sheep, and chickens, but not real property) to Hazardous Materials in connection with the Properties that Seller has not resolved.

(d)           There are no material Environmental Liabilities resulting from the breach of Environmental Laws pertaining to use or operation of the Properties on or prior to Closing that Seller has not resolved.

(e)           Seller either has made, or will, immediately after the execution of this Agreement, make available to Buyer all environmental assessment, investigatory, and audit reports, studies, analyses, and correspondence (other than correspondence that exists solely in electronic form) relating to the Properties that are in control of Seller or any of its Affiliates and addressing releases or threatened releases, remediations, Environmental Liabilities, Environmental Conditions, or violations of Environmental Laws.

(f)            All material Governmental Authorizations required under Environmental Laws that are necessary to the operation of the Properties as currently operated by Seller have been obtained and are in full force and effect, and Seller has operated the Properties in material compliance with Environmental Laws and such Governmental Authorizations.

(g)           The representations set forth in this Section 2.11 shall be the sole and exclusive representations and warranties of this Agreement that address or relate to compliance with, liabilities under or any factual or legal matters related to or arising under Environmental Laws pertaining to the Properties and Section 2.10 shall not apply to any matter for which this Section 2.11 could apply.

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2.12         Contracts  Seller has paid its share of all costs (including without limitation Property Costs) payable by it under the Leases and Contracts, except those being contested in good faith.  Seller is not in default under any Contract. Schedule 2.12 sets forth all of the following contracts, agreements, and commitments (excluding Leases and Surface Contracts that are of record) to which any of the Assets will be bound as of the Closing: (i) any agreement with any Affiliate; (ii) any agreement or contract for the sale, exchange, or other disposition of Hydrocarbons produced from or attributable to Seller’s interest in the Assets that is not cancelable without penalty or other material payment on not more than thirty (30) days prior written notice; and (iii) any agreement of or binding upon Seller to sell, lease, farmout, or otherwise dispose of any interest in any of the Assets after the date hereof, other than conventional rights of reassignment arising in connection with Seller’s surrender or release of any of the Assets and (iv) any tax partnership agreement of or binding upon Seller affecting any of the Assets other than Seller.

2.13         Payments for Production  Except as set forth on Schedule 2.13, (a) all rentals, royalties, excess royalty, overriding royalty interests, production payments, and other payments and interest thereon due and/or payable by or on behalf of Seller to mineral and royalty holders and other interest owners on or prior to the Effective Date under or with respect to the Assets and the Hydrocarbons produced therefrom or attributable thereto, have been paid and (b) Seller is not obligated under any contract or agreement for the sale of gas from the Assets containing a take-or-pay, advance payment, prepayment, or similar provision, or under any gathering, transmission, or any other contract or agreement with respect to any of the Assets to gather, deliver, process, or transport any gas without then or thereafter receiving full payment therefor.

2.14         Imbalances  Except with respect to Properties and in the amounts set forth on Schedule 2.14, as of the dates set forth on such Schedule, there are no Imbalances with respect to the Properties arising from overproduction or underproduction or overdeliveries or underdeliveries or other imbalance arising at the wellhead, pipeline, gathering system, transportation system, processing plant or other location.

2.15         Consents and Preferential Purchase Rights  None of the Assets, or any portion thereof, is subject to any preferential rights to purchase or restrictions on assignment or required third-party consents to assignment, which may be applicable to the transactions contemplated by this Agreement, except for (i) governmental consents and approvals of assignments that are customarily obtained after Closing, (ii) preferential rights, consents and restrictions contained in easements, rights-of-way or equipment leases and (iii) preferential rights, consents and restrictions as are set forth on Schedule 2.15.

2.16         Equipment  The Equipment is adequate for normal operation of the Assets consistent with current practices, ordinary wear and tear excepted.

2.17         Payout Balances  Schedule 2.17 contains a complete and accurate list of the status of any “payout” balance, as of the Effective Date, for the Wells and Units subject to a reversion or other adjustment at some level of cost recovery or payout (or passage of time or other event other than termination of a Lease by its terms).

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2.18         Condemnation  There is no actual or threatened taking (whether permanent, temporary, whole or partial) of any part of the Properties by reason of condemnation or the threat of condemnation.

2.19         Bankruptcy  There are no bankruptcy, reorganization, or similar arrangement proceedings pending, being contemplated by or, to Seller’s knowledge, threatened against Seller or any Affiliate.

2.20         Investment Company  Seller is not an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended.

2.21         Employee Benefits.

(a)           No Seller Plan is a “multiemployer plan” within the meaning of section 4001(a)(3) of ERISA (“Multiemployer Plan”).  None of Seller or any of its ERISA Affiliates has, at any time during the six-year period preceding the Effective Date, contributed to or been obligated to contribute to any Multiemployer Plan, and none of Seller or any of its ERISA Affiliates has incurred any withdrawal liability under Part I of Subtitle E of Title IV of ERISA that has not been satisfied in full.

(b)           There does not now exist, nor do any circumstances exist that could result in, any “controlled group liability” of Seller or any of its ERISA Affiliates that would be, or could become, a liability of the Buyer or any of its Affiliates or could result in the imposition of a lien against any of the Assets following the Closing.  As used in the preceding sentence, the term “controlled group liability” means any and all liabilities (i) under Title IV of ERISA, (ii) under section 302 of ERISA, (iii) under sections 412 and 4971 of the Code, (iv) as a result of the failure to comply with the continuation of coverage requirements of section 601 et seq. of ERISA and section 4980B of the Code, and (v) under corresponding or similar provisions of foreign Laws.

2.22         Employment Matters

(a)           Seller has no collective bargaining agreements or other labor agreement with any labor union or organization concerning employment or relating to the Assets.  No labor organization or group of Seller’s employees has made a demand for recognition or certification as a union or other labor organization with respect to any of Seller’s employees.  There are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened to be brought or filed with the National Labor Relations Board or any labor relations tribunal or authority with respect to any of Seller’s employees.  To Seller’s knowledge, there are no organizing activities involving Seller’s employees.

(b)           Seller has complied, and is in compliance, with all applicable laws regarding labor, employment and employment practices, terms and conditions of employment, immigration

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compliance, occupational safety and health and wages and hours, including, without limitation, any bargaining or other obligations under the National Labor Relations Act.

(c)           Except as disclosed on Schedule 2.7, there are no claims, lawsuits, petitions, charges, investigations, complaints, proceedings, suits, demands or actions which are pending against Seller before any court, administrative agency, other governmental entity or arbitrator, or which have been asserted or threatened against Seller, including without limitation those for: (i) wages, salaries, commissions, bonuses, vacation pay, severance or termination pay, sick pay or other compensation; (ii) employee benefits; (iii) alleged unlawful, unfair, wrongful or discriminatory employment or labor practices; (iv) alleged breach of contract or other claim arising under a collective bargaining or individual agreement or any other employment covenant whether express or implied; (v) alleged violation of any statute, ordinance, contract or regulation relating to minimum wages or maximum hours of work; (vi) alleged violation of occupational safety and health standards; or (vii) alleged violation of plant closing, mass layoff, immigration, workers’ compensation, disability, unemployment compensation, whistleblower laws, or other employment or labor relations laws; and to the knowledge of Seller no such basis therefore exists.

(d)           Seller is not a party to any agreements or arrangements or subject to any requirement that in any manner requires or may require Buyer to hire any of Seller’s employees, or that would restrict Buyer from relocating, consolidating, merging or closing, in whole or in part, any portion of the Assets, subject to applicable law.

(e)           Seller is solely responsible for providing all notices, if applicable, that may be required under WARN Act with respect to all of its employees who are affiliated with the Assets.  Seller recognizes that it is solely responsible for taking all remedial measures under the WARN Act with respect to its employees including without limitation, the payment of all amounts, penalties, liabilities, costs and expenses if required notices are not provided, for a plant closing or mass layoff with respect to the termination of any of its employees on or before the Closing Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller the following are true and correct as of the date hereof:

3.1           Existence and Qualification  Buyer is a corporation organized, validly existing and in good standing under the laws of the state of its incorporation; and Buyer is duly qualified to do business as a foreign corporation in every jurisdiction in which it is required to qualify in order to conduct its business except where the failure to so qualify would not have a Material Adverse Effect on Buyer or its properties; and Buyer is duly qualified to do business as a foreign corporation in the respective jurisdictions where the Assets to be transferred to it are located.

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3.2           Power  Buyer has the corporate power to enter into and perform this Agreement and consummate the transactions contemplated by this Agreement.

3.3           Authorization and Enforceability  The execution, delivery and performance of this Agreement, and the performance of the transaction contemplated hereby, have been duly and validly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer (and all documents required hereunder to be executed and delivered by Buyer at Closing will be duly executed and delivered by Buyer) and this Agreement constitutes, and at the Closing such documents will constitute, the valid and binding obligations of Buyer enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

3.4           No Conflicts  The execution, delivery and performance of this Agreement by Buyer, and the transactions contemplated by this Agreement will not (i) violate any provision of the certificate of incorporation or bylaws of Buyer, (ii) result in a material default (with due notice or lapse of time or both) or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or agreement to which Buyer is a party, (iii) violate any judgment, order, ruling, or regulation applicable to Buyer as a party in interest, or (iv) violate any law, rule or decree applicable to Buyer or any of its assets, or (v) require any filing with, notification of or consent, approval or authorization of any Governmental Authority, except any matters described in clauses (ii), (iii), (iv) or (v) above which would not have a Material Adverse Effect on Buyer.

3.5           Consents, Approvals, or Waivers  The execution, delivery, and performance of this Agreement by Buyer will not be subject to any consent, approval or waiver from any Governmental Authority or other third Person, except for the approval and waiting period requirements under the Hart-Scott-Rodino Act.

3.6           Financing  Buyer has, and will have at Closing, sufficient cash, available lines of credit, or other sources of immediately available funds (in United States dollars) to enable it to pay the Purchase Price to Seller at Closing.

3.7           Accredited Investor; Investment Intent  Buyer is an accredited investor as defined in Regulation D under the Securities Act of 1933, as amended. Buyer is acquiring the Assets and, if applicable, any limited liability membership interest acquired pursuant to Section 10.6 for its own account and not with a view to their sale or distribution in violation of the Securities Act of 1933, as amended, the rules and regulations thereunder, any applicable state blue sky Laws, or any other applicable securities Laws.

3.8           Liability for Brokers’ Fees  Seller shall not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Buyer, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.

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3.9           Litigation  As of the date of the execution of this Agreement, there are no actions, suits or proceedings pending, or to Buyer’s knowledge, threatened in writing before any Governmental Authority against Buyer or any Affiliate of Buyer that are reasonably likely to impair materially Buyer’s ability to perform its obligations under this Agreement.

3.10         Limitation  Except for the representations and warranties expressly made by Seller in Article 2 of this Agreement and the Assignment and Bill of Sale, or in any certificate furnished or to be furnished to Buyer pursuant to this Agreement, Buyer represents and acknowledges that (i) there are no representations or warranties, express, statutory or implied, as to the Assets or prospects thereof, and (ii) Buyer has not relied upon any oral or written information provided by Seller. Without limiting the generality of the foregoing, Buyer represents and acknowledges that Seller has made and will make no representation or warranty regarding any matter or circumstance relating to Environmental Laws, Environmental Liabilities, the release of materials into the environment or protection of human health, safety, natural resources or the environment or any other environmental condition of the Assets. Buyer further represents and acknowledges that it is knowledgeable of the oil and gas business and of the usual and customary practices of producers such as Seller and in making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Buyer has relied solely on the basis of its own independent due diligence investigation of the Assets.

3.11         Bankruptcy  There are no bankruptcy, reorganization or receivership proceedings pending against, being contemplated by, or to Buyer’s knowledge, threatened against Buyer.

3.12         Qualification.

(a)           Buyer is now, and hereafter shall continue to be, qualified to own federal and state oil, gas and mineral leases in all jurisdictions where the Assets to be transferred to it are located, and the consummation of the transactions contemplated in this Agreement will not cause Buyer to be disqualified as such an owner. To the extent required by the applicable state or federal government, Buyer currently has, and will continue to maintain, lease bonds, area wide bonds or any other surety bonds as may be required by, and in accordance with, such state or federal regulations governing the ownership of such leases.

(b)           Buyer’s Affiliate, Linn Operating, Inc., is now, and hereafter shall continue to be, qualified to assume operatorship of federal and state oil, gas and mineral leases in all jurisdictions where the Assets are located, and the consummation of the transactions contemplated in this Agreement will not cause such entity to be disqualified as such an operator. To the extent required by the applicable state or federal government, Buyer shall cause Linn Operating, Inc. to obtain, and to continue to maintain, lease bonds, area wide bonds or any other surety bonds as may be required by, and in accordance with, such state or federal regulations governing operation of such leases.

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ARTICLE IV

TITLE MATTERS

4.1           Access to Title Information  After the date of this Agreement and until Closing, Seller shall make the records and documents in Seller’s possession affecting Seller’s title to the Assets available to Buyer at Seller’s office located at 4444 E. 146th Street North, Skiatook, Oklahoma, 74070, or such other place as deemed appropriate by Seller, during Seller’s normal business hours for examination by Buyer. Seller shall not be obligated to perform any additional title work, and any additional abstracts and title opinions shall not be made current by Seller. NO WARRANTY OF ANY KIND IS MADE BY SELLER AS TO THE INFORMATION SO SUPPLIED, AND BUYER AGREES THAT ANY CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF ITS OWN INDEPENDENT REVIEW AND JUDGMENT.

4.2Title Warranty.

(a)           The assignment and bill of sale to be delivered by Seller to Buyer (the “Assignment and Bill of Sale”) shall be substantially in the form attached hereto as Exhibit D and must contain a special warranty of title by, through and under Seller to the Properties, but shall otherwise be without warranty of title, express, implied or statutory, except that such Assignment and Bill of Sale shall transfer to Buyer all rights, actions or title warranties given or made by Seller’s predecessors (other than Affiliates of Seller), to the extent Seller may legally transfer such rights.

(b)           Seller represents and warrants to Buyer that Seller’s title to the Wells and Units shown on Exhibit A as of the Effective Date is Defensible Title as defined in Section 4.2(c).

(c)           As used in this Agreement, the term “Defensible Title” means that record title of Seller that:

(i)            Entitles Seller to receive a share of the oil, gas and other associated minerals produced, saved and marketed from any Unit or Well throughout the duration of the productive life of such Unit or Well (after satisfaction of all royalties, overriding royalties, nonparticipating royalties, net profits interests or other similar burdens on or measured by production of oil and gas) (a “Net Revenue Interest”), of not less than the Net Revenue Interest share shown in Exhibit A for such Unit or Well, except decreases in connection with those operations in which Seller may after the Effective Date be a non-consenting co-owner, decreases resulting from the establishment or amendment after the Effective Date of pools or units, and decreases required to allow other working interest owners to make up past underproduction or pipelines to make up past under deliveries and except as stated in such Exhibit A;

(ii)           Obligates Seller to bear a percentage of the costs and expenses for the maintenance and development of, and operations relating to, (i) any Unit or Well not greater than the “working interest” shown in Exhibit A without increase throughout the productive life of such Unit or Well except as stated in Exhibit A and except increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements and increases that are accompanied by at least a proportionate increase in Seller’s Net Revenue Interest; and

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(iii)          Is free and clear of liens and security interests other than (i) a lien for taxes which are not yet delinquent or (ii) a mechanic’s or materialmen’s lien (or other similar lien), or a lien under an operating agreement or similar agreement, to the extent the same relates to expenses incurred which are not yet delinquent or (iii) liens which will be released at or before Closing listed on Schedule 4.2(c) (the liens described in (i), (ii) and (iii) of this Section 4.2(c) are herein called “Excluded Liens”).

4.3           Title Defects.

(a)           The term “Title Defect,” as used herein, means failure to have Defensible Title; provided, however, the following matters shall not constitute a Title Defect, a breach of any covenant, representation or warranty of Buyer or a failure to satisfy a condition to Buyer’s obligation to close and shall not be asserted as such:

(i)            defects or irregularities arising out of lack of corporate authorization or a variation in corporate name, unless Buyer provides affirmative evidence that such corporate action was not authorized and results in another person’s superior claim of title to the relevant Property;

(ii)           defects or irregularities in the chain of title consisting of the failure to recite marital status in documents;

(iii)          a gas imbalance (e.g., a situation where Seller and its predecessor in title to the Properties have taken more or less gas from a Well or Unit than ownership of the Properties would entitle them to receive); any such gas imbalance shall be resolved pursuant to Section 14.3; or

(iv)          conventional rights of reassignment normally actuated by an intent to abandon or release a lease and requiring notice to the holders of such rights.

(b)           Buyer may assert a Title Defect for any Asset that (i) Buyer has allocated value on Exhibit C, and (ii) Buyer reasonably believes is a Material Title Defect, which means that the effect of such Title Defect on the Allocated Value of such Asset would be equal to at least Twenty Five Thousand and No/100 Dollars ($25,000.00) (“Material Title Defect”).

(c)           If the total value of all Material Title Defects, in the aggregate, does not meet or exceed One-Percent (1%) of the Purchase Price, then there shall be no adjustment to the Purchase Price or any other remedy from or obligation of Seller that shall be available to Buyer other than any warranty of title provided in the Assignment and Bill of Sale. Provided further, in the event the amount attributable to Material Title Defects, in the aggregate, satisfies the threshold percentage set forth above and a reduction to the Purchase Price is warranted, then the Purchase Price shall only be reduced to the extent the amount attributable to Material Title Defects, in the aggregate, exceeds the percentage of the Purchase Price specified above, and all amounts attributable to Material Title Defects, in the aggregate, that are below such threshold percentage shall be borne solely by Buyer, and there shall be no adjustment to the Purchase Price therefor.

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4.4           Title Benefit.

(a)           The term “Title Benefit,” as used herein, shall be limited any right, circumstance or condition that operates to increase the Net Revenue Interest of Seller in any Property above that shown on Exhibit A, without causing a greater than proportionate increase in Seller’s working interest above that shown in Exhibit A.

(b)           Either party may assert a Title Benefit for any Asset that (i) Buyer has allocated value to on Exhibit C, and (ii) is a Material Title Benefit, which means that the effect of such Title Benefit on the Allocated Value of such Asset would be equal to at least Twenty Five Thousand and No/100 Dollars ($25,000.00) (“Material Title Benefit”).

(c)           If the total value of all Material Title Benefits, in the aggregate, does not meet or exceed One-Percent (1%) of the Purchase Price, then there shall be no adjustment to the Purchase Price. Provided further, in the event the amount attributable to Material Title Benefits, in the aggregate, satisfies the threshold percentage set forth above and an increase to the Purchase Price is warranted, then the Purchase Price shall only be increased to the extent the amount attributable to Material Title Benefits, in the aggregate, exceeds the percentage of the Purchase Price specified above, and all amounts attributable to Material Title Benefits, in the aggregate, that are below such threshold percentage shall be borne solely by Seller, and there shall be no adjustment to the Purchase Price therefor.

(d)           If either party discovers a Material Title Benefit that exceeds the threshold requirement stated in this Section 4.4, then no later than five (5) days prior to Closing, such party shall notify the other, in writing, of the nature of the Material Title Benefit and provide (i) the basis for the assertion of such Material Title Benefit, (ii) the data in support of, such Material Title Benefit and (iii) the proposed increase in the Purchase Price attributable to such Material Title Benefit. If the parties cannot agree on the existence of a Material Title Benefit or the amount in which the Purchase Price should be increased on account thereof, the issue will be resolved in accordance with Section 9.1.

4.5           Notice of and Remedies for Material Title Defects.

(a)           In the event Buyer discovers a Material Title Defect that exceeds the threshold requirements stated above in Section 4.3, then up to five (5) days prior to Closing, Buyer shall have the right to notify Seller, in writing, of the nature of the Material Title Defect. Along with the written notice, Buyer shall furnish Seller with Buyer’s basis for the assertion of such Material Title Defect and the data in support thereof, and shall also furnish Seller with the proposed reduction in the Purchase Price attributable to such Material Title Defect.

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(b)           If Seller agrees with Buyer’s assertion of a Material Title Defect, then upon receipt of such notice, Buyer and Seller shall choose one of the following options, provided, however that if Buyer and Seller cannot agree on the option, option (ii) below shall be deemed to have been elected:

(i)            cure the Material Title Defect at Seller’s expense prior to or within 90 days after Closing thereby eliminating the need for a reduction in Purchase Price; or

(ii)           reduce the Purchase Price by the Title Defect Amount, as determined by Section 4.5(c); or

(iii)          exclude the affected Asset from the sale and reduce the Purchase Price by an amount equal to the Allocated Value of the excluded Asset; or

(iv)          indemnify Buyer for the Material Title Defect and the Purchase Price shall not be reduced.

(c)The Title Defect Amount shall be determined as follows:

(i)            If Buyer and Seller agree on the Title Defect Amount, that amount shall be the Title Defect Amount;

(ii)           if the Title Defect is a lien which is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount necessary to be paid to remove the Material Title Defect from the affected Asset; provided, however, if the Title Defect Amount exceeds the Allocated Value of the affected Asset, then Seller may choose to exclude the affected Asset from the sale and reduce the Purchase Price by an amount equal to the Allocated Value of the excluded Asset;

(iii)          if the Title Defect represents a discrepancy between (a) the actual Net Revenue Interest for the affected Asset and (b) the Net Revenue Interest or percentage stated on Exhibit C, then the Title Defect Amount shall be the product of the Allocated Value of such affected Asset multiplied by a fraction, the numerator of which is the net revenue interest or percentage ownership decrease and the denominator of which is the net revenue interest or percentage ownership stated on Exhibit C.

(d)           If Seller does not agree with Buyer’s assertion and/or valuation of a Material Title Defect, then Buyer and Seller will resolve the existence and/or value of such Material Title Defect pursuant to Section 9.1 of this Agreement.

(e)           Any Title Defect which is not disclosed to Seller by Buyer at least five (5) days prior to Closing shall conclusively be deemed waived by Buyer for all purposes other than the warranty of title provided by Seller in the Assignment and Bill of Sale .

4.6           Preferential Purchase Rights.

(a)           Seller has not heretofore sent letters to parties holding preferential purchase rights covering the Assets requesting a waiver of such rights as they may apply to the transactions set forth in this Agreement. Seller will provide Buyer an opportunity to review the form of preferential purchase notice and list of parties holding preferential rights prior to issuing the notices. With respect to each preferential purchase right covering the Assets or any portion thereof, upon execution of this Agreement Seller shall identify and shall send to the holder of such right a notice offering to sell to such holder, in accordance with the contractual provisions

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applicable to such right, those Assets covered by such right on the same terms hereof and for the Allocated Value of such Assets, subject to adjustments in the same manner as the Purchase Price is adjusted pursuant to Section 1.4 of this Agreement.

(b)           If, prior to Closing, any holder of a preferential purchase right notifies Seller that it intends to consummate the purchase of the Assets to which its preferential purchase right applies, then those Assets shall be excluded from the Assets to be conveyed to Buyer, and the Purchase Price shall be reduced by the Allocated Value of such Asset; provided however, that if the holder of such preferential purchase right fails to consummate the purchase of the Assets covered by such right, then Seller shall so notify Buyer, and within fifteen (15) business days after Buyer’s receipt of such notice from Seller, Seller shall sell to Buyer, and Buyer shall purchase from Seller, for the Allocated Value of such Asset upon the other terms of this Agreement the Assets to which the preferential purchase right is applied. Provided however, to the extent that Seller and the holder of such preferential purchase right are in a dispute regarding the sale of the Assets covered by such right, then Buyer shall have no obligation to purchase such Assets from Seller.

(c)           Unless otherwise mutually agreed, all Assets for which a preferential purchase right has not been asserted prior to Closing shall be sold to Buyer at Closing pursuant to the provisions of this Agreement. Seller shall identify all agreements and contracts that contain rights of first refusal or preferential right to purchase provisions. Seller and Buyer agree that if a bona fide third party owner or holder of such right(s), asserts said right(s) after the Closing Date, Buyer shall cooperate fully with Seller to reconcile and resolve said claims to the extent the interest conveyed to Buyer is affected. If Seller and Buyer agree in good faith on the validity of such third party’s claim, the reconciliation or resolution with such third party shall include an assignment, as of the Effective Date, of the affected interest from Buyer to such third party and a full reimbursement by Seller to Buyer of that portion of the Purchase Price allocable to the affected interest; and payment to such third party by Buyer of all revenue and income attributable to such interest which has been collected and received by Buyer from and after the Effective Date, less all taxes and other expenses incurred by Buyer attributable to such interest, including but not limited to the costs and legal fees associated with conveying the effective interest from Buyer to such third party. Seller shall, at its sole cost and expense, negotiate terms with third party owners as necessary to fully resolve any outstanding issues with such third party relating to the sale of the affected interest.

4.7           Consents to Assign  After Closing, Seller shall identify and send to each holder of a governmental consent or approval of assignment pertaining to the Assets and the transactions contemplated hereby and that are customarily obtained after Closing a notice seeking such party’s consent to assign the Asset to Buyer or Buyer’s Affiliate, Linn Operating, Inc.  If prior to Closing Seller becomes aware of a holder of a right to consent to assignment pertaining to the Assets and the transactions contemplated hereby (other than a governmental consent or approval customarily obtained after Closing) and Seller fails to obtain such consent prior to the Closing Date and the failure to obtain such consent would (i) cause the assignment of such Asset to Buyer or Linn Operating, Inc. to be void or voidable, (ii) trigger an express termination or right of termination of the lease or document underlying the consent, or (iii) trigger an express monetary penalty, then, and only then, the Asset subject to such failed consent shall be excluded from the sale and the Purchase Price shall be reduced by the Allocated Value of such Asset.

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ARTICLE V

BUYER’S INVESTIGATION OF PHYSICAL CONDITIONS AND SELLER’S DISCLAIMER

5.1           Inspection  On or after the date this Agreement is executed, Buyer shall have the right to enter upon the Assets at its sole cost and risk for the purpose of an inspection of the Physical Conditions of the Assets which are operated by Seller. “Physical Condition” as used herein means the condition of the Assets, including without limitation, equipment in its current state of maintenance and repair, the presence of abandoned oil and gas wells, water wells, sumps and pipelines, whether known or unknown by Seller. Prior to such inspection, Buyer shall Schedule an appointment with the party shown in Section 16.8. Provided, however, that at all times Buyer is present upon the Assets, Buyer shall be accompanied by an individual designated by the party listed in Section 16.8.

5.2           Investigation  Buyer acknowledges that in making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Buyer shall have relied solely on the basis of its own independent investigation, analysis and evaluation of the Assets and the public records relating to the Assets, and upon the express representations, covenants and disclaimers set forth in this Agreement.

5.3           Disclaimer  Except as expressly provided in this Agreement and in the Assignment and Bill of Sale, Seller makes no representations or warranties whatsoever and disclaims all liability and responsibility for any other representation, warranty, statement or information made or communicated (orally or in writing) to Buyer (including, but not limited to, any information contained in the files or any opinions, information or advice which may have been provided to Buyer by any officer, stockholder, director, employee, agent, consultant or representative of Seller). Buyer acknowledges that Seller has not made, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO (a) THE CONDITIONS OF THE ASSETS (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS), (b) ANY INFRINGEMENT BY SELLER OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY, AND (c) ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY OR ON BEHALF OF SELLER (INCLUDING WITHOUT LIMITATION, WITH RESPECT TO GEOLOGICAL DATA, THE EXISTENCE OR EXTENT OF OIL, GAS OR OTHER MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF RECOVERING ANY SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY PRODUCT PRICING ASSUMPTIONS, AND THE ABILITY TO SELL OIL OR GAS PRODUCTION AFTER CLOSING); provided, however, that the foregoing disclaimer and negation of representations and warranties shall not affect or impair the representations of Seller as set forth in Article II hereof or the special warranty of title in the Assignment and Bill of Sale. Other than as expressly provided in this Agreement or in the Assignment and Bill of Sale, THE SALE OF THE WELLS, EQUIPMENT AND FACILITIES HEREUNDER SHALL BE “AS IS, WHERE IS, WITH ALL FAULTS.”.

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5.4           Indemnity Regarding Access  Buyer agrees to indemnify, defend and hold harmless Seller, its Affiliates, the other owners of interests in the Properties, and all such Persons’ directors, officers, employees, agents and representatives from and against any and all claims, liabilities, losses, costs and expenses (including court costs and reasonable attorneys’ fees), including claims, liabilities, losses, costs and expenses attributable to personal injury, death, or property damage, arising out of or relating to access to the Assets prior to the Closing by Buyer, its Affiliates, or its or their directors, officers, employees, agents or representatives, even if caused in whole or in part by the negligence (whether sole, joint or concurrent), strict liability or other legal fault of any indemnified Person.

ARTICLE VI

BUYER’S INVESTIGATION OF ENVIRONMENTAL CONDITIONS

6.1           Inspection and Assessment of Environmental Condition(s)  Subject to the conditions set forth herein, Buyer shall have access to the Assets, Seller’s personnel, and the books, records and files of Seller (subject to the provisions of Section 11.3 below) relating to the Assets until five (5) days prior to Closing for the purpose of inspecting the Assets and conducting such tests, examinations, investigations and assessments as may be necessary or appropriate in Buyer’s opinion to evaluate the Environmental Condition of the Assets; provided, however, that prior to conducting any tests on the Assets, Buyer shall Schedule an appointment with the party shown in Section 16.8 and Buyer shall be accompanied by a representative of Seller and such representative shall be available to Buyer during normal business hours and at other reasonable times. “Environmental Condition” as used herein means any condition relating to the Assets that contaminates soil, sediment, air, water or groundwater in a manner that violates any applicable law, regulation, ordinance, rule or order in effect and as interpreted and enforced before the Effective Date. Changes in, or changes in interpretation of, any law, regulation, ordinance, rule, order or permit on or after the Closing Date shall not provide the basis for an Environmental Condition even if such changes are made retroactive.

6.2           Notice of and Remedies for Material Environmental Condition(s).

(a)           Upon discovery of a Material Environmental Condition (as defined below), Buyer shall notify Seller in writing of the nature of the Material Environmental Condition and shall furnish Seller with Buyer’s basis for the assertion of such Material Environmental Condition and data in support thereof on or before five (5) days prior to Closing. Failure to provide notice shall constitute a waiver and release of any Environmental Condition (including a Material Environmental Condition). In the event the Buyer has properly notified Seller of a Material Environmental Condition, Seller and Buyer shall select one of the following options:

(i)            remedy the Material Environmental Condition prior to Closing or as soon thereafter as practicable; or

(ii)           reduce the Purchase Price by an amount mutually agreed upon; or

(iii)          exclude the affected Asset from the sale, and reduce the Purchase Price by the Allocated Value of the excluded asset; or

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(iv)          indemnify Buyer for the Material Environmental Condition and the Purchase Price shall not be reduced.

(b)           A single Environmental Condition shall be deemed “material” for the purpose of this Section 6.2 only if the total probable cost of remediation plus the total probable liability from existing claims and assessed government penalties exceed, in the aggregate for that Environmental Condition, the amount of Twenty Five Thousand and No/100 Dollars ($25,000.00) (“Material Environmental Conditions”). Provided, however, if the total value of all Material Environmental Conditions, in the aggregate, do not meet or exceed One Percent (1%) of the Purchase Price as defined in Section 1.3, then there shall be no adjustment of the Purchase Price or any other remedy from or obligation of Seller that shall be available to Buyer. Provided further, in the event the total value of all Material Environmental Conditions, in the aggregate, meets or exceeds the percentage of the Purchase Price set forth immediately above, then the Purchase Price shall only be adjusted to the extent the total value of all Material Environmental Conditions, in the aggregate, exceeds the percentage of the Purchase Price specified above, and all amounts attributable to such Material Environmental Conditions, in the aggregate, that are below the percentage of the Purchase Price specified above shall be borne solely by Buyer, and no adjustment to the Purchase Price or any other remedy from or obligation of Seller shall be available to Buyer therefor.

(c)           Any Material Environmental Condition which is not disclosed by Buyer to Seller no later than five (5) days prior to Closing, shall conclusively be deemed waived by Buyer for all purposes. Environmental Conditions that are not considered Material Environmental Conditions shall be the sole responsibility of Buyer, regardless of when the condition arose, and Buyer shall indemnify and hold Seller harmless from and against any and all such Environmental Conditions in accordance with the provisions of Section 7.1 below.

(d)           With respect to each Asset as to which Buyer and Seller are unable to agree upon an option under Section 6.2(a), the Asset shall be excluded from the transaction contemplated hereby, or if such Asset participates in a Unit(s), such Asset along with the Unit(s) in which such Asset participates shall be excluded from the transaction contemplated hereby, and the Purchase Price will be reduced by the Allocated Value attributed to such Asset plus the Allocated Value attributed to the Unit(s) in which such Asset participates.

(e)           If Seller does not agree with Buyer’s assertion and/or valuation of a Material Environmental Condition, then Buyer and Seller will resolve the existence and/or value of such Material Environmental Condition pursuant to Section 9.1 of this Agreement.

ARTICLE VII

INDEMNIFICATION AND LITIGATION

7.1           Assumption and Indemnification.

(a)           Except as may be otherwise specifically provided for in this Agreement, on the Closing Date Buyer shall assume and hereby agrees to fulfill, perform, pay and discharge

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(or cause to be fulfilled, performed, paid or discharged) all of the obligations and liabilities of Seller and its Affiliates, known or unknown, with respect to the Assets, regardless of whether such obligations or liabilities arose prior to, on or after the Effective Time (the “Assumed Seller Obligations”), including, but not limited to:

(i)            Any condition relating to the assets that contaminates soil, sediment, air, water or groundwater in a manner that violates or is cause for remediation under any applicable law, regulation, ordinance, rule or order, regardless of when the events occurred that caused such condition to exist; or

(ii)           NORM or asbestos on the Properties, regardless of when the events occurred that caused NORM or asbestos to exist; and

(iii)          Plugging and abandonment of wells on the Properties, including without limitation wells which were abandoned or temporarily abandoned prior to the Effective Date, whether by Seller or a third party.

(b)           Except as may be otherwise specifically provided for in this Agreement, Buyer agrees to protect, defend, indemnify and hold Seller, its ultimate parent and their Affiliates, and their respective directors, shareholders, partners, members, managers, officers and employees (“Seller Indemnified Party”) free and harmless from and against any and all costs, expenses, fines, penalties, claims, losses, liabilities, demands and causes of action of every kind and character (“Damages”), including but not limited to pollution and environmental claims, arising out of, incident to, or in connection with:

(i)            the Assumed Seller Obligations, or other obligations and liabilities assumed pursuant to this Agreement;

(ii)           the ownership, use or operation of the Assets, whether before or after the Effective Date;

(iii)          any misrepresentation or breach of any warranty, covenant or agreement of Buyer contained in this Agreement.

Provided, however, that Buyer does not assume any obligations or liabilities under (a) and (b) above to the extent that they are (Y) Seller Retained Litigation, or (Z) the continuing responsibility of the Seller for which Seller is required to indemnify Buyer under Section 7.3.

THE FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS OF BUYER SHALL APPLY WHETHER OR NOT SUCH DUTIES, OBLIGATIONS OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE) OF ANY SELLER INDEMNIFIED PARTY, (ii) STRICT LIABILITY, OR (iii) ANY VIOLATION OF ANY LAW, RULE, REGULATION OR ORDER RELATED TO THE OWNERSHIP OR OPERATION OF THE PROPERTIES, INCLUDING APPLICABLE ENVIRONMENTAL LAWS.

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7.2           Retained and Assumed Litigation  Notwithstanding the provisions of Section 7.1 above, unless otherwise agreed to in writing by the parties (for example, to reflect continuing joint responsibility), Seller agrees to be responsible for, at its sole cost and expense, the actions, claims, suits, litigation, and proceedings shown on Schedule 7.2 as being retained by Seller (the “Seller Retained Litigation”). Buyer shall assume and be solely responsible and liable for, at its sole cost and expense, the actions, claims, suits, litigation and proceedings shown on said Schedule 7.2 as being assumed by Buyer. Provided that, in no event shall Seller have any liability or obligation to Buyer for the outcome of any matter identified in Schedule 7.2 that would not otherwise cause a breach of Seller’s warranties and representations in Article II of this Agreement and in the Assignment and Bill of Sale.

7.3           Seller Retained Liabilities  Notwithstanding the provisions of Section 7.1 above, and in addition to the liabilities retained by Seller elsewhere in this Agreement, Seller shall be responsible and indemnify, defend and hold harmless Buyer against and from Damages, arising out of, incident to, or in connection with:

(a)           Seller Taxes;

(b)           The Seller Retained Litigation;

(c)           The Excluded Assets;

(d)           Any misrepresentation or breach of any warranty, covenant or agreement of Seller contained in this Agreement;

(e)           Any liabilities associated with Imbalances related to the Assets that are not expressly assumed by Buyer in Section 14.3(d); and

(f)            Any liabilities of Seller or any of its Affiliates with regard to the Seller Plans or otherwise relating to any present or former employees of Seller or any of its Affiliates (“Seller Employee Liabilities”).

7.4           Survival of Provisions  All representations and warranties (and any related indemnity) made herein by Seller or Buyer shall be continuing and shall be true and correct on the date hereof and as of the date of Closing with the same force and effect as if made at that time, and all of such representations and warranties (and any related indemnity) shall, survive Closing and the delivery of the Assignment and Bill of Sale for a period of one (1) year unless notice of such breach is given to the breaching party prior to such date, except that the representations and warranties under Sections 2.2, 2.3, 2.4, 2.8, 3.1, 3.2, and 3.3 shall survive until the expiration of the applicable statute of limitations unless notice of such breach is given to the breaching party prior to such date, and provided, however, the representations and warranties of Seller set forth in Section 2.11 shall terminate at Closing and shall not survive Closing, unless notice of such breach is given to the breaching party prior to such date, and provided, however, the representations and warranties of Seller set forth in Section 2.11(e) shall terminate on July 1, 2008, unless notice of such breach is given to the breaching party prior to such date.  All other provisions contained in this Agreement shall survive the Closing indefinitely, except for any provision that by its terms terminates as of a specific date, or is only made for a specified period.  The provisions and obligations of the parties under Sections 1.3(a) and 5.3, 5.4 and Article 12 (to

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the extent the same are, by mutual agreement, not performed at Closing), and Article 16 shall (subject to any limitations set forth therein) survive the Closing and delivery of the Assignment and Bill of Sale indefinitely.  The provisions and obligations of the parties set forth in Articles IV, VI and VII, subject to any additional limitations otherwise provided therein, shall also survive the Closing and the delivery of the Assignment and Bill of Sale.

7.5           Exclusive Remedy  The sole and exclusive remedy of Buyer and Seller with respect to the Assets and the transactions contemplated hereby shall be pursuant to the express provisions of this Agreement.

(a)           Without limitation of the foregoing, if the Closing occurs the sole and exclusive remedy of Buyer and Seller, for any and all (a) claims relating to any representations, warranties, covenants and agreements that are contained in this Agreement (other than the covenants in Sections 8.2, 8.3, 8.5, 8.8, 8.9, 8.10, and Articles XIV and XV) or in any certificate delivered at Closing and (b) other claims pursuant to or in connection with this Agreement (other than claims related to the covenants in Sections 8.2, 8.3, 8.5, 8.8, 8.9, 8.10, and Articles XIV and XV) shall be any right to indemnification from such claims that is expressly provided in this Agreement; provided, however that such limitation is not intended to, and does not, limit or affect the covenants, representations and warranties provided in the Bill of Sale(s) or the limits on liability for matters specified in Sections 8.3 and 8.5, which duties and liabilities are solely governed by the COMFS.

(b)           If Closing does not occur due to breach of Buyer or Seller, Buyer and Seller agree that the remedy for such breach shall be an action for specific performance by the non-breaching party.  Notwithstanding the foregoing, in the event a court of law or an arbitration panel determines that specific performance is not available as a remedy as a matter of law, (i)  in the case of a breach by the Seller, Buyer shall have the right to recover as liquidated damages an amount equal to five percent (5%) of the Purchase Price (in addition to return of the Deposit and interest earned thereon); and (ii) in the case of a breach by the Buyer, Seller shall have the right to recover as liquidated damages, the Deposit and interest earned thereon.  Accordingly, Buyer and Seller waive all other legal and equitable remedies and claims related to a breach of this Agreement resulting in a failure to close the transactions contemplated in this Agreement, except as provided in this Section 7.5.

7.6           Limitation on Seller’s Indemnity Obligations  Seller shall not be obligated to Buyer (for indemnification or otherwise) under Section 7.3(d) except to the extent, if any, that the aggregate of all of claims for Damages arising under Section 7.3(d) exceeds one percent (1%) of the Purchase Price (the “Indemnification Deductible”), and then Seller shall be liable only for all such claims for Damages in excess of the Deductible up to a maximum amount of fifteen percent (15%) of the Purchase Price (the “Indemnification Cap”).  Notwithstanding the forgoing, Buyer shall not be entitled to indemnification under Section 7.3(d) for, and Damages shall not include, (i) loss of profits, whether actual or consequential, or other consequential damages suffered by Buyer or its Affiliates, or any punitive damages (other than loss of profits, consequential damages or punitive damages suffered by third persons for which responsibility is allocated between the parties), (ii) any liability, loss, cost, expense, claim, award or judgment to the extent resulting from or increased by the actions or omissions of any indemnified party after the Closing Date or (iii) except with respect to claims for any Retained Seller Litigation or Seller Employee Liabilities, any liability, loss, cost, expense, claim, award or judgment that does not individually exceed $50,000.

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7.7           Notification of Claim  If indemnification pursuant to Section 7.1 is sought, the party seeking indemnification (the “Indemnitee”) shall give written notice to the indemnifying party of an event giving rise to the obligation to indemnify within ninety (90) days of the President, Chief Executive Officer or Chief Operating Officer of Indemnitee first having actual knowledge of such event, such notice shall describe in reasonable detail the factual basis for such claim, and shall allow the indemnifying party to assume and conduct the defense of the claim or action with counsel reasonably satisfactory to the Indemnitee, and cooperate with the indemnifying party in the defense thereof.

ARTICLE VIII

ADDITIONAL COVENANTS OF THE PARTIES

8.1           Operations  From the date hereof until the date set forth in the agreement between Buyer and Seller as provided in Section 8.3 below, Seller will (i) continue the routine operation of the Properties in the ordinary course of business; and (ii) operate the Properties in material compliance with all applicable Laws and Environmental Laws and in material compliance with all Leases and Contracts. During such time, except as otherwise provided in Section 8.3, Seller will not, without Buyer’s prior consent in connection with the Assets:

(a)           expend any funds, or make any commitments to expend funds (including entering into new agreements which would obligate Seller to expend funds), or otherwise incur any other obligations or liabilities, other than (i) for amounts less than $50,000.00, (ii) to pay expenses or to incur liabilities in connection with routine operation of the Properties after the Effective Date and (iii) except in the event of an emergency requiring immediate action to protect life or preserve the Properties;

(b)           except where necessary to prevent the termination of a Lease or other material agreement governing Seller’s interest in the Properties, propose the drilling of any additional wells, or propose the deepening, plugging back or reworking of any existing Wells, or propose the conducting of any other operations which require consent under the applicable operating agreement, or propose the conducting of any other operations other than the normal operation of the existing Wells on the Properties, or propose the abandonment of any Wells on the Properties; provided, however, it is expressly agreed that Seller shall never have any liability to Buyer with respect to operation of a Property greater than that which it might have as the operator to a non-operator under the applicable operating agreement (or in the absence of such an agreement, under the AAPL 610 (1989 Revision) Form Operating Agreement), IT BEING RECOGNIZED THAT, UNDER SUCH AGREEMENTS AND SUCH FORM, THE OPERATOR IS NOT RESPONSIBLE FOR ITS OWN NEGLIGENCE, AND HAS NO RESPONSIBILITY OTHER THAN FOR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT;

(c)           sell, transfer or abandon any portion of the Assets other than items of materials, supplies, machinery, equipment, improvements or other personal property or fixtures

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forming a part of the Assets (and then only if the same is replaced with an item of substantially equal suitability, free of liens and security interests, which replacement item will then, for the purposes of this Agreement, become part of the Assets); or

(d)           release (or permit to terminate), or modify or reduce its rights under, any oil, gas or mineral lease forming a part of the Properties, or any other Lease or Contract, or enter into any new agreements related to the Assets, or modify any existing production sales contracts or enter into any new production sales contracts, except contracts terminable by Seller with notice of sixty (60) days or less without monetary penalty.

Buyer shall assume all risk and realize all benefits of any such change in condition of the Assets from the Effective Date to Closing, including but not limited to change in produced volumes, equipment failure, and well completions, except to the extent any change in condition is directly caused by the gross negligence or willful misconduct of Seller or is determined to be a Casualty Loss as described in Section 8.4 below.

8.2           Successor Operator  While Buyer may represent that it desires to succeed Seller as operator of the Assets or portions thereof which Seller may presently operate, Buyer acknowledges and agrees that Seller cannot and does not covenant or warrant that Buyer shall become successor operator of same, since such Assets are covered by agreements which control the appointment or election of a successor operator. However, Seller will assist Buyer or its affiliate, Linn Operating, Inc., in its efforts to succeed Seller as operator of any Wells. Buyer or its affiliate, Linn Operating, Inc., shall promptly, following Closing, file all appropriate forms, pit permit transfers and declarations or bonds with federal and state agencies relative to its assumption of operatorship. For all Seller-Operated Assets, Seller shall execute and deliver to Buyer or its affiliate, Linn Operating, Inc., and Buyer or its affiliate, Linn Operating, Inc., shall promptly file the appropriate forms with the applicable regulatory agency transferring operatorship of such Assets to Buyer or its affiliate, Linn Operating, Inc.

8.3           Contract Operating, Marketing and Financial Services Agreement  Seller agrees to continue to provide Buyer those services listed in the Contract Operating, Marketing and Financial Services Agreement (COMFS) that is attached hereto as Exhibit E for the term as set forth in the COMFS.

8.4           Casualty Loss  If prior to the Closing Date any facility or equipment included within the Assets is damaged or destroyed by fire, flood, storm or other casualty (hereinafter called “Casualty Loss”), Seller shall immediately notify Buyer and the Purchase Price shall be reduced by an amount estimated by Seller and as agreed to by Buyer, to be equal to the repair or replacement costs of that Asset. In no event shall the reduction of Purchase Price exceed the Allocated Value of such Asset. Any insurance proceeds payable to Seller with respect to the Casualty Loss shall be retained by Seller. In the event Seller and Buyer are unable to agree upon the value of the estimated damage, such value shall be determined pursuant to Section 9.1.

8.5           Right to Market Production  From and after the Effective Date and continuing during the term specified in the COMFS, Seller will, upon consultation with Buyer, market the oil, gas and liquid hydrocarbon production from the Assets as well as any pooled, communitized or unitized acreage derived by virtue of Seller’s ownership of the Assets. This includes the right

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to make any and all necessary scheduling and/or nominations arrangements for such production to implement marketing arrangements. The revenues realized from the sale of production attributable to the Assets on and after the Effective Date shall be handled in accordance with Section 14.1 of this Agreement.

8.6           Hart-Scott-Rodino Act  As soon as practicable, but no later than twenty (20) business days after the execution hereof, Seller and Buyer shall each prepare and submit any necessary filings in connection with the transactions contemplated by this Agreement under the Hart-Scott-Rodino Act (“HSR Act”) and the rules and regulations promulgated thereunder. Each party shall request expedited treatment of such filing by the Federal Trade Commission, shall promptly make any appropriate or necessary subsequent or supplemental filings, and shall furnish to the other party copies of all filings made under the HSR Act at the same time they are filed with the government.

8.7           Financial Statements.

(a)           Seller shall use its commercially reasonable efforts to assist Buyer in preparing, as soon as practicable after the date of this Agreement, and at the sole cost and expense of Buyer, statements of revenues and direct operating expenses for the business and operations conducted by Seller with respect to the Assets (the “E&P Business”) for up to the most recent two (2) fiscal years ending prior to the Closing Date and all notes and schedules related thereto (including a footnote satisfying the requirements of FAS 69) in accordance with the rules and regulations adopted by the Securities and Exchange Commission (the “SEC”), but only to the extent that such statements and notes will be required of Buyer or any of its Affiliates in connection with any required Form 8-K filing with the SEC pursuant to the Securities and Exchange Act of 1934 (the “Exchange Act”) related to the transactions contemplated by this Agreement, together with any quarterly or interim period statement of revenues and direct operating expenses (in accordance with the rules and regulations adopted by the SEC) required in connection with such Form 8-K filing (collectively, the “Statements of Revenues and Expenses”).  If requested by KPMG, Buyer’s external auditor (“Auditor”), Seller shall execute and deliver to Auditor such representation letters, in form and substance customary for representation letters provided to external audit firms by management of the company whose financial statements are the subject of an audit or are the subject of a review pursuant to Statement of Auditing Standards 100 (Interim Financial Information), as may be reasonably requested by Auditor, with respect to the Statement of Revenue and Expenses, provided, however, that Buyer shall provide customary indemnity for any officer of any Seller executing and delivering such representation letters to Auditor.  If requested by Auditor, Buyer shall execute and deliver to Auditor such representation letters, in form and substance customary for representation letters provided to external audit firms by management of the company whose financial statements are the subject of an audit or are the subject of a review pursuant to Statement of Auditing Standards 100 (Interim Financial Information), as may be reasonably requested by Auditor, with respect to the Statement of Revenue and Expenses.  Seller will provide suitable electronic detail in the form of lease operating statements by property adequately supporting all statements provided.

(b)           Promptly after the date of this Agreement, Seller shall request Auditor, after discussing specifications with Buyer, to (i) perform an audit of the Statements of Revenues

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and Expenses (other than the quarterly or interim statements for 2007) on Buyer’s behalf and to issue its opinion with respect to such Statements of Revenues and Expenses for the period(s) specified by Buyer (such Statements of Revenues and Expenses and related audit opinions being hereinafter referred to as the “Audited Statements of Revenue and Expenses”) and (ii) provide its written consent for the use of its audit reports with respect to Statements of Revenues and Expenses in any registration statement, report or other document filed by Linn Energy, LLC or any of its Affiliates with the SEC.  Buyer shall bear all fees charged by Auditor pursuant to such engagement.  Both Seller and Buyer shall sign an engagement letter for Auditor and provide such information as may be reasonably requested from time to time by Auditor.  Seller shall reasonably cooperate in the completion of such audit and delivery of the Audited Statements of Revenue and Expenses to Buyer or any of its Affiliates as soon as reasonably practicable.

(c)           Seller shall execute and deliver to Auditor representation letters (in form and substance customary for representation letters provided by management to external audit firms) related to the audited financial statements contemplated in Section 8.7(a) and (b) as may be reasonably required by Auditor; provided, however, that Buyer shall provide customary indemnity for any officer of any Seller executing and delivering such representation letters to Auditor.

(d)           Buyer shall promptly reimburse Seller and its Affiliates for all internal and external expenses incurred by Seller and its Affiliates pursuant to this Section 8.7.

(e)           Promptly after the date of this Agreement, but no later than five (5) Business Days prior to Closing, Seller, to the extent Seller has such information in its possession, will provide Buyer with the following information for preparation of the Audited Statements of Revenue and Expenses:  (i) unaudited direct revenues and expenses, (ii) data supporting the unaudited direct revenues and expenses, and (iii) reserve data (collectively the “Financial Data”).

8.8           Transfer Taxes  The Buyer shall be responsible for the payment of all state and local transfer, sales, use, stamp, registration or other similar Taxes (the “Transfer Taxes”) resulting from the transactions contemplated by this Agreement. The Buyer and the Seller shall cooperate in good faith to minimize, to the extent permissible under applicable law, the amount of any such Transfer Taxes. If at any time after the Closing, Seller or any Affiliate shall become liable for Transfer Taxes for which Buyer is responsible under this paragraph, Buyer shall promptly reimburse Seller or such Affiliate for such Taxes and related costs, including any penalties and interest thereon assessed by any Taxing Authority relating thereto. Buyer shall defend, indemnify and hold Seller harmless with respect to the payment of such Transfer Taxes including any interest or penalties assessed thereon.

8.9           Other Taxes  All other taxes on the ownership or operation of the Assets, including real estate taxes other than transfer taxes, personal property taxes, ad valorem taxes and severance or production taxes (but excluding income and franchise taxes), which are imposed for or with respect to periods or portions of periods prior to the Effective Date shall be the burden of Seller and all such taxes imposed for or with respect to periods or portions of periods after the Effective Date shall be the burden of Buyer. Ad valorem taxes shall be prorated between the parties as of the Effective Date. Any party which pays any such taxes which are the responsibility of the other party shall be entitled to prompt reimbursement upon issuance to the responsible party of evidence of such payment.

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8.10         Cooperation  Buyer and Seller shall cooperate fully as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding (each a “Tax Proceeding”) with respect to Taxes imposed on or with respect to the Assets. Buyer and Seller agree to file such reports or returns as are reasonably requested by the other party or are required under state, local, foreign or other applicable law in order to reduce or eliminate any Taxes attributable to the transactions contemplated by this Agreement.

8.11         Updated Exhibits and Schedules  Each Party shall, prior to Closing, notify the other party in writing of any information that, if existing or known to it on the date of this Agreement, would have been required to have been included in one or more Exhibits or Schedules to this Agreement and such information shall be added to the Exhibits and Schedules, which shall be considered updated. For purposes of determining the satisfaction of any of the conditions to the obligations of Buyer or Seller in Article XI and the liability of Buyer and Seller following Closing for breaches of its representations, warranties, and covenants under this Agreement, the Exhibits and Schedules to this Agreement shall be deemed to include only the information contained therein on the date of this Agreement; provided, however, that, if, at Closing, Buyer has knowledge that any representation or warranty of Seller contained in this Agreement is untrue or will be untrue in any respect as of the Closing Date and Buyer fails to notify Seller prior to Closing, such representation or warranty will be deemed waived by Buyer as a condition to close, and Buyer hereby waives any claim for breach of a representation or warranty or for indemnity related thereto.

8.12         Notification of Breaches.

Until the Closing,

(a)           Buyer shall notify Seller promptly after Buyer obtains actual knowledge that any representation or warranty of Seller contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Seller prior to or on the Closing Date has not been so performed or observed in any material respect; and

(b)           Seller shall notify Buyer promptly after Seller obtains actual knowledge that any representation or warranty of Seller contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Buyer prior to or on the Closing Date has not been so performed or observed in any material respect.

If any of Buyer’s or Seller’s representations and warranties is untrue or shall become untrue in any material respect between the date of execution of this Agreement and the Closing Date, or if any of Buyer’s or Seller’s covenants or agreements to be performed or observed prior to or on the Closing Date shall not have been so performed or observed in any material respect and such breach of representation, warranty, covenant, or agreement shall (if curable) be cured by the Closing (or, if the Closing does not occur, by the date set forth in Section 13.1(f)), then such breach shall be considered not to have occurred for all purposes of this Agreement.

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ARTICLE IX

DISPUTE RESOLUTION

9.1           Arbitration.

(a)           Any and all disputes or claims by either party arising from or related to this Agreement (whether such claims sound in contract, tort, or otherwise) that cannot be amicably settled, shall be determined solely and exclusively by arbitration in accordance with the Federal Arbitration Act and using the rules of the American Arbitration Association or any successor thereof when not in conflict with such Act.

(b)           Each party shall select one impartial arbitrator, and the two so designated shall select a third impartial arbitrator. If either party shall fail to designate an arbitrator within fourteen (14) days after arbitration is requested, or if the two arbitrators shall fail to select a third arbitrator within thirty (30) days after arbitration is requested, then an arbitrator shall be selected by the Senior U.S. District Judge for the Northern District of Texas. Judgment upon an award of the majority of the arbitrators shall be binding. In no event, may the arbitrators award any damages prohibited by this Agreement.

(c)           Discovery shall be made pursuant to the Federal Rules of Civil Procedure and completed within forty five (45) days of selection of the third arbitrator. Final hearing on the matter shall be had within sixty (60) days of the selection of the third arbitrator and a final decision (which may include the award of attorney’s fees and costs) with a written opinion stating the reasons therefor shall be rendered within seventy five (75) days of said date.

(d)           The arbitration process shall be kept confidential and such conduct, statements, promises, offers, views and opinions shall not be discoverable or admissible in any legal proceeding for any purpose, except to the extent reasonably necessary to enforce the final decision of the arbitrators.

9.2           Waiver of Certain Damages  EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO SEEK, ANY CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY OR PUNITIVE DAMAGES WITH RESPECT TO ANY CLAIM OR CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH THEREOF (other than loss of profits, consequential damages or punitive damages suffered by third persons for which responsibility is allocated between the parties). Notwithstanding the foregoing, neither party hereto waives or shall be deemed to have otherwise waived any other rights, remedies or causes of action it may have under the provisions of this Agreement, or otherwise.

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ARTICLE X

PROCEEDS, ROYALTY OBLIGATIONS, EXPENSES AND TAXES

10.1Accounting for Production and Proceeds of Production  At Closing, ownership of all production from the Assets shall pass from Seller to Buyer as of the Effective Date; however, Seller shall retain ownership and be entitled to all proceeds from the sale of any oil above the pipeline connections in tanks attributable to the Assets as of the Effective Date. If Seller should at any time subsequent to the Closing Date receive from any purchaser of production any proceeds attributable to any sale of production from the Assets occurring after the Effective Date, Seller shall remit all such proceeds to Buyer in accordance with Section 14.1. Similarly, if Buyer should at any time after the Closing Date receive any proceeds attributable to any such sale occurring prior to the Effective Date, Buyer shall promptly remit the same to Seller.

10.2Royalty Obligations; Expenses  Seller shall be responsible for the payment of all royalty obligations, operating expenses and capital expenses attributable to Seller’s interest in the Assets prior to the Effective Date. Buyer shall be responsible for the payment of all royalty obligations, operating expenses and capital expenses attributable to Buyer’s interest in the Assets on and after the Effective Date. Any party which pays any such royalties, operating expenses, or capital expenditures which are the responsibility of the other shall be entitled to prompt reimbursement upon issuance to the responsible party of evidence of such payment.

10.3Joint Billing Audits, Credits and Advances  Seller shall be responsible for the conduct and settlement of all joint billing audits which relate to accounting periods prior to the Effective Date. Buyer shall be responsible for the conduct and settlement of all joint billing audits which relate to accounting periods after the Effective Date. Any credits or advances received by Buyer after the Effective Date attributable to expenses paid prior to the Effective Date shall be reimbursed to Seller by Buyer. Any unapplied credits or advances received by Seller after the Effective Date attributable to expenses paid after the Effective Date shall be reimbursed to Buyer by Seller. The parties agree to provide reasonable access to records in their possession and control during normal business hours for the purpose of conducting audits and to reasonably cooperate with such audit efforts; provided, however, that neither party shall have the authority to extend the period for conducting any audit that affects the other parties period of ownership.

10.4Payments on Behalf of Others  In the event Seller makes payments (including but not limited to payments of Taxes) on behalf of royalty owners or joint interest owners after the Effective Date but prior to the Closing Date, Buyer shall reimburse Seller for all such payments in accordance with Section 14.1 and Buyer shall assume the risk of collection of the amount of any such payments from the appropriate party.

10.5Filing of Tax Returns  Buyer shall prepare or cause to be prepared all Tax Returns with respect to the Assets required to be filed after the Closing Date that relate to periods beginning prior to the Closing Date and ending after the Closing Date.  Buyer will cause such Tax Returns to be timely filed and will provide copies to Seller. Not later than five (5) days prior to the due date for payment of Taxes with respect to any such Tax Return, Seller shall pay to Buyer the amount of any Taxes that Seller is responsible for under Section 8.9 with respect to

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such Tax Return.  Seller shall prepare or cause to be prepared all Tax Returns with respect to the Assets required to be filed before the Closing Date that relate to periods beginning prior to the Closing Date and covering any period after the Effective Date.  Seller will cause such Tax Returns to be timely filed and will provide copies to Buyer.  The parties will be responsible for any Taxes reported on such Tax Returns in accordance with the provisions of Section 8.9.

10.6Holdco and Subco Formation and Assignment.

(a)           Prior to Closing, Seller shall form a single member subsidiary Delaware limited liability company (“Holdco”) and a single member subsidiary Delaware limited liability company (“Subco”), both of which subsidiaries shall be disregarded entities for federal tax purposes. Prior to Closing (which may be on the day of Closing), Seller shall assign and transfer to Subco as a capital contribution all the Assets. Seller will cause its membership interests in Subco to be contributed to Holdco.

(b)           At the Closing, in lieu of conveying the Assets to Buyer, Seller shall assign and transfer to Buyer at Closing all the outstanding membership interests in Holdco (the “Holdco Interest”).

(c)           The form of documents to effect the formation of Holdco and Subco shall be provided by Buyer and shall be reasonably acceptable to Seller.

(d)           At or prior to the Closing, Seller and Buyer shall enter into any amendment of this Agreement necessary to reflect the provisions of this Section 10.6, including changes from a sale of Assets to a sale of the Holdco Interest.

(e)           Buyer shall promptly reimburse Seller for, and indemnify, defend and hold harmless Seller, its General Partners and its Affiliates from and against, any and all claims, liabilities, losses, costs, expenses, and administrative fees incurred or suffered by Seller, its General Partners and its Affiliates caused by or arising out of or relating to the analysis, structuring and preparation of documents for the matters described in this Section 10.6, the formation of Holdco and Subco, the assignment of the Assets to Subco and Holdco, and the assignment of Holdco Interest, including Taxes and any loss of long-term capital gains treatment, if any, (including any fines, penalty or other liability arising from the assignment of the Assets to Subco and Holdco and transfer of the Holdco Interest or from failure to withhold and remit any Tax related to such assignments and transfer) which would not have been incurred by Seller, its General Partners or its Affiliates if the Seller and Buyer had engaged in a sale of the Assets as provided in this Agreement, in each case (i) whether incurred or suffered before or after the Closing Date and (ii) regardless of whether the Closing occurs.

(f)            Buyer agrees that any failure to have record title transferred from Seller to Subco or Holdco shall not constitute a Title Defect or breach of any representation or warranty or obligation under this Agreement provided that the appropriate conveyances as described in Section 10.6(a) have been executed and delivered to Subco and Holdco prior to the Closing. In addition, Buyer agrees that any failure to have permits, licenses, or other appurtenances, or any Contracts or Records, in the name of Subco or Holdco instead of Seller shall not constitute a breach of any representation or warranty or obligation under this Agreement. Buyer agrees after

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Closing to make any additional filings required with any Governmental Authority with respect to the transactions contemplated in this Section 10.6.

(g)           Notwithstanding anything to the contrary contained herein, Seller shall not effect the transactions described in this Section 10.6 unless and until Buyer delivers to Seller (i) a written request to effect the transaction described in this Section 10.6 no less than ten (10) days prior to the Closing and (ii) a written confirmation agreeing that all Buyer’s conditions to Closing set forth in Article XI (other than those conditions related to delivery of documents by Seller to Buyer at Closing) have been satisfied or irrevocably waived by Buyer.

(h)           Notwithstanding anything to the contrary contained herein, Buyer shall pay to Seller any expenses incurred by Seller to effect the transactions described in this Section 10.6.

(i)            Notwithstanding anything to the contrary contained herein, none of Seller’s representations and warranties in Section 2.8 shall apply to Subco or Holdco.

ARTICLE XI

CONDITIONS OF CLOSING

Buyer’s and Seller’s obligation to consummate the transactions provided for herein is subject to the satisfaction or waiver by the other party of the following conditions:

11.1Representations.

(a)           The representations of Seller contained in Article II hereof shall be true and correct in all material respects and on the date of Closing as though made on and as of that date.

(b)           The representations of Buyer contained in Article III hereof shall be true and correct in all material respects and on the date of Closing as though made on and as of that date

11.2Performance.  Buyer and Seller shall have performed in all material respects the obligations, covenants and agreements hereunder to be performed by them at or prior to Closing. Seller shall have tendered to Buyer all documents contemplated by Section 12.2.

11.3Pending Matters.  Except as disclosed herein, no suit, action or other proceeding by a third party or a Governmental Authority shall be pending or threatened which seeks substantial damages from Buyer or Seller in connection with the Assets, or seeks to restrain, enjoin or otherwise prohibit, the consummation of the transactions contemplated by this Agreement. The Closing shall not violate any order or decree of any Governmental Authority having competent jurisdiction.

11.4Expiration of HSR Waiting Period.  If applicable, the waiting period under the HSR Act shall have expired or been terminated.

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11.5Evidence of Bonding.  Buyer shall deliver to Seller:

(a)           A copy of certificate from Secretary of State evidencing Buyer has the authority to do business with the state(s) where the Assets are located; and

(b)           Either a copy of Buyer’s existing blanket plugging or performance bond, or evidence of Buyer’s compliance with applicable state or federal rules and regulations, if any, filed with the applicable conservation or regulatory agency.

11.6Financial Statements

(a)           Buyer shall have received the Financial Data pursuant to Section 8.7(e); and

(b)           Buyer and KPMG shall be satisfied that they have the Financial Data required to complete the Audited Statements of Revenues and Expenses.

ARTICLE XII

CLOSING

12.1Date and Place of Closing  Consummation of the purchase and sale of the Assets as contemplated by this Agreement (the “Closing”) shall, unless otherwise agreed to in writing by Buyer and Seller, take place at the offices of the Seller, at 10:00 a.m., local time, on January 31, 2008 (the “Target Closing Date”), or if all conditions in Article XI to be satisfied prior to Closing have not yet been satisfied or waived, as soon thereafter as such conditions have been satisfied or waived, subject to the termination provisions of Article XIII.  The date on which the Closing occurs is referred to herein as the “Closing Date.”

12.2Closing Obligations  At the Closing (except in the case of Section 12.2(l), which shall be delivered five (5) days prior to Closing) the following events shall occur, each being a condition precedent to the others and each being deemed to have occurred simultaneously with the others:

(a)           Seller shall execute, acknowledge and deliver to Buyer an Assignment and Bill of Sale of the Assets and such other instruments of transfer and assignment necessary to convey to Buyer the Assets in the manner contemplated by this Agreement.

(b)           Seller shall execute and deliver assignments in form required by federal, state or tribal agencies for the assignment of any federal, state or tribal Properties in sufficient duplicate originals to allow recording in all appropriate offices

(c)           Seller shall deliver to Buyer exclusive possession of the Assets and Buyer shall take possession of the Assets, as of the Closing Date.

(d)           Buyer shall deliver to Seller the Purchase Price, as adjusted in accordance with Section 1.4 hereof, including applicable Transfer Taxes, if any, by wire transfer to an account designated by Seller.

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(e)           Seller and Buyer shall execute, acknowledge, and deliver transfer orders or letters in lieu thereof directing all purchasers of production to make payments of proceeds attributable to production from the Assets to Buyer.

(f)            Seller and Buyer shall execute, acknowledge and deliver such other instruments and take such other action as may be reasonably necessary to carry out their respective obligations under this Agreement.

(g)           Seller and Buyer shall execute and deliver the Closing Statement that shall set forth the Purchase Price, any adjustment to the Purchase Price in accordance with Section 1.4 hereof, and the calculations used to determine such adjustment, as set forth on Exhibit F.

(h)           Seller and Buyer shall each execute and deliver a certificate duly executed by their respective authorized corporate officers or partners, as applicable, dated as of Closing, certifying on behalf of Seller and Buyer that the conditions set forth in Article XI that apply to each have been fulfilled.

(i)            Seller shall deliver a certificate of non-foreign status of Seller that meets the requirements of Treasury Regulation Section 1.1445-2(b)(2).

(j)            Seller shall deliver evidence of the consent of the General Partners to the transactions contemplated by this Agreement.

(k)           Seller shall deliver evidence of the authority of the Person(s) executed this Agreement and the Assignment and Bill of Sale to execute such agreements on behalf of Seller.

(l)            Seller shall deliver the Financial Data pursuant to Section 8.7(e) unless Buyer has waived the condition in Section 11.6.

12.3Files  Seller shall, at or within ten (10) days Closing, provide Buyer with either paper or electronic copies or originals, of the Records, Leases, Contracts, Surface Contracts and amendments and correspondence related thereto. Seller shall retain at its option copies of all original files and shall have no obligation to furnish Buyer any data or information that Seller cannot provide Buyer because of third-party restrictions on Seller or that does not directly pertain to the Assets.

ARTICLE XIII

TERMINATION OF AGREEMENT

13.1Grounds for Termination  This Agreement may be terminated at any time on or prior to the Closing Date by:

(a)           Buyer or Seller, if consummation of the transactions contemplated hereby would violate any non-appealable final order by any Governmental Authority having competent jurisdiction;

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(b)           Buyer or Seller, if after the date hereof, any legislation which would have the effect of prohibiting or making unlawful the acquisition or ownership of the Assets by Buyer or the conveyance or sale of the Assets by Seller, has been enacted into law;

(c)           Buyer or Seller, if any of the representations or warranties of the other party contained in Article II or Article III above (as applicable) are not materially true and correct on and as of the Closing Date;

(d)           Buyer or Seller, if the Material Title Defect amount exceeds ten percent (10%) of the Purchase Price;

(e)           Buyer or Seller, if the Material Environmental Condition amount exceeds ten percent (10%) of the Purchase Price; or

(f)            Buyer or Seller, if Closing has not occurred on or before February 29, 2008;

provided, however, that no Party shall be entitled to terminate this Agreement under Section 13.1(f) if the Closing has failed to occur because such Party negligently or willfully failed to perform or observe in any material respect its covenants and agreements hereunder.

13.2Effect of Termination.

(a)           If this Agreement is terminated pursuant to Section 13.1, this agreement will become void and will be of no further force or effect (except for the provisions of Sections 2.6, 3.8, 5.4, 10.6(e), 13.2, 14.5, Article IX, Article XVI (but excluding Section 16.2) and of the Confidentiality Agreement, all of which shall continue to be in full force and effect).  In the event this Agreement terminates under Section 13.1(f) and any party has willfully or negligently failed to perform or observe in any material respect any of its agreements or covenants contained herein that are to be performed or observed at or prior to Closing, then the other Party shall only be entitled to all remedies available as provided in Section 7.5.

(b)           If Closing has not occurred by February 29, 2008, due to Buyer’s actions or inactions (including Buyer’s failure to perform pursuant to Section 12.2 above) or should Buyer default under this Agreement in any material way, including, but not limited to, Buyer’s absence at the designated time for Closing, Seller shall have the right to terminate this Agreement and retain the Performance Guarantee Deposit set forth in Section 1.3 above including any accrued interest, as liquidated damages and in addition such remedies as provided in Section 7.5. Furthermore, Seller shall be free immediately to enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any party without any restriction under this Agreement and Buyer shall be liable for all damages if it attempts to interfere in any way with such enjoyment or action by Seller.

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ARTICLE XIV

CONTINUING OBLIGATIONS

14.1Post-Closing Settlement  Within one hundred twenty (120) days after the Closing, a final settlement statement shall be prepared by Seller and submitted to Buyer showing income and expenses for the Assets between the Effective Date and Closing Date and other charges and credits provided in this Agreement. However, neither party to this Agreement shall be absolved from liability should such accounting and adjustment not be completed within said one hundred twenty (120) day period.

(a)           Seller shall be credited with:

(i)            The value of all merchantable oil above the pipeline connections in tanks at the Effective Date based on either the operator’s gauge report, if available, or regulatory reports furnished by the operator that is credited to Seller’s net revenue interest in the Assets, such value to be based on the net contract price in effect as of the Effective Date (or the market value at the wellhead, if there is no contract price in effect as of such time), less any taxes withheld properly by the purchaser of such.

(ii)           The amount of all costs and expenses paid or incurred by Seller, including, without limitation, royalties, rentals and other charges, ad valorem, and other taxes based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom, expenses paid or incurred under applicable operating agreements and, in the absence of an operating agreement, expenses of the sort customarily billed under such agreements, not including income taxes or franchise taxes paid by Seller, in connection with the operation of the Assets subsequent to the Effective Date.

(iii)          An amount equal to all prepaid expenses attributable to the Assets that are paid or incurred by or on behalf of Seller prior to the Closing Date and that are, in accordance with generally accepted accounting principles, attributable to the period after the Effective Date, including, without limitation, prepaid ad valorem, property, production, severance, and similar taxes (but not including income taxes) based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom. Any refund of such taxes attributable to the period before the Effective Date received by Buyer shall be credited to Seller.

(iv)          The amount of any advances paid by Seller to, and held by, the operator of any property (exclusive of Seller) as a working fund pursuant to the applicable joint operating agreements.

(b)           Buyer shall be credited with:

(i)            Proceeds received by Seller that are, in accordance with generally accepted accounting principles, attributable to the Assets for the period of time after the Effective Date.

(ii)           The amount of all costs and expenses paid by Buyer, including,

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without limitation, royalties, rentals and other charges, ad valorem, property, production, excise, severance, and similar taxes based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom, expenses paid under applicable operating agreements and, in the absence of an operating agreement, expenses of the sort customarily billed under such agreements, not including income taxes or franchise taxes paid by Buyer, in connection with the operation of the Assets prior to the Effective Date.  Any refund of such taxes attributable to the period  after the Effective Date received by Seller shall be credited to Buyer.

(iii)          Any unpaid amount attributable to any reduction under Section 8.4 for a Casualty Loss which occurs subsequent to the Effective Date and prior to the Closing Date.

(iv)          All amounts held in suspense. Buyer agrees to indemnify, defend and hold Seller harmless from, and assume full responsibility for, the proper distribution of all suspense amounts delivered to Buyer by Seller.

(v)           The amount of any advances paid to Seller as Operator and held by Seller as Operator as a working fund pursuant to the applicable joint operating agreements.

(c)           In addition to the matters mentioned above, the final settlement statement shall include any other debits and credits, either cash or accrued, but excluding income and franchise taxes, which under generally accepted accounting principles would be attributable to the transfer of ownership of the Assets on the Effective Date.

(d)           Buyer shall have the right for a period of sixty (60) days from the date of the final settlement statement in which to audit the matters covered thereby and respond with objections and proposed corrections to the final settlement statement.

(e)           Within thirty (30) days after Seller’s receipt of Buyer’s modifications to the final settlement statement, Seller and Buyer may undertake to agree with respect to the adjustments or payments and the amount due from Buyer or Seller, as the case may be, shall be submitted to the other party. The final settlement statement shall be deemed conclusive and not subject to further audit by either party.

(f)            In the event Buyer and Seller are unable to mutually agree upon the amount of the settlement statement, the dispute shall be resolved pursuant to Section 9.1 above.

14.2Further Assurances  After Closing, the parties agree to execute and deliver to each other all such instruments, notices, division or transfer orders, and other documents, and to do all such other acts not inconsistent with this Agreement as may reasonably be necessary or advisable to carry out their obligations under this Agreement.  Without limitation of the forgoing, but not as a representation or warranty, the Parties agree that Seller intends to convey to Buyer, and Buyer intends to purchase, subject to the terms and conditions of this Agreement, all mineral interests related to the leases, units, wells and other property described in the reserve report prepared by Albrecht & Associates, Inc. that was provided in the Seller’s data room.  To the extent Exhibit A attached to this Agreement at the time of execution fails to describe all such mineral interests, Seller and Buyer agree to revise Exhibit A to include all such mineral interests

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that Seller owns (but excluding fee surface acreage without minerals that do not relate to the operation of the Properties as currently operated by Seller).

14.3Gas Imbalances  Seller and Buyer acknowledge and agree to the following regarding possible gas imbalances on any of the Assets transferred by this Agreement:

(a)           Gas Balance Status: Schedule 2.13 sets forth any Imbalances pertaining to the Assets.

(b)           Gas Underproduction: In the event Seller is under-produced as to any well(s) located on the Assets, Buyer agrees not to hold Seller liable for such underproduction, subject to Seller’s representation in Section 2.13.  Seller, however, agrees to assign to Buyer all of its rights to make up such underproduction.

(c)           Gas Overproduction: In the event Seller is overproduced as to any well(s) located on the Assets, Buyer acknowledges and agrees that its share of gas from any such overproduced well(s) on the Assets may at some point be curtailed by underproduced working interest owners. Seller shall not be liable to Buyer in the event such curtailment occurs, subject to Seller’s representation in Section 2.13.

(d)           Seller and Buyer agree that Buyer will assume the liability for the volumes of Imbalances shown on Schedule 2.13.

(e)           The provisions of this Section shall survive Closing.

14.4Recording  As soon as practicable after Closing, Buyer shall, at its own cost, (i) record the Assignment(s) and Bill(s) of Sale in the appropriate office of the state and county in which the lands covered by the Assignment(s) and Bill(s) of Sale are located, (ii) obtain the approval of any federal, Indian tribal or state government agencies to the assignment of the Assets, and (iii) file any state, federal or Indian tribal oil and gas leases in the appropriate governmental offices on a form required and in compliance with the applicable rules of the applicable government agencies. Buyer shall supply Seller with a true and accurate photocopy of all the recorded and filed assignments within a reasonable period of time after their recording and filing. Documentary tax stamps, if applicable, shall be the responsibility of Seller.

14.5Confidentiality  In the event of the termination of this Agreement, Seller and Buyer shall, to the extent permitted by law, keep confidential and not use any confidential information obtained pursuant to this Agreement, unless such information is readily ascertainable from public or published information or trade sources or is received by Buyer from a third party having no obligation of confidentiality with respect to such information. Notwithstanding the above, Seller shall not be precluded from informing its employees of such details of the transaction as Seller deems necessary; provided, however, Seller shall be responsible for ensuring that such employees comply with the provisions of this Section 14.5.

14.6Preservation of Books and Records  For a period of seven (7) years following the Closing Date, the party in possession of the originals shall retain the original books, records and files relating to the Assets and shall make such books, records and files available to the other party, upon reasonable notice, for review and copying (at the expense of the party requesting to

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review and/or copy same) at the headquarters of the party in possession (or at such other location in the United States as the party in possession may designate in writing to the other party) at reasonable times and during regular office hours. Buyer acknowledges that Seller may need to review and copy such books, records and files in connection with litigation or other business purposes. Buyer’s obligation under this Section 13.7 shall survive Closing and shall continue in the event the Assets or any portion thereof are sold or otherwise transferred to third parties.

14.7Financial Statements

(a)           Seller shall fully cooperate with and assist Buyer in the completion of the Audited Statements of Revenues and Expenses.

(b)           Buyer shall use, and shall cause its Auditors to use, their reasonable best efforts to help Seller identify and to obtain from Seller, on or before January 17, 2008, the Financial Data necessary to complete the Audited Statements of Revenues and Expenses.  Buyer shall notify Seller promptly after Buyer or its Auditors determine that any Financial Data provided by Seller needs to be supplemented, updated or is otherwise insufficient in any respect.  On or before January 17, 2008, Buyer shall provide Seller with either (i) a letter stating that Buyer has received the Financial Data pursuant to Section 8.7(e) and the condition to Closing set forth in Section 11.6 has been satisfied or waived, or (ii) a final report identifying all outstanding Financial Data that Seller still needs to provide in order for Buyer to complete the Audited Statements of Revenues and Expenses.  Buyer shall be precluded from asserting that Section 8.7(e) and the condition to Closing set forth in Section 11.6 were not met due to Seller’s failure to provide any Financial Data that was not specifically listed and requested in the final report.

ARTICLE XV

EMPLOYEE MATTERS

15.1Continuing Employees.  From and after the date hereof, and throughout the term of the COMFS (the “Transition Period”) Seller will assist Buyer or an Affiliate thereof in seeking to retain certain of Seller’s employees to effectuate a smooth transition of the operation of the Assets to the Buyer.  Within 10 days from the date hereof, Seller will provide Buyer with a list of employees (the “Seller Employees”) available for employment with Buyer, which will include the following data: name, job title, salary or wage, bonus eligibility, vacation eligibility, hire date, and service date.  The Seller Employees that Buyer hires are referred to as the “Continuing Employees”.

15.2No Obligation to Hire Seller Employees.  Nothing in this Agreement shall require or be construed or interpreted as requiring the Buyer or any Affiliate thereof to offer employment to any employee of Seller or its Affiliates or to continue the employment of any employee of Seller or its Affiliates (including any Continuing Employees) following their respective Hire Date, or to prevent Buyer or an Affiliate thereof from changing the terms and conditions of employment (including compensation and benefits) of any of its employees (including any Continuing Employees) following their respective Hire Dates.  Seller and the Buyer hereby acknowledge and agree that any employment offered by Buyer or its Affiliate to a Continuing

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Employee will be “at will” and may be terminated by the relevant Buyer or Affiliate thereof or such Continuing Employee at any time for any reason (subject to applicable Laws and to any specific written commitments made to the contrary by a Buyer or an Affiliate thereof or by such Continuing Employee).  Further, any such offer of employment shall be on such terms and conditions as the Buyer or their Affiliates shall determine and may be conditioned upon the Seller Employee’s passage of the Buyer or its Affiliates’ pre-employment screening requirements.

15.3Interview, Screening, and Offers to Seller Employees.

(a)           Seller shall notify the Seller Employees of Buyer or its Affiliates’ desire to hire them.  Seller and Buyer shall assist one another in providing such employees the right to meet with representatives of Buyer or its Affiliates to discuss the capacity in which such persons will be employed by a Buyer or an Affiliate thereof and the terms and conditions under which such employment will be offered; provided, however, that no employee of Seller shall be required to accept an offer of employment with Buyer or Affiliate thereof if such an offer is made.  Seller shall retain all liability for all severance benefits owed to the employees of Seller (including but not limited to any Seller Employees who receive but do not accept offers of employment from a Buyer or Affiliate thereof) under Seller’s employment agreements, offer letters, or severance plans or policies, if any.  During the Transition Period, Buyer shall provide offers of employment to the Seller Employees the Buyer or Affiliate thereof desires to hire, with each offer stipulating that the date for commencement of work is the termination date of the COMFS (the “Hire Date”).  Buyer shall provide Seller with notice of the names of those Seller Employees to whom Buyer or an Affiliate thereof has made employment offers promptly after making such offers.

(b)           No Seller Employee shall become a Continuing Employee unless he or she (i) accepts Buyer’s or its Affiliate’s offer of employment under the terms provided in Buyer or its Affiliate’s offer, (ii) passes any required pre-employment screening required by Buyer or its Affiliate, and (iii) on the Hire Date, is actively at work, on sickness or disability leave, or an approved leave of absence.

15.4Employee Benefits.

(a)           The Buyer or its Affiliate, as applicable, shall grant to the Continuing Employees credit for their past service years as outlined in the data provided by Seller to Buyer pursuant to Section 1.1 for the following: (i) vesting and eligibility purposes under any employee benefit programs maintained by the Buyer or its Affiliate in which they are available to participate and (ii) determining the duration and amount of their benefits under any sick pay or sick leave policy or vacation policy, maintained by the Buyer or its Affiliate in which they are eligible to participate.  Seller shall use commercially reasonable efforts to provide Buyer with all necessary transition assistance, including any applicable service credit information relating to Continuing Employees, to enable Buyer to develop and implement compensation and benefit plans and programs for any Continuing Employees.

(b)           Effective as of each Seller Employee’s respective Hire Date, such Seller Employee that becomes a Continuing Employee shall cease to actively participate or be eligible

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to actively participate in any Seller Plan.  Neither Buyer nor its Affiliate shall assume any Seller Plan or be liable in any respect for the funding of, or contributions to, or liabilities under any Seller Plan.  Until each Continuing Employee’s respective Hire Date, such Continuing Employee shall remain the employee of Seller and Seller shall provide his or her wages and employee benefits at Seller’s sole expense.  Without limiting the foregoing, or Section 7.3(f) of this Agreement for all periods prior to the Closing Date and from the Closing Date until each Seller Employee’s respective Hire Date, under the COMFS, Seller shall be responsible for (i) the base salaries or wages and overtime payments of the Seller Employees along with any bonuses to which such Seller Employee may be entitled, (ii) the costs of the Seller Employees’ participation in the retirement, medical, dental and other employee benefit plans sponsored by Seller, (iii) workers’ compensation coverage of the Seller Employees, (iv) vacation and leave pay for the Seller Employees, (v) the employer’s portion of any health, life, disability or other insurance provided as a part of Seller’s employee benefit plans in effect after the Closing Date and in which the Seller Employees participate, (vi) all employee taxes (including Social Security, Medicare and unemployment taxes) and tax withholdings, and (vii) all payroll processing, payroll deduction, tax withholding and tax reporting services, employee benefit administration, claims processing, personnel administration, and all such related human resources services with respect to the Seller Employees.

15.5Control of Seller Employees.  Prior to the Hire Date, if any, of a Seller Employee, Seller shall have the right to control and direct the Seller Employees as to the performance of duties and as to the means by which such duties are performed, including the right to terminate the employment of any Seller Employee, provided that: (i) Buyer shall not be liable for any costs, expense, liabilities, or severance benefits, if any, related to any such terminated Seller Employee; and (ii) Seller and its Affiliates agree not to rehire any terminated Seller Employee who becomes a Continuing Employee for a period of two years following any such Seller Employee’s termination date.  Seller shall fully and timely inform Buyer of and consult Buyer with respect to, all employment, benefit workplace and performance matters relating to Seller Employees prior to the Seller Employees’ respective Hire Dates that, in the reasonable judgment of Seller’s management, could have a material impact on Buyer prior to taking any actions or making any decisions with respect to such matters, subject to applicable law.  Notwithstanding the foregoing, prior to each Seller Employee’s respective Hire Date, Seller shall have the right to direct such employee to perform reasonable administrative duties on behalf of Seller in connection with the winding down of Seller’s services with respect to the Assets and the termination of any Seller Plan.  During the Transition Period, but prior to the Seller Employees’ respective Hire Dates, Seller will not permanently reassign, make compensation changes, promote or relocate any Seller Employee, other than in the ordinary course of business or as required by any Seller Plan or applicable law, without the written consent of Buyer.  Seller shall be responsible for complying with all safety, health and work-related laws, regulations and rules with respect to the Seller Employees employed by Seller during the Transition Period.  Nothing herein is intended to affect Seller’s status as employer of each Seller Employee while employed by Seller or Seller’s control over such individual until his or her respective Hire Date.

15.6Solicitation of Continuing Employees.  For the period beginning on each Continuing Employee’s Hire Date and ending on the date that is two (2) years after the Closing Date, neither Seller nor any of its Affiliates will, unless acting in accordance with Buyer’s prior written consent, solicit, encourage or otherwise induce such Continuing Employee to leave the

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employment of Buyer or any of its Affiliates or become an employee of Seller or any of its Affiliates.  Notwithstanding the foregoing, neither Seller nor its Affiliates will be prohibited from hiring or contracting for the services of a Continuing Employee who has terminated his or her employment relationship with Buyer without solicitation or inducement from Seller or its Affiliates.  A general advertisement by Seller or its Affiliates for employment that is not targeted at any Continuing Employee or group of Continuing Employees shall not constitute a breach of the obligations of Seller or its Affiliates under this Section 15.6.

15.7Waiver of Restrictions on Continuing Employees.  On or before each Continuing Employee’s Hire Date, if any, Seller shall take and shall cause its Affiliates to take any necessary action to waive any covenants not to compete, confidentiality provisions or similar restrictions under agreements between Seller and/or such Affiliates and the Continuing Employee that may be applicable to any Continuing Employee, but only to the extent any of the foregoing would preclude a Continuing Employee from accepting employment with a Buyer party or an Affiliate thereof, and may not restrain such Continuing Employee in any way in performing his services for the Buyer or their Affiliates.

15.8No Third Party Beneficiaries.  Notwithstanding any other provisions of this Agreement, the provisions of this Article XV are not intended to and shall not create or confer any third-party beneficiary rights respecting any Seller Employee or Continuing Employee.

ARTICLE XVI

MISCELLANEOUS

16.1Definitions  Capitalized terms used herein shall have the meaning ascribed to them in this Agreement as such terms are identified and/or defined in the following list:

(a)           “Affiliate” with respect to any Person, means any person that directly or indirectly controls, is controlled by or is under common control with such Person.

(b)           “Agreed Interest Rate” shall mean the Wall Street Journal London Interbank Offered Rate (as defined below) plus one percentage point, with said rate to be adjusted to reflect any change in The Wall Street Journal London Interbank Offered Rate at the time of any such change. As used herein, for any date, the “Wall Street Journal London Interbank Offered Rate” shall mean the London Interbank Offered Rate (LIBOR) for one (1) month quoted in the most recently published issue of The Wall Street Journal (Central Edition) in the “Money Rates” column. If the Wall Street Journal London Interbank Offered Rate ceases to be made available by the publisher, or any successor to the publisher of The Wall Street Journal, (Central Edition) the interest rate will be determined by using a comparable index. If more than one Wall Street Journal London Interbank Offered Rate for one (1) month is quoted, the higher rate shall apply.

(c)           “Allocated Value” means the value allocated to each Asset on Exhibit C.

(d)           “Business Day” means each calendar day except Saturdays, Sundays, and Federal holidays.

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(e)           “Closing Date Interest Amount” means the amount of interest, computed at the Agreed Interest Rate, accrued on an amount equal to the Adjusted Purchase Price minus the Performance Guarantee Deposit from the Target Closing Date to the Closing Date.

(f)            “Code” means the Internal Revenue Code of 1986, as amended.

(g)           “Confidentiality Agreement” means that letter agreement entered into between Albrecht & Associates, Inc and Linn Energy, LLC and dated September 5, 2007.

(h)           “Environmental Laws” mean as the same may have been amended, the 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 Water Act”); the Clean Air Act, 42 U.S.C. § 7401 et seq. the Hazardous Materials Transportation Act, 49 U.S.C. § 1471 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 Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Atomic Energy Act, 42 U.S.C. § 2011 et seq.; and all applicable related law, whether local, state, territorial, or national, of any Governmental Body having jurisdiction over the property in question addressing pollution or protection of human health, safety, natural resources or the environment and all regulations implementing the foregoing.

(i)            “Environmental Liabilities” means any and all environmental response costs (including costs of remediation), damages, natural resource damages, settlements, consulting fees, expenses, penalties, fines, orphan share, prejudgment and post judgment interest, court costs, attorneys’ fees, and other liabilities incurred or imposed (i) pursuant to any order, notice of responsibility, directive (including requirements embodied in Environmental Laws), injunction, judgment or similar act (including settlements) by any Governmental Authority or court of competent jurisdiction to the extent arising out of any violation of, or remedial obligation under, any Environmental Laws which are attributable to the ownership or operation of the Properties prior to the Effective Date or (ii) pursuant to any claim or cause of action by a Governmental Authority or other Person for personal injury, property damage, damage to natural resources, remediation or response costs to the extent arising out of any violation of, or any remediation obligation under, any Environmental Laws which is attributable to the ownership or operation of the Properties prior to the Effective Date. The term does not include good or desirable operating practices or standards that may be employed or adopted by other oil or gas well operators or recommended by a Governmental Authority.

(j)            “ERISA” means the Employee  Retirement Income Security Act of 1974, as amended.

(k)           “ERISA Affiliate” means, with respect to any entity, any entity, trade or business that is a under common control with such entity, within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.

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(l)            “Governmental Authority” means any federal, state, local, municipal, or other governments; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and any court or governmental tribunal.

(m)          “Governmental Authorization” shall mean any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Authority or pursuant to any federal, state, local, or municipal law, Order, constitution, ordinance, or rule, including rules of common law, regulation, statute, treaty, or other legally enforceable directive or requirement.

(n)           “Hazardous Materials” shall mean any (i) chemical, constituents, material, pollutant, contaminant, substance or waste that is regulated by any Governmental Body or may form the basis of liability under any Environmental Law; (ii) asbestos containing material, lead-based paint, polychlorinated biphenyls, or radon; and (iii) petroleum, Hydrocarbons, or petroleum products.

(o)           “Hedge Adjustment Amount” shall mean the difference (positive or negative) between (i) the Net Mark-to-Market Hedge Value as of the close of trading on the business day before the date this Agreement is executed minus (ii) the Net Mark-to-Market Hedge Value as of the close of trading on the earlier of (i) the business day before the Closing Date or (ii) February 29, 2008.  Attached as Schedule 16.1(n) are example calculations of the Hedge Adjustment Amount.

(p)           “Hydrocarbons” mean gas, condensate and other gaseous and liquid hydrocarbons or any combination thereof and sulphur extracted from hydrocarbons.

(q)           “Imbalance” or “Imbalances” means over-production or under-production or over-deliveries or under-deliveries with respect to oil or gas produced from or allocated to the Assets, regardless of whether such over-production or under-production or over-deliveries or under-deliveries arise at the platform, wellhead, pipeline, gathering system, transportation or other location.

(r)            “Laws” means all statutes, rules, regulations, ordinances, orders, and codes of Governmental Authorities.

(s)           “Mark-to-Market Hedge Value” means the mark-to-market value to Seller of each hedge transaction listed on Schedule 16.1(r) (either positive or negative) as calculated by the Seller in good faith as of the close of trading on the business day before the relevant determination date.  If Seller is “in the money” with respect to a hedge transaction, the Mark-to-Market Value of that transaction will be a positive number.

(t)            “Material Adverse Effect” means any adverse effect on the ownership, operation or value of the Assets, as currently operated, which exceeds ten percent of the Purchase Price in value, provided, however, that “Material Adverse Effect” shall not include general changes in industry or economic conditions or changes in laws or in regulatory policies.

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(u)           “Net Mark-to-Market Hedge Value” means the sum of the Mark-to-Market Hedge Values of all hedge transactions listed on Schedule 16.1(r) as of the close of trading on the business day before the relevant determination date.

(v)           “Person” means any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, government or agency or subdivision thereof or any other entity.

(w)          “Property Costs” mean all operating expenses (including without limitation costs of insurance and ad valorem, property, severance, production and similar Taxes based upon or measured by the ownership or operation of the Assets or the production of Hydrocarbons therefrom, but excluding any other Taxes) and capital expenditures incurred in the ownership and operation of the Assets in the ordinary course of business and, where applicable, in accordance with the relevant operating or unit agreement, if any, and overhead costs charged to the Assets under the relevant operating agreement or unit agreement, if any, but excluding without limitation liabilities, losses, costs, and expenses attributable to (i) claims for personal injury or death, property damage or violation of any Law, (ii) obligations to plug wells, dismantle facilities, close pits and restore the surface around such wells, facilities and pits, (iii) obligations to remediate any contamination of groundwater, surface water, soil or Equipment under applicable Environmental Laws, (iv) obligations to furnish make-up gas according to the terms of applicable gas sales, gathering or transportation contracts, (v) gas balancing obligations and (vi) obligations to pay working interests, royalties, overriding royalties or other interests held in suspense.

(x)            “Seller Plan” means any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, change-in-control, termination pay, deferred compensation, retirement or pension payments, bonuses, performance awards, retention payments, incentive compensation, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA and any plans that would be “employee benefit plans” within the meaning of Section 3(3) of ERISA if they were subject to ERISA (such as foreign plans and plans for directors) which, in each case, is or ever has been sponsored, maintained, contributed to, or required to be contributed to, by the Seller or any ERISA Affiliate of the Seller (present or former) for the benefit of any present or former employee or officer, consultant or similar representative of Seller or any of such ERISA Affiliates, and with respect to which the Seller or any of such ERISA Affiliates has or may have any liability or obligation on behalf of any of such individuals.

(y)           “Seller-Operated Assets” mean Assets operated by Seller.

(z)            “Seller Taxes” means any and all Taxes imposed on the Seller or for which the Seller may otherwise be liable other than Taxes for which the Buyer has assumed responsibility under Section 8.8 and 8.9 hereof or as provided in Section 14.1 and 10.5.

(aa)         “Tax” or “Taxes” means all federal, state, local, foreign and other net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem,

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transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, government fees, or other assessments or charges of any kind whatsoever imposed by any Governmental Authority, together with any interest and any penalties or additions to tax with respect thereto.

(bb)         “Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

(cc)         “Taxing Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums.

(dd)         “WARN Act” means the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2109 et seq. and the regulations promulgated thereunder.

16.2Use of Seller’s Name  As soon as practicable after Closing in order to be in compliance with all applicable Laws, Buyer shall remove or cause to be removed the names and marks used by Seller and all variations and derivations thereof and logos relating thereto from the Assets and shall not thereafter make any use whatsoever of those names, marks and logos.

16.3Integrations, Amendment and Modification.  Except as expressly set forth herein, none of the parties makes to the other any representation, whether expressed or implied, of any kind whatsoever. This Agreement may not be modified, supplemented or changed in any respect except by a writing duly executed by Seller and Buyer.

16.4Descriptive Headings  The headings of the paragraphs and subparagraphs of this Agreement are inserted for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

16.5Governing Law  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF OKLAHOMA EXCEPT FOR MATTERS RELATING TO TITLE TO PROPERTY, WHICH SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE JURISDICTION IN WHICH SUCH PROPERTY IS LOCATED.

16.6Binding Effect; Assignment  This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by each of the parties, and their successors and permitted assigns. This Agreement and the rights and obligations hereunder shall not be assigned by Buyer, in whole or in part, without the prior written consent of Seller, provided however, Buyer may assign its rights and obligations under the Agreement to any affiliate without notice or consent from Seller.

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16.7Notices

(a)           All notices, disclosures or other communications which are required or permitted hereunder shall be in writing and shall be delivered as follows:

If to Buyer:	Charlene A. Ripley
	Senior Vice President, General Counsel and Corporate
	Secretary JP Morgan Chase Tower
	600 Travis, Suite 5100
	Houston, Texas 77002
	Telephone:	(281) 840-4119
	Facsimile:	(281) 840-4180
If to Seller:	Curtis J. Biram
	General Counsel
	Post Office Box 550
	Skiatook, Oklahoma 74070
	Telephone:	(918) 396-3020
	Facsimile:	(918) 396-2521
With a copy to:	Arthur J. Wright
	Thompson & Knight L.L.P.
	1700 Pacific Avenue, Suite 3300
	Dallas, TX 75201
	Telephone:	(214) 969-1303
	Fax No.:	(214) 969-1751

(b)           Either party may change its address for notice by notice to the other party in the manner set forth above. All notices will be deemed to have been duly given at the time of receipt by the party to which such notice is addressed.

16.8DTPA Waiver  To the extent applicable to the Assets or any portion thereof, Buyer hereby waives the provisions of the Texas Deceptive Trade Practices Act, Chapter 17, Subchapter E, Section 17.41 through 17.63 inclusive (other than Section 17.555 which is not waived), Tex. Bus. & Com. Code. In order to evidence its ability to grant such waiver, Buyer hereby expressly recognizes and represents to Seller that Buyer is not in a significantly disparate bargaining position and Buyer is represented by legal counsel in this transaction.

16.9Waiver  Any failure by and party or parties to comply with its or their obligations, agreements or conditions herein contained may be waived in writing, but not in any other manner, by the party or parties to whom such compliance is owed. No waiver of, or consent to a change in, any of the provisions of this Agreement shall be deemed or shall constitute a wavier of, or consent to a change in, other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

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16.10References.  In this Agreement:

(a)           References to the singular include the plural and vice versa;

(b)           References to any Article or Section means an Article or Section of this Agreement;

(c)           References to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all of which are incorporated and made a part of this Agreement;

(d)           Unless expressly provided to the contrary, “hereunder”, “hereof’, “herein” and words of similar import are references to this Agreement as a whole and not to any particular Section or other provision of this Agreement; and

(e)           “Include” and “including” mean include or including without limiting the generality of the description preceding such term.

16.11Conspicuousness  The parties agree that provisions in this Agreement in all capital letters or “bold” type satisfy any requirements of the “express negligence rule” and any other requirements at law or in equity that provisions be conspicuously marked or highlighted.

16.12Counterparts  This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original, and all of which together shall constitute one and the same instrument.

16.13Invalid Provisions  Should any of the provisions of this Agreement, or portions thereof, be found to be invalid or unenforceable by any court of competent jurisdiction, the remainder of this Agreement shall nonetheless remain in full force and effect.

16.14Complete Agreement  This Agreement together with the Exhibits and Schedules attached hereto and the agreements and instruments referred to herein and therein set forth the entire agreement among the parties hereto, and further supersedes any and all prior agreements or understandings, whether oral or written, among the parties hereto pertaining to the specific subject matter identified in this Agreement. The provisions hereof are contractual and not mere recitals. In signing this Agreement, none of the parties has relied upon any statement or representation which is not expressly contained herein and is not relying upon any oral statement or representation pertaining to this matter made by any other party or by anyone in privity with or representing any party. By the signature set forth hereinbelow, the parties to this Agreement acknowledge that they have read the same, they understand the terms and conditions set forth herein, and they shall abide by those terms and conditions.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date hereof.

SELLER’S TAX ID#:	SELLER: Lamamco Drilling Company
	By:	/s/ Stanley J. Miller
		STANLEY J. MILLER
		Title: Partner
BUYER’S TAX ID#:	BUYER: Linn Energy Holdings, LLC
	By:	/s/ Mark E. Ellis
	Name:	Mark E. Ellis
	Its:	President & COO

EX-2.2

Exhibit 2.2

AMENDMENT TO

PURCHASE AND SALE AGREEMENT

THIS AMENDMENT TO PURCHASE AND SALE AGREEMENT (“Amendment”), dated as of January 31, 2008, is by and between Lamamco Drilling Company, LP (“Seller”) and Linn Energy Holdings, LLC (“Buyer”).

W I T N E S S E T H:

WHEREAS, Seller and Buyer are parties to that certain Purchase and Sale Agreement, dated as of December 20, 2007 (the “Agreement”), pursuant to which Seller agreed, on the terms and subject to the conditions described therein, to sell, assign and convey to Buyer certain oil and gas interests as described therein and referred to therein as the “Assets”; and

WHEREAS, the Seller and Buyer desire to amend the Agreement as set forth herein;

NOW THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the receipt, adequacy and legal sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

1.            Terms Defined in the Agreement.  Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Agreement shall have the same meanings whenever used in this Amendment.

2.            Amendment.

2.1.        Section 2.5 of the Agreement is hereby amended to read as follows:

“Section 2.5           No Conflicts  The execution, delivery and performance of this Agreement by Seller, and the transactions contemplated by this Agreement will not (i) violate any provision of the formation documents or partnership agreement of Seller, (ii) result in default (with due notice or lapse of time or both) or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or agreement to which Seller is a party or which affect the Assets, (iii) violate any judgment, order, ruling, or decree applicable to Seller as a party in interest, (iv) violate any Laws applicable to Seller or the Assets, except for (a) rights to consent by, required notices to, and filings with or other actions by any Governmental Authority where the same are not required prior to the assignment of oil and gas interests, (b) any notification of or consent, approval or authorization of any Native American tribes or nations and (c) any matters described in clauses (ii), (iii) or (iv) above which would not have a Material Adverse Effect.”

2.2.        Section 3.1 of the Agreement is hereby amended to read as follows:

“Section 3.1           Existence and Qualification  Buyer is a limited liability company organized, validly existing and in good standing under the laws of the state of its

formation; and Buyer is duly qualified to do business as a foreign corporation in every jurisdiction in which it is required to qualify in order to conduct its business except where the failure to so qualify would not have a Material Adverse Effect on Buyer or its properties; and Buyer is or will be at Closing duly qualified to do business as a foreign limited liability company in the respective jurisdictions where the Assets to be transferred to it are located.”

2.3Section 3.2 of the Agreement is hereby amended to read as follows:

“Section 3.2           Power  Buyer has the requisite power to enter into and perform this Agreement and consummate the transactions contemplated by this Agreement.”

2.4         Section 3.3 of the Agreement is hereby amended to read as follows:

“Section 3.3           Authorization and Enforceability  The execution, delivery and performance of this Agreement, and the performance of the transaction contemplated hereby, have been duly and validly authorized by all necessary action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer (and all documents required hereunder to be executed and delivered by Buyer at Closing will be duly executed and delivered by Buyer) and this Agreement constitutes, and at the Closing such documents will constitute, the valid and binding obligations of Buyer enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).”

2.5Section 3.4 of the Agreement is hereby amended to read as follows:

“Section 3.4           No Conflicts  The execution, delivery and performance of this Agreement by Buyer, and the transactions contemplated by this Agreement will not (i) violate any provision of the certificate of formation or the limited liability company agreement of Buyer, (ii) result in a material default (with due notice or lapse of time or both) or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or agreement to which Buyer is a party, (iii) violate any judgment, order, ruling, or regulation applicable to Buyer as a party in interest, or (iv) violate any law, rule or decree applicable to Buyer or any of its assets, or (v) require any filing with, notification of or consent, approval or authorization of any Governmental Authority, except any matters described in clauses (ii), (iii), (iv) or (v) above which would not have a Material Adverse Effect on Buyer.”

2.6Section 3.12 of the Agreement is hereby amended to read as follows:

“Section 3.12         Qualification

                (a)           At Closing, Buyer will be, and thereafter shall continue to be, qualified to own federal and state oil, gas and mineral leases in all jurisdictions where the Assets to be transferred to it are located, and the consummation of the transactions contemplated in this Agreement will not cause Buyer to be disqualified as such an owner. To the extent required by the applicable state or federal government, Buyer will have at Closing, and will continue to maintain, lease bonds, area wide bonds or any other surety bonds as may be required by, and in accordance with, such state or federal regulations governing the ownership of such leases.

                (b)           At Closing, Buyer’s Affiliate, Linn Operating, Inc., will be, and thereafter shall continue to be, qualified to assume operatorship of federal and state oil, gas and mineral leases in all jurisdictions where the Assets are located, and the consummation of the transactions contemplated in this Agreement will not cause such entity to be disqualified as such an operator. To the extent required by the applicable state or federal government, Buyer shall cause Linn Operating, Inc. to obtain before Closing, and to continue to maintain, lease bonds, area wide bonds or any other surety bonds as may be required by, and in accordance with, such state or federal regulations governing operation of such leases.”

2.7Section 5.1 of the Agreement is hereby amended to read as follows:

“Section 5.1           Inspection  On or after the date this Agreement is executed, Buyer shall have the right to enter upon the Assets at its sole cost and risk for the purpose of an inspection of the Physical Conditions of the Assets which are operated by Seller. “Physical Condition” as used herein means the condition of the Assets, including without limitation, equipment in its current state of maintenance and repair, the presence of abandoned oil and gas wells, water wells, sumps and pipelines, whether known or unknown by Seller. Prior to such inspection, Buyer shall Schedule an appointment with the party shown in Section 16.7. Provided, however, that at all times Buyer is present upon the Assets, Buyer shall be accompanied by an individual designated by the party listed in Section 16.7.”

2.8Section 6.1 of the Agreement is hereby amended to read as follows:

“Section 6.1           Inspection and Assessment of Environmental Condition(s)  Subject to the conditions set forth herein, Buyer shall have access to the Assets, Seller’s personnel, and the books, records and files of Seller (subject to the provisions of Section 12.3 below) relating to the Assets until five (5) days prior to Closing for the purpose of inspecting the Assets and conducting such tests, examinations, investigations and assessments as may be necessary or appropriate in Buyer’s opinion to evaluate the Environmental Condition of the Assets; provided,

however, that prior to conducting any tests on the Assets, Buyer shall schedule an appointment with the party shown in Section 16.7 and Buyer shall be accompanied by a representative of Seller and such representative shall be available to Buyer during normal business hours and at other reasonable times. “Environmental Condition” as used herein means any condition relating to the Assets that contaminates soil, sediment, air, water or groundwater in a manner that violates any applicable law, regulation, ordinance, rule or order in effect and as interpreted and enforced before the Effective Date. Changes in, or changes in interpretation of, any law, regulation, ordinance, rule, order or permit on or after the Closing Date shall not provide the basis for an Environmental Condition even if such changes are made retroactive.”

2.9Section 7.6 of the Agreement is hereby amended to read as follows:

“Section 7.6           Limitation on Seller’s Indemnity Obligations  Seller shall not be obligated to Buyer (for indemnification or otherwise) under Section 7.3(d) except to the extent, if any, that the aggregate of all of claims for Damages arising under Section 7.3(d) exceeds one percent (1%) of the Purchase Price (the “Indemnification Deductible”), and then Seller shall be liable only for all such claims for Damages in excess of the Indemnification Deductible up to a maximum amount of fifteen percent (15%) of the Purchase Price (the “Indemnification Cap”).  Notwithstanding the forgoing, Buyer shall not be entitled to indemnification under Section 7.3(d) for, and Damages shall not include, (i) loss of profits, whether actual or consequential, or other consequential damages suffered by Buyer or its Affiliates, or any punitive damages (other than loss of profits, consequential damages or punitive damages suffered by third persons for which responsibility is allocated between the parties), (ii) any liability, loss, cost, expense, claim, award or judgment to the extent resulting from or increased by the actions or omissions of any indemnified party after the Closing Date or (iii) except with respect to claims for any Retained Seller Litigation or Seller Employee Liabilities, any liability, loss, cost, expense, claim, award or judgment that does not individually exceed $50,000.”

2.10Section 8.1(a) of the Agreement is hereby amended to read as follows:

“              (a)           expend any funds, or make any commitments to expend funds (including entering into new agreements which would obligate Seller to expend funds), or otherwise incur any other obligations or liabilities, other than (i) for amounts less than $50,000.00, (ii) to pay expenses or to incur liabilities in connection with routine operation of the Properties after the Effective Date and (iii) in the event of an emergency requiring immediate action to protect life or preserve the Properties;”

2.11Section 8.12(b) of the Agreement is hereby amended to read as follows:

“              (b)           Seller shall notify Buyer promptly after Seller obtains actual knowledge that any representation or warranty of Buyer contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Buyer prior to or on the Closing Date has not been so performed or observed in any material respect.”

2.12Section 10.3 of the Agreement is hereby amended to read as follows:

“Section 10.3         Joint Billing Audits, Credits, and Advances  Seller shall be responsible for the conduct and settlement of all joint billing audits which relate to accounting periods prior to the Effective Date. Buyer shall be responsible for the conduct and settlement of all joint billing audits which relate to accounting periods after the Effective Date. Any credits or advances received by Buyer after the Effective Date attributable to expenses paid prior to the Effective Date shall be reimbursed to Seller by Buyer. Any unapplied credits or advances received by Seller after the Effective Date attributable to expenses paid after the Effective Date shall be reimbursed to Buyer by Seller. The parties agree to provide reasonable access to records in their possession and control during normal business hours for the purpose of conducting audits and to reasonably cooperate with such audit efforts; provided, however, that neither party shall have the authority to extend the period for conducting any audit that affects the other party’s period of ownership.”

2.13Section 12.2(k) of the Agreement is hereby amended to read as follows:

“              (k)           Seller shall deliver evidence of the authority of the Person(s) executing this Agreement and the Assignment and Bill of Sale to execute such agreements on behalf of Seller.”

2.14Section 12.3 of the Agreement is hereby amended to read as follows:

“Section 12.3         Files  Notwithstanding Section 12.2(c) or any other provision of this Agreement, Seller shall, at or within ten (10) days of the termination of the COMFS, provide Buyer with either paper or electronic copies or originals, of the Records, Leases, Contracts, Surface Contracts and amendments and correspondence related thereto. Seller shall retain at its option copies of all original files and shall have no obligation to furnish Buyer any data or information that Seller cannot provide Buyer because of third-party restrictions on Seller or that does not directly pertain to the Assets.”

2.15A new Section 12.4 is hereby added to the Agreement after Section 12.3 as follows:

“Section 12.4         Vehicles  Notwithstanding Section 12.2(c) or any other provision of this Agreement, Seller shall, at or within ten (10) days of the termination of the

COMFS, convey all right, title and interest of Seller in the vehicles described in Section 1.1(j) and Schedule 1.1(j) (the “Vehicles”) for consideration already paid to Seller under the Agreement.  At such time, Seller shall execute, acknowledge and deliver to Buyer an Assignment and Bill of Sale of the Vehicles and such other instruments of transfer and assignment necessary to convey to Buyer the Vehicles in the manner contemplated by this Agreement.”

2.16A new Section 12.5 is hereby added to the Agreement after the new Section 12.4 as follows:

“Section 12.5         Letters in Lieu  Notwithstanding Section 12.2(e) or any other provision of this Agreement, Seller and Buyer shall, within ten (10) days of the Closing, execute, acknowledge, and deliver transfer orders or letters in lieu thereof directing all purchasers of production to make payments of proceeds attributable to production from the Assets to Buyer.”

2.17Section 14.1(b)(v) of the Agreement is hereby amended to read as follows:

“              (v)           The amount of any advances paid to Seller as operator and held by Seller as operator as a working fund pursuant to the applicable joint operating agreements.”

2.18Section 14.3 of the Agreement is hereby amended to read as follows:

“Section 14.3         Gas Imbalances  Seller and Buyer acknowledge and agree to the following regarding possible gas imbalances on any of the Assets transferred by this Agreement:

                (a)           Gas Balance Status: Schedule 2.14 sets forth any Imbalances pertaining to the Assets.

                (b)           Gas Underproduction: In the event Seller is under-produced as to any well(s) located on the Assets, Buyer agrees not to hold Seller liable for such underproduction, subject to Seller’s representation in Section 2.14.  Seller, however, agrees to assign to Buyer all of its rights to make up such underproduction.

                (c)           Gas Overproduction: In the event Seller is overproduced as to any well(s) located on the Assets, Buyer acknowledges and agrees that its share of gas from any such overproduced well(s) on the Assets may at some point be curtailed by underproduced working interest owners. Seller shall not be liable to Buyer in the event such curtailment occurs, subject to Seller’s representation in Section 2.14.

                (d)           Seller and Buyer agree that Buyer will assume the liability for the volumes of Imbalances shown on Schedule 2.14.

                (e)           The provisions of this Section shall survive Closing.”

2.19Section 14.6 of the Agreement is hereby amended to read as follows:

“Section 14.6         Preservation of Books and Records  For a period of seven (7) years following the Closing Date, the party in possession of the originals shall retain the original books, records and files relating to the Assets and shall make such books, records and files available to the other party, upon reasonable notice, for review and copying (at the expense of the party requesting to review and/or copy same) at the headquarters of the party in possession (or at such other location in the United States as the party in possession may designate in writing to the other party) at reasonable times and during regular office hours. Buyer acknowledges that Seller may need to review and copy such books, records and files in connection with litigation or other business purposes. Buyer’s obligation under this Section 14.6 shall survive Closing and shall continue in the event the Assets or any portion thereof are sold or otherwise transferred to third parties.”

2.20Section 15.4(a) of the Agreement is hereby amended to read as follows:

“              (a)           The Buyer or its Affiliate, as applicable, shall grant to the Continuing Employees credit for their past service years as outlined in the data provided by Seller to Buyer pursuant to Section 15.1 for the following: (i) vesting and eligibility purposes under any employee benefit programs maintained by the Buyer or its Affiliate in which they are available to participate and (ii) determining the duration and amount of their benefits under any sick pay or sick leave policy or vacation policy, maintained by the Buyer or its Affiliate in which they are eligible to participate.  Seller shall use commercially reasonable efforts to provide Buyer with all necessary transition assistance, including any applicable service credit information relating to Continuing Employees, to enable Buyer to develop and implement compensation and benefit plans and programs for any Continuing Employees.”

2.21Section 16.1(m) of the Agreement is hereby amended to read as follows:

“              (m)          “Governmental Authorization” shall mean any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Authority or pursuant to any federal, state, local, or municipal law, order, constitution, ordinance, or rule, including rules of common law, regulation, statute, treaty, or other legally enforceable directive or requirement.”

3.             Miscellaneous.

                3.1.          Ratification of Agreements.  The Agreement as hereby amended is hereby ratified and confirmed in all respects. Any reference to the Agreement in any document is now a reference to the Agreement as hereby amended.

                3.2.          Counterparts.  This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed constitutes one and the same Amendment.

                3.3.          Entire Agreement; Amendments.  This Amendment, the Agreement, the Exhibits and Schedules attached thereto or referred to therein, and the instruments and documents delivered or to be delivered at Closing, embody the entire agreement between the Parties with respect to the subject matter hereof and supersede all prior representations, agreements and understandings, oral or written with respect thereto.  This Agreement may not be modified orally, but only by an agreement signed by the Party or Parties against whom any waiver, change, amendment, modification or discharge may be sought to be enforced.

                IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Purchase and Sale Agreement as of the date first above written.

BUYER:
LINN ENERGY HOLDINGS, LLC
By:	/s/ Mark E. Ellis
Name: MARK E. ELLIS
Title:   President and Chief Operating Officer
SELLER:
LAMAMCO DRILLING COMPANY
By:	/s/ Stanley J. Miller
Name: STANLEY J. MILLER
Title:   Partner

EX-10.4

Exhibit 10.4

LINN ENERGY, LLC

LONG-TERM INCENTIVE PLAN

FORM OF EXECUTIVE OPTION AGREEMENT

This option agreement (“Option Agreement”) is made and entered into effective as of [Grant Date], (the “Grant Date”) by and between LINN ENERGY, LLC, a Delaware limited liability company (together with its subsidiaries, the “Company”), and [Executive] (“Participant”).

WHEREAS, the Company considers it to be in its best interest that Participant be given a proprietary interest in the Company and an added incentive to advance the interests of the Company; and

WHEREAS, the Company desires to accomplish such objectives by affording Participant an option to purchase Units pursuant to the Linn Energy, LLC Long-Term Incentive Plan, which is attached hereto as Appendix A and incorporated by reference herein (the “Plan”). Unless otherwise defined herein, capitalized terms shall have the meaning given such terns in the Plan.

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, the parties hereby agree as follows:

1.             Grant of Option.  The Company hereby grants to Participant an option (the “Option”) to purchase all or any part of an aggregate of [                ] Units, under and subject to the terms and conditions of this Option Agreement and the Plan.

2.             Purchase Price.  The purchase price for each Unit to be purchased hereunder shall be $ [            ] (the “Exercise Price”).

3.             Vesting and Option Period.  Participant may exercise the Option in whole or in part.  Except as otherwise provided herein, the Option shall become vested and exercisable with respect to one third (1/3) of the covered Units on January 19, [              ], with respect to an additional one third (1/3) of the covered Units on January 19, [              ] and with respect to the final one third (1/3) of the covered Units on January 19, [              ].  Prior to such time, no portion of the Option shall be exercisable unless its exercisability is accelerated as provided in this Option Agreement or the Plan.  Except as provided otherwise in this Option Agreement or the Plan, the Option, to the extent not theretofore exercised, shall terminate on the expiration of ten (10) years from the date of grant of the Option; provided, however, that upon the termination Participant’s service relationship with the Company for any reason other than (a) the death of the Participant or (b) termination of the Participant’s service relationship with the Company as a result of a Change of Control, Participant may, until the earlier of (i) 90 days from the date of such termination or (ii) the expiration of the Option in accordance with this Section 3, exercise the Option, to the extent such Option had vested immediately prior to such termination and, thereafter, the Option shall, to the extent not previously exercised, automatically terminate and become null and void.

4.             Method of Exercise and Payment.  To the extent that the Option has become exercisable, the Option may be exercised from time to time by written notice to General Counsel, in substantially the form attached hereto as Appendix B or such other form as may be approved from time to time by the Committee, accompanied by the aggregate Exercise Price for the Units to be purchased and any required tax withholding amount as may be determined in the discretion of General Counsel.  The Exercise Price and any withholding shall be payable in cash, by certified check, by bank check or other means provided for in the Plan and approved by the Committee, including without limitation by cashless-broker exercise or the withholding of Units upon the exercise of the Option.

5.             General Restrictions.  Subject to the terms of this Option Agreement and the Plan, the Option may be exercised at any time, and from time to time, in whole or in part, until the termination thereof as set forth herein, or until all Units covered by the Option shall have been purchased, whichever first occurs.  The Option shall not be assignable or transferable except as expressly provided by the Committee.

6.             Termination by Company other than for Cause.Upon the termination by the Company of Participant’s service relationship with the Company other than for Cause (as defined herein and as determined by the Committee in its sole discretion), the Option granted hereby shall automatically and immediately vest in full.  “Cause” shall mean (a) Participant’s conviction of, or plea of nolo contendere to, any felony, any crime or offense causing substantial harm to the Company (whether or not for personal gain) or involving acts of theft, fraud, embezzlement, moral turpitude or similar conduct; (b) Participant’s repeated intoxication by alcohol or drugs during the performance of his or her duties; (c) malfeasance in the conduct of Participant’s duties, including, but not limited to, (i) willful and intentional misuse or diversion of any Company funds, (ii) embezzlement or (iii) fraudulent or willful and material misrepresentations or concealments on any written reports submitted to the Company; (d) Participant’s material failure to perform the duties of Participant’s employment or service relationship consistent with Participant’s position or material failure to follow or comply with the reasonable and lawful written directives of the Board of the Company; or (e) a material breach by Participant of the written policies of the Company concerning employee discrimination or harassment.

7.             Termination by Participant with Good Reason.Upon the termination by Participant of Participant’s service relationship with the Company with Good Reason (as defined herein), the Option granted hereby shall automatically and immediately vest in full.  “Good Reason” shall mean any of the following to which Participant does not consent in writing: (a) a reduction in Participant’s base salary; (b) a relocation of Participant’s primary place of employment to a location more than 50 miles from [Houston, Texas]/[Pittsburgh, Pennsylvania]; or (c) any material reduction in Participant’s title, authority or responsibilities as [Title] of the Company.

8.             Death or Disability.In the case of termination of Participant’s service relationship with the Company due to death or Disability (as defined herein), the Option granted hereby shall automatically and immediately vest in full.  “Disability” shall mean the determination by a physician selected by the Company that Participant has been unable to perform substantially Participant’s usual and customary duties for a period of at least one

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hundred twenty (120) consecutive days or a non-consecutive period of one hundred eighty (180) days during any twelve-month period as a result of incapacity due to mental or physical illness or disease.  In the case of termination of Participant’s service relationship with the Company due to death or Disability, Participant or Participant’s estate (or any person who acquired the right to exercise such Option by bequest or inheritance or otherwise by reason of Participant’s death or by reason of Participant’s Disability) may, until the earlier of (a) one year after the date of death or (b) the expiration of the Option in accordance with Section 3, exercise the Option and, thereafter, the Option shall, to the extent not previously exercised, automatically terminate and become null and void.

9.             Change of  Control.Notwithstanding anything in the Plan to the contrary, in the event of a Change of Control (as defined in the Employment Agreement), the Option granted hereby shall automatically and immediately vest in full.  In the event of the termination of Participant’s service relationship with the Company as a result of a Change of Control, the Participant may, until the earlier of (a) one year after the date of such termination or (b) the expiration of the Option in accordance with Section 3, exercise the Option and, thereafter, the Option shall, to the extent not previously exercised, automatically terminate and become null and void.

10.          Termination by Company for Cause or by Participant without Good Reason.In the case of (a) termination by the Company of Participant’s service relationship with the Company for Cause or (b) termination by Participant of Participant’s service relationship with the Company without Good Reason and other than due to Participant’s death or disability, Participant shall immediately forfeit all rights with respect to any unvested Options..  Participant hereby agrees to undertake any action and execute any document, instrument or papers reasonably requested by the Company to effect such forfeiture of the Option resulting from any such termination.

11.          Rights as a Unitholder.  Participant, or a transferee of the Option, shall have no rights as a holder of a membership interest in the Company except as to any Units actually purchased pursuant to the exercise of the Option.

12.          Plan Controlling Document.  Participant agrees that the Plan is the controlling instrument and that to the extent there is any conflict between the terms of the Plan and this Option Agreement, the Plan shall control and be the governing document.

13.          Limited Liability Company Agreement.  As a condition to the exercise of the Option, Participant agrees to be bound by all applicable provisions of the Company’s limited liability company agreement, as it may be amended from time to time.

14.          Taxes.  The Company and any affiliate thereof are authorized to withhold from any payment relating to the Option, or any payroll or other payment to Participant, amounts of withholding and other taxes due or potentially payable in connection with the exercise of the Option, and to take such other action as the Committee may deem advisable to enable the Company, any affiliate, and Participant to satisfy obligations for the payment of withholding taxes and other tax obligations relating to the Option.  This authority shall include authority to withhold or receive Units or other property and to make cash payments in respect thereof in

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satisfaction of Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee.

15.          Issuance of Units.  The Company shall not be obligated to issue any Units pursuant to the Option at any time when the Units covered by such Option have not been registered under the Securities Act of 1933, as amended, and such other state and federal laws, rules or regulations as the Company or the Committee deems applicable and, in the opinion of legal counsel for the Company, there is no exemption from the registration requirements of such laws, rules or regulations available for the issuance and sale of such Units.

16.          Notices.  Any notices given in connection with this Option Agreement shall, if issued to Participant, be delivered to Participant’s current address on file with the Company, or if issued to the Company, be delivered to the Company’s principal offices.

17.          Execution of Receipts and Releases.  Any payment of cash or any issuance or transfer of Units or other property to Participant, or to Participant’s legal representatives, heirs, legatees or distributees, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder.  The Company may require Participant or Participant’s legal representatives, heirs, legatees or distributees, as a condition precedent to such payment or issuance, to execute a release and receipt therefor in such form as it shall determine.

18.          Successors.  This Option Agreement shall be binding upon Participant, Participant’s legal representatives, heirs, legatees and distributees, and upon the Company, its successors and assigns.

[Remainder of this Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement to be effective as of the day and year first above written.

LINN ENERGY, LLC
By:
Name:	[                                     ]
Title:	[                                     ]

PARTICIPANT:

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EX-10.5

Exhibit 10.5

LINN ENERGY, LLC

LONG-TERM INCENTIVE PLAN

FORM OF EXECUTIVE RESTRICTED UNIT GRANT AGREEMENT

This Restricted Unit grant agreement (“Grant Agreement”) is made and entered into effective as of [Grant Date], (the “Grant Date”) by and between LINN ENERGY, LLC, a Delaware limited liability company (together with its subsidiaries, the “Company”), and [Executive] (“Participant”).

WHEREAS, the Company considers it to be in its best interest that Participant be given a proprietary interest in the Company and an added incentive to advance the interests of the Company; and

WHEREAS, the Company desires to accomplish such objectives by granting Participant Restricted Units pursuant to the Employment Agreement and the Linn Energy, LLC Long-Term Incentive Plan, which is attached hereto as Appendix A and incorporated by reference herein (the “Plan”);

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, the parties hereby agree as follows:

1.             Grant of Restricted Units.  The Company hereby grants to Participant [          ] Restricted Units, under and subject to the terms and conditions of this Grant Agreement and the Plan.

2.             Vesting and Restricted Period.  Except as otherwise provided herein, the Restricted Period with respect to one third (1/3) of the Restricted Units granted hereby shall lapse on January 19, [              ], the Restricted Period with respect to an additional one third (1/3) of the Restricted Units granted hereby shall lapse on January 19, [              ], and the Restricted Period with respect to the final one third (1/3) of the Restricted Units granted hereby shall lapse on January 19, [              ].  Upon the termination of the Restricted Period with respect to a Restricted Unit, such Restricted Unit shall vest in full and no longer be subject to forfeiture, and shall no longer be deemed a Restricted Unit.

3.             General Restrictions.  The Restricted Units shall not be assignable or transferable except as expressly provided in the Plan or by the Committee in its sole discretion.

4.             Termination by Company other than for Cause.  Upon the termination by the Company of Participant’s service relationship with the Company other than for Cause (as defined herein and as determined by the Committee in its sole discretion), all Restricted Periods established hereunder shall automatically and immediately terminate and all outstanding Restricted Units granted hereby shall automatically and immediately vest in full.  “Cause” shall mean (a) Participant’s conviction of, or plea of nolo contendere to, any felony, any crime or offense causing substantial harm to the Company (whether or not for personal gain) or involving acts of theft, fraud, embezzlement, moral turpitude or similar conduct; (b) Participant’s repeated intoxication by alcohol or drugs during the performance of his or her duties; (c) malfeasance in the conduct of Participant’s duties, including, but not limited to, (i) willful and intentional misuse or diversion of any Company funds, (ii) embezzlement or (iii) fraudulent or willful and material

misrepresentations or concealments on any written reports submitted to the Company; (d) Participant’s material failure to perform the duties of Participant’s employment or service relationship consistent with Participant’s position or material failure to follow or comply with the reasonable and lawful written directives of the Board of the Company; or (e) a material breach by Participant of the written policies of the Company concerning employee discrimination or harassment.

5.             Termination by Participant with Good Reason.  Upon the termination by Participant of Participant’s service relationship with the Company with Good Reason (as defined herein), all Restricted Periods established hereunder shall automatically and immediately terminate and all outstanding Restricted Units granted hereby shall automatically and immediately vest in full.  “Good Reason” shall mean any of the following to which Participant does not consent in writing: (a) a reduction in Participant’s base salary; (b) a relocation of Participant’s primary place of employment to a location more than 50 miles from [Houston, Texas]/[Pittsburgh, Pennsylvania]; or (c) any material reduction in Participant’s title, authority or responsibilities as [Title] of the Company.

6.             Death or Disability.  In the case of termination of Participant’s service relationship with the Company due to death or Disability (as defined herein), all Restricted Periods established hereunder shall automatically and immediately terminate and all outstanding Restricted Units granted hereby shall automatically and immediately vest in full.  “Disability” shall mean the determination by a physician selected by the Company that Participant has been unable to perform substantially Participant’s usual and customary duties for a period of at least one hundred twenty (120) consecutive days or a non-consecutive period of one hundred eighty (180) days during any twelve-month period as a result of incapacity due to mental or physical illness or disease.

7.             Change of  Control.  Notwithstanding anything in the Plan to the contrary, in the event of a Change of Control (as defined in the Employment Agreement), all Restricted Periods established hereunder shall automatically and immediately terminate and all outstanding Restricted Units granted hereby shall automatically and immediately vest in full.

8.             Termination by Company for Cause or by Participant without Good Reason.  In the case of (a) termination by the Company of Participant’s service relationship with the Company for Cause or (b) termination by Participant of Participant’s service relationship with the Company without Good Reason and other than due to Participant’s death or Disability, all outstanding Restricted Units granted hereby shall be automatically and immediately forfeited, and Participant hereby agrees to undertake any action and execute any document, instrument or papers reasonably requested by the Company to effect such forfeiture of Restricted Units resulting from any such termination.

9.             Plan Controlling Document.  Unless otherwise defined herein, capitalized terms shall have the meaning given such terms in the Plan.  Participant agrees that the Plan is the controlling instrument and that to the extent there is any conflict between the terms of the Plan and this Grant Agreement, the Plan shall control and be the governing document.

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10.          Limited Liability Company Agreement.  Participant agrees to be bound by all applicable provisions of the Company’s limited liability company agreement, as it may be amended from time to time.

11.          Taxes.  The Company and any affiliate thereof are authorized to withhold from any payment relating to the Restricted Units granted hereby, or any payroll or other payment to Participant, amounts of withholding and other taxes due or potentially payable in connection with the Restricted Units granted hereby, and to take such other action as the Committee may deem advisable to enable the Company, any affiliate, and Participant to satisfy obligations for the payment of withholding taxes and other tax obligations relating to the Restricted Units granted hereby.  This authority shall include authority to withhold or receive Units or other property and to make cash payments in respect thereof in satisfaction of Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee.

12.          Issuance of Units.  The Company shall not be obligated to issue any Restricted Units at any time when the Restricted Units have not been registered under the Securities Act of 1933, as amended, and such other state and federal laws, rules or regulations as the Company or the Committee deems applicable and, in the opinion of legal counsel for the Company, there is no exemption from the registration requirements of such laws, rules or regulations available for the issuance of such Restricted Units.

13.          Notices.  Any notices given in connection with this Grant Agreement shall, if issued to Participant, be delivered to Participant’s current address on file with the Company, or if issued to the Company, be delivered to the Company’s principal offices.

14.          Execution of Receipts and Releases.  Any payment of cash or any issuance or transfer of Restricted Units or other property to Participant, or to Participant’s legal representatives, heirs, legatees or distributees, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder.  The Company may require Participant or Participant’s legal representatives, heirs, legatees or distributees, as a condition precedent to such payment or issuance, to execute a release and receipt therefor in such form as it shall determine.

15.          Successors.  This Grant Agreement shall be binding upon Participant, Participant’s legal representatives, heirs, legatees and distributees, and upon the Company, its successors and assigns.

[Remainder of this page intentionally left blank.]

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IN WITNESS WHEREOF, the parties hereto have executed this Grant Agreement to be effective as of the day and year first above written.

LINN ENERGY, LLC
By:
Name:	[                                              ]
Title:	[                                              ]
PARTICIPANT:

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EX-10.12

Exhibit 10.12

EXECUTION COPY

EMPLOYMENT AGREEMENT

March 22. 2007

The parties to this Employment Agreement (this “Agreement”) are LlNN OPERATING, INC., a Delaware corporation (the “Company”) and Charlene A. Ripley (the “Employee”). The parties desire to provide for the employment of the Employee as Senior Vice President & General Counsel of the Company and of Linn Energy (as defined) commencing on Employee’s first date of employment, such date to be mutually agreed by the parties (the “Effective Date”) on the terms set forth herein. LINN ENERGY, LLC, a Delaware limited liability company and the 100% parent of the Company (“Linn Energy”), is joining in this agreement for the limited purposes of reflecting its agreement to the matters set forth herein as to it, but such joinder is not intended to make Linn Energy the employer of the Employee for any purpose.

Accordingly, the parties, intending to be legally bound, agree as follows:

1.Position and Duties

1.1Employment; Titles; Reporting.  The Company agrees to employ the Employee and the Employee agrees to enter employment with the Company, upon the terms and subject to the conditions provided under this Agreement.  During the Employment Term (as defined in Section 2), the Employee will serve each of the Company and Linn Energy as the Senior Vice President & General Counsel, and Corporate Secretary. In such capacity, the Employee will report to Linn Energy’s and the Company’s Chairman, President & CEO and otherwise will be subject to the direction and control of the Board of Directors of Linn Energy (including any committee thereof, the (“Board”), and, the Employee will have such duties, responsibilities and authorities as may be assigned to her by the Company’s Chairman of the Board or the Board from time to time and otherwise consistent with such position in a public company comparable to Linn Energy which is engaged in natural gas and oil acquisition, development and production (including, but not limited to, maintaining, to the extent applicable, compliance with the Sarbanes-Oxley Act of 2002 and related regulations and all other federal, state and local laws and regulations, as well as all regulations and rules of any exchange or electronic trading system on which Linn Energy’s securities are traded).

1.2Duties.  During the Employment Term, the Employee will devote substantially all of her full working time to the business and affairs of the Company, will use her best efforts to promote the Company’s interests and will perform her duties and responsibilities faithfully, diligently and to the best of her ability, consistent with sound business practices. The Employee may be required by the Board to provide services to, or otherwise serve as an officer or director of, any direct or indirect subsidiary of the Company or to Linn Energy, as applicable. The Employee will comply with the Company’s and Linn Energy’s policies, codes and procedures, as they may be in effect from time to time, applicable to executive officers of the Company and Linn Energy. Nevertheless, the Employee may, with the prior approval of the Board in each instance, engage in such other business and charitable activities that do not create a conflict of interest or the appearance of a conflict of interest with the Company or Linn Energy or materially

interfere with the performance of her obligations to the Company or Linn Energy under this Agreement.

1.3Place of Employment.  The Employee will perform her duties under this Agreement at the Company’s offices in Houston, Texas, with the likelihood of substantial business travel.

2.Term of Employment.  The term of the Employee’s employment by the Company under this Agreement (the “Employment Term”) will commence on the Effective Date and will continue until employment is terminated by either party under Section 5. The date on which the Employee’s employment ends is referred to in this Agreement as the “Termination Date.”

3.Compensation.

3.1Base Salary.  During the Employment Term, the Employee will be entitled to receive a base salary (“Base Salary”) at an annual rate of not less than $200,000 for services rendered to the Company and any of its direct or indirect subsidiaries, payable in accordance with the Company’s regular payroll practices. The Employee’s Base Salary will be reviewed annually by the Board and may be adjusted upward in the Board’s sole discretion.

3.2Bonus Compensation.  (a)  The Employee will be entitled to a one-time bonus (the “One-Time Bonus”) in the amount of $120,000, (1/₂) payable within thirty (30) days after the Effective Date and (1/2) payable on the first anniversary of the Effective Date. (b) The Employee will also be entitled to receive a guaranteed bonus (“Guaranteed Bonus”) payment of not less than $125,000 with respect to the Company’s fiscal year ending December 31, 2007. Thereafter, during the Employment Term, the Employee will be entitled to receive incentive compensation in such amounts and at such times as the Board may determine in its sole discretion to award to her under any incentive compensation or other bonus plan or arrangement as may be established by the Board from time to time (collectively, the “Employee Bonus Plan”). Any additional incentive compensation payable under any Employee Bonus Plan will be referred to in the aggregate in this Agreement as the Employee’s “Bonus.”

3.3Long-Term Incentive Compensation.

(a)Unit Options.  As of the Effective Date, the Employee will receive an award of non-qualified options to purchase up to 30,000 Units of Linn Energy at a per share exercise price equal to the fair market value of a Unit as of the date of grant, which shall be awarded under the terms of the Linn Energy, LLC Long Term Incentive Plan or any successor plan, as it may be in effect from time to time (the “Incentive Plan”), and subject to a service-based vesting schedule and such other terms and conditions set forth in the applicable option agreement.

(b)Restricted Units.  As of the Effective Date, the Employee will receive a restricted Unit award in the amount of 30,000 Units of Linn Energy, which shall be awarded under the terms of the Incentive Plan, and subject to a service-based vesting schedule and such other terms and conditions set forth in the applicable restricted unit agreement.

(c)Future Awards.  In addition to the above long-term incentive compensation awards, awards of Unit options, Unit grants, restricted Units and/or other forms of equity-based compensation to the Employee on or after the Effective Date may be made from time to time during the Employment Term by the Board in its sole discretion, whose decision will

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be based upon performance and award guidelines for executive officers of the Company and Linn Energy established periodically by the Board in its sole discretion.

4.Expenses and Other Benefits.

4.1Reimbursement of Expenses.  The Employee will be entitled to receive prompt reimbursement for all reasonable expenses incurred by her during the Employment Term (in accordance with the policies and practices presently followed by the Company or as may be established by the Board from time to time for the Company’s and Linn Energy’s senior executive officers) in performing services under this Agreement, provided that the Employee properly accounts for such expenses in accordance with the Company’s and Linn Energy’s policies as in effect from time to time.

4.2Vacation.  Employee will be entitled to paid vacation time each year during the Employment Term that will accrue in accordance with the Company’s policies and procedures now in force or as such policies and procedures may be modified with respect to all senior executive officers of the Company.

4.3Other Employee Benefits.  In addition to the foregoing, during the Employment Term, the Employee will be entitled to participate in and to receive benefits as a senior executive under all of the Company’s employee benefit plans, programs and arrangements available to senior executives, subject to the eligibility criteria and other terms and conditions thereof, as such plans, programs and arrangements may be duly amended, terminated, approved or adopted by the Board from time to time.

5.Termination of Employment.

5.1Death.  The Employee’s employment under this Agreement will terminate upon her death.

5.2Termination by the Company.

(a)Terminable at Will.  The Company may terminate the Employee’s employment under this Agreement at any time with or without Cause (as defined below).

(b)Definition of Cause.  For purposes of this Agreement, the Company will have “Cause” to terminate the Employee’s employment under this Agreement by reason of any of the following: (i) the Employee’s conviction of, or plea of nolo contendere to, any felony or to any crime or offense causing substantial harm to any of Linn Energy or its direct or indirect subsidiaries (whether or not for personal gain) or involving acts of theft, fraud, embezzlement, moral turpitude or similar conduct; (ii) the Employee’s repeated intoxication by alcohol or drugs during the performance of her duties; (iii) malfeasance in the conduct of Employee’s duties, including, but not limited to, (A) willful and intentional misuse or diversion of any of the funds of Linn Energy or its direct or indirect subsidiaries, (B) embezzlement or (C) fraudulent or willful and material misrepresentations or concealments on any written reports submitted to any of Linn Energy or its direct or indirect subsidiaries; (iv) the Employee’s material failure to perform the duties of the Employee’s employment consistent with Employee’s position expressly including the provisions of this Agreement, or material failure to follow or comply with the reasonable and lawful written directives of the Board; (v) a material

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breach of this Agreement; or (vi) a material breach by the Employee of written policies of the Company concerning employee discrimination or harassment.

(c)Notice and Cure Opportunity in Certain Circumstances.  The Employee may be afforded a reasonable opportunity to cure any act or omission that would otherwise constitute “Cause” hereunder according to the following terms: The Board will give the Employee written notice stating with reasonable specificity the nature of the circumstances determined by the Board in good faith to constitute “Cause.” If, in the good faith judgment of the Board, the alleged breach is reasonably susceptible to cure, the Employee will have fifteen (15) days from her receipt of such notice to effect the cure of such circumstances or such breach to the good faith satisfaction of the Board. The Board will state whether the Employee will have such an opportunity to cure in the initial notice of “Cause”referred to above. If, in the good faith judgment of the Board the alleged breach is not reasonably susceptible to cure, or such circumstances or breach have not been satisfactorily cured within such fifteen (15) day cure period, such breach will thereupon constitute “Cause” hereunder.

5.3Termination by the Employee.

(a)Terminable at will.  The Employee may terminate her employment under this Agreement at any time with or without Good Reason (as defined below).

(b)Notice and Cure Opportunity.  If such termination is with Good Reason, the Employee will give the Company written notice, which will identify with reasonable specificity the grounds for the Employee’s resignation and provide the Company with fifteen (15) days from the day such notice is given to cure the alleged grounds for resignation contained in the notice. A termination will not be for Good Reason if such notice is given by the Employee to the Company more than thirty (30) days after the occurrence of the event that the Employee alleges is Good Reason for her termination hereunder.

(c)Definition of Good Reason.  For purposes of this Agreement, “Good Reason” will mean any of the following to which the Employee will not consent in writing: (a) a reduction in the Employee’s Base Salary, or (b) a relocation within two (2) years from the Effective Date of this Agreement of the Employee’s primary place of employment to a location more than 50 miles from Houston, Texas.

5.4Notice of Termination.  Any termination of the Employee’s employment by the Company or by the Employee during the Employment Term (other than termination pursuant to Section 5.1) will be communicated by written Notice of Termination to the other party hereto in accordance with Section 7.7. For purposes of this Agreement, a “Notice of Termination” means a written notice that (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated, and (c) if the Termination Date (as defined herein) is other than the date of receipt of such notice, specifies the Termination Date (which Termination Date will be not more than thirty (30) days after the giving of such notice).

5.5Disability.  If the Company determines in good faith that the Disability (as defined herein) of the Employee has occurred during the Employment Term, it may, without breaching this Agreement, give to the Employee written notice in accordance with Section 5.4 of its

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intention to terminate the Employee’s employment. In such event, the Employee’s employment with the Company will terminate effective on the fifteenth (15th) day after receipt of such notice by the Employee (the “Disability Effective Date”), provided that, within the fifteen (15) days after such receipt, the Employee will not have returned to full-time performance of the Employee’s duties. “Disability” means the determination by a physician selected by the Company that the Employee has been unable to perform substantially the Employee’s usual and customary duties under this Agreement for a period of at least one hundred twenty (120) consecutive days or a non-consecutive period of one hundred eighty (180) days during any twelve-month period as a result of incapacity due to mental or physical illness or disease. At any time and from time to time, upon reasonable request therefore by the Company, the Employee will submit to reasonable medical examination for the purpose of determining the existence, nature and extent of any such disability.

6.Compensation of the Employee upon Termination.

6.1Death.  If the Employee’s employment under this Agreement is terminated by reason of her death, the Company will pay to the person or persons designated by the Employee for that purpose in a notice filed with the Company, or, if no such person will have been so designated, to her estate, the amount of (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date, (b) with respect to any Termination Date on or after January 1, 2008 by reason of Employee’s death, (i) any unpaid One-Time Bonus amounts, and (ii) any accrued but unpaid Bonus, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable, (c) with respect to any Termination Date on or before December 31, 2007 by reason of Employee’s death, a cash amount equal to (i) any unpaid One-Time Bonus amounts, if any, and (ii) the Employee’s pro-rata Guaranteed Bonus amount set forth in Section 3.2 of this Agreement, payable at such time as bonuses for such annual period are paid to other executive officers of the Company, and (d) any other amounts that may be reimbursable by the Company to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Company thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Company and any payments or benefits required to be made or provided under applicable law. Without limiting the generality of the foregoing, any rights the Employee’s beneficiary may have to the proceeds of any life insurance arrangement set forth in Section 4.3 will be in lieu of any special entitlement to severance pay or benefits upon the Employee’s death.

6.2Disability.  In the event of the Employee’s termination by reason of Disability pursuant to Section 5.5, the Employee will continue to receive her Base Salary and participate in applicable employee benefit plans or programs of the Company (on an equivalent basis to Section 6.4(a)(iv) below) through the Termination Date, subject to offset dollar-for-dollar by the amount of any disability income payments provided to the Employee under any Company disability policy or program funded by the Company, and will receive (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date, (b) with respect to any Termination Date on or after January 1, 2008 by reason of Employee’s Disability, any accrued, but unpaid Bonus, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable, (c) with respect to any Termination Date on or before December 31, 2007 by reason of Employee’s Disability, a cash amount equal to (i) any unpaid One-Time Bonus amounts, if any, and (ii) the Employee’s pro-rata Guaranteed Bonus amount set forth in Section 3.2 of this Agreement, payable at such time as bonuses for such annual period are paid to other

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executive officers of the Company, and (d) any other amounts that may be reimbursable by the Company to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Company thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Company and any payments or benefits required to be made or provided under applicable law.

6.3By the Company for Cause or the Employee Without Good Reason.  If the Employee’s employment is terminated by the Company for Cause, or if the Employee terminates her employment other than for Good Reason, the Employee will receive (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date, (b) any accrued but unpaid Bonus, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable, and (c) any other amounts that may be reimbursable by the Company to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Company thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Company and any payments or benefits required to be made or provided under applicable law.

6.4By the Employee for Good Reason or the Company other than for Cause.

(a)   Severance Benefits on Non-Change of Control Termination.  Subject to the provisions of Section 6.4(b) and Section 6.4(d), if prior to or more than one (1) year after the occurrence of a Change of Control (as defined below) the Company terminates the Employee’s employment without Cause, or the Employee terminates her employment for Good Reason, then the Employee will be entitled to the following benefits (the “Severance Benefits”):

(i)an amount equal to (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date, (b) with respect to any Termination Date on or after January 1, 2008 by the Employee for Good Reason or by the Company without Cause, any accrued but unpaid Bonus, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable, (c) any other amounts that may.be reimbursable by the Company to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date;

(ii)with respect to any termination event described in this paragraph (a) of Section 6.4: (A) occurring after the Effective Date and prior to the first anniversary date thereof, twelve (12) monthly payments, and (B) occurring on or after the first anniversary of the Effective Date, twenty-four (24) monthly payments, in either case in an amount equal to one-twelfth (1/12) of the Employee’s annual Base Salary at the highest rate in effect at any time during the thirty-six (36)-month period prior to the Termination Date, commencing with the calendar month immediately following the calendar month in which the Termination Date occurs;

(iii)With respect to any Termination Date on or before December 31, 2007 by the Employee for Good Reason or by the Company without Cause, a

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cash amount equal to the Employee’s pro-rata Guaranteed Bonus amount set forth in Section 3.2 of this Agreement, payable at such time as bonuses for such annual period are paid to other executive officers of the Company; and

(iv)the Company will pay the full cost of the Employee’s COBRA continuation coverage for such period, as such coverage is required to be continued under applicable law; provided, however, that, notwithstanding the foregoing, the benefits described in this Section 6.4(a)(iv) may be discontinued prior to the end of the period provided in this subsection (iv) to the extent, but only to the extent, that the Employee receives substantially similar benefits from a subsequent employer (“COBRA Benefit”).

(b)  Change of Control Benefits. Subject to the provisions of Section 6,4(d), if within the one (1)-year period following the occurrence of a Change of Control, the Company terminates the Employee’s employment without Cause, or the Employee terminates her employment for Good Reason (an “Eligible Termination”), then, in lieu of the Severance Benefits under Section 6.4(a), the Employee will be entitled to benefits (the “Change of Control Benefits”) identical to those set forth in Section 6.4(a) except that the amount described in clause (ii) will be paid in a lump sum within thirty (30) days following the Termination Date and will be equal to twenty-four (24) monthly payments.

(c)   Definition of Change of Control. For purposes of this Agreement, a “Change of Control” will mean the first to occur of:

(i)The acquisition by any individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the then-outstanding equity interests of Linn Energy (the “Outstanding Linn Energy Equity”) or (B) the combined voting power of the then-outstanding voting securities of Linn Energy entitled to vote generally in the election of directors (the “Outstanding Linn Energy Voting Securities”); provided, however, that, for purposes of this Section 6.4(c)(i), the following acquisitions will not constitute a Change of Control: (A) any acquisition directly from Linn Energy, (B) any acquisition by Linn Energy, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Linn Energy or any affiliated company, or (D) any acquisition by any corporation or other entity pursuant to a transaction that complies with Section 6.4(c)(iii)(A), Section 6.(c)(iii)(B) or Section 6.4(c)(iii)(C);

(ii)Any time at which individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Linn Energy’s Unit holders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

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(iii)Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving Linn Energy or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of Linn Energy, or the acquisition of assets or equity interests of another entity by Linn Energy or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Linn Energy Equity and the Outstanding Linn Energy Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding equity interests and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (Including, without limitation, a corporation or other entity that, as a result of such transaction, owns Linn Energy or all or substantially all of Linn Energy’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Linn Energy Equity and the Outstanding Linn Energy Voting Securities, as the case may be, (B) no. Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Linn Energy or such corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then-outstanding equity interests of the corporation or other entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or other entity, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation or equivalent body of any other entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(iv)Consummation of a complete liquidation or dissolution of Linn Energy.

(d)  Conditions to Receipt of Severance Benefits.

(i)Release.  As a condition to receiving any Severance Benefits or Change of Control Benefits to which the Employee may otherwise be entitled under Section 6.4(a) or Section 6.4(b), the Employee will execute a release (the “Release”), which will include a non-disparagement provision, in a form and substance satisfactory to the Company, of any claims, whether arising under federal, state or local statute, common law, or otherwise, against the Company and its direct or indirect subsidiaries, which arise or may have arisen on or before the date of the Release, other than any claims under this Agreement or any rights to indemnification from the Company and its direct or indirect subsidiaries pursuant to any provisions of the Company’s (or any of its subsidiaries’) organizational documents or any directors and officers liability insurance policies maintained by the Company. If the Employee fails or otherwise refuses to execute a Release within a reasonable time of not less than 21 days after the Company’s request to do so, and in all events prior to the date on which such benefits are to be first paid to her, the Employee will not be entitled to any

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Severance Benefits or Change of Control Benefits, as the case may be, or any other benefits provided under this Agreement and the Company will have no further obligations with respect to the provision of those benefits except as may be required by law.

6.5Severance Benefits Not Includable for Employee Benefits Purposes.  Except to the extent the terms of any applicable benefit plan, policy or program provide otherwise, any benefit programs of the Company that takes into account the Employee’s income will exclude any and all Severance Benefits and Change of Control Benefits provided under this Agreement.

6.6Exclusive Severance Benefits.  The Severance Benefits payable under Section 6.4(a) or the Change of Control Benefits payable under Section 6.4(b) if they become applicable under the terms of this Agreement, will be in lieu of any other severance or similar benefits that would otherwise be payable under any other agreement, plan, program or policy of the Company.

6.7Additional Provisions Regarding Payments Under This Agreement. Notwithstanding anything in this Agreement to the contrary, in the event that any benefits payable or otherwise provided under this Agreement Would be

(a)subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), (such excise tax referred to in this Agreement as the “Excise Tax”), then the Board may, in its sole discretion, provide for the payment of, or otherwise reimburse the Employee for, an amount up to such Excise Tax and any related taxes, fees or penalties thereon as the Board may consider to be customary and appropriate for a comparable public company; or

(b)deemed to constitute non-qualified deferred compensation subject to Section. 409A of the Code, Linn Energy or the Company, as the case may be, will have the discretion to adjust the terms of such payment or benefit as it deems necessary to comply with the requirements of Section 409A to avoid the imposition of any excise tax or other penalty with respect to such payment or benefit under Section 409A of the Code.

7.Miscellaneous.

7.1Assignment: Successors; Binding Agreement.  This Agreement may not be assigned by either party, whether by operation of law or otherwise, without the prior written consent of the other party, except that any right, title or interest of the Company arising out of this Agreement may be assigned to any corporation or entity controlling, controlled by, or under common control with the Company, or succeeding to the business and substantially all of the assets of the Company or any affiliates for which the Employee performs substantial services. Subject to the foregoing, this Agreement will be binding upon and will inure to the benefit of the parties and their respective heirs, legatees, devisees, personal representatives, successors and assigns.

7.2Modification and Waiver.  Except as otherwise provided below, no provision of this Agreement may be modified, waived, or discharged unless such waiver, modification or discharge is duly approved by the Board and is agreed to in writing by the Employee and such officer(s) as may be specifically authorized by the Board to effect it. No waiver by any party of any breach by any other party of, or of compliance with, any term or condition of this Agreement

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to be performed by any other party, at any time, will constitute a waiver of similar or dissimilar terms or conditions at that time or at any prior or subsequent time.

7.3Entire Agreement.  This Agreement embodies the entire understanding of the parties hereof, and, upon the Effective Date, will supersede all other oral or written agreements or understandings between them regarding the subject matter hereof. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter of this Agreement, has been made by either party which is not set forth expressly in this Agreement.

7.4Governing Law.  The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of Texas other than the conflict of laws provision thereof.

7.5Consent to Jurisdiction and Service of Process.  In the event of any dispute relating to this Agreement, the parties will use their best efforts, to settle the dispute, claim, question, or disagreement. To this effect, they will consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties. If such a dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Employment Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure. If the parties do not reach such solution through negotiation or mediation within a period of sixty (60) days, then, upon notice by either party to the other, all disputes, claims, questions, or differences shall be resolved exclusively by arbitration administered by the American Arbitration Association under the Employment Arbitration Rules and before a single neutral arbitrator. If arbitration is elected by one party, the other is bound to submit itself and all disputes to arbitration. The arbitrator will be selected by agreement of the parties or, if they do not agree on an arbitrator within thirty (30) days after either party has notified the other of her or its desire to have the question settled by arbitration, then the arbitrator will be selected pursuant to the Employment Arbitration Rules of the American Arbitration Association. The decision of the Arbitrator shall be final and binding, and may be enforced in any court with jurisdiction. Unless otherwise mutually agreed by the parties in writing, any such arbitration shall take place in Houston, Texas.

7.6Withholding of Taxes.  The Company will withhold from any amounts payable under the Agreement all federal, state, local or other taxes as legally will be required to be withheld.

7.7Notices.  All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):

to the Company, to:

Attn: General Counsel

Linn Energy, LLC

650 Washington Road, Suite 500

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Pittsburgh, Pennsylvania  15228

to the Employee, to:

Charlene A, Ripley

94 E, Bracebridge Circle

The Woodlands, Texas 77381

Addresses may be changed by written notice sent to the other party at the last recorded address of that party.

7.8Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

7.9Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

7.10Headings.  The headings used in this Agreement are for convenience only, do not constitute a part of the Agreement, and will not be deemed to limit, characterize, or affect in any way the provisions of the Agreement, and all provisions of the Agreement will be construed as if no headings had been used in the Agreement.

7.11Construction.  As used in this Agreement, unless the context otherwise requires: (a) the terms defined herein will have the meanings set forth herein for all purposes; (b) references to “Section” are to a section hereof; (c) “include,” “Includes” and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import; (d) “writing,” “written” and comparable terms refer to printing, typing, lithography and other means of reproducing words in a visible form; (e) “hereof,” “herein,” “hereunder” and comparable terms refer to the entirety of this Agreement and not to any particular section or other subdivision hereof or attachment hereto; (f) references to any gender include references to all genders; and (g) references to any agreement or other instrument or statute or regulation are referred to as amended or supplemented from time to time (and, in the case of a statute or regulation, to any successor provision).

7.12Capacity; No Conflicts.  The Employee represents and warrants to the Company that: (i) he has full power, authority and capacity to execute and deliver this Agreement, and to perform her obligations hereunder, (ii) such execution, delivery, and performance will not (and with the giving of notice or lapse of time, or both, would not) result in the breach of any agreement or other obligation to which he is a party or is otherwise bound, and (iii) this Agreement is her valid and binding obligation, enforceable in accordance with its terms.

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the 22nd day of March, 2007.

LINN OPERATING, INC.
By:	/s/ Michael C. Linn
Name:	Michael C. Linn
Title:	Chairman, President and Chief Executive
Officer
EMPLOYEE
/s/ Charlene A. Ripley
Charlene A. Ripley
For the limited purposes set forth herein:
LINN ENERGY, LLC
By:		/s/ Michael C. Linn
Name:		Michael C. Linn
Title:    Chairman, President and Chief Executive Officer

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EX-10.13

Exhibit 10.13

EXECUTION COPY

EMPLOYMENT AGREEMENT

February 7, 2007

The parties to this Employment Agreement (this “Agreement”) are LINN OPERATING, INC., a Delaware corporation (the “Company’’) and Arden L Walker, Jr. (the “Employee”). The parties desire to provide for the employment of the Employee as Senior Vice President Operations - Chief Engineer of the Company and of Linn Energy (as defined) commencing on Employee’s first date of employment, such date to be mutually agreed by the parties (the “Effective Date”) on the terms set forth herein. LINN ENERGY, LLC, a Delaware limited liability company and the 100% parent of the Company (“Linn Energy”), is joining in this agreement for the limited purposes of reflecting its agreement to the matters set forth herein as to it, but such joinder is not Intended to make Linn Energy the employer of the Employee for any purpose.

Accordingly, the parties, intending to be legally bound, agree as follows:

1.Position and Duties

1.1Employment; Titles; Reporting.  The Company agrees to employ the Employee and the Employee agrees to enter employment with the Company, upon the terms and subject to the conditions provided under this Agreement. During the Employment Term (as defined in Section 2), the Employee will serve each of the Company and Linn Energy as the Senior Vice President Operations – Chief Engineer. In such capacity, the Employee will report to Linn Energy’s and the Company’s Executive Vice President and Chief Operating Officer and otherwise will be subject to the direction and control of the Board of Directors of Linn Energy (including any committee thereof, the “Board”), and, the Employee will have such duties, responsibilities and authorities as may be assigned to him by the Company’s Executive Vice President and Chief Operating Officer or the Board from time to time and otherwise consistent with such position in a public company comparable to Linn Energy which is engaged in natural gas and oil acquisition, development and production (including, but not limited to, maintaining, to the extent applicable, compliance with the Sarbanes-Oxley Act of 2002 and related regulations and all other federal, state and local laws and regulations, as well as all regulations and rules of any exchange or electronic trading system on which Linn Energy’s securities are traded).

1.2Duties.  During the Employment Term, the Employee will devote substantially all of his full working time to the business and affairs of the Company, will use his best efforts to promote the Company’s interests and will perform his duties and responsibilities faithfully, diligently and to the best of his ability, consistent with sound business practices. The Employee may be required by the Board to provide services to, or otherwise serve as an officer or director of, any direct or indirect subsidiary of the Company or to Linn Energy, as applicable. The Employee will comply with the Company’s and Linn Energy’s policies, codes and procedures, as they may be in effect from time to time, applicable to executive officers of the Company and Linn Energy. Nevertheless, the Employee may, with the prior approval of the Board in each instance, engage in such other business and charitable activities that do not violate Section 7, create a conflict of interest or the appearance of a conflict of interest with the Company or Linn

Energy or materially Interfere with the performance of his obligations to the Company or Linn Energy under this Agreement.

1.3Place of Employment.  The Employee will perform his duties under this Agreement at the Company’s offices in Houston, Texas, with the likelihood of substantial business travel.

2.Term of Employment.  The term of the Employee’s employment by the Company under this Agreement (the “Employment Term”) will commence on the Effective Date and will continue until employment is terminated by either party under Section 5. The date on which the Employee’s employment ends is referred to In this Agreement as the “Termination Date.”

3.Compensation.

3.1Base Salary.  During the Employment Term, the Employee will be entitled to receive a base salary (“Base Salary”) at an annual rate of not less than $175,000 for services rendered to the Company and any of its direct or indirect subsidiaries, payable in accordance with the Company’s regular payroll practices. The Employee’s Base Salary will be reviewed annually by the Board and may be adjusted upward in the Board’s sole discretion.

3.2Bonus Compensation.  (a)  The Employee will be entitled to a one-time bonus (the “One-Time Bonus”) in the amount of $175,000 payable within thirty (30) days after the Effective Date. (b) The Employee will also be entitled to receive a guaranteed bonus (“Guaranteed Bonus”) payment of not less than $125,000 with respect to the Company’s fiscal year ending December 31, 2007. Thereafter, during the Employment Term, the Employee will be entitled to receive incentive compensation in such amounts and at such times as the Board may determine in its sole discretion to award to him under any incentive compensation or other bonus plan or arrangement as may be established by the Board from time to time (collectively, the “Employee Bonus Plan”). Any additional incentive compensation payable under any Employee Bonus Plan will be referred to in the aggregate in this Agreement as the Employee’s “Bonus.”

3.3Long-Term Incentive Compensation.

(a)Unit Options.  As of the Effective Date, the Employee will receive an award of non-qualified options to purchase up to 50,000 Units of Linn Energy at a per share exercise price equal to the fair market value of a Unit as of the date of grant, which shall be awarded under the terms of the Linn Energy, LLC Long Term Incentive Plan or any successor plan, as it may be in effect from time to time (the “Incentive Plan”), and subject to a service-based vesting schedule and such other terms and conditions set forth in the applicable option agreement.

(b)Restricted Units.  As of the Effective Date, the Employee will receive a restricted Unit award in the amount of 50,000 Units of Linn Energy, which shall be awarded under the terms of the Incentive Plan, and subject to a service-based vesting schedule and such other terms and conditions set forth in the applicable restricted unit agreement.

(c)Future Awards.  In addition to the above long-term incentive compensation awards, awards of Unit options. Unit grants, restricted Units and/or other forms of equity-based compensation to the Employee on or after the Effective Date may be made from time to time during the Employment Term by the Board in its sole discretion, whose decision will

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be based upon performance and award guidelines for executive officers of the Company and Linn Energy established periodically by the Board in its sole discretion.

4.Expenses and Other Benefits.

4.1Reimbursement of Expenses.  The Employee will be entitled to receive prompt reimbursement for all reasonable expenses incurred by him during the Employment Term (in accordance with the policies and practices presently followed by the Company or as may be established by the Board from time to time for the Company’s and Linn Energy’s senior executive officers) in performing services under this Agreement, provided that the Employee properly accounts for such expenses in accordance with the Company’s and Linn Energy’s policies as in effect from time to time.

4.2Vacation.  Employee will be entitled to paid vacation time each year during the Employment Term that will accrue in accordance with the Company’s policies and procedures now in force or as such policies and procedures may be modified with respect to all senior executive officers of the Company.

4.3Other Employee Benefits.  In addition to the foregoing, during the Employment Term, the Employee will be entitled to participate in and to receive benefits as a senior executive under all of the Company’s employee benefit plans, programs and arrangements available to senior executives, subject to the eligibility criteria and other terms and conditions thereof, as such plans, programs and arrangements may be duly amended, terminated, approved or adopted by the Board from time to time.

5.Termination of Employment.

5.1Death.    The Employee’s employment under this Agreement will terminate upon his death.

5.2Termination by the Company.

(a)Terminable at Will.  The Company may terminate the Employee’s employment under this Agreement at any time with or without Cause (as defined below).

(b) Definition of Cause.  For purposes of this Agreement, the Company will have “Cause” to terminate the Employee’s employment under this Agreement by reason of any of the following: (i) the Employee’s conviction of, or plea of nolo contendere to, any felony or to any crime or offense causing substantial harm to any of Linn Energy or its direct or indirect subsidiaries (whether or not for personal gain) or involving acts of theft, fraud, embezzlement, moral turpitude or similar conduct; (ii) the Employee’s repeated intoxication by alcohol or drugs during the performance of his duties; (iii) malfeasance in the conduct of Employee’s duties, including, but not limited to, (A) willful and Intentional misuse or diversion of any of the funds of Linn Energy or its direct or indirect subsidiaries, (B) embezzlement or (C) fraudulent or willful and material misrepresentations or concealments on any written reports submitted to any of Linn Energy or its direct or indirect subsidiaries; (iv) the Employee’s material failure to perform the duties of the Employee’s employment consistent with Employee’s position, expressly including the provisions of this Agreement, or material failure to follow or comply with the reasonable and lawful written directives of the Board; (v) a material

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breach of this Agreement; or (vi) a material breach by the Employee of written policies of the Company concerning employee discrimination or harassment.

(c)Notice and Cure Opportunity in Certain Circumstances.  The Employee may be afforded a reasonable opportunity to cure any act or omission that would otherwise constitute “Cause” hereunder according to the following terms: The Board will give the Employee written notice stating with reasonable specificity the nature of the circumstances determined by the Board in good faith to constitute “Cause.” If, in the good faith judgment of the Board, the alleged breach is reasonably susceptible to cure, the Employee will have fifteen (15) days from his receipt of such notice to effect the cure of such circumstances or such breach to the good faith satisfaction of the Board. The Board will state whether the Employee will have such an opportunity to cure in the initial notice of “Cause” referred to above. If, In the good faith judgment of the Board the alleged breach is not reasonably susceptible to cure, or such circumstances or breach have not been satisfactorily cured within such fifteen (15) day cure period, such breach will thereupon constitute “Cause” hereunder.

5.3Termination by the Employee.

(a)  Terminable at Will.  The Employee may terminate his employment under this Agreement at any time with or without Good Reason (as defined below).

(b)  Notice and Cure Opportunity.  If such termination is with Good Reason, the Employee will give the Company written notice, which will identify with reasonable specificity the grounds for the Employee’s resignation and provide the Company with fifteen (15) days from the day such notice is given to cure the alleged grounds for resignation contained in the notice. A termination will not be for Good Reason if such notice is given by the Employee to the Company more than thirty (30) days after the occurrence of the event that the Employee alleges is Good Reason for his termination hereunder.

(c)  Definition of Good Reason.  For purposes of this Agreement, “Good Reason” will mean any of the following to which the Employee will not consent in writing: (a) a reduction in the Employee’s Base Salary, or (b) a relocation within two (2) years from the Effective Date of this Agreement of the Employee’s primary place of employment to a location more than 50 miles from Houston, Texas.

5.4Notice of Termination.  Any termination of the Employee’s employment by the Company or by the Employee during the Employment Term (other than termination pursuant to Section 5.1) will be communicated by written Notice of Termination to the other party hereto in accordance with Section 8.7. For purposes of this Agreement, a “Notice of Termination” means a written notice that (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated, and (c) if the Termination Date (as defined herein) is other than the date of receipt of such notice, specifies the Termination Date (which Termination Date will be not more than thirty (30) days after the giving of such notice).

5.5Disability.  If the Company determines in good faith that the Disability (as defined herein) of the Employee has occurred during the Employment Term, it may, without breaching this Agreement, give to the Employee written notice in accordance with Section 5.4 of its

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intention to terminate the Employee’s employment. In such event, the Employee’s employment with the Company will terminate effective on the fifteenth (15th) day after receipt of such notice by the Employee (the “Disability Effective Date”), provided that, within the fifteen (15) days after such receipt, the Employee will not have returned to full-time performance of the Employee’s duties, “Disability’’ means the determination by a physician selected by the Company that the Employee has been unable to perform substantially the Employee’s usual and customary duties under this Agreement for a period of at least one hundred twenty (120) consecutive days or a non-consecutive period of one hundred eighty (180) days during any twelve-month period as a result of incapacity due to mental or physical illness or disease. At any time and from time to time, upon reasonable request therefore by the Company, the Employee will submit to reasonable medical examination for the purpose of determining the existence, nature and extent of any such disability.

6.Compensation of the Employee upon Termination.

6.1Death.  If the Employee’s employment under this Agreement is terminated by reason of his death, the Company will pay to the person or persons designated by the Employee for that purpose in a notice filed with the Company, or, if no such person will have been so designated, to his estate, the amount of (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date, (b) with respect to any Termination Date on or after January 1, 2008 by reason of Employee’s death, any accrued but unpaid Bonus, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable, (c) with respect to any Termination Date on or before December 31, 2007 by reason of Employee’s death, a cash amount equal to (i) any unpaid One-Time Bonus amounts, if any, and (ii) the Employee’s pro-rata Guaranteed Bonus amount set forth in Section 3.2 of this Agreement, payable at such time as bonuses for such annual period are paid to other executive officers of the Company, and (d) any other amounts that may be reimbursable by the Company to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Company thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Company and any payments or benefits required to be made or provided under applicable law. Without limiting the generality of the foregoing, any rights the Employee’s beneficiary may have to the proceeds of any life insurance arrangement set forth in Section 4.3 will be in lieu of any special entitlement to severance pay or benefits upon the Employee’s death.

6.2Disability.  In the event of the Employee’s termination by reason of Disability pursuant to Section 5.5, the Employee will continue to receive his Base Salary and participate in applicable employee benefit plans or programs of the Company (on an equivalent basis to Section 6.4(a)(iv) below) through the Termination Date, subject to offset dollar-for-dollar by the amount of any disability Income payments provided to the Employee under any Company disability policy or program funded by the Company, and will receive (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date, (b) with respect to any Termination Date on or after January 1, 2008 by reason of Employee’s Disability, any accrued but unpaid Bonus, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable, (c) with respect to any Termination Date on or before December 31, 2007 by reason of Employee’s Disability, a cash amount equal to (i) any unpaid One-Time Bonus amounts, if any, and (ii) the Employee’s pro-rata Guaranteed Bonus amount set forth in Section 3.2 of this Agreement, payable at such time as bonuses for such annual period are paid to other

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executive officers of the Company, and (d) any other amounts that may be reimbursable by the Company to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Company thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Company and any payments or benefits required to be made or provided under applicable law.

6.3By the Company for Cause or the Employee Without Good Reason.  If the Employee’s employment is terminated by the Company for Cause, or if the Employee terminates his employment other than for Good Reason, the Employee will receive (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date, (b) any accrued but unpaid Bonus, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable, and (c) any other amounts that may be reimbursable by the Company to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Company thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Company and any payments or benefits required to be made or provided under applicable law.

6.4By the Employee for Good Reason or the Company other than for Cause.

(a)Severance Benefits on Non-Change of Control Termination.  Subject to the provisions of Section 6.4(b) and Section 6.4(d), if prior to or more than one (1) year after the occurrence of a Change of Control (as defined below) the Company terminates the Employee’s employment without Cause, or the Employee terminates his employment for Good Reason, then the Employee will be entitled to the following benefits (the “Severance Benefits”):

(i)an amount equal to (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date, (b) with respect to any Termination Date on or after January 1, 2008 by the Employee for Good Reason or by the Company without Cause, any accrued but unpaid Bonus, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable, (c) any other amounts that may be reimbursable by the Company to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date;

(ii)with respect to any termination event described in this paragraph (a) of Section 6.4: (A) occurring after the Effective Date and prior to the first anniversary date thereof, twelve (12) monthly payments, and (B) occurring on or after the first anniversary of the Effective Date, twenty-four (24) monthly payments, in either case in an amount equal to one-twelfth (1/12) of the Employee’s annual Base Salary at the highest rate in effect at any time during the thirty-six (36)-month period prior to the Termination Date, commencing with the calendar month immediately following the calendar month in which the Termination Date occurs;

(iii)With respect to any Termination Date on or before December 31, 2007 by the Employee for Good Reason or by the Company without Cause, a

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cash amount equal to the Employee’s pro-rata Guaranteed Bonus amount set forth in Section 3.2 of this Agreement, payable at such time as bonuses for such annual period are paid to other executive officers of the Company; and

(iv)the Company will pay the full cost of the Employee’s COBRA continuation coverage for such period, as such coverage is required to be continued under applicable law; provided, however, that, notwithstanding the foregoing, the benefits described in this Section 6.4(a)(iv) may be discontinued prior to the end of the period provided in this subsection (iv) to the extent, but only to the extent, that the Employee receives substantially similar benefits from a subsequent employer (“COBRA Benefit”).

(b)  Change of Control Benefits.  Subject to the provisions of Section 6.4(d), if within the one (1)-year period following the occurrence of a Change of Control, the Company terminates the Employee’s employment without Cause, or the Employee terminates his employment for Good Reason (an “Eligible Termination”), then, in lieu of the Severance Benefits under Section 6.4(a), the Employee will be entitled to benefits (the “Change of Control Benefits”) identical to those set forth in Section 6.4(a) except that the amount described in clause (ii) will be paid in a lump sum within thirty (30) days following the Termination Date and will be equal to: (A) twelve (12) monthly payments with respect to any Eligible Termination occurring after the Effective Date and prior to the first anniversary date thereof, and (B) with respect to any Eligible Termination occurring on or after the first anniversary date of the Effective Date an additional twelve (12) monthly payments.

(c)  Definition of Change of Control.  For purposes of this Agreement, a “Change of Control will mean the first to occur of:

(i)The acquisition by any individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the then-outstanding equity interests of Linn Energy (the “Outstanding Linn Energy Equity”) or (B) the combined voting power of the then-outstanding voting securities of Linn Energy entitled to vote generally in the election of directors (the “Outstanding Linn Energy Voting Securities”); provided, however, that, for purposes of this Section 6.4(c)(i), the following acquisitions will not constitute a Change of Control: (A) any acquisition directly from Linn Energy, (B) any acquisition by Linn Energy, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Linn Energy or any affiliated company, or (D) any acquisition by any corporation or other entity pursuant to a transaction that complies with Section 6.4(c)(iii)(A), Section 6.4(c)(iii)(B) or Section 6.4(c)(iii)(C):

(ii)Any time at which individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Linn Energy’s Unit holders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as

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a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(iii)Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving Linn Energy or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of Linn Energy, or the acquisition of assets or equity interests of another entity by Linn Energy or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Linn Energy Equity and the Outstanding Linn Energy Voting Securities Immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding equity interests and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation or other entity that, as a result of such transaction, owns Linn Energy or all or substantially all of Linn Energy’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Linn Energy Equity and the Outstanding Linn Energy Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Linn Energy or such corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then-outstanding equity interests of the corporation or other entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or other entity, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation or equivalent body of any other entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(iv)Consummation of a complete liquidation or dissolution of Linn Energy.

(d)  Conditions to Receipt of Severance Benefits.

(i)Release.  As a condition to receiving any Severance Benefits or Change of Control Benefits to which the Employee may otherwise be entitled under Section 6.4(a) or Section 6.4(b), the Employee will execute a release (the “Release”), which will include an affirmation of the restrictive covenants set forth in Section 7 and a non-disparagement provision, in a form and substance satisfactory to the Company, of any claims, whether arising under federal, state or local statute, common law or otherwise, against the Company and its direct or indirect subsidiaries which arise or may have arisen on or before the date of the Release, other than any claims under this Agreement or any rights to indemnification from the Company and its direct or indirect subsidiaries pursuant to any provisions of the Company’s (or any of its subsidiaries’) organizational

8

documents or any directors and officers liability insurance policies maintained by the Company. If the Employee fails or otherwise refuses to execute a Release within a reasonable time after the Company’s request to do so, and in all events prior to the date on which such benefits are to be first paid to him, the Employee will not be entitled to any Severance Benefits or Change of Control Benefits, as the case may be, or any other benefits provided under this Agreement and the Company will have no further obligations with respect to the provision of those benefits except as may be required by law.

(ii)Limitation on Benefits.  If, following a termination of employment that gives the Employee a right to the payment of Severance Benefits under Section 6.4(a) or Section 6.4(b), the Employee violates in any material respect any of the covenants in Section 7 or as otherwise set forth in the Release, the Employee will have no further right or claim to any payments or other benefits to which the Employee may otherwise be entitled under Section 6.4(a) or Section 6.4(b) from and after the date on which the Employee engages in such activities and the Company will have no further obligations with respect to such payments or benefits, and the covenants in Section 7 will nevertheless continue in full force and effect.

6.5Severance Benefits Not Includable for Employee Benefits Purposes.  Except to the extent the terms of any applicable benefit plan, policy or program provide otherwise, any benefit programs of the Company that takes into account the Employee’s income will exclude any and all Severance Benefits and Change of Control Benefits provided under this Agreement.

6.6Exclusive Severance Benefits.  The Severance Benefits payable under Section 6.4(a) or the Change of Control Benefits payable under Section 6.4(b), if they become applicable under the terms of this Agreement, will be in lieu of any other severance or similar benefits that would otherwise be payable under any other agreement, plan, program or policy of the Company.

6.7Additional Provisions Regarding Payments Under This Agreement.  Notwithstanding anything in this Agreement to the contrary, in the event that any benefits payable or otherwise provided under this Agreement would be

(a)  subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”). (such excise tax referred to in this Agreement as the “Excise Tax”), then the Board may, in its sole discretion, provide for the payment of, or otherwise reimburse the Employee for, an amount up to such Excise Tax and any related taxes, fees or penalties thereon as the Board may consider to be customary and appropriate for a comparable public company; or

(b)  deemed to constitute non-qualified deferred compensation subject to Section 409A of the Code, Linn Energy or the Company, as the case may be, will have the discretion to adjust the terms of such payment or benefit as it deems necessary to comply with the requirements of Section 409A to avoid the imposition of any excise tax or other penalty with respect to such payment or benefit under Section 409A of the Code.

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7.Restrictive Covenants.

7.1Confidential Information.  The Employee hereby acknowledges that in connection with his employment by the Company he will be exposed to and may obtain certain Confidential Information (as defined below) (including, without limitation, procedures, memoranda, notes, records and customer and supplier lists whether such information has been or is made, developed or compiled by the Employee or otherwise has been or is made available to him) regarding the business and operations of the Company and its subsidiaries or affiliates. The Employee further acknowledges that such Confidential Information is unique, valuable, considered trade secrets and deemed proprietary by the Company. For purposes of their Agreement, “Confidential Information’’ includes, without limitation, any information heretofore or hereafter acquired, developed or used by any of the Company, Linn Energy or their direct or indirect subsidiaries relating to Business Opportunities or Intellectual Property or other geological, geophysical, economic, financial or management aspects of the business, operations, properties or prospects of the Company, Linn Energy or their direct or indirect subsidiaries, whether oral or in written form. The Employee agrees that all Confidential information is and will remain the property of the Company, Linn Energy or their direct or indirect subsidiaries, as the case may be. The Employee further agrees, except for disclosures occurring in the good faith performance of his duties for the Company, Linn Energy or their direct or indirect subsidiaries, during the Employment Term and for a period of two (2) years after the Termination Date, to hold in the strictest confidence all Confidential Information, and not to, directly or indirectly, duplicate, sell, use, lease, commercialize, disclose or otherwise divulge to any person or entity any portion of the Confidential information or use any Confidential Information, directly or indirectly, for his own benefit or profit or allow any person, entity or third party, other than the Company, Linn Energy or their direct or indirect subsidiaries and authorized executives of the same, to use or otherwise gain access to any Confidential Information. The Employee will have no obligation under this Agreement with respect to any information that becomes generally available to the public other than as a result of a disclosure by the Employee or his agent or other representative or becomes available to the Employee on a non-confidential basis from a source other than the Company, Linn Energy or their direct or indirect subsidiaries. Further, the Employee will have no obligation under this Agreement to keep confidential any of the Confidential Information to the extent that a disclosure of it is required by law or is consented to by the Company or Linn Energy; provided, however, that if and when such a disclosure is required by law, the Employee promptly will provide the Company with notice of such requirement, so that the Company may seek an appropriate protective order.

7.2Return of Property.  Employee agrees to deliver promptly to the Company, upon termination of his employment hereunder, or at any other time when the Company so requests, all documents relating to the business of the Company, Linn Energy or their direct or indirect subsidiaries, including without limitation: all geological and geophysical reports and related data such as maps, charts, logs, seismographs, seismic records and other reports and related data, calculations, summaries, memoranda and opinions relating to the foregoing, production records, electric logs, core data, pressure data, lease files, well files and records, land files, abstracts, title opinions, title or curative matters, contract files, notes, records, drawings, manuals, correspondence, financial and accounting information, customer lists, statistical data and compilations, patents, copyrights, trademarks, trade names, inventions, formulae, methods, processes, agreements, contracts, manuals or any documents relating to the business of the Company, Linn Energy or their direct or indirect subsidiaries and all copies thereof and therefrom; provided, however, that the Employee will be permitted to retain copies of any

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documents or materials of a personal nature or otherwise related to the Employee’s rights under this Agreement.

7.3Non-Compete Obligations.

(a) Non-Compete Obligations During Employment Term. The Employee agrees that during the Employment Term:

(i)the Employee will not, other than through the Company, engage or participate in any manner, whether directly or indirectly through any family member or as an employee, employer, consultant, agent, principal, partner, more than one percent shareholder, officer, director, licensor, lender, lessor or in any other individual or representative capacity, in any business or activity which is engaged in leasing, acquiring, exploring, producing, gathering or marketing hydrocarbons and related products; provided that the foregoing shall not be deemed to restrain the participation by Employee’s spouse in any capacity set forth above in any business or activity engaged in any such activity and provided further that Linn Energy may, in good faith, take such reasonable action with respect to Employee’s performance of his duties, responsibilities and authorities as set forth in Sections 1.1 and 1.2 of this Agreement as it deems necessary and appropriate to protect its legitimate business interests with respect to any actual or apparent conflict of interest reasonably arising from or out of the participation by Employee’s spouse in any such competitive business or activity; and

(ii)all investments made by the Employee (whether in his own name or in the name of any family members or other nominees or made by the Employee’s controlled affiliates), which relate to the leasing, acquisition, exploration, production, gathering or marketing of hydrocarbons and related products will be made solely through the Company; and the Employee will not (directly or indirectly through any family members or other persons), and will not permit any of his controlled affiliates to: (A) invest or otherwise participate alongside the Company or its direct or indirect subsidiaries in any Business Opportunities, or (B) invest or otherwise participate in any business or activity relating to a Business Opportunity, regardless of whether any of the Company or its direct or indirect subsidiaries ultimately participates in such business or activity, in either case, except through the Company. Notwithstanding the foregoing, nothing in this Section 7.3 shall be deemed to prohibit the Employee or any family member from owning, or otherwise having an interest in, less than one percent (1 %) of any publicly-owned entity or three percent (3%) or less of any private equity fund or similar investment fund that invests in any business or activity engaged in any of the activities set forth above, provided that Employee has no active role with respect to any investment by such fund in any entity.

(b) Non-Compete Obligations After Termination Date.  The Employee agrees that the Employee will not engage or participate in any manner, whether directly or indirectly through any family member or other person or as an employee, employer, consultant, agent principal, partner, more than one percent shareholder, officer, director, licensor, lender, lessor or in any other individual or representative capacity:

(i)during the one-year period following the Termination Date, in any business or activity which is engaged in leasing, acquiring, exploring, producing,

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gathering or marketing hydrocarbons and related products within (A) any county or parish in which the Company owns any oil and gas interests or conducts operations on the Termination Date or in which the Company has owned any oil and gas interests or conducted operations at any time during the six months immediately preceding the Termination Date or (B) any county or parish adjacent to any county or parish described in clause (A); and

(ii)during the one-year period following the Termination Date, in any business or activity which is in direct competition with the business of the Company or its direct or indirect subsidiaries in the leasing, acquiring, exploring, producing, gathering or marketing of hydrocarbons and related products within the boundaries of, or within a two-mile radius of the boundaries of, any mineral property interest of any of the Company or its direct or indirect subsidiaries (including, without limitation, a mineral lease, overriding royalty interest production payment net profits interest, mineral fee interest or option or right to acquire any of the foregoing, or an area of mutual interest as designated pursuant to contractual agreements between the Company and any third party) or any other property on which any of the Company or its direct or indirect subsidiaries has an option, right, license or authority to conduct or direct exploratory activities, such as three-dimensional seismic acquisition or other seismic, geophysical and geochemical activities (but not including any preliminary geological mapping), as of the Termination Date or as of the end of the six-month period following such Termination Date; provided that, this subsection (ii) will not preclude the Employee from making investments in securities of oil and gas companies which are registered on a national stock exchange, if (A) the aggregate amount owned by the Employee and all family members and affiliates does not exceed 5% of such company’s outstanding securities, and (B) the aggregate amount invested in such investments by the Employee and all family members and affiliates after the date hereof does not exceed $500,000.

Notwithstanding the foregoing, nothing in this Section 7.3 shall be deemed to restrain the participation by Employee’s spouse in any capacity set forth above in any business or activity described above.

(c) Not Applicable Following Change of Control Termination.  The Employee will not be subject to the covenants contained in this Section 7.3 and such covenants will not be enforceable against the Employee from and after the date that the Employee’s employment is terminated within one (1) year after a Change of Control.

7.4Non-Solicitation.  During the Employment Term and for a period of twenty-four (24) months after the Termination Date, the Employee will not, whether for his own account or for the account of any other Person (other than the Company or its direct or indirect subsidiaries), intentionally solicit, endeavor to entice away from the Company or its direct or indirect subsidiaries, or otherwise interfere with the relationship of the Company or its direct or indirect subsidiaries with, (a) any person who is employed by the Company or its direct or indirect subsidiaries (including any independent sales representatives or organizations), or (b) any client or customer of the Company or its direct or indirect subsidiaries.

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7.5Assignment of Developments.  The Employee assigns and agrees to assign without further compensation to the Company and its successors, assigns or designees, all of the Employee’s right, title and interest in and to all Business Opportunities and Intellectual Property (as those terms are defined below), and further acknowledges and agrees that all Business Opportunities and Intellectual Property constitute the exclusive property of the Company.

For purposes of this Agreement, “Business Opportunities” means all business ideas, prospects, proposals or other opportunities pertaining to the lease, acquisition, exploration, production, gathering or marketing of hydrocarbons and related products and the exploration potential of geographical areas on which hydrocarbon exploration prospects are located, which are developed by the Employee during the Employment Term, or originated by any third party and brought to the attention of the Employee during the Employment Term, together with information relating thereto (including, without limitation, geological and seismic data and interpretations thereof, whether In the form of maps, charts, logs, seismographs, calculations, summaries, memoranda, opinions or other written or charted means).

For purposes of this Agreement, “Intellectual Property” shall mean all ideas, inventions, discoveries, processes, designs, methods, substances, articles, computer programs and improvements (Including, without limitation, enhancements to, or further interpretation or processing of, information that was in the possession of the Employee prior to the date of this Agreement), whether or not patentable or copyrightable, which do not fall within the definition of Business Opportunities, which the Employee discovers, conceives, invents, creates or develops, alone or with others, during the Employment Term, if such discovery, conception, invention, creation or development (A) occurs in the course of the Employee’s employment with the Company, or (B) occurs with the use of any of the time, materials or facilities of the Company or its direct or indirect subsidiaries, or (C) in the good faith judgment of the Board, relates or pertains in any material way to the purposes, activities or affairs of the Company or its direct or indirect subsidiaries.

7.6Injunctive Relief.  The Employee acknowledges that a breach of any of the covenants contained in this Section 7 may result in material, irreparable injury to the Company for which there is no adequate remedy at law, that it may not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat of breach, the Company may be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining the Employee from engaging in activities prohibited by this Section 7 or such other relief as may be required to specifically enforce any of the covenants in this Section 7. To the extent that the Company seeks a temporary restraining order (but not a preliminary or permanent Injunction), the Employee agrees that a temporary restraining order may be obtained ex parte, to the extent provided by Texas law.

7.7Adjustment of Covenants.  The parties consider the covenants and restrictions contained in this Section. 7 to be reasonable. However, if and when any such covenant or restriction is found to be void or unenforceable and would have been valid had some part of it been deleted or had its scope of application been modified, such covenant or restriction will be deemed to have been applied with such modification as would be necessary and consistent with the intent of the parties to have made it valid, enforceable and effective.

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7.8Forfeiture Provision.

(a) Detrimental Activities.  If the Employee engages in any activity that violates any covenant or restriction contained in this Section 7. in addition to any other remedy the Company may have at law or in equity, (i) the Employee will be entitled to no further payments or benefits from the Company under this Agreement or otherwise, except for any payments or benefits required to be made or provided under applicable law, (ii) all unexercised Unit options, restricted Units and other forms of equity compensation held by or credited to the Employee will terminate effective as of the date on which the Employee engages in that activity, unless terminated sooner by operation of another term or condition of this Agreement or other applicable plans and agreements, and (iii) any exercise, payment or delivery pursuant to any equity compensation award that occurred within one year prior to the date on which the Employee engages in that activity may be rescinded within one year after the first date that a majority of the members of the Board first became aware that the Employee engaged in that activity. In the event of any such rescission, the Employee will pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment or delivery, in such manner and on such terms and conditions as may be required.

(b) Right of Set-Off.  The Employee consents to a deduction from any amounts the Company owes the Employee from time to time (Including amounts owed as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to the Employee by the Company), to the extent of the amounts the Employee owes the Company under Section 7.8(a) above. Whether or not the Company elects to make any set-off in whole or in part, if the Company does not recover by means of set-off the full amount the Employee owes, calculated as set forth above, the Employee agrees to pay immediately the unpaid balance to the Company. In the discretion of the Board, reasonable interest may be assessed on the amounts owed, calculated from the later of (i) the date the Employee engages in the prohibited activity and (ii) the applicable date of exercise, payment or delivery.

8.Miscellaneous.

8.1Assignment: Successors: Binding Agreement.  This Agreement may not be assigned by either party, whether by operation of law or otherwise, without the prior written consent of the other party, except that any right, title or Interest of the Company arising out of this Agreement may be assigned to any corporation or entity controlling, controlled by, or under common control with the Company, or succeeding to the business and substantially all of the assets of the Company or any affiliates for which the Employee performs substantial services. Subject to the foregoing, this Agreement will be binding upon and will inure to the benefit of the parties and their respective heirs, legatees, devisees, personal representatives, successors and assigns.

8.2Modification and Waiver.  Except as otherwise provided below, no provision of this Agreement may be modified, waived, or discharged unless such waiver, modification or discharge is duly approved by the Board and is agreed to in writing by the Employee and such officer(s) as may be specifically authorized by the Board to effect it. No waiver by any party of any breach by any other party of, or of compliance with, any term or condition of this Agreement to be performed by any other party, at any time, will use constitute a waiver of similar or dissimilar terms or conditions at that time or at any prior or subsequent time.

8.3Entire Agreement.  This Agreement embodies the entire understanding of the parties hereof, and, upon the Effective Date, will supersede all other oral or written agreements

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or understandings between them regarding the subject matter hereof. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter of this Agreement, has been made by either party which is not set forth expressly in this Agreement.

8.4Governing Law.  The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of Texas other than the conflict of laws provision thereof.

8.5Consent to Jurisdiction and Service of Process.

(a)  Section 7 Disputes.  In the event of any dispute, controversy or claim between the Company and the Employee arising out of or relating to the interpretation, application or enforcement of the provisions of Section 7, the Company and the Employee agree and consent to the personal jurisdiction of the state district courts located within Harris County, Texas and/or the United States District Court for the Southern District of Texas, Houston Division for resolution of the dispute, controversy or claim, and that those courts, and only those courts, will have jurisdiction to determine any dispute, controversy or claim related to, arising under or in connection with Section 7 of this Agreement. The Company and the Employee also agree that those courts are convenient forums for the parties to any such dispute, controversy or claim and for any potential witnesses and that process issued out of any such court or in accordance with the rules of practice of that court may be served by mail or other forms of substituted service to the Company at the address of its principal executive offices and to the Employee at his last known address as reflected in the Company’s records.

(b)  Disputes Other Than Under Section 7.  In the event of any dispute relating to this Agreement, other than a dispute relating solely to Section 7, the parties will use their best efforts to settle the dispute, claim, question, or disagreement. To this effect, they will consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties. If such a dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Employment Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure. If the parties do not reach such solution through negotiation or mediation within a period of sixty (60) days, then, upon notice by either party to the other, all disputes, claims, questions, or differences shall be resolved exclusively by arbitration administered by the American Arbitration Association under the Employment Arbitration Rules and before a single neutral arbitrator. If arbitration is elected by one party, the other is bound to submit itself and all disputes to arbitration. The arbitrator will be selected by agreement of the parties or, if they do not agree on an arbitrator within thirty (30) days after either party has notified the other of his or its desire to have the question settled by arbitration, then the arbitrator will be selected pursuant to the Employment Arbitration Rules of the American Arbitration Association. The decision of the Arbitrator shall be final and binding, and may be enforced in any court with jurisdiction. Unless otherwise mutually agreed by the parties in writing, any such arbitration shall take place in Houston, Texas.

8.6Withholding of Taxes.  The Company will withhold from any amounts payable under the Agreement all federal, state, local or other taxes as legally will be required to be withheld.

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8.7Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested). In each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):

to the Company, to:

Attn: General Counsel

Linn Energy, LLC

650 Washington Road, Suite 800

Pittsburgh, Pennsylvania 15228

to the Employee, to:

Arden L. Walker, Jr.

4461 Bella Vista Circle

Farmington, New Mexico 87401

Addresses may be changed by written notice sent to the other party at the last recorded address of that party.

8.8Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

8.9Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same Instrument.

8.10Headings.  The headings used in this Agreement are for convenience only, do not constitute a part of the Agreement, and will not be deemed to limit, characterize, or affect in any way the provisions of the Agreement, and all provisions of the Agreement will be construed as if no headings had been used in the Agreement.

8.11Construction.  As used in this Agreement, unless the context otherwise requires: (a) the terms defined herein will have the meanings set forth herein for all purposes; (b) references to “Section” are to a section hereof; (c) “include,” “Includes” and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import; (d) “writing,” “written” and comparable terms refer to printing, typing, lithography and other means of reproducing words in a visible form; (e) “hereof,” “herein.” “hereunder” and comparable terms refer to the entirety of this Agreement and not to any particular section or other subdivision hereof or attachment hereto; (f) references to any gender include references to all genders; and (g) references to any agreement or other instrument or statute or regulation are referred to as amended or supplemented from time to time (and, in the case of a statute or regulation, to any successor provision).

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8.12Capacity: No Conflicts. The Employee represents and warrants to the Company that: (i) he has full power, authority and capacity to execute and deliver this Agreement, and to perform his obligations hereunder, (ii) such execution, delivery and performance will not (and with the giving of notice or lapse of time, or both, would not) result in the breach of any agreement or other obligation to which he is a party or Is otherwise bound, and (iii) this Agreement is his valid and binding obligation, enforceable in accordance with its terms.

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the 22 day of January, 2007.

LINN OPERATING, INC.
By:	/s/ Michael C. Linn
Name:	Michael C. Linn
Title:	Chairman, President and Chief Executive
Officer
EMPLOYEE
Arden L. Walker, Jr.
For the limited purposes set forth herein:
LINN ENERGY, LLC
By:	/s/ Michael C. Linn
Name:	Michael C. Linn
Title:	Chairman, President and Chief Executive
Officer

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the 22nd day of February, 2007.

LINN OPERATING, INC.
By:
Name:	Michael C. Linn
Title:	Chairman, President and Chief Executive
Officer
EMPLOYEE
/s/ Arden L. Walker, Jr.
Arden L. Walker, Jr.
For the limited purposes set forth herein:
LINN ENERGY, LLC
By:
Name:	Michael C. Linn
Title:	Chairman, President and Chief Executive
Officer

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EX-10.15

Exhibit 10.15

Execution Version

FIRST AMENDMENT

TO

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Among

LINN ENERGY, LLC

as Borrower,

BNP PARIBAS,

as Administrative Agent,

and

The Lenders Signatory Hereto

Effective as of November 2, 2007

FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

This FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this “First Amendment”) executed effective as of November 2, 2007 (the “First Amendment Effective Date”) is among LINN ENERGY, LLC, a limited liability company formed under the laws of the State of Delaware (the “Borrower”); each of the undersigned guarantors (the “Guarantors”, and together with the Borrower, the “Obligors”); each of the Lenders that is a signatory hereto; and BNP PARIBAS, as administrative agent for the Lenders (in such capacity, together with its successors, the “Administrative Agent”).

Recitals

A.            The Borrower, the Administrative Agent and the Lenders are parties to that certain Third Amended and Restated Credit Agreement dated as of August 31, 2007 (as amended, the “Credit Agreement”), pursuant to which the Lenders have made certain credit available to and on behalf of the Borrower.

B.            The Borrower has requested and the Administrative Agent and the Lenders have agreed to amend certain provisions of the Credit Agreement.

C.            NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.               Defined Terms.  Each capitalized term which is defined in the Credit Agreement, but which is not defined in this First Amendment, shall have the meaning ascribed such term in the Credit Agreement.  Unless otherwise indicated, all section references in this First Amendment refer to the Credit Agreement.

Section 2.               Amendments to Credit Agreement.

2.1           Definitions.  Section 1.02 is hereby amended by adding or amending and restating the following definitions:

“ ‘Agreement’ means this Third Amended and Restated Credit Agreement, as amended by that certain First Amendment to Third Amended and Restated Credit Agreement, dated as of November 2, 2007, and as the same may from time to time be further amended, modified, supplemented or restated.”

“ ‘Investment’ means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person or any unfunded subscription agreement to make any such acquisition or fund capital calls (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale, but excluding any unconsummated purchase and sale agreements to purchase all or substantially all the Equity Interests of Persons

2

owning Oil and Gas Properties); (b) the making of any deposit with, or advance, loan or capital contribution to, assumption of Debt of, purchase or other acquisition of any other Debt or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property of another Person that constitutes a business unit or (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, Debt or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.”

2.2               Section 9.05.  Section 9.05(g) is hereby amended and restated in its entirety as follows:

“(g)         Investments (i) made by the Borrower in or to the Guarantors, (ii) made by any Subsidiary in or to the Borrower or any Guarantor, (iii) made by the Borrower or any Guarantor in any Person that owns Oil and Gas Properties which are overriding royalty, royalty interests or other similar non-cost bearing interests and which do not own other material Properties, provided, that after the consummation of such Investment (A) the Borrower and its Subsidiaries are in compliance with all covenants under this Agreement and (B) such Person promptly becomes a Guarantor or is promptly dissolved into a Guarantor or the Borrower and (iv) made by the Borrower or any Guarantor in Subsidiaries that are not Guarantors, provided that the aggregate of all Investments made by the Borrower and the Guarantors in or to all Subsidiaries that are not Guarantors shall not exceed $10,000,000 at any time.

2.3           Section 9.18.  Section 9.18(a)(iii) is hereby amended and restated in its entirety as follows:

“(iii) the notional volumes for which do not exceed the current net monthly production (regardless of projected production levels) at the time such Swap Agreement is executed, calculated separately for each of crude oil and natural gas, provided, that the foregoing shall not prevent the Borrower from entering into forward agreements in respect of commodity Swap Agreements in respect of future projected volumes from Oil and Gas Properties subject to the Dominion Production Payment, so long as the notional volumes under such forward agreements do not exceed the reasonably anticipated net monthly production for all calculation periods under such forward agreements, calculated separately for each of crude oil and natural gas.”

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Section 3.               Conditions Precedent.  The effectiveness of this First Amendment is subject to the receipt by the Administrative Agent of the following documents and satisfaction of the other conditions provided in this Section 3, each of which shall be reasonably satisfactory to the Administrative Agent in form and substance:

3.1           Payment by the Borrower to the Administrative Agent of all fees and other amounts due and payable on or prior to the First Amendment Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower.

3.2           The Administrative Agent shall have received multiple counterparts as requested of this First Amendment from the Majority Lenders.

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

3.4           No Default or Event of Default shall have occurred and be continuing as of the First Amendment Effective Date.

Section 4.               Representations and Warranties; Etc.  Each Obligor hereby affirms:  (a) that as of the date of execution and delivery of this First Amendment, all of the representations and warranties contained in each Loan Document to which such Obligor is a party are true and correct in all material respects as though made on and as of the First Amendment Effective Date (unless made as of a specific earlier date, in which case, was true as of such date); and (b) that after giving effect to this First Amendment and to the transactions contemplated hereby, no Defaults exist under the Loan Documents or will exist under the Loan Documents.

Section 5.               Miscellaneous.

5.1           Confirmation.  The provisions of the Credit Agreement (as amended by this First Amendment) shall remain in full force and effect in accordance with its terms following the effectiveness of this First Amendment.

5.2           Ratification and Affirmation of Obligors.  Each of the Obligors hereby expressly (i) acknowledges the terms of this First Amendment, (ii) ratifies and affirms its obligations under the Guarantee Agreement and the other Security Instruments to which it is a party, (iii) acknowledges, renews and extends its continued liability under the Guarantee Agreement and the other Security Instruments to which it is a party and agrees that its guarantee under the Guarantee Agreement and the other Security Instruments to which it is a party remains in full force and effect with respect to the Indebtedness as amended hereby.

5.3           Counterparts.  This First Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

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5.4           No Oral Agreement.  THIS WRITTEN FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.

5.5           Governing Law.  THIS FIRST AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed effective as of the date first written above.

BORROWER:	LINN ENERGY, LLC
		By:	/s/ Kolja Rockov
			Kolja Rockov, Executive Vice President
			and Chief Financial Officer

GUARANTORS:	LINN ENERGY HOLDINGS, LLC
	LINN OPERATING, INC.
	PENN WEST PIPELINE, LLC
	MID ATLANTIC WELL SERVICE, INC.
	MID-CONTINENT HOLDINGS I, LLC
	MID-CONTINENT HOLDINGS II, LLC
	MID-CONTINENT I, LLC
	MID-CONTINENT II, LLC
	LINN GAS MARKETING, LLC
	LINN EXPLORATION MIDCONTINENT, LLC

By:	/s/ Kolja Rockov
	Kolja Rockov
	Executive Vice President and Chief
	Financial Officer

First Amendment

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BNP PARIBAS, as Administrative Agent and a
Lender
By:	/s/ Doug Liftman
Name:	Doug Liftman
Title:	Managing Director
By:	/s/ Betsy Jocher
Name:	Betsy Jocher
Title:	Director

7

ROYAL BANK OF CANADA, as Syndication
Agent and a Lender
By:	/s/ Don J. McKinnerney
Name:	Don J. McKinnerney
Title:	Authorized Signatory

8

SOCIETE GENERALE, as a Co-Documentation
Agent and a Lender
By:	/s/ Elena Robciuc
Name:	Elena Robciuc
Title:	Director

9

COMERICA BANK, as a Lender
By:	/s/ Huma V. Manal
Name:	Huma V. Manal
Title:	Vice President

10

FORTIS CAPITAL CORP., as a Lender
By:	/s/ David Montgomery
Name:	David Montgomery
Title:	Director
By:	/s/ Darrell Holley
Name:	Darrell Holley
Title:	Managing Director

11

CITIBANK, NA, as a Co-Documentation Agent
and a Lender
By:	/s/ Thomas Benavides
Name:	Thomas Benavides
Title:	Vice President

12

KEYBANK NATIONAL ASSOCIATION, as a
Lender
By:	/s/ Thomas Rajan
Name:	Thomas Rajan
Title:	Director

13

WACHOVIA BANK, N.A., as a Lender
By:	/s/ Leanne S. Phillips
Name:	Leanne S. Phillips
Title:	Director

14

BMO CAPITAL MARKETS FINANCING,
INC., as a Co-Documentation Agent and a Lender
By:	/s/ James V. Ducote
Name:	James V. Ducote
Title:	Director

15

CREDIT SUISSE CAYMAN ISLANDS
BRANCH, as a Lender
By:	/s/ Vanessa Gomez
Name:	Vanessa Gomez
Title:	Vice President
By:	/s/ Morenikeji Ajayi
Name:	Morenikeji Ajayi
Title:	Associate

16

COMPASS BANK, as a Lender
By:	/s/ Dorothy Marchand
Name:	Dorothy Marchand
Title:	Senior Vice President

17

DnB NOR BANK ASA, as a Lender
By:	/s/ Thomas Tangen
Name:	Thomas Tangen
Title:	Vice President
By:	/s/ Asa Jemseby Rodgers
Name:	Asa Jemseby Rodgers
Title:	Vice President

18

DZ BANK AG, DEUTSCHE ZENTRAL-GENOSSENSCHAFTSBANK, FRANKFURT AM MAIN, NEW YORK BRANCH, as a Lender
By:	/s/ Daria A. Plahle
Name:	Daria A. Plahle
Title:	First Vice President
By:	/s/ Avery B. Snead
Name:	Avery B. Snead
Title:	Assistant Treasurer

19

GUARANTY BANK, FSB, as a Lender
By:	/s/ David M. Butler
Name:	David M. Butler
Title:	Vice President

20

LEHMAN BROTHERS COMMERCIAL BANK, as a Lender
By:	/s/ Brian McNany
Name:	Brian McNany
Title:	Authorized Signatory

21

JPMORGAN CHASE BANK, N.A., as a Lender
By:	/s/ Michael A. Kamauf
Name:	Michael A. Kamauf
Title:	Vice President

22

THE ROYAL BANK OF SCOTLAND plc, as a Lender
By:	/s/ Lucy Walker
Name:	Lucy Walker
Title:	Vice President

23

RZB FINANCE LLC, as a Lender
By:	/s/ Shirley Ritch
Name:	Shirley Ritch
Title:	Assistant Vice President
By:	/s/ Nicolas M. Moriatis
Name:	Nicolas M. Moriatis
Title:	Group Vice President
	Controller

24

UNION BANK OF CALIFORNIA, N.A., as a Lender
By:	/s/ Scott Gildea
Name:	Scott Gildea
Title:	Vice President

25

U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:	/s/ Justin M. Alexander
Name:	Justin M. Alexander
Title:	Vice President

26

CALYON NEW YORK BRANCH, as a Lender
By:	/s/ Tom Byargeon
Name:	Tom Byargeon
Title:	Managing Director
By:	/s/ Sharada Manne
Name:	Sharada Manne
Title:	Vice President

27

THE BANK OF NOVA SCOTIA, as a Lender
By:	/s/ Andrew Ostrov
Name:	Andrew Ostrov
Title:	Director

28

DEUTSCHE BANK TRUST COMPANY AMERICAS, as a Lender
By:	/s/ Dusan Lazarov
Name:	Dusan Lazarov
Title:	Vice President
By:	/s/ Carin Keegan
Name:	Carin Keegan
Title:	Vice President

29

ALLIED IRISH BANKS P.L.C., as a Lender
By:	/s/ Mark Connelly
Name:	Mark Connelly
Title:	Senior Vice President
By:	/s/ Edward M. Fenk
Name:	Edward Fenk
Title:	Vice President

30

WESTLB AG, NEW YORK BRANCH, as a Lender
By:	/s/ Duncan Robertson
Name:	Duncan Robertson
Title:	Executive Director
By:	/s/ Paul Vastola
Name:	Paul Vastola
Title:	Director

31

SUNTRUST BANK, as a Lender
By:	/s/ Sean Roche
Name:	Sean Roche
Title:	Vice President

32

EX-10.16

Exhibit 10.16

Execution Version

SECOND AMENDMENT

TO

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Among

LINN ENERGY, LLC

as Borrower,

BNP PARIBAS,

as Administrative Agent,

and

The Lenders Signatory Hereto

Effective as of January 31, 2008

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

This SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this “Second Amendment”) executed effective as of January 31, 2008 (the “Second Amendment Effective Date”) is among LINN ENERGY, LLC, a limited liability company formed under the laws of the State of Delaware (the “Borrower”); each of the undersigned guarantors (the “Guarantors”, and together with the Borrower, the “Obligors”); each of the Lenders that is a signatory hereto; and BNP PARIBAS, as administrative agent for the Lenders (in such capacity, together with its successors, the “Administrative Agent”).

Recitals

A.            The Borrower, the Administrative Agent and the Lenders are parties to that certain Third Amended and Restated Credit Agreement dated as of August 31, 2007 (as amended by the First Amendment to Third Amended and Restated Credit Agreement, dated November 2, 2007, as the same has been further amended, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”), pursuant to which the Lenders have made certain credit available to and on behalf of the Borrower.

B.            The Borrower has requested and the Administrative Agent and the Lenders have agreed to amend certain provisions of the Credit Agreement.

C.            NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.               Defined Terms.  Each capitalized term which is defined in the Credit Agreement, but which is not defined in this Second Amendment, shall have the meaning ascribed to such term in the Credit Agreement.  Unless otherwise indicated, all section references in this Second Amendment refer to the Credit Agreement.  For purposes of this Second Amendment, the following terms have the meanings specified below:

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

“Acquisition Documents” means (a) the Purchase and Sale Agreement dated as of December 20, 2007, by and between Lamamco Drilling Company, as seller and Linn Energy Holdings, LLC, as buyer, and (b) all bills of sale, assignments, agreements, instruments and documents executed and delivered in connection therewith, as amended.

“Acquisition Properties” means the Oil and Gas Properties and other properties described in the Acquisition Documents.

Section 2.               Amendments to Credit Agreement.

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2.1           Definitions.  Section 1.02 is hereby amended by adding or amending and restating the following definitions:

“ ‘Agreement’ means this Third Amended and Restated Credit Agreement, as amended by that certain First Amendment to Third Amended and Restated Credit Agreement, dated as of November 2, 2007, as amended by the Second Amendment, and as the same may from time to time be further amended, modified, supplemented or restated.”

“ ‘Asset Sale’ means, solely for purposes of Section 3.04(c), the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise) by the Borrower or any of the Subsidiaries to any Person other than the Borrower or any Guarantor of (a) any Equity Interests in any of the Subsidiaries (including any such sale by the issuer of such Equity Interests but excluding directors’ qualifying shares) or (b) any other assets of the Borrower or any of the Subsidiaries (other than (x)(i) inventory (including Hydrocarbons), (ii) damaged, obsolete or worn out assets, scrap and equipment no longer used in the operations of the Borrower or any Subsidiary, and (iii) Investments permitted by Section 9.05, in each case disposed of in the ordinary course of business and (y) any sale, transfer or other disposition that, together with all related sales, transfers or other dispositions, has a value not in excess of $25,000,000 in the aggregate).”

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

“ ‘Intercreditor Agreement’ means in respect of the Second Lien Term Loan Agreement, that certain Intercreditor Agreement dated as of the Second Amendment Effective Date entered into by and among the Administrative Agent, the Second Lien Term Loan Administrative Agent, the Borrower and the Guarantors, as the same may from time to time be amended, modified, supplemented or restated.”

“ ‘Net Cash Proceeds’ means (a) in connection with any issuance or sale of Equity Interests, Debt securities, Casualty Events or the incurrence of Debt, the cash proceeds received from such issuance or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith; and (b) in connection with any Asset Sale, the cash proceeds thereof (including cash proceeds subsequently received (as and when received) in respect of noncash consideration initially received), net of (i) selling and other expenses (including reasonable broker’s fees or commissions, legal fees, transfer and similar taxes, and the Borrower’s good faith estimate of income taxes actually paid or payable in connection with such sale), (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) any amount payable in

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respect of any Debt for borrowed money which is secured by the asset sold in such Asset Sale and which is required to be repaid with such proceeds (excluding any such Debt assumed by the purchaser of such asset).”

“ ‘Permitted Refinancing Debt’ means Debt (for purposes of this definition, “new Debt”) incurred in exchange for, or proceeds of which are used to refinance, all of the Second Lien Term Loan or any Permitted Refinancing Debt theretofore incurred (as applicable, the “Refinanced Debt”); provided that (a) such new Debt is in an aggregate principal amount not in excess of $400,000,000; (b) such new Debt has a stated maturity no earlier than the day 365 days after August 1, 2010; and (c) such new Debt (and any guarantees thereof) is subordinated in right of payment to the Indebtedness (or, if applicable, the Guaranty Agreement) to at least the same extent as the Refinanced Debt or is otherwise subordinated on terms reasonably satisfactory to the Administrative Agent.”

“ ‘Second Amendment’ means the Second Amendment to Third Amended and Restated Credit Agreement, dated as of January 31, 2008, among the Borrower, the Guarantors, the Administrative Agent and each Lender party thereto.”

“ ‘Second Amendment Effective Date’ has the meaning assigned to such term in the Second Amendment.”

“ ‘Second Lien Term Loan Administrative Agent’ means BNP Paribas, as administrative agent for the lenders under the Second Lien Term Loan Agreement (in such capacity, together with its successors and assigns).”

“ ‘Second Lien Term Loan Agreement’ means that certain Second Lien Term Loan Agreement, dated as of January 31, 2008, by and among the Borrower, the several lenders from time to time parties thereto, and the Second Lien Term Loan Administrative Agent, as the same shall be amended, supplemented or otherwise modified from time to time in accordance with Section 12.02 thereof and Section 9.04(b).”

“ ‘Second Lien Term Loan’ means any Debt incurred pursuant to Section 9.02(j) and all Debt and other obligations under the Second Lien Term Loan Documents.”

“ ‘Second Lien Term Loan Documents’ means the Second Lien Term Loan Agreement and the other Loan Documents (as defined in the Second Lien Term Loan Agreement) as the same shall be amended, supplemented or otherwise modified from time to time in accordance with Section 9.04(b).”

“ ‘Second Lien Term Loan Notes’ means the notes from time to time issued under the Second Lien Term Loan Agreement.”

2.2Section 2.07.

(a)           The first sentence of Section 2.07(a) is hereby amended and restated as follows:

4

“For the period from and including the Second Amendment Effective Date to but excluding April 1, 2008, the amount of the Borrowing Base and the Conforming Borrowing Base shall be $1,900,000,000.”

(b)           Section 2.07(e) is hereby amended and restated as follows:

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

2.3           Section 3.04.

(a)  Section 3.04(c)(iv) is hereby amended and restated as follows:

“(iv)        If, at any time after the Effective Date, the Borrower issues additional Funded Debt and any Borrowing Base Deficiency exists, then the Borrower shall (a) use 100% of the Net Cash Proceeds from the issuance of such Funded Debt to prepay the Borrowings in an aggregate principal amount equal to such excess, and (b) if, as a result of an LC Exposure, any Borrowing Base Deficiency remains after prepaying all of the Borrowings, deposit with the Administrative Agent on behalf of the Lenders an amount equal to the lesser of such LC Exposure and any remaining Net Cash Proceeds to be held as cash collateral as provided in Section 2.08(j).  The Borrower shall be obligated to make such prepayment and/or deposit of cash collateral as soon as practicable and in any event no later than the Business Day after it or any Subsidiary receives such Net Cash Proceeds as a result of such issuance of Funded Debt.”

(b)  Section 3.04(c) is hereby amended by adding the following subsection 3.04(c)(vii):

“(vii)       If there is less than $350,000,000 in availability under this Agreement after giving effect to any adjustment to the Borrowing Base pursuant to Section 9.12, then the Borrower shall (A) use 100% of the Net Cash Proceeds from any Asset Sale to prepay the Borrowings until there is at least $350,000,000 in availability under this Agreement after giving effect to any adjustments to the Borrowing Base pursuant to Section 9.12 and (B) if, as a result of an LC Exposure, any Borrowing Base Deficiency remains after prepaying all of the Borrowings, deposit with the Administrative Agent on behalf of the Lenders an amount equal to the lesser of such LC Exposure and any remaining Net Cash Proceeds to be held as cash collateral as provided in Section 2.08(j).  The Borrower shall be obligated to make such prepayment and/or deposit of cash collateral as soon as practicable and in any event no later than the Business Day after it or any Subsidiary receives such Net

5

Cash Proceeds as a result of such Asset Sale.”

(c)  Section 3.04(c) is hereby amended by adding the following subsection 3.04(c)(viii):

“(viii)      If not otherwise required as prepayments by this Section 3.04 (including payments required within 90 days pursuant to Section 3.04(c)(ii)), the Borrower shall use 100% of the Net Cash Proceeds of any Equity Interests or Funded Debt to prepay the Second Lien Term Loans.”

2.4Article VII.  Article VII is hereby amended by adding a Section 7.24 to read in its entirety as follows:

“Section 7.24  Specified Senior Indebtedness.

The Indebtedness of the Borrower constitutes “Senior Indebtedness” as defined in the Intercreditor Agreement.”

2.5Section 8.14.  Section 8.14 is hereby amended by adding a subsection “(c)” to read in its entirety as follows:

“(c)Prior to or contemporaneously with the granting of any Lien on any Property to or for the benefit of any agent or lender under the Second Lien Term Loan Agreement pursuant to any Second Lien Term Loan Document or otherwise, the Borrower or applicable Subsidiary shall grant to the Administrative Agent a first priority Lien interest (subject only to Excepted Liens of the type described in clauses (a) to (d) and (f) in the definition thereof, but subject to the provisos at the end of such definition) on such Property for the benefit of the Lenders to secure the Indebtedness.  All such Liens in favor of the Administrative Agent will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements or other Security Instruments, all in form and substance reasonably satisfactory to the Administrative Agent and in a sufficient number of executed (and acknowledged where necessary or appropriate) counterparts for recording purposes.  In order to comply with the foregoing, if any Subsidiary places a Lien on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).”

2.6Article VIII.  Article VIII is hereby amended by adding the following Section 8.18:

“Section 8.18.  Additional Swap Agreements.  Within 30 days of the Second Amendment Effective Date, the Borrower shall enter into Swap Agreements with respect to the Acquisition Properties for volumes and prices satisfactory to the Administrative Agent and the Borrower shall neither assign, terminate or unwind any such Swap Agreements nor sell any Swap Agreements if the effect of such action (when taken together with any other Swap Agreements executed contemporaneously with the taking of such action) would have the effect of canceling its positions under such Swap Agreements required hereby.”

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2.7           Section 9.02.  Section 9.02 is hereby amended by adding subsections “(j)” and “(k)” to read as follows:

“(j)          Debt incurred by the Borrower pursuant to the Second Lien Term Loan Agreement and/or the Permitted Refinancing Debt in respect thereof and any guarantees thereof by any of the Guarantors; provided that, without the prior written consent of all of the Lenders, (i) the aggregate principal amount of such Debt shall not exceed $400,000,000, (ii) the maturity date of any Permitted Refinancing Debt shall be no earlier than 365 days after August 1, 2010, (iii) such Debt and the holders thereof shall at all times be subject to the Intercreditor Agreement, and (iv) such Debt has no amortization.”

“(k)         Extensions, renewals or replacements of any Debt (for purposes of this paragraph (k), “refinancing debt”) permitted in clauses (a) through (i) so long as (i) the principal amount (or accreted value, if applicable) of such refinancing debt does not exceed the principal amount (or accreted value, if applicable) of the Debt extended, renewed or replaced (plus all accrued interest on the Debt and the amount of all expenses and premiums incurred in connection therewith), (ii) such refinancing debt has a final maturity date later than the final maturity date of the Debt being extended, renewed or replaced, (iii) if the Debt being extended, renewed or replaced is subordinated in right of payment to the obligations under this Agreement, such refinancing debt has a final maturity date equal to or later than the final maturity date of, and is subordinated in right of payment to, the obligations under this Agreement on terms at least as favorable to the Lenders as those contained in the documentation governing the Debt being extended, renewed or replaced, (iv) such refinancing debt is incurred either by the Borrower or by a Subsidiary who is the obligor on the Debt being extended, renewed or replaced, and (v) if incurred by the Borrower, such refinancing debt may be guaranteed by the Guarantors.

2.8           Section 9.03.  Section 9.03 is hereby amended by amending and restating subsection (f) in its entirety and adding subsections “(g)” and “(h)” to read as follows:

“(f)          Liens on Property not constituting collateral for the Indebtedness and not otherwise permitted by the foregoing clauses of this Section 9.03; provided that the aggregate principal or face amount of all Debt secured under this Section 9.03(f) shall not exceed $10,000,000 at any time.”

“(g)         Liens securing the obligations of the Borrower and the Guarantors under the Second Lien Term Loan Agreement and the other Second Lien Term Loan Documents; provided that, such Liens shall not encumber any Property that is not subject to a first priority Lien in favor of, or for the benefit of, the Lenders to secure the Indebtedness as required by Section 8.14.”

“(h)         Extensions, renewals or replacements of any of the Liens permitted in clauses (a) through (g) so long as (i) the principal amount of the Debt or obligation

7

secured thereby is no greater than the principal amount of such Debt or obligation at the time such Lien was permitted hereunder except for increases in an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such extension, renewal, refinancing, or replacement and in an amount equal to any existing commitments unutilized thereunder, (ii) any such extension, renewal or replacement Lien is limited to the property originally encumbered thereby, and (iii) any renewal or extension of the Debt or obligations secured or benefited thereby is permitted by Section 9.02.”

2.9           Section 9.04(b).  Section 9.04(b) is hereby deleted and restated in its entirety to read as follows:

“(b)         Redemption or Repayment of Subordinated Debt.  The Borrower will not, and will not permit any Subsidiary to: (i) call, make or offer to make any Redemption of or otherwise Redeem (whether optional or mandatory and whether in whole or in part) or repay any subordinated Debt permitted to be incurred hereunder, including the Second Lien Term Loan, except with the proceeds of Asset Sales, Casualty Events or Funded Debt, or the proceeds of the sale or issuance of Equity Interests or Permitted Refinancing Debt, in each case, in accordance with Section 3.04; (ii) amend, modify, waive or otherwise change, consent or agree to any amendment, modification, waiver or other change to, any of the terms of any notes evidencing any subordinated Debt permitted hereunder, including the Second Lien Term Loan, or any indenture, agreement, instrument, certificate or other document relating to any subordinated Debt permitted hereunder (including the Second Lien Term Loan Agreement, any Second Lien Term Loan Document and any other document or agreement relating thereto) if (A) the effect of such amendment, modification or waiver is to shorten the final maturity, except as permitted under Section 9.02(h) or in accordance with the definition of Permitted Refinancing Debt, or increase the amount of any payment of principal thereof or increase the rate or shorten any period for payment of interest thereon or modify the method of calculating the interest rate, (B) such action adds covenants, events of default or other agreements to the extent more restrictive than those contained in this Agreement, or (C) such action adds collateral unless the Loan Documents are being amended at the same time to reflect such new collateral, provided that the foregoing shall not prohibit the execution of supplemental agreements in connection with the issuance of Permitted Refinancing Debt or the addition of guarantors if required by the terms thereof; and (iii) designate any Debt (other than obligations of the Borrower and the Subsidiaries pursuant to the Loan Documents) as “Specified Senior Indebtedness” or “Specified Guarantor Senior Indebtedness” or give any such other Debt any other similar designation for the purposes of any indentures or other documents relating to any subordinated Debt permitted hereunder, including the Second Lien Term Loan.”

2.10         Section 9.07.  Section 9.07 is hereby amended and restated as follows:

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“Section 9.07 Limitation on Leases.  Neither the Borrower nor any of its Subsidiaries will create, incur, assume or suffer to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal but excluding Capital Leases permitted by Section 9.02(g), leases of Hydrocarbon Interests and drilling and other similar contracts), under leases or lease agreements which would cause the aggregate amount of all payments made by the Borrower and its Subsidiaries pursuant to all such leases or lease agreements, including, without limitation, any residual payments at the end of any lease, to exceed $10,000,000 in any period of twelve consecutive calendar months during the life of such leases.”

2.11         Section 9.12.  Section 9.12(d)(iii) is hereby amended and restated as follows:

“(iii) if such other sale or disposition of Oil and Gas Property or Subsidiary owning Oil and Gas Properties included in the most recently delivered Reserve Report during any period between two successive Scheduled Redetermination Dates has a fair market value (as determined by the Administrative Agent), individually or in the aggregate, in excess of $25,000,000 (or, if the Second Lien Term Loan Agreement has been terminated, $50,000,000), the Borrowing Base shall be reduced, effective immediately upon such sale or disposition, by an amount equal to the value, if any, assigned such Property as determined in good faith by the Supermajority Lenders assigned such Property in the most recently delivered Reserve Report and”

2.12         Section 9.16.  The first parenthetical in Section 9.16 is hereby amended and restated in its entirety as follows:

“(other than this Agreement, the Security Instruments or the Second Lien Term Loan Documents)”

2.13         Section 10.01.  Section 10.01 is hereby amended by adding a subsection “(o)” to read in its entirety as follows:

“(o)         the Intercreditor Agreement, after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with its terms against the Borrower or any party thereto or holder of the Debt subordinated thereby or shall be repudiated by any of them, or cause the payment of the obligations of the Second Lien Term Loan Notes to be senior or pari passu in right to the payment of obligations of this Agreement, or the Borrower or any Guarantor shall make any payment in violation of the terms of the Intercreditor Agreement.”

2.14         Section 11.08(b).  Section 11.08(b) is hereby deleted and replaced in its entirety to read as follows:

“(b)         The Lenders acknowledge that the Administrative Agent and the Arrangers

9

are acting solely in administrative capacities with respect to the structuring and syndication of this facility and have no duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than their administrative duties, responsibilities and liabilities specifically as set forth in the Loan Documents and in their capacity as Lenders hereunder.  In structuring, arranging or syndicating this facility, each Lender acknowledges that the Administrative Agent and/or Arrangers may be agents or lenders under these Notes, the Second Lien Term Loan Notes, other loans or other securities and waives any existing or future conflicts of interest associated with their role in such other debt instruments.  If in its administration of this facility or any other debt instrument, the Administrative Agent determines (or is given written notice by any Lender) that a conflict exists, then it shall eliminate such conflict within 90 days or resign pursuant to Section 11.06 and shall have no liability for action taken or not taken, other than actions taken or not taken which represent Administrative Agent’s gross negligence or willful misconduct, while such conflict existed.”

2.15         Section 12.01.  Section 12.01(a)(i) and (ii) are hereby amended and restated in their entirety as follows:

(i)	“if to the Borrower, to it at
	Linn Energy, LLC
	600 Travis Street, Suite 5100
	Houston, TX 77002
	Attention: Kolja Rockov
	Telephone: 281-840-4169
	Fax: 281-840-4189
	E-Mail: kr@linnenergy.com
	with a copy to:
	Linn Energy, LLC
	600 Travis Street, Suite 5100
	Houston, TX 77002
	Attention: Charlene A. Ripley
	Telephone: 281-840-4119
	Fax: 281-840-4180
	E-mail: cripley@linnenergy.com

10

(ii)	if to the Administrative Agent, to it at
	525 Washington Blvd., 8th floor
	Jersey City, New Jersey 07310
	Attention: Dina Wilson, Loan Assistant
	Telecopy: 201-850-4020
	with a copy to the Administrative Agent at:
	1200 Smith Street, Suite 3100
	Houston, Texas 77002
	Attention: Betsy Jocher
	Telecopy: 713-659-6915”

2.16         Annex I.  Annex I is hereby amended and restated in is entirety as shown on the attached Annex I.

2.17         Schedule 7.14.  Schedule 7.14 is hereby amended and restated in its entirety as shown on the attached Schedule 7.14.

Section 3.               Conditions Precedent.  The effectiveness of this Second Amendment is subject to the receipt by the Administrative Agent of the following documents and satisfaction of the other conditions provided in this Section 3, each of which shall be reasonably satisfactory to the Administrative Agent in form and substance:

3.1           Payment by the Borrower to the Administrative Agent of all fees and other amounts due and payable on or prior to the Second Amendment Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower.

3.2           The Administrative Agent shall have received multiple counterparts as requested of this Second Amendment from all of the Lenders.

3.3           The Administrative Agent shall have received an Intercreditor Agreement executed by the Second Lien Term Loan Administrative Agent and the Borrower.

3.4           No Default or Event of Default shall have occurred and be continuing as of the Second Amendment Effective Date.

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

11

shall not be greater than $600,000,000, subject to pre-closing and post-closing adjustments under the Acquisition Documents; (iii) that attached thereto is a true and complete list of the Acquisition Properties which have been excluded from the Acquisition pursuant to the terms of the Acquisition Documents, specifying with respect thereto the basis of exclusion as (A) title defect, (B) preferential purchase right, (C) environmental or (D) casualty loss; (iv) that attached thereto is a true and complete list of all Acquisition Properties for which any seller has elected to cure a title defect, (v) that attached thereto is a true and complete list of all Acquisition Properties for which any seller has elected to remediate an adverse environmental condition, (vi) there was no known breach of the seller’s title or environmental representations in the Acquisition Documents that would have a material adverse effect on the Acquisition Properties, taken as a whole, and (vii) that attached thereto is a true and complete list of all Acquisition Properties which are currently pending final decision by a third party regarding purchase of such property in accordance with any preferential right; (b) a true and complete executed copy of each of the Acquisition Documents; (c) original counterparts or copies, certified as true and complete, of the assignments, deeds and leases for all of the Acquisition Properties; and (d) such other related documents and information as the Administrative Agent shall have reasonably requested.

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

3.7           The Administrative Agent shall have received a certificate of the Borrower and of each Guarantor setting forth (a) resolutions of the Managers, board of directors or other managing body with respect to the authorization of the Borrower or such Guarantor to execute and deliver the Second Amendment and related documents to which it is a party and to enter into the transactions contemplated in those documents, (b) the individuals (i) who are authorized to sign the Loan Documents to which the Borrower or such Guarantor is a party and (ii) who will, until replaced by another individual duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the other Loan Documents to which it is a party, (c) specimen signatures of such authorized individuals, and (d) that the articles or certificate of incorporation or formation and bylaws, operating agreement or partnership agreement, as applicable, of the Borrower and each Guarantor, in each case, are certified as not being amended since last delivered to the Administrative Agent.  The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from the Borrower to the contrary.

3.8           The Administrative Agent shall have received from each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Security Instruments described on Exhibit A.  After giving effect to the execution and delivery of the Security Instruments, the Borrower shall be in compliance with Section 8.14(a).

3.9           The Administrative Agent shall be reasonably satisfied with the environmental condition of the Acquisition Properties.

12

3.10         The Administrative Agent shall have received duly executed Notes payable to the order of each Lender who has requested a Note in a principal amount equal to its new Aggregate Maximum Credit Amount dated as of the date hereof.

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

The Administrative Agent shall notify the Borrower and the Lenders of the Second Amendment Effective Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of each Issuing Bank to issue Letters of Credit pursuant to this Second Amendment shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 12.02) at or prior to 1:00 p.m., Houston time, on February 1, 2008 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).

Section 4.               Representations and Warranties; Etc.  Each Obligor hereby affirms:  (a) that as of the date of execution and delivery of this Second Amendment, all of the representations and warranties contained in each Loan Document to which such Obligor is a party are true and correct in all material respects as though made on and as of the Second Amendment Effective Date (unless made as of a specific earlier date, in which case, was true as of such date); and (b) that after giving effect to this Second Amendment and to the transactions contemplated hereby, no Defaults exist under the Loan Documents or will exist under the Loan Documents.

Section 5.               Miscellaneous.

5.1           Confirmation.  The provisions of the Credit Agreement (as amended by this Second Amendment) shall remain in full force and effect in accordance with its terms following the effectiveness of this Second Amendment.

5.2           Ratification and Affirmation of Obligors.  Each of the Obligors hereby expressly (i) acknowledges the terms of this Second Amendment, (ii) ratifies and affirms its obligations under the Guaranty Agreement and the other Security Instruments to which it is a party, (iii) acknowledges, renews and extends its continued liability under the Guaranty Agreement and the other Security Instruments to which it is a party and agrees that its guarantee under the Guarantee Agreement and the other Security Instruments to which it is a party remains in full force and effect with respect to the Indebtedness as amended hereby.

5.3           Counterparts.  This Second Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

5.4           No Oral Agreement.  THIS WRITTEN SECOND AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.

13

5.5           Governing Law.  THIS SECOND AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

14

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed effective as of the date first written above.

BORROWER: LINN ENERGY, LLC

By:	/s/ Kolja Rockov
	Kolja Rockov, Executive Vice President
	and Chief Financial Officer

GUARANTORS:	LINN ENERGY HOLDINGS, LLC
	LINN OPERATING, INC.
	PENN WEST PIPELINE, LLC
	MID ATLANTIC WELL SERVICE, INC.
	MID-CONTINENT HOLDINGS I, LLC
	MID-CONTINENT HOLDINGS II, LLC
	MID-CONTINENT I, LLC
	MID-CONTINENT II, LLC
	LINN GAS MARKETING, LLC
	LINN EXPLORATION MIDCONTINENT, LLC

By:	/s/ Kolja Rockov
	Kolja Rockov
	Executive Vice President and Chief
	Financial Officer

Second Amendment

15

BNP PARIBAS, as Administrative Agent and a Lender
By:	/s/ Douglas R. Liftman
Name:	/s/ Douglas R. Liftman
Title:	Managing Director
By:	/s/ Betsy Jocher
Name:	Betsy Jocher
Title:	Director

16

ROYAL BANK OF CANADA, as Syndication Agent and a Lender
By:	/s/ Don J. McKinnerney
Name:	Don J. McKinnerney
Title:	Authorized Signatory

17

SOCIETE GENERALE, as a Co-Documentation Agent and a Lender
By:	/s/ Elena Robciuc
Name:	Elena Robciuc
Title:	Director

18

COMERICA BANK, as a Lender
By:	/s/ Huma Manal
Name:	Huma Manal
Title:	Vice President

19

FORTIS CAPITAL CORP., as a Lender
By:	/s/ David Montgomery
Name:	David Montgomery
Title:	Director
By:	/s/ Deirdre Sanbom
Name:	Deirdre Sanbom
Title:	Director

20

CITIBANK, NA, as a Co-Documentation Agent and a Lender
By:	/s/ David E. Hunt
Name:	David E. Hunt
Title:	Vice President

21

KEYBANK NATIONAL ASSOCIATION, as a Lender
By:	/s/ Thomas Rajan
Name:	Thomas Rajan
Title:	Director

22

WACHOVIA BANK, N.A., as a Lender
By:	/s/ Leanne S. Phillips
Name:	Leanne S. Phillips
Title:	Director

23

BMO CAPITAL MARKETS FINANCING, INC., as a Co-Documentation Agent and a Lender
By:	/s/ James V. Ducote
Name:	James V. Ducote
Title:	Director

24

CREDIT SUISSE, as a Lender
By:	/s/ Vanessa Gomez
Name:	Vanessa Gomez
Title:	Director
By:	/s/ Morenikeji Ajayi
Name:	Morenikeji Ajayi
Title:	Associate

25

COMPASS BANK, as a Lender
By:	/s/ Murray E. Brasseux
Name:	Murray E. Brasseux
Title:	Executive Vice President

26

DnB NOR BANK ASA, as a Lender
By:	/s/ Philip F. Kurpiewski
Name:	Philip F. Kurpiewski
Title:	Senior Vice President
By:	/s/ Jack Sun
Name:	Jack Sun
Title:	First Vice President

27

DZ BANK AG, DEUTSCHE ZENTRAL- GENOSSENSCHAFTSBANK, FRANKFURT AM MAIN, NEW YORK BRANCH, as a Lender
By:	/s/ Scott B. Lamoreaux
Name:	Scott B. Lamoreaux
Title:	First Vice President
By:	/s/ Paul J. Bowles
Name:	Paul J. Bowles
Title:	Assistant Treasurer

28

GUARANTY BANK, FSB, as a Lender
By:	/s/ W. David McCarver IV
Name:	W. David McCarver IV
Title:	Vice President

29

LEHMAN BROTHERS COMMERCIAL BANK, as a Lender
By:	/s/ Brian McNany
Name:	Brian McNany
Title:	Authorized Signatory

30

JPMORGAN CHASE BANK, N.A., as a Lender
By:	/s/ Michael A. Kamauf
Name:	Michael A. Kamauf
Title:	Vice President

31

THE ROYAL BANK OF SCOTLAND plc, as a
Lender
By:	/s/ Mark Lumpkin, Jr.
Name:	Mark Lumpkin, Jr.
Title:	Vice President

32

RZB FINANCE LLC, as a Lender
By:	/s/ Shirley Ritch
Name:	Shirley Ritch
Title:	Assistant Vice President
By:	/s/ John A. Valiska
Name:	John A. Valiska
Title:	First Vice President

33

UNION BANK OF CALIFORNIA, N.A., as a Lender
By:	/s/ Scott Gildea
Name:	Scott Gildea
Title:	Vice President

34

U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:	/s/ Justin M. Alexander
Name:	Justin M. Alexander
Title:	Vice President

35

CALYON NEW YORK BRANCH, as a Lender
By:	/s/ Page Dillehunt
Name:	Page Dillehunt
Title:	Managing Director
By:	/s/ Sharada Manne
Name:	Sharada Manne
Title:	Vice President

36

THE BANK OF NOVA SCOTIA, as a Lender
By:	/s/ David Mills
Name:	David Mills
Title:	Director

37

DEUTSCHE BANK TRUST COMPANY AMERICAS, as a Lender
By:	/s/ Susan LeFevre
Name:	Susan LeFevre
Title:	Director
By:	/s/ Erin Morrissey
Name:	Erin Morrissey
Title:	Vice President

38

ALLIED IRISH BANKS P.L.C., as a Lender
By:	/s/ David O’Driscoll
Name:	David O’Driscoll
Title:	Assistant Vice President
By:	/s/ Aidan Lanigan
Name:	Aidan Lanigan
Title:	Vice President

39

WESTLB AG, NEW YORK BRANCH, as a Lender
By:	/s/ Dominick D’Ascoli
Name:	Dominick D’Ascoli
Title:	Director
By:	/s/ Jennifer King
Name:	Jennifer King
Title:	Director

40

SUNTRUST BANK, as a Lender
By:	/s/ Peter Panos
Name:	Peter Panos
Title:	Vice President

41

EX-10.18

Exhibit 10.18

Execution Version

SECOND LIEN TERM LOAN AGREEMENT

DATED AS OF

JANUARY 31, 2008

AMONG

LINN ENERGY, LLC,

AS BORROWER,

BNP PARIBAS,

AS ADMINISTRATIVE AGENT,

RBC CAPITAL MARKETS,

AS SYNDICATION AGENT,

SOCIETE GENERALE, CALYON CORPORATE AND INVESTMENT BANK

AND THE ROYAL BANK OF SCOTLAND PLC,

AS CO-DOCUMENTATION AGENTS

AND

THE LENDERS PARTY HERETO

JOINT LEAD ARRANGERS AND JOINT BOOK RUNNERS

BNP PARIBAS RBC CAPITAL MARKETS

TABLE OF CONTENTS

ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01	Terms Defined Above	1
Section 1.02	Certain Defined Terms	1
Section 1.03	Types of Loans and Tranches	19
Section 1.04	Terms Generally	19
Section 1.05	Accounting Terms and Determinations; GAAP	20
ARTICLE II
THE CREDITS
Section 2.01	Term Loans	20
Section 2.02	Loans and Tranches	20
Section 2.03	Requests for the Loans	21
Section 2.04	Interest Elections	22
Section 2.05	Funding of Tranches	23
Section 2.06	Termination	24
Section 2.07	Total Reserve Value	24
Section 2.08	Intercreditor Agreement	24
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
Section 3.01	Repayment of Loans	24
Section 3.02	Interest	24
Section 3.03	Alternate Rate of Interest	25
Section 3.04	Optional Prepayments	26
Section 3.05	Mandatory Prepayments	26
Section 3.06	Fees	27
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
Section 4.01	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	27
Section 4.02	Presumption of Payment by the Borrower	28
Section 4.03	Certain Deductions by the Administrative Agent	28
ARTICLE V
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES
Section 5.01	Increased Costs	28
Section 5.02	Break Funding Payments	29
Section 5.03	Taxes	30
Section 5.04	Designation of Different Lending Office; Replacement of Lenders	31
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01	Effective Date	32

i

Section 6.02	Additional Conditions		35
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01		Organization; Powers	35
Section 7.02		Authority; Enforceability	36
Section 7.03		Approvals; No Conflicts	36
Section 7.04		Financial Position; No Material Adverse Change	36
Section 7.05		Litigation	37
Section 7.06		Environmental Matters	37
Section 7.07		Compliance with the Laws and Agreements; No Defaults	38
Section 7.08		Investment Company Act	38
Section 7.09		Taxes	39
Section 7.10		ERISA	39
Section 7.11		Disclosure; No Material Misstatements	40
Section 7.12		Insurance	40
Section 7.13		Restriction on Liens	40
Section 7.14		Subsidiaries	40
Section 7.15		Location of Business and Offices	40
Section 7.16		Properties; Titles, Etc	41
Section 7.17		Maintenance of Properties	42
Section 7.18		Gas Imbalances, Prepayments	42
Section 7.19		Marketing of Production	42
Section 7.20		Swap Agreements	43
Section 7.21		Use of Loans	43
Section 7.22		Solvency	43
Section 7.23		Acquisition	43
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01		Financial Statements; Other Information	44
Section 8.02		Notices of Material Events	47
Section 8.03		Existence; Conduct of Business	48
Section 8.04		Payment of Obligations	48
Section 8.05		Performance of Obligations under Loan Documents	48
Section 8.06		Operation and Maintenance of Properties	48
Section 8.07		Insurance	49
Section 8.08		Books and Records; Inspection Rights	49
Section 8.09		Compliance with Laws	49
Section 8.10		Environmental Matters	49
Section 8.11		Further Assurances	50
Section 8.12		Reserve Reports	51
Section 8.13		Title Information	52
Section 8.14		Additional Collateral; Additional Guarantors	53
Section 8.15		ERISA Compliance	54
Section 8.16		Marketing Activities	54
Section 8.17		Swap Agreements	54

ii

Section 8.18	Permanent Securities	54
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01	Financial Covenants		55
Section 9.02	Debt		55
Section 9.03	Liens		57
Section 9.04	Dividends		57
Section 9.05	Investments, Loans and Advances		58
Section 9.06	Nature of Business		59
Section 9.07	Limitation on Leases		59
Section 9.08	Proceeds of Notes		59
Section 9.09	ERISA Compliance		60
Section 9.10	Sale or Discount of Receivables		60
Section 9.11	Mergers, Etc		60
Section 9.12	Sale of Properties		60
Section 9.13	Environmental Matters		61
Section 9.14	Transactions with Affiliates		61
Section 9.15	Subsidiaries		61
Section 9.16	Negative Pledge Agreements; Dividend Restrictions		61
Section 9.17	Gas Imbalances, Take-or-Pay or Other Prepayments		62
Section 9.18	Swap Agreements		62
Section 9.19	Tax Status as Partnership		63
Section 9.20	Acquisition Documents		63
Section 9.21	Anti-Layering		63
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01	Events of Default		63
Section 10.02	Remedies		65
Section 10.03	Disposition of Proceeds		66
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.01	Appointment; Powers		66
Section 11.02	Duties and Obligations of Administrative Agent		66
Section 11.03	Action by Agent		67
Section 11.04	Reliance by Agent		68
Section 11.05	Subagents		68
Section 11.06	Resignation or Removal of Agents		68
Section 11.07	Agents and Lenders		69
Section 11.08	No Reliance		69
Section 11.09	Administrative Agent May File Proofs of Claim		70
Section 11.10	Authority of Administrative Agent to Release Collateral and Liens		70
Section 11.11	The Arrangers and the Agents		70

iii

ARTICLE XII
MISCELLANEOUS
Section 12.01	Notices	71
Section 12.02	Waivers; Amendments	72
Section 12.03	Expenses, Indemnity; Damage Waiver	73
Section 12.04	Successors and Assigns	75
Section 12.05	Survival; Revival; Reinstatement	78
Section 12.06	Counterparts; Integration; Effectiveness	79
Section 12.07	Severability	79
Section 12.08	Right of Setoff	79
Section 12.09	GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS	79
Section 12.10	Headings	81
Section 12.11	Confidentiality	81
Section 12.12	Interest Rate Limitation	82
Section 12.13	EXCULPATION PROVISIONS	83
Section 12.14	No Third Party Beneficiaries	83
Section 12.15	USA Patriot Act Notice	83
Section 12.16	Senior Revolving Credit Documents	84

iv

ANNEXES, EXHIBITS AND SCHEDULES

Annex I	Commitments
Exhibit A	Form of Note
Exhibit B	Form of Compliance Certificate
Exhibit C	Security Instruments
Exhibit D	Form of Assignment and Assumption
Exhibit E	Form of Borrowing Request
Exhibit F	Form of Interest Election Request
Schedule 7.05	Litigation
Schedule 7.14	Subsidiaries and Partnerships
Schedule 7.18	Gas Imbalances
Schedule 7.19	Marketing Contracts
Schedule 7.20	Swap Agreements

v

THIS SECOND LIEN TERM LOAN AGREEMENT dated as of January 31, 2008, is among Linn Energy, LLC, a limited liability company duly formed and existing under the laws of the State of Delaware (the “Borrower”); each of the Lenders from time to time party hereto; BNP PARIBAS (in its individual capacity, “BNP Paribas”), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”); RBC Capital Markets plc (in its individual capacity, “RBC”), as syndication agent for the Lenders (in such capacity, together with its successor in such capacity, the “Syndication Agent”), and Societe Generale, Calyon Corporate and Investment Bank and The Royal Bank of Scotland plc, as co-documentation agents (in such capacities, together with their successors in such capacity, the “Co-Documentation Agents”) for the Lenders.

R E C I T A L S

A.The Borrower has requested that the Lenders provide a $400,000,000 second lien term loan facility to the Borrower.

B.Each Lender has severally agreed to make its ratable portion of such loans subject to the terms and conditions of this Agreement.

C.Now, therefore, in consideration of the mutual covenants and agreements herein contained and of the loans and commitments hereinafter referred to, the parties hereto agree as follows:

ARTICLE I
Definitions and Accounting Matters

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

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

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

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

“Acquisition Documents” means (a) the Purchase and Sale Agreement dated as of December 20, 2007, by and between Lamamco Drilling Company, as seller and Linn Energy Holdings, LLC, as buyer, and (b) all bills of sale, assignments, agreements, instruments and documents executed and delivered in connection therewith, as amended.

“Acquisition Properties” means the Oil and Gas Properties and other properties acquired by the Borrower or any Guarantor pursuant to the Acquisition Documents.

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

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

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

“Agreement” means this Second Lien Term Loan Agreement, as the same may from time to time be amended, modified, supplemented or restated.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1%.  Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Applicable Margin” means the rate per annum applicable to each Type of Tranche or Loan for the period set forth below:

Period	Eurodollar		ABR
Effective Date to and including the one year anniversary of Effective Date	5.0	%	3.5	%
One day after anniversary of Effective Date to Maturity Date	7.5	%	6.0	%

“Approved Counterparty” means (a) any “Lender” as such term is defined under the Senior Revolving Credit Agreement or any Affiliate of such lender and (b) any other Person whose long term senior unsecured debt rating is A/A2 by S&P or Moody’s (or their equivalent) or higher.

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

“Asset Sale” means, solely for purposes of Section 3.05, the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise) by the Borrower or any of the Subsidiaries to any Person other than the Borrower or any Guarantor of (a) any Equity Interests in any of the Subsidiaries (including any such sale by the issuer of such Equity Interests but excluding directors’ qualifying shares) or (b) any other assets of the Borrower or any of the Subsidiaries (other than (x)(i) inventory (including Hydrocarbons), (ii) damaged, obsolete or worn out assets, scrap and equipment no longer used in the operations of the Borrower or any

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Subsidiary, and (iii) Investments permitted by Section 9.05, in each case disposed of in the ordinary course of business and (y) any sale, transfer or other disposition that, together with all related sales, transfers or other dispositions, has a value not in excess of $25,000,000).

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

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

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

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

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

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

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

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

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

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

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

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

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

“Commitment” means, with respect to each Lender, the commitment of such Lender to make its Loan hereunder on the Effective Date and “Commitments” means the aggregate amount of the Commitments of all Lenders.  The amount of each Lender’s Commitment is set forth on Annex I.

“Consolidated Net Income” means with respect to the Borrower and the Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated Subsidiaries after allowances for taxes for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Borrower or a Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and the Consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the net income

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(but not loss) during such period of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) any extraordinary gains or losses during such period; (d) non-cash gains, losses or adjustments under FASB Statement No. 133 as a result of changes in the fair market value of derivatives; (e) any gains or losses attributable to writeups or writedowns of assets, including ceiling test writedowns; and (f) non-cash share-based payments under FASB Statement No. 123R; and provided further that if the Borrower or any Consolidated Subsidiary shall acquire or dispose of any Property during such period, then Consolidated Net Income shall be calculated after giving pro forma effect to such acquisition or disposition, as if such acquisition or disposition had occurred on the first day of such period.

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

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  For the purposes of this definition, and without limiting the generality of the foregoing, any Person that owns directly or indirectly 10% or more of the Equity Interests having ordinary voting power for the election of the directors or other governing body of a Person will be deemed to “control” such other Person.  “Controlling” and “Controlled” have meanings correlative thereto.

“Debt” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable, accrued expenses, liabilities or other obligations of such Person, in each such case to pay the deferred purchase price of Property or services; (d) all obligations under Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Debt is assumed by such Person; (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or with respect to which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property of others; (i) obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business; (j) obligations to pay for goods or services whether or not such goods or services are

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actually received or utilized by such Person (other than obligations under firm transportation or drilling contracts); (k) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (l) Disqualified Capital Stock; and (m) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment.  The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

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

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

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

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

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

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

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

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“Environmental Laws” means any and all Governmental Requirements pertaining in any way to health and safety (to the extent relating to exposure to Hazardous Materials), the environment or the preservation or reclamation of natural resources, in effect in any and all jurisdictions in which the Borrower or any Subsidiary is conducting or at any time has conducted business, or where any Property of the Borrower or any Subsidiary is located, including without limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, and Hazardous Materials Transportation Act, as amended.  The term “oil” shall have the meaning specified in OPA, the terms “hazardous substance” and “release” (or “threatened release”) have the meanings specified in CERCLA, the terms “solid waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and the term “oil and gas waste” shall mean those waste that are excluded from the definition of “hazardous waste” pursuant to 40 C.F.R. Section 261.4(b)(5) (“Section 261.4(b)(5)”); provided, however, that (a) in the event either OPA, CERCLA, RCRA or Section 261.4(b)(5) is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (b) to the extent the laws of the state or other jurisdiction in which any Property of the Borrower or any Subsidiary is located establish a meaning for “oil,” “hazardous substance,” “release,” “solid waste,” “disposal” or “oil and gas waste” which is broader than that specified in either OPA, CERCLA, RCRA or Section 261.4(b)(5), such broader meaning shall apply.

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

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

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

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

“ERISA Event” means (a) a reportable event described in section 4043 of ERISA and the regulations issued thereunder, (b) the withdrawal of the Borrower or any of its Subsidiaries or any ERISA Affiliate from a Plan during a plan year in which it was a “substantial employer” as defined in section 4001(a)(2) of ERISA, (c) in each case solely with respect to a Plan subject to Title IV of ERISA, the filing of a notice of intent to terminate a Plan or the treatment of a Plan

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amendment as a termination under section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, (e) receipt by the Borrower or any of its Subsidiaries or any ERISA Affiliate of a notice of withdrawal liability pursuant to Section 4202 of ERISA with respect to any Multiemployer Plan or (f) any other event or condition which might constitute grounds under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan subject to Title IV of ERISA.

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

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

“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) contractual Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any of its Subsidiaries or materially impair the value of material Property subject thereto; (e) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by the Borrower or any of its Subsidiaries to provide collateral to the depository institution; (f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in

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

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

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

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

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

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

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

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

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

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

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

“Guaranty Agreement” means an agreement executed by the Guarantors in form and substance reasonably satisfactory to the Administrative Agent unconditionally guarantying on a joint and several basis, payment of the Indebtedness, as the same may be amended, modified or supplemented from time to time.

“Hazardous Material” means any substance regulated or as to which liability might arise under any applicable Environmental Law and including, without limitation:  (a) any chemical, compound, material, product, byproduct, substance or waste defined as or included in the definition or meaning of “hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar meaning or import found in any applicable Environmental Law; (b) petroleum hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil and

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gas waste, crude oil, and any components, fractions, or derivatives thereof; and (c) radioactive materials, asbestos containing materials, polychlorinated biphenyls, or radon.

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

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

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

“Indebtedness” means, without duplication, any and all amounts owing or to be owing by the Borrower or any Guarantor (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising): (a) to the Administrative Agent or any Lender under any Loan Document and (b) all renewals, extensions and/or rearrangements of any of the above.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Effective Date entered into by and among BNP Paribas, as administrative agent for the lenders pursuant to the Senior Revolving Credit Documents, the Administrative Agent, and the Borrower, as the same may from time to time be amended, modified, supplemented or restated.

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

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

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

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

“Investment Bank” means one or more investment banks engaged by the Borrower and satisfactory to the Arrangers to assist in issuing the Permanent Securities.

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

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined on the basis of the rate for deposits in dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on the Reuters Screen LIBOR01 Page as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period.  In the event that such rate does not appear on such page (or otherwise on such screen), the “LIBO Rate” shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the

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Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered dollar deposits at or about 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein.

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

“Loan Documents” means this Agreement, the Notes, Security Instruments and the Intercreditor Agreement.

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

“Majority Lenders” means, at any time while no Loans are outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the Commitments; and at any time while any Loans are outstanding, Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding principal amount of the Loans (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)).

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

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

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

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

“Maturity Date” means July 31, 2009.

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

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

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

“Net Cash Proceeds” means (a) in connection with any issuance or sale of Equity Interests, Debt securities, Casualty Events or the incurrence of Debt, the cash proceeds received from such issuance or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith; and (b) in connection with any Asset Sale, the cash proceeds thereof (including cash proceeds subsequently received (as and when received) in respect of noncash consideration initially received), net of (i) selling and other expenses (including reasonable broker’s fees or commissions, legal fees, transfer and similar taxes, and the Borrower’s good faith estimate of income taxes actually paid or payable in connection with such sale), (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) any amount payable in respect of any Debt for borrowed money which is secured by the asset sold in such Asset Sale and which is required to be repaid with such proceeds (excluding any such Debt assumed by the purchaser of such asset).

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

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby (including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests;

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(d) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment, rental equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing.

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

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

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

“Permanent Securities” means senior subordinated unsecured notes, subordinated unsecured notes or any Equity Interests of the Borrower which are issued after the Effective Date for the purpose of refinancing all or a portion of the Loans outstanding under this Agreement.

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

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

“Prime Rate” means the rate of interest per annum publicly announced from time to time by BNP Paribas as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.  Such rate is set by BNP Paribas as a general reference rate of

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interest, taking into account such factors as BNP Paribas may deem appropriate; it being understood that many of BNP Paribas’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that BNP Paribas may make various commercial or other loans at rates of interest having no relationship to such rate.

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

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

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

“PV” means the net present value, discounted at 10% per annum, of the future net revenues expected to accrue to the Borrower’s and its Subsidiaries’ collective interests in Proved Reserves expected to be produced from their Oil and Gas Properties during the remaining expected economic lives of such reserves.  Each calculation of such expected future net revenues shall be made in accordance with the then existing standards of the Society of Petroleum Engineers, provided that in any event (a) appropriate deductions shall be made for severance and ad valorem taxes, and for operating, gathering, transportation and marketing costs required for the production and sale of such reserves, (b) appropriate adjustments shall be made for hedging operations, provided that Swap Agreements with non-investment grade counterparties shall not be taken into account to the extent that such Swap Agreements improve the position of or otherwise benefit the Borrower or any of its Subsidiaries, (c) the pricing assumptions used in determining net present value for any particular reserves shall be based upon the following price decks:  (i) for natural gas, the quotation for deliveries of natural gas for each such year from the New York Mercantile Exchange for Henry Hub, provided that with respect to quotations for calendar years after the fifth calendar year, the quotation for the fifth calendar year shall be applied and (ii) for crude oil, the quotation for deliveries of West Texas Intermediate crude oil for each such calendar year from the New York Mercantile Exchange for Cushing, Oklahoma, provided that with respect to quotations for calendar years after the fifth calendar year, the quotation for the fifth calendar year shall be applied, and (d) the cash-flows derived from the pricing assumptions set forth in clauses (b) and (c) above shall be further adjusted to account for the historical basis differentials for each month during the preceding 12-month period calculated by comparing realized crude oil and natural gas prices to Cushing, Oklahoma and Henry Hub NYMEX prices for each month during such period.

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

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

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

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

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

“Reserve Report” means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of each December 31^st or June 30^th (or any other specified “as of” date), the oil and gas reserves attributable to the Oil and Gas Properties of the Borrower and its Subsidiaries, together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the economic assumptions consistent with the Administrative Agent’s lending requirements at the time.

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

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

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

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

“Senior Revolving Credit Agreement” means that certain Third Amended and Restated Credit Agreement dated as of August 31, 2007 among the Borrower, as borrower, BNP Paribas, as administrative agent and the other agents and lenders from time to time parties thereto, as

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amended by that certain First Amendment to Third Amended and Restated Credit Agreement dated as of November 2, 2007, and as hereafter amended, supplemented, modified, restated, refinanced or replaced from time to time.

“Senior Revolving Credit Documents” means the Senior Revolving Credit Agreement, the Senior Notes and any “Loan Documents” (as defined therein), in each case, together with all amendments, modifications and supplements thereto and replacements thereof.

“Senior Revolving Credit Notes” means the Notes from time to time issued under the Senior Revolving Credit Agreement.

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

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

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

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

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

“Total Debt” means, at any date, all Debt of the Borrower and its Consolidated Subsidiaries on a consolidated basis, excluding (i) non-cash obligations under FAS 133 or 143

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and (ii) accounts payable and other accrued liabilities (for the deferred purchase price of Property or services) from time to time incurred in the ordinary course of business which are not greater than sixty (60) days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP.

“Total Reserve Value” means at any time the PV attributable to Proved Reserves as most recently determined and certified to the Lenders in accordance with Section 2.07, as the same may be adjusted from time to time pursuant to Section 8.13(c) or Section 9.12(d).

“Tranche” means a division or portion of the Loans.

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

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

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

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

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

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

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

ARTICLE II
The Credits

Section 2.01Term Loans.  Subject to the terms and conditions set forth herein, each Lender agrees to make a Loan on the Effective Date in dollars to the Borrower to fund the Acquisition in an aggregate principal amount equal to such Lender’s Commitment.  The Commitments are not revolving and amounts repaid or prepaid may not be re-borrowed under any circumstance.

Section 2.02Loans and Tranches.

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

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

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(c)Minimum Amounts.  At the commencement of each Interest Period for any Eurodollar Tranche, such Tranche shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000.  At the time that each ABR Tranche is made, such Tranche shall be in an aggregate amount that is an integral multiple of $250,000 and not less than $1,000,000.  Tranches of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of four (4) Eurodollar Tranches outstanding.  Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Tranche if the Interest Period requested with respect thereto would end after the Maturity Date.

(d)Notes.  If a Lender shall make a written request to the Administrative Agent and the Borrower to have its Loan evidenced by a promissory note, then the Borrower shall executed and deliver a single promissory note of the Borrower in substantially the form of Exhibit A payable to the order of such Lender in a principal amount equal to such Lender’s Commitment and otherwise duly completed.  The date, amount, Type, interest rate and, if applicable, Interest Period of each Tranche consisting of a portion of the Loan made by each Lender, and all payments made on account of the principal thereof, may be recorded by such Lender on its books for its Note, and, prior to any transfer, may be endorsed by such Lender on a schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender.  Failure to make any such notation or to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of its Loan or affect the validity of such transfer by any Lender of its Note.

Section 2.03Requests for the Loans.  To request a Loan, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Tranche, not later than 11:00 a.m., Houston time, three Business Days before the Effective Date or (b) in the case of an ABR Tranche, not later than 12:00 noon, Houston time, on the Effective Date.  Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request and signed by the Borrower.  Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i)the aggregate amount of the requested Loans;

(ii)the date of such Loan, which shall be the Effective Date;

(iii)whether any portion of such Loans is to be an ABR Tranche or a Eurodollar Tranche;

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

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

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If no election as to the Type is specified, then the entire portion of the Loans shall be a Eurodollar Tranche having an Interest Period of one month.  If no Interest Period is specified with respect to any requested Eurodollar Tranche, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

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

Section 2.04Interest Elections.

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

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

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

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

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

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

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

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

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

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

Section 2.05Funding of Tranches.

(a)Funding by Lenders.  Each Lender shall make its Loan on the Effective Date by wire transfer of immediately available funds by 1:00 p.m., Houston time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders.  The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower and designated by the Borrower in such Borrowing Request.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.

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

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Section 2.06Termination.  The Commitments shall terminate on the Effective Date.  Any portion of the Commitments not borrowed on the Effective Date shall terminate.

Section 2.07Total Reserve Value.  Subject to interim adjustment under Section 8.13(c) and Section 9.12(d), the initial Total Reserve Value shall be $4,600,000,000.00.  The Borrower shall deliver to the Administrative Agent a certificate, in form reasonably satisfactory to the Administrative Agent, no later than March 15^th and September 15^th of each year, commencing March 15, 2008, reflecting the Total Reserve Value as of the immediately preceding December 31^st or June 30^th. In addition, the Borrower may, by notifying the Administrative Agent thereof, and the Administrative Agent may, at the direction of the Majority Lenders, by notifying the Borrower thereof, each elect to require the Total Reserve Value be determined one additional time on a specified “as of” date between such regular determinations (which shall be the first day of a calendar month following the date of such notice), in which event the Borrower shall deliver to the Administrative Agent a certificate, in form reasonably satisfactory to the Administrative Agent, no later than three months after such specified date reflecting the Total Reserve Value as of such specified date.  The Borrower shall calculate the Total Reserve Value based upon the applicable definitions of this Agreement, and provide with each such certificate the Reserve Report and other information used by the Borrower in calculating the Total Reserve Value.

Upon receipt of such certificate, the Administrative Agent shall promptly review such certificate and, within five (5) Business Days, confirm to the Borrower and the Lenders that (i) the calculations used to determine the Total Reserve Value were based upon the pricing and other requirements set forth in the definition of Total Reserve Value and (ii) no mathematical or other errors or omissions have been made in such calculation.  If discrepancies or errors under (i) or (ii) are ascertained to exist, the Administrative Agent and the Borrower shall cooperate to promptly calculate the proper amount of the Total Reserve Value.  Otherwise, upon confirmation of such amount as the Total Reserve Value, such amount will be the Total Reserve Value until next adjusted or redetermined in accordance with the terms of this Agreement.

Section 2.08Intercreditor Agreement.  The Loans, the Notes, this Agreement and the other Loan Documents; the rights and remedies of the Lenders and the Administrative Agent hereunder and thereunder and the Liens created thereby are subject to the Intercreditor Agreement.

ARTICLE III
Payments of Principal and Interest; Prepayments; Fees

Section 3.01Repayment of Loans.  On the Maturity Date, the Borrower shall repay the outstanding principal balance of the Loans in full.

Section 3.02Interest.

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

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

(c)Post-Default Rate.  Notwithstanding the foregoing, if an Event of Default has occurred and is continuing, or if any principal of or interest on any Loan or any fee or other amount payable by the Borrower or any Guarantor hereunder or under any other Loan Document is not paid when due, whether at stated maturity, upon acceleration or otherwise, then all Loans outstanding, in the case of an Event of Default, and such overdue amount, in the case of a failure to pay amounts when due, shall bear interest, after as well as before judgment, at a rate per annum equal to two percent (2%) plus the rate applicable to ABR Tranches as provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.

(d)Interest Payment Dates.  Accrued interest on each Loan shall be payable in arrears on: (i) with respect to any ABR Tranche, the last day of each March, June, September and December; (ii) with respect to any Eurodollar Tranche, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part but in all cases to be paid at least every three months and (iii) in any case, on the Maturity Date; provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable on demand, (ii) in the event of any prepayment of principal of any Loan, accrued interest on the principal amount prepaid shall be payable on the date of such prepayment, and (iii) in the event of any conversion of any Eurodollar Tranche prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e)Interest Rate Computations.  All interest hereunder shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  The applicable Alternate Base Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error, and be binding upon the parties hereto.

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

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

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

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

Section 3.04Optional Prepayments.

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

(b)Notice and Terms of Optional Prepayment.  The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Tranche, not later than 12:00 noon, Houston time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Tranche, not later than 12:00 noon, Houston time, one Business Day before the date of prepayment.  Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of the Loans or portion thereof to be prepaid.  Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof.  Each prepayment of a Tranche shall be applied ratably to the Loans of all Lenders in respect of such Tranche.  Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02.

Section 3.05Mandatory Prepayments

(a)The Borrower shall prepay the Notes in amounts equal to:

(i)100% of the Net Cash Proceeds of any Debt incurrence of the Borrower or any of its Subsidiaries pursuant to Section 9.02(i) or 9.02(j) (but only, in the case of 9.02(j), to the extent such Debt exceeds $10,000,000 in the aggregate), or of the sale or issuance of any Equity Interests of the Borrower.  Such prepayment shall be made no later than the next Business Day after the receipt of such proceeds.

(ii)100% of the Net Cash Proceeds of any Casualty Event related to the Borrower or any of its Subsidiaries. Such prepayment shall be made no later than the next Business Day after the receipt of such proceeds.

(iii)100% of the Net Cash Proceeds of any Asset Sale.  Such prepayment shall be made no later than the next Business Day after the receipt of such proceeds.

(b)Notwithstanding anything herein to the contrary, (x) if the terms of the Senior Revolving Credit Agreement require that any Net Cash Proceeds referred to in Section 3.05(a)(i) through (iii) be applied to the obligations under the Senior Revolving Credit Agreement, then prepayment under Sections 3.05(a)(i) through (iii) shall only be required to the

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extent any Net Cash Proceeds remain after any such application (taking into consideration any waiver or reduction of such requirement) and (y) if not required as a prepayment pursuant to clause (x), then any Net Cash Proceeds received from the issuance of the Permanent Securities shall first be applied to prepay the Loans.

Section 3.06Fees.  The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs

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

(a)Payments by the Borrower.  The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 1:00 p.m., Houston time, on the date when due, in immediately available funds, without defense, deduction, recoupment, set-off or counterclaim.  Fees, once paid, shall be fully earned and shall not be refundable under any circumstances, absent manifest error.  Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the Administrative Agent at its offices specified in Section 12.01, as expressly provided herein and except that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the Persons entitled thereto.  The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.  All payments hereunder shall be made in dollars.

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

(c)Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on its Loan resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loan and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate

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

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

Section 4.03Certain Deductions by the Administrative Agent.  If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(a), Section 4.01(c) or Section 4.02 then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

ARTICLE V
Increased Costs; Break Funding Payments; Taxes

Section 5.01Increased Costs.

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

(i)impose, modify or deem applicable any reserve (including marginal, special, emergency or supplemental reserves), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender for Eurocurrency liabilities under Regulation D of the Board (as the same may be amended, supplemented or replaced from time to time) or otherwise; or

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(ii)impose on any Lender or the London interbank market any other condition affecting this Agreement or any Eurodollar Tranche consisting of any portion of the Loan of such Lender;

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

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

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

(d)Effect of Failure or Delay in Requesting Compensation.  Failure or delay on the part of any Lender to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section 5.01 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.  No Lender may make any demand pursuant to this Section 5.01 more than 180 days after the Maturity Date.

Section 5.02Break Funding Payments.  In the event of (a) the payment of any principal of any Eurodollar Tranche other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Tranche into an ABR Tranche other than on the last day of the Interest Period applicable thereto or (c) the failure to borrow, convert, continue or prepay any Eurodollar Tranche on the date specified in any notice delivered pursuant hereto, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event.  In the case of a Eurodollar Tranche, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would

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have accrued on the principal amount of its Loan had such event not occurred, at the LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.

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

Section 5.03Taxes.

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

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

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

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

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reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

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

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

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

(b)Replacement of Lenders.  If (i) any Lender requests compensation under Section 5.01, (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, (iii) any Lender defaults in its obligation to fund Loans hereunder, (iv) any Lender has voted against an amendment, modification or waiver of any provision of this Agreement proposed by the Borrower, which proposed amendment, modification or waiver (x) was approved by Lenders representing no less than 90% of the outstanding principal amount of the Loans but (y) required the approval of all of the Lenders and did not get such approval, or (v) any Lender has voted against an amendment, modification or waiver of any provision of this Agreement proposed by the Borrower, which proposed amendment, modification or waiver (x) was approved by Lenders representing no less than 50% of the outstanding principal amount of the Loans but (y) required the approval of the Majority Lenders and did not get such approval, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.04(b)), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (1) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (2) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (3) in the case of any such

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assignment resulting from a claim for compensation under Section 5.01 or payments required to be made pursuant to Section 5.03, such assignment will result in a reduction in such compensation or payments.  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

ARTICLE VI
Conditions Precedent

Section 6.01Effective Date.  The obligations of each Lender to make its Loan hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02):

(a)The Arrangers, the Administrative Agent and the Lenders shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.

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

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

(d)The Administrative Agent shall have received a closing certificate which shall be in form and substance reasonably satisfactory to the Administrative Agent, duly and properly executed by a Responsible Officer and dated as of the Effective Date.

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

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(f)The Borrower shall have received a copy of an amendment or waiver from the requisite lenders under the Senior Revolving Credit Agreement authorizing this Agreement and the transactions contemplated hereby.

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

(i)the Security Instruments create second priority, perfected Liens (subject only to Liens existing under the Senior Revolving Credit Documents and Excepted Liens identified in clauses (a) to (d) and (f) of the definition thereof, but subject to the provisos at the end of such definition) on so much of the total value of the Oil and Gas Properties (x) evaluated in the most recently delivered Reserve Report and (y) included in the Acquisition Properties as is necessary to satisfy Section 8.14(a).

(ii)the administrative agent under the Senior Revolving Credit Agreement has received certificates, together with undated, blank stock powers for each such certificate, representing all of the issued and outstanding Equity Interests of each of the Guarantors.

(iii)it has a Lien on all Property constituting security for the Senior Revolving Credit Agreement.

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

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

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

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

(l)The Administrative Agent shall have received appropriate UCC search certificates reflecting no prior Liens, other than Liens in favor of the administrative agent under the Senior Revolving Credit Agreement, encumbering the Properties of the Borrower, and its

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Subsidiaries for each of the following jurisdictions:  Pennsylvania, West Virginia, California, Oklahoma, Texas, Louisiana, Illinois, Delaware and any other jurisdiction requested by the Administrative Agent; other than those being assigned or released on or prior to the Effective Date or Liens permitted by Section 9.03.

(m)The Administrative Agent or its counsel shall have received (i) a certificate of a Responsible Officer of the Borrower certifying:  (A) that the Borrower is concurrently consummating the Acquisition in accordance with the terms of the Acquisition Documents (with all of the material conditions precedent thereto having been satisfied in all material respects by the parties thereto) and acquiring substantially all of the Acquisition Properties contemplated by the Acquisition Documents; (B) as to the final purchase price for the Acquisition Properties after giving effect to all adjustments as of the closing date contemplated by the Acquisition Documents and specifying, by category, the amount of such adjustment; (C) that attached thereto is a true and complete list of the Acquisition Properties which have been excluded from the Acquisition pursuant to the terms of the Acquisition Documents, specifying with respect thereto the basis of exclusion as (1) title defect, (2) preferential purchase right, (3) environmental or (4) casualty loss; (D) that attached thereto is a true and complete list of all Acquisition Properties for which any seller has elected to cure a title defect, (E) that attached thereto is a true and complete list of all Acquisition Properties for which any seller has elected to remediate an adverse environmental condition, there was no known breach of the seller’s title or environmental representations in the Acquisition Documents that would have a material adverse effect on the Acquisition Properties, taken as a whole, and (F) that attached thereto is a true and complete list of all Acquisition Properties which are currently pending final decision by a third party regarding purchase of such property in accordance with any preferential right; (ii) a true and complete executed copy of each of the Acquisition Documents; (iii) original counterparts or copies, certified as true and complete, of the assignments, deeds and leases for all of the Acquisition Properties; and (iv) such other related documents and information as the Administrative Agent shall have reasonably requested.

(n)The Administrative Agent shall have received evidence satisfactory to it that all Liens associated with the Acquisition Properties have been released or terminated contemporaneously with the Acquisition and that arrangements satisfactory to the Administrative Agent have been made for recording and filing of such releases.

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

(p)The Administrative Agent shall have received title information as the Administrative Agent may reasonably require satisfactory to the Administrative Agent such that the requirements of Section 8.13(a) are satisfied after giving effect to the inclusion of the Acquisition Properties.

(q)The Administrative Agent shall have received duly executed Notes payable to the order of each Lender who has requested a Note in a principal amount equal to its Commitment dated as of the date hereof.

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

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the obligations of each Lender to make its Loan hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 12.02) at or prior to 1:00 p.m., Houston time, on February 15, 2008 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).

Section 6.02Additional Conditions.  The obligation of each Lender to fund its Loan is subject to the satisfaction of the following additional conditions:

(a)At the time of and immediately after giving effect to the funding of the Loans, no Default shall have occurred and be continuing.

(b)At the time of and immediately after giving effect to such Loans, no Material Adverse Effect shall have occurred.

(c)The representations and warranties of the Borrower and the Guarantors set forth in this Agreement and in the other Loan Documents shall be true and correct on and as of the Effective Date, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the Effective Date, such representations and warranties shall continue to be true and correct as of such specified earlier date.

(d)The making of such Loan would not conflict with, or cause any Lender to violate or exceed, any applicable Governmental Requirement, and no Change in Law shall have occurred, and no litigation shall be pending or threatened, which does or, with respect to any threatened litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of any Loan, the Senior Revolving Credit Agreement or the consummation of the transactions contemplated by this Agreement or any other Loan Document.

(e)The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.03.

ARTICLE VII
Representations and Warranties

The Borrower represents and warrants to the Lenders that:

Section 7.01Organization; Powers.  Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority, and has all material governmental licenses, authorizations, consents and approvals necessary, to own its assets and to carry on its business as now conducted, and is qualified to do business in, and is in good standing in, or has applied to qualify to do business in, every jurisdiction where such qualification is required, except where

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failure to have such power, authority, licenses, authorizations, consents, approvals and qualifications could not reasonably be expected to have a Material Adverse Effect.

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

Section 7.03Approvals; No Conflicts.  The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including the members or any class of directors of the Borrower or any other Person, whether interested or disinterested), nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, except (i) such as have been obtained or made and are in full force and effect, (ii) as may not be filed or obtained until after the consummation of the Acquisition and (iii) for the filing and recording of Security Instruments to perfect the Liens created hereby and by the Security Instruments, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or their Properties, or give rise to a right thereunder to require any payment to be made by the Borrower or such Subsidiary and (d) will not result in the creation or imposition of any Lien on any Property of the Borrower or any of its Subsidiaries (other than the Liens created by the Loan Documents).

Section 7.04Financial Position; No Material Adverse Change.

(a)The Borrower has heretofore furnished to the Lenders (i) the audited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2006, and related audited consolidated statements of income, cash flows and changes in members’ equity for the fiscal year ending December 31, 2006 and (ii) the unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2007 certified by its chief financial officer.  Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated subsidiaries as of such date and for such period in accordance with GAAP.

(b)Since December 31, 2006, (i) there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect and

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(ii) the business of the Borrower and its Subsidiaries has been conducted only in the ordinary course consistent with past business practices.

(c)Neither the Borrower nor any of its Subsidiaries has on the date hereof any material Debt (including Disqualified Capital Stock), or any contingent liabilities, off-balance sheet liabilities or partnerships, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except for the (i) Indebtedness or (ii) as referred to or reflected or provided for in the Financial Statements.

Section 7.05Litigation.  Except as set forth on Schedule 7.05, there are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries or involving the Acquisition (a) as to which there is a reasonable possibility of an adverse determination that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (b) that involve any Loan Document or (c) that could impair the consummation of the Acquisition on the time and in the manner contemplated by the Acquisition Documents.

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

(a)the Borrower and its Subsidiaries and each of their respective Properties and operations thereon are, and within all applicable statute of limitation periods have been, in compliance with all applicable Environmental Laws;

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

(c)there are no claims, demands, suits, orders, inquiries, or proceedings concerning any violation of, or any liability (including as a potentially responsible party) under, any applicable Environmental Laws that is pending or threatened against the Borrower or its Subsidiaries or any of their respective Properties or as a result of any operations at the Properties;

(d)none of the Properties contain or have contained any:  (i) underground storage tanks; (ii) asbestos containing materials in a friable condition or otherwise requiring abatement under Environmental Laws; or (iii) landfills or dumps; (iv) hazardous waste management units as defined pursuant to RCRA or any comparable state law; or (v) sites on or nominated for the National Priority List promulgated pursuant to CERCLA or any similar state remedial priority list promulgated or published pursuant to any comparable state law;

(e)there is no Release or threatened Release, of Hazardous Materials at, on, under or from any of Borrower’s or its Subsidiaries’ Properties, there are no investigations,

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remediations, abatements, removals, or monitorings of Hazardous Materials required under applicable Environmental Laws at such Properties and none of such Properties are adversely affected by any Release or threatened Release of a Hazardous Material originating or emanating from any other real property,

(f)neither the Borrower nor its Subsidiaries has received any written notice asserting an alleged liability or obligation under any applicable Environmental Laws with respect to the investigation, remediation, abatement, removal, or monitoring of any Hazardous Materials at, under, or Released or threatened to be Released from any real properties offsite the Borrower’s or its Subsidiaries’ Properties and there are no conditions or circumstances that would reasonably be expected to result in the receipt of such written notice.

(g)there has been no exposure of any Person or property to any Hazardous Materials as a result of or in connection with the operations and businesses of any of the Borrower’s or its Subsidiaries’ Properties that would reasonably be expected to form the basis for a material claim for damages or compensation and there are no conditions or circumstances that would reasonably be expected to result in the receipt of notice regarding such exposure; and

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

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

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

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

(c)No Default has occurred and is continuing.

Section 7.08Investment Company Act.  Neither the Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment

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company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.

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

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

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

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

(c)no act, omission or transaction has occurred that could result in imposition on the Borrower, any of its Subsidiaries or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA.

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

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

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

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

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Section 7.11Disclosure; No Material Misstatements.  None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent, any other Agent or any Lender or any of their Affiliates in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.  There is no fact peculiar to the Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect or in the future is reasonably likely to have a Material Adverse Effect and which has not been set forth in this Agreement or the Loan Documents or the other documents, certificates and statements furnished to the Administrative Agent, any other Agent or the Lenders by or on behalf of the Borrower or any of its Subsidiaries prior to, or on, the date hereof in connection with the transactions contemplated hereby.  There are no statements or conclusions in any Reserve Report which are based upon or include misleading information or fail to take into account material information regarding the matters reported therein, it being understood that projections concerning volumes attributable to the Oil and Gas Properties and production and cost estimates contained in each Reserve Report are necessarily based upon professional opinions, estimates and projections and that the Borrower and the Subsidiaries do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

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

Section 7.13Restriction on Liens.  Neither the Borrower nor any of its Subsidiaries is a party to any material agreement or arrangement (other than (i) the Senior Revolving Credit Documents and (ii) Capital Leases creating Liens to the extent permitted by Section 9.03(d), but then only on the Property subject to such Capital Leases), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Administrative Agent and the Lenders on or in respect of their Properties to secure the Indebtedness and the Loan Documents.

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

Section 7.15Location of Business and Offices.  The Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as listed in the public records of its

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jurisdiction of organization is Linn Energy, LLC, and the organizational identification number of the Borrower in its jurisdiction of organization is 3951040 (or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(l) in accordance with Section 12.01).  The Borrower’s principal place of business and chief executive offices are located at the address specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(l) and Section 12.01(c)).  Each Subsidiary’s jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business and chief executive office is stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to Section 8.01(l)).

Section 7.16Properties; Titles, Etc.

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

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

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

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

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

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databases, geological data, geophysical data, engineering data, seismic data, maps, interpretations and other technical information used in their businesses as presently conducted, subject to the limitations contained in the agreements governing the use of the same, which limitations are customary for companies engaged in the business of the exploration and production of Hydrocarbons, with such exceptions as could not reasonably be expected to have a Material Adverse Effect.

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

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

Section 7.18Gas Imbalances, Prepayments.  As of the date hereof, except as set forth on Schedule 7.18 or on the most recent certificate delivered pursuant to Section 8.12(b), on a net basis there are no gas imbalances, take or pay or other prepayments which would require the Borrower or any of its Subsidiaries to deliver, in the aggregate, two percent (2%) or more of the monthly production from Hydrocarbons produced from the Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor.

Section 7.19Marketing of Production.  Except for contracts listed and in effect on the date hereof on Schedule 7.19, and thereafter either disclosed in writing to the Administrative Agent or included in the most recently delivered Reserve Report (with respect to all of which contracts the Borrower represents that it or its Subsidiaries are receiving a price for all

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production sold thereunder which is computed substantially in accordance with the terms of the relevant contract and are not having deliveries curtailed substantially below the subject Property’s delivery capacity), no material agreements exist which are not cancelable on 60 days notice or less without penalty or detriment for the sale of production from the Borrower’s or its Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other rights to purchase, production, whether or not the same are currently being exercised) that (a) pertain to the sale of production at a fixed price and (b) have a maturity or expiry date of more than six (6) months from the date hereof.

Section 7.20Swap Agreements.  Schedule 7.20, as of December 31, 2007, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(d) (as of the relevant period end), sets forth, a true and complete list of all Swap Agreements of the Borrower and each of its Subsidiaries, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net marked-to-market value thereof, all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement.

Section 7.21Use of Loans.  The proceeds of the Loans shall be used to finance the Acquisition and to pay related fees and expenses.  The Borrower and its Subsidiaries are not engaged principally, or as one of its or their important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board).  No part of the proceeds of any Loan will be used for any purpose which violates the provisions of Regulations T, U or X of the Board.

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

Section 7.23Acquisition.  The copies of the Acquisition Documents previously delivered by the Borrower to the Administrative Agent are true, accurate and complete and have not been amended or modified in any manner, other than pursuant to amendments or modifications previously delivered to the Administrative Agent.  No party to any Acquisition Document is in default in respect of any material term or obligation thereunder.

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ARTICLE VIII
Affirmative Covenants

Until the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been paid in full, the Borrower covenants and agrees with the Lenders that:

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

(a)Annual Financial Statements.  As soon as available, but in any event not later than 90 days after the end of each fiscal year, Borrower’s audited consolidated balance sheet and related statements of operations, members’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG, LLP or independent public accountants of recognized national standing and reasonably acceptable to the Administrative Agent (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied.

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

(c)Certificate of Financial Officer — Compliance.  Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer in substantially the form of Exhibit B hereto (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 9.01 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the Effective Date and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate.

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

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agreements relating thereto not listed on Schedule 7.20, any margin required or supplied under any credit support document, and the counterparty to each such agreement.  To the extent the Borrower or a Subsidiary changes the material terms of a Swap Agreement listed in the foregoing schedule, terminates any such Swap Agreement or enters into a new Swap Agreement which has the effect of creating an off-setting position, the Borrower will give the Lenders prompt written notice of such event if, with respect to any commodity-price Swap Agreement, the product of (i) the notional volumes of such commodity-price Swap Agreement times (ii) the excess of (A) the strike or fixed rate payor price over (B) the “price deck” used in calculating the Total Reserve Value for the relevant commodities, exceeds in the aggregate during such period $50,000,000.

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

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

(g)SEC and Other Filings; Reports to shareholders.  Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; provided, however, that the Borrower shall be deemed to have furnished the information required by this Section 8.01(g) if it shall have timely made the same available on “EDGAR” and/or on its home page on the worldwide web (at the date of this Agreement located at http://www.linnenergy.com); provided further, however, that if any Lender is unable to access EDGAR or the Borrower’s home page on the worldwide web, the Borrower agrees to provide such Lender with paper copies of the information required to be furnished pursuant to this Section 8.01(g) promptly following notice from the Administrative Agent that such Lender has requested same.  Information required to be delivered pursuant to this Section 8.01(g) shall be deemed to have been delivered on the date on which the Borrower provides notice to the Administrative Agent that such information has been posted on “EDGAR” or the Borrower’s website or another website identified in such notice and accessible by the Administrative Agent without charge (and the Borrower hereby agrees to provide such notice).

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

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(i)Lists of Purchasers.  Concurrently with the delivery of any Reserve Report to the Administrative Agent pursuant to Section 8.12, a list of Persons purchasing Hydrocarbons from the Borrower and its Subsidiaries reasonably expected to account for at least 80% of the revenues resulting from the sale of Hydrocarbons produced from the Mortgaged Properties in the quarter following the “as of” date of such Reserve Report.

(j)Notice of Sales of Oil and Gas Properties.  In the event the Borrower or any of its Subsidiaries intends to sell, transfer, assign or otherwise dispose of any Oil or Gas Properties included in the most recently delivered Reserve Report (or any Equity Interests in any Subsidiary owning interests in such Oil and Gas Properties) during any period between two successive dates on which the Total Reserve Value is determined in accordance with Section 2.07 having a fair market value, individually or in the aggregate, in excess of $10,000,000, prior written notice of such disposition, the price thereof, the anticipated date of closing, and any other details thereof reasonably requested by the Administrative Agent or any Lender.

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

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

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

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

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

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(p)Acquisition Notices.  In the event that after the Effective Date:  (i) the Borrower is required or elects to purchase any of the Acquisition Properties which had been excluded from, or return any of the Acquisition Properties which had been included in, the Acquisition Properties in accordance with the terms of the Acquisition Documents, (ii) the Borrower is required to honor any preferential purchase right in respect of any Acquisition Property which has not been waived, (iii) any matter being disputed in accordance with the terms of the Acquisition Documents is resolved and (iv) the Borrower receives the draft and final statements setting forth the final calculation of the Adjusted Purchase Price (as defined therein) and showing the calculation of each adjustment, delivered to the Borrower pursuant to Section 14.1 of the Acquisition Documents, then, in each such case, the Borrower shall promptly give the Administrative Agent notice in reasonable detail of such circumstances and such copies of such documents, as applicable.

(q)Certificate of Responsible Officer—Total Debt.  At the times specified in Section 2.07 and promptly following any change to Total Reserve Value pursuant to Section 8.13(c) or Section 9.12(d), the Borrower will deliver a certificate of a Responsible Officer of the Borrower setting forth the Total Reserve Value both immediately prior to and after giving effect to such event.

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

Section 8.02Notices of Material Events.  The Borrower will furnish to the Administrative Agent and each Lender, promptly after the Borrower obtains knowledge thereof, written notice of the following:

(a)the occurrence of any Default;

(b)the filing or commencement of, or the threat in writing of, any action, suit, investigation, arbitration or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Subsidiary thereof, or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Lenders), that, in either case, if adversely determined, could reasonably be expected to result in liability in excess of $10,000,000;

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

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

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

Section 8.03Existence; Conduct of Business.  The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which any of its Oil and Gas Properties is located or the ownership of its Properties requires such qualification, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 9.12.

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

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

Section 8.06Operation and Maintenance of Properties.  The Borrower will, and will cause each of its Subsidiaries to:

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

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

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

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

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

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

Section 8.08Books and Records; Inspection Rights.  The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.  The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.

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

Section 8.10Environmental Matters.

(a)The Borrower shall at its sole expense (including such contribution from third parties as may be available): (i) comply, and shall cause its Properties and operations and each Subsidiary and each Subsidiary’s Properties and operations to comply, with all applicable Environmental Laws, the breach of which could be reasonably expected to have a Material Adverse Effect; (ii) not dispose of or otherwise release, and shall cause each Subsidiary not to dispose of or otherwise release, any oil, oil and gas waste, hazardous substance, or solid waste

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on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties or any other Property to the extent caused by the Borrower’s or any of its Subsidiaries’ operations except in compliance with applicable Environmental Laws, the disposal or release of which could reasonably be expected to have a Material Adverse Effect; (iii) timely obtain or file, and shall cause each Subsidiary to timely obtain or file, all notices, permits, licenses, exemptions, approvals, registrations or other authorizations, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower’s or its Subsidiaries’ Properties, which failure to obtain or file could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and diligently prosecute to completion, and shall cause each Subsidiary to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the “Remedial Work”) in the event any Remedial Work is required or reasonably necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other release of any oil, oil and gas waste, hazardous substance or solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties, which failure to commence and diligently prosecute to completion could reasonably be expected to have a Material Adverse Effect; and (v) establish and implement, and shall cause each Subsidiary to establish and implement, such reasonable policies of environmental audit and compliance as may be reasonably necessary to continuously determine and assure that the Borrower’s and its Subsidiaries’ obligations under this Section 8.10(a) are timely and fully satisfied, which failure to establish and implement could reasonably be expected to have a Material Adverse Effect.

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

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

Section 8.11Further Assurances.

(a)The Borrower at its sole expense will, and will cause each of its Subsidiaries to, promptly execute and deliver to the Administrative Agent all such other documents, agreements and instruments reasonably requested by the Administrative Agent to comply with, cure any defects or accomplish the conditions precedent, covenants and agreements of the Borrower or any of its Subsidiaries, as the case may be, in the Loan Documents, including the Notes, or to further evidence and more fully describe the collateral intended as security for

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the Indebtedness, or to correct any omissions in this Agreement or the Security Instruments, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in the sole discretion of the Administrative Agent, in connection therewith.

(b)           The Borrower hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Mortgaged Property without the signature of the Borrower or any other Guarantor where permitted by law.  A carbon, photographic or other reproduction of the Security Instruments or any financing statement covering the Mortgaged Property or any part thereof shall be sufficient as a financing statement where permitted by law.  The Administrative Agent will promptly send the Borrower any financing or continuation statements it files without the signature of the Borrower or any other Guarantor and the Administrative Agent will promptly send the Borrower the filing or recordation information with respect thereto.

Section 8.12Reserve Reports.

(a)           On or before March 1st and September 1st of each year, commencing March 1st, 2008, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report as of the immediately preceding December 31^st or June 30^th, as applicable.  The Reserve Report as of December 31^st of each year shall be prepared by one or more petroleum engineers reasonably acceptable to the Administrative Agent and the June 30^th Reserve Report of each year shall be prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately preceding December 31^st Reserve Report.

(b)           With the delivery of each Reserve Report, the Borrower shall provide to the Administrative Agent and the Lenders a certificate from a Responsible Officer certifying that in all material respects: (i) the information provided by the Borrower in connection with the preparation of such Reserve Report and any other information delivered in connection therewith by the Borrower is true and correct, and any projections based upon such information have been prepared in good faith based upon assumptions believed by the Borrower to be reasonable, subject to uncertainties inherent in all projections, (ii) the Borrower or its Subsidiaries owns good and defensible title to the Oil and Gas Properties evaluated in such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.18 with respect to their Oil and Gas Properties evaluated in such Reserve Report that would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons either generally or produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of their Oil and Gas Properties have been sold since the date of the last Reserve Report except as set forth on an exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the certificate is a list of all marketing agreements entered into subsequent to the later

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of the date hereof or the most recently delivered Reserve Report that the Borrower could reasonably be expected to have been obligated to list on Schedule 7.19 had such agreement been in effect on the date hereof and (vi) attached thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve Report that are Mortgaged Properties and demonstrating the percentage of the present value that such Mortgaged Properties represent.

Section 8.13           Title Information.

(a)           On or before the delivery to the Administrative Agent and the Lenders of each Reserve Report required by Section 8.12(a), to the extent requested by the Administrative Agent, the Borrower will deliver title information in form and substance reasonably acceptable to the Administrative Agent covering enough of the Oil and Gas Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report, so that the Administrative Agent shall have received together with title information previously delivered to the Administrative Agent, reasonably satisfactory title information on such portion of the Oil and Gas Properties evaluated by such Reserve Report, not to exceed 80% of the total value thereof, as may be reasonably requested by the Administrative Agent.

(b)           If the Borrower has provided title information for additional Properties under Section 8.13(a), the Borrower shall, within 60 days of notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Properties, either (i) cure any such title defects or exceptions (including defects or exceptions as to priority) which are not permitted by Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged Properties with no title defects or exceptions except for Excepted Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such definition) having an equivalent value or (iii) deliver title information in form and substance reasonably acceptable to the Administrative Agent so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent, reasonably satisfactory title information on such portion of the Oil and Gas Properties evaluated by such Reserve Report, not to exceed 80% of the total value thereof, as may be reasonably requested by the Administrative Agent.

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

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Section 8.14           Additional Collateral; Additional Guarantors.

(a)           In connection with the delivery of each Reserve Report, the Borrower shall review the Reserve Report and the list of current Mortgaged Properties (as described in Section 8.12(b)(vi)) to ascertain whether the Mortgaged Properties represent at least 80% of the total value of the Oil and Gas Properties evaluated in the most recently completed Reserve Report after giving effect to exploration and production activities, acquisitions, dispositions and production.  In the event that the Mortgaged Properties do not represent at least 80% of such total value, then the Borrower shall, and shall cause its Subsidiaries to, grant, within sixty (60) days of the delivery of the certificate contemplated by Section 8.12(b), to the Administrative Agent or its designee as security for the Indebtedness a Lien interest (subject to a Lien under the Senior Revolving Credit Documents and provided the Excepted Liens of the type described in clauses (a) to (d) and (f) of the definition thereof may exist, but subject to the provisos at the end of such definition) on additional Oil and Gas Properties not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 80% of such total value.  All such Liens will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements or other Security Instruments, all in form and substance reasonably satisfactory to the Administrative Agent or its designee and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes.  In order to comply with the foregoing, if any Subsidiary places a Lien on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).

(b)           If (i) the Borrower determines that any Subsidiary is a Material Domestic Subsidiary or (ii) any Domestic Subsidiary incurs or guarantees any Debt other than the Indebtedness, and in either case, such Subsidiary is not already a Guarantor, then the Borrower shall promptly cause such Subsidiary to guarantee the Indebtedness pursuant to the Guaranty Agreement.  In connection with any such guaranty, the Borrower shall, or shall cause such Subsidiary to, (A) execute and deliver a supplement to the Guaranty Agreement executed by such Subsidiary, (B) pledge all of the Equity Interests of such Subsidiary (including, without limitation, delivery of original stock certificates evidencing the Equity Interests of such Subsidiary, together with an appropriate undated stock powers for each certificate duly executed in blank by the registered owner thereof to the Administrative Agent or if the Senior Revolving Credit Agreement is then in effect, to the administrative agent thereunder) and (C) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent or its designee.

(c)           Prior to or contemporaneously with the granting of any Lien on any Property to or for the benefit of any agent or lender under the Senior Revolving Credit Agreement pursuant to any Senior Revolving Credit Document or otherwise, the Borrower or applicable Subsidiary shall grant to the Administrative Agent a Lien interest (subject only to Liens under the Senior Revolving Credit Documents and Excepted Liens of the type described in clauses (a) to (d) and (f) in the definition thereof, but subject to the provisos at the end of such definition) on such Property for the benefit of the Lenders to secure the Indebtedness.  All such Liens in favor of the Administrative Agent will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements or other

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Security Instruments, all in form and substance reasonably satisfactory to the Administrative Agent and in a sufficient number of executed (and acknowledged where necessary or appropriate) counterparts for recording purposes.  In order to comply with the foregoing, if any Subsidiary places a Lien on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).

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

Section 8.16           Marketing Activities.  The Borrower will not, and will not permit any of its Subsidiaries to, engage in marketing activities for any Hydrocarbons or enter into any contracts related thereto other than (a) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from their proved Oil and Gas Properties during the period of such contract, (b) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from proved Oil and Gas Properties of third parties during the period of such contract associated with the Oil and Gas Properties of the Borrower and its Subsidiaries that the Borrower or one of its Subsidiaries has the right to market pursuant to joint operating agreements, unitization agreements or other similar contracts that are usual and customary in the oil and gas business and (c) other contracts for the purchase and/or sale of Hydrocarbons of third parties (i) which have generally offsetting provisions (i.e. corresponding pricing mechanics, delivery dates and points and volumes) such that no “position” is taken and (ii) for which appropriate credit support has been taken to alleviate the material credit risks of the counterparty thereto.

Section 8.17           Swap Agreements.  Within 30 days of the Effective Date, the Borrower shall enter into Swap Agreements with respect to the Acquisition Properties for volumes and prices satisfactory to the Administrative Agent and the Borrower shall neither assign, terminate or unwind any such Swap Agreements nor sell any Swap Agreements if the effect of such action (when taken together with any other Swap Agreements executed contemporaneously with the taking of such action) would have the effect of canceling its positions under such Swap Agreements required hereby.

Section 8.18           Permanent Securities.  The Borrower shall use commercially reasonable efforts to prepare a registration statement or a Rule 144A offering memorandum relating to the Permanent Securities, and provide to the Arrangers a complete initial draft of such document (including the financial statements to be included therein) in each case, no later than 13 months after the Effective Date, provided that the Borrower shall not be required to issue or sell Permanent Securities pursuant to such registration statement or offering memorandum.  The Borrower shall engage and provide evidence of such engagement to the Administrative Agent, and at all times retain an Investment Bank (or promptly engage another Investment Bank if either

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party disengages from such relationship) for the purpose of assisting the Borrower using commercially reasonable efforts to issue, sell or place the Permanent Securities, the Net Cash Proceeds of which shall equal or exceed the outstanding principal balance of the Loans, interest thereon and all fees and expenses required to be paid under this Agreement and be available to repay this Agreement on or before the Maturity Date.

ARTICLE IX
Negative Covenants

Until the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents have been paid in full, the Borrower covenants and agrees with the Lenders that:

Section 9.01Financial Covenants.

(a)Ratio of EBITDA to Interest Expense.  The Borrower will not, as of the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 2008, permit its ratio of EBITDA for the period of four fiscal quarters then ended to Interest Expense for such period to be less than 2.5 to 1.0.  For purposes of this Section 9.01(a), the calculation of EBITDA and Interest Expense shall be as follows: (x) for the fiscal quarter ending March 31, 2008, EBITDA and Interest Expense for the two quarter period ending on such date, each multiplied by two, (y) for the fiscal quarter ending June 30, 2008, EBITDA and Interest Expense for the three quarter period ending on such date, each multiplied by 4/3 and (z) for each fiscal quarter ending on or after September 30, 2008, EBITDA and Interest Expense for the period of four fiscal quarters then ending.

(b)Current Ratio.  The Borrower will not permit, as of the last day of any fiscal quarter, its ratio of (i) consolidated current assets (including the unused amount of the total Commitments, but excluding non-cash assets under FAS 133) to (ii) consolidated current liabilities (excluding non-cash obligations under FAS 133 and current maturities under this Agreement) to be less than 1.0 to 1.0.

(c)Total Reserve Value to Total Debt Ratio.  The Borrower will not as of any date of determination permit its ratio of (i) Total Reserve Value as in effect on such date of determination to (ii) Total Debt as of such date of determination to be less than 1.5 to 1.0.

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

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

(b)accounts payable and other accrued expenses, liabilities or other obligations to pay (for the deferred purchase price of Property or services) from time to time incurred in the ordinary course of business which are not greater than ninety (90) days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP.

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

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

(e)           Debt now or hereafter outstanding under the Senior Revolving Credit Agreement (and any guarantees thereof by the Guarantors), provided that (i) the aggregate principal amount of the Senior Revolving Credit Agreement shall not exceed $2,250,000,000, (ii) no part of the Debt for principal owing under the Senior Revolving Credit Agreement is subordinated in right of payment to any other Debt for principal owing under the Senior Revolving Credit Agreement and (iii) such Debt is comprised of a single facility with no differentiation among lenders in the revolving character, pricing or maturity thereof.

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

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

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

(i)            Debt and any guarantees thereof, provided that (i) at the time such Debt is incurred, no Default has occurred and is then continuing, (ii) no Default would result from the incurrence of such Debt after giving effect to the incurrence of such Debt (and any concurrent repayment of Debt with the proceeds of such incurrence), and (iii) the Net Cash Proceeds of such Debt are applied as contemplated by Section 3.05.

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

(k)           Extensions, renewals or replacements of any Debt (for purposes of this paragraph (k), “refinancing debt”) permitted in clauses (a) through (j) so long as (i) the principal amount (or accreted value, if applicable) of such refinancing debt does not exceed the principal amount (or accreted value, if applicable) of the Debt extended, renewed or replaced (plus all accrued interest on the Debt and the amount of all expenses and premiums incurred in connection therewith), (ii) such refinancing debt has a final maturity date later than the final maturity date of the Debt being extended, renewed or replaced, (iii) if the Debt being extended, renewed or replaced is subordinated in right of payment to the obligations under this Agreement, such refinancing debt has a final maturity date equal to or later than the final maturity date of, and is subordinated in right of payment to, the obligations under this Agreement on terms at least as favorable to the Lenders as those contained in the documentation governing the Debt being

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extended, renewed or replaced, (iv) such refinancing debt is incurred either by the Borrower or by a Subsidiary who is the obligor on the Debt being extended, renewed or replaced, and (v) if incurred by the Borrower, such refinancing debt may be guaranteed by the Guarantors.

Section 9.03           Liens.  Neither the Borrower nor any of its Subsidiaries will create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except:

(a)           Liens securing the payment of any Indebtedness.

(b)           Excepted Liens.

(c)           Liens securing the obligations of the Borrower and the Guarantors under the Senior Revolving Credit Agreement and the other Senior Revolving Credit Documents; provided that, such Liens shall not encumber any Property that is not subject to a second priority Lien in favor of, or for the benefit of, the Administrative Agent for the benefit of the Lenders to secure the Indebtedness.

(d)           The Dominion Production Payment.

(e)           Liens in connection with Capital Leases permitted under Section 9.02(h).

(f)            Liens on cash, marketable securities or letters of credit in an aggregate amount not to exceed $50,000,000 at any one time to secure Swap Agreements with Persons (or their Affiliates) who have ceased to be lenders under the Senior Revolving Credit Agreement.

(g)           Liens on Property not constituting collateral for the Indebtedness and not otherwise permitted by the foregoing clauses of this Section 9.03; provided that the aggregate principal or face amount of all Debt secured under this Section 9.03(g) shall not exceed $10,000,000 at any time.

(h)           Extensions, renewals or replacements of any of the Liens permitted in clauses (a) through (g) so long as (i) the principal amount of the Debt or obligation secured thereby is no greater than the principal amount of such Debt or obligation at the time such Lien was permitted hereunder except for increases in an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such extension, renewal, refinancing, or replacement and in an amount equal to any existing commitments unutilized thereunder, (ii) any such extension, renewal or replacement Lien is limited to the property originally encumbered thereby, and (iii) any renewal or extension of the Debt or obligations secured or benefited thereby is permitted by Section 9.02.

Section 9.04           Dividends.  The Borrower will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, return any capital to its stockholders or make any distribution of their Property to their respective Equity Interest holders, except (i)  the Borrower may declare and pay dividends or distributions with respect to its Equity Interests payable solely in additional shares of its Equity Interests (other than Disqualified Capital Stock), (ii) Subsidiaries may declare and pay dividends

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or distributions ratably with respect to their Equity Interests and (iii) so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the Borrower may declare and pay quarterly cash dividends to its members out of Available Cash for the preceding quarter (including amounts borrowed as contemplated under clause (a)(ii) of the definition of Available Cash subsequent to the end of such quarter).

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

(a)Investments reflected in the Financial Statements.

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

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

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

(e)deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by, any Lender or any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $250,000,000 (as of the date of such bank or trust company’s most recent financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by S&P or Moody’s, respectively.

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

(g)Investments (i) made by the Borrower in or to the Guarantors, (ii) made by any Subsidiary in or to the Borrower or any Guarantor, (iii) made by the Borrower or any Guarantor in any Person that owns Oil and Gas Properties which are overriding royalty, royalty interests or other similar non-cost bearing interests and which does not own other material Properties, provided, that after the consummation of such Investment (A) the Borrower and its Subsidiaries are in compliance with all covenants under this Agreement and (B) such Person promptly becomes a Guarantor or is promptly dissolved into a Guarantor or the Borrower and (iv) made by the Borrower or any Guarantor in Subsidiaries that are not Guarantors, provided that the aggregate of all Investments made by the Borrower and the Guarantors in or to all Subsidiaries that are not Guarantors shall not exceed $10,000,000 at any time.

(h)Investments (including, without limitation, capital contributions) in general or limited partnerships or other types of entities (each a “venture”) entered into by the Borrower or any of its Subsidiaries with others in the ordinary course of business; provided that (i) any such venture is engaged exclusively in oil and gas exploration, development, production,

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processing and related activities, including transportation, treatment and storage, (ii) the interest in such venture is acquired in the ordinary course of business and on fair and reasonable terms and (iii) such venture interests acquired and capital contributions made (valued as of the date such interest was acquired or the contribution made) do not exceed, in the aggregate at any time outstanding an amount equal to $10,000,000.

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

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

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

(l)            Any guarantee permitted under Section 9.02.

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

Section 9.07           Limitation on Leases.  Neither the Borrower nor any of its Subsidiaries will create, incur, assume or suffer to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal but excluding Capital Leases permitted by Section 9.02(h), leases of Hydrocarbon Interests and drilling and other similar contracts), under leases or lease agreements which would cause the aggregate amount of all payments made by the Borrower and its Subsidiaries pursuant to all such leases or lease agreements, including, without limitation, any residual payments at the end of any lease, to exceed $10,000,000 in any period of twelve consecutive calendar months during the life of such leases.

Section 9.08           Proceeds of Notes.  The Borrower will not permit the proceeds of the Notes to be used for any purpose other than those permitted by Section 7.21.  Neither the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which might cause any of the Loan Documents to violate Regulations T, U or X or any other regulation of the Board or to violate Section 7 of the Securities Exchange Act of 1934 or any rule 

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or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect.  If requested by the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 or such other form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

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

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

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

(c)acquire, or permit any ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to the Borrower or any of its Subsidiaries or with respect to any ERISA Affiliate of the Borrower or any of its Subsidiaries if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (i) any Multiemployer Plan, or (ii) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities.

Section 9.10Sale or Discount of Receivables.  Except for receivables obtained by the Borrower or any of its Subsidiaries out of the ordinary course of business or the settlement of joint interest billing accounts in the ordinary course of business or discounts granted to settle collection of accounts receivable or the sale of defaulted accounts arising in the ordinary course of business in connection with the compromise or collection thereof and not in connection with any financing transaction, neither the Borrower nor any of its Subsidiaries will discount or sell (with or without recourse) any of its notes receivable or accounts receivable.

Section 9.11Mergers, Etc.  Neither the Borrower nor any of its Subsidiaries will merge into or with or consolidate with any other Person, or sell, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property to any other Person, except that any Wholly-Owned Subsidiary may merge with any other Wholly-Owned Subsidiary so long as in the case of any merger involving a Guarantor, a Guarantor is the surviving entity, and that the Borrower may merge with any Wholly-Owned Subsidiary so long as the Borrower is the survivor.

Section 9.12Sale of Properties.  The Borrower will not, and will not permit any of its Subsidiaries to, sell, assign, farm-out, convey or otherwise transfer any Property except for: (a) the sale of Hydrocarbons in the ordinary course of business; (b) farmouts of undeveloped acreage

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and assignments in connection with such farmouts; (c) the sale or transfer of equipment that is no longer necessary for the business of the Borrower or such Subsidiary or is replaced by equipment of at least comparable value and use; (d) other sales or dispositions (including Casualty Events) of Oil and Gas Properties or any interest therein or Subsidiaries owning Oil and Gas Properties; provided that (i) 100% of the consideration received in respect of such other sale or disposition shall be cash, (ii) the consideration received in respect of such other sale or disposition shall be equal to or greater than the fair market value of the Oil and Gas Property, interest therein or Subsidiary subject of such other sale or disposition (as reasonably determined by the board of directors of the Borrower and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to that effect), (iii) if such other sale or disposition of Oil and Gas Property or Subsidiary owning Oil and Gas Properties included in the most recently delivered Reserve Report during any period between two successive dates on which the Total Reserve Value is determined in accordance with Section 2.07 has a fair market value (as determined by the Administrative Agent), individually or in the aggregate, in excess of $25,000,000, the Total Reserve Value shall be reduced, effective immediately upon such sale or disposition, by an amount equal to the Total Reserve Value of such Property as calculated pursuant to the most recently delivered Reserve Report and (iv) if any such other sale or disposition is of a Subsidiary owning Oil and Gas Properties, such other sale or disposition shall include all the Equity Interests of such Subsidiary; and (e) sales and other dispositions of Properties not regulated by Section 9.12(a) to (d) having a fair market value not to exceed $10,000,000 during any 12-month period.

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

Section 9.14           Transactions with Affiliates.  The Borrower will not, and will not permit any Subsidiary to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate (other than the Guarantors and Wholly-Owned Subsidiaries of the Borrower) unless such transactions are otherwise permitted under this Agreement and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate.

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

Section 9.16           Negative Pledge Agreements; Dividend Restrictions.  Neither the Borrower nor any of its Subsidiaries will create, incur, assume or suffer to exist any contract,

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agreement or understanding (other than this Agreement, the Security Instruments and the Senior Revolving Credit Documents) that in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Administrative Agent and the Lenders or restricts any Subsidiary from paying dividends or making distributions to the Borrower or any Guarantor, or which requires the consent of or notice to other Persons in connection therewith; provided, however, that the preceding  restrictions will not apply to encumbrances or restrictions arising under or by reason of (1) the Dominion Production Payment but only on the Oil and Gas Property subject thereto, (2) any leases (other than leases of Oil and Gas Properties) or licenses or similar contracts as they affect any Property or Lien subject to such lease or license, (3) any restriction with respect to a Subsidiary imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or substantially all the equity or Property of such Subsidiary (or the Property that is subject to such restriction) pending the closing of such sale or disposition, (4) customary provisions with respect to the distribution of Property in joint venture agreements or (5) Capital Leases permitted under Section 9.02(g), but then only on the Property subject of such Capital Leases.

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

Section 9.18           Swap Agreements.  Neither the Borrower nor any of its Subsidiaries will enter into any Swap Agreements with any Person other than (a) Swap Agreements in respect of commodities (i) with an Approved Counterparty, (ii) the notional volumes for which (when aggregated with other commodity Swap Agreements then in effect other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements) do not exceed, as of the date such Swap Agreement is executed, 85% of the reasonably anticipated projected production from Proved Reserves for each month during the period during which such Swap Agreement is in effect for each of crude oil and natural gas, calculated separately, for the remainder of the calendar year plus the next two full calendar years succeeding the execution of such Swap Agreement and 70% of the reasonably anticipated projected production from Proved Reserves for each month during the period during which such Swap Agreement is in effect for each of crude oil and natural gas, calculated separately, for each month thereafter, and (iii) the notional volumes for which do not exceed the current net monthly production (regardless of projected production levels) at the time such Swap Agreement is executed, calculated separately for each of crude oil and natural gas, provided, that the foregoing shall not prevent the Borrower from entering into forward agreements in respect of commodity Swap Agreements in respect of future projected volumes from Oil and Gas Properties subject to the Dominion Production Payment, so long as the notional volumes under such forward agreements do not exceed the reasonably anticipated net monthly production for all calculation periods under such forward agreements, calculated separately for each of crude oil and natural gas, and (b) Swap Agreements in respect of interest rates with an Approved Counterparty, which effectively convert interest rates from floating to fixed, the notional amounts of which (when aggregated with all other Swap Agreements of the Borrower and its Subsidiaries then in effect effectively converting interest

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rates from floating to fixed) do not exceed 90% of the then outstanding principal amount of the Borrower’s Debt for borrowed money which bears interest at a floating rate.  Notwithstanding anything to the contrary in this Section 9.18, there shall be no prohibition against the Borrower entering into any “put” contracts or commodity price floors so long as such agreements are entered into for non-speculative purposes and in the ordinary course of business for the purpose of hedging against fluctuations of commodity prices.

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

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

Section 9.21Anti-Layering.  The Borrower will not, and will not permit any Subsidiary to, incur, create, assume or suffer to exist any Debt if such Debt is subordinate or junior in ranking in right of payment to the Senior Revolving Credit Agreement, unless such Debt is pari passu or expressly subordinated in right of payment to the obligations under this Agreement.

ARTICLE X
Events of Default; Remedies

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

(a)the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise.

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

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

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

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

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

(g)           any event or condition occurs (after giving effect to any notice or cure period) that results in any Material Indebtedness (other than the Senior Revolving Credit Agreement) becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the Redemption thereof or any offer to Redeem to be made in respect thereof, prior to its scheduled maturity or require the Borrower or any of its Subsidiaries to make an offer in respect thereof.

(h)           any event or condition occurs (after giving effect to any notice or cure period) that results in the Senior Revolving Credit Notes becoming due prior to their scheduled maturity or requires the Borrower or any of its Subsidiaries to make an offer in respect thereof.

(i)            an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any of its Subsidiaries or its debts, or of a substantial part of its assets, under any  federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered.

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

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

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

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

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

(o)a Change in Control shall occur.

Section 10.02Remedies.

(a)In the case of an Event of Default other than one described in Section 10.01(i), Section 10.01(j) or Section 10.01(k), at any time thereafter during the continuance of such Event of Default, the Administrative Agent, at the request of the Majority Lenders, shall, by notice to the Borrower, declare the Notes and the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents, shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(i), Section 10.01(j) or  Section 10.01(k), the Notes and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor.

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

(c)           All proceeds realized from the liquidation or other disposition of collateral or otherwise received after maturity of the Notes, whether by acceleration or otherwise, shall be applied:  first, to reimbursement of expenses and indemnities provided for in this Agreement and the Security Instruments; second, to accrued interest on the Notes; third, to fees; fourth, pro rata to principal outstanding on the Notes; fifth, to any other Indebtedness; and any excess shall be paid to the Borrower or as otherwise required by any Governmental Requirement.

Section 10.03         Disposition of Proceeds.  The Security Instruments contain an assignment by the Borrower and/or the Guarantors unto and in favor of the Administrative Agent for the benefit of the Lenders of all of the Borrower’s or each Guarantor’s interest in and to production and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged Property.  The Security Instruments further provide in general for the application of such proceeds to the satisfaction of the Indebtedness and other obligations described therein and secured thereby.  Notwithstanding the assignment contained in such Security Instruments, except after the occurrence and during the continuance of an Event of Default, (a) the Administrative Agent and the Lenders agree that they will neither notify the purchaser or purchasers of such production nor take any other action to cause such proceeds to be remitted to the Administrative Agent or the Lenders, but the Lenders will instead permit such proceeds to be paid to the Borrower and its Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to take such actions as may be necessary to cause such proceeds to be paid to the Borrower and/or its Subsidiaries.

ARTICLE XI
The Administrative Agent

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

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

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

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

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

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

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

Section 11.06         Resignation or Removal of Agents.  Subject to the appointment and acceptance of a successor Agent as provided in this Section 11.06, any Agent may resign at any time by notifying the Lenders and the Borrower, and any Agent may be removed at any time with or without cause by the Majority Lenders.  Upon any such resignation or removal, the Majority Lenders shall have the right, in consultation with the Borrower, to appoint a successor.  If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation or removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent.  Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the Agent’s resignation hereunder, the provisions of this ARTICLE XI and

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

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

Section 11.08No Reliance.

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

(b)The Lenders acknowledge that the Administrative Agent and the Arrangers are acting solely in administrative capacities with respect to the structuring and syndication of this facility and have no duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than their administrative duties, responsibilities and liabilities specifically as set forth in the Loan Documents and in their capacity as Lenders hereunder.  In structuring, arranging or syndicating this facility, each Lender acknowledges that the Administrative Agent and/or Arrangers may be agents or lenders under these Notes, the Senior Revolving Credit Notes, other loans or other securities and waives any existing or future conflicts of interest associated with the their role in such other debt instruments.  If in its administration of this facility or any other debt instrument, the Administrative Agent determines (or is given written notice by any Lender) that a conflict exists, then it shall eliminate such

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conflict within 90 days or resign pursuant to Section 11.06 and shall have no liability for action taken or not taken, other than actions taken or not taken which represent Administrative Agent’s gross negligence or willful misconduct, while such conflict existed.

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

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

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

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

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

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

Section 11.11         The Arrangers and the Agents.  The Arrangers, the Syndication Agent and the Co-Documentation Agents shall have no duties, responsibilities or liabilities under this

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Agreement and the other Loan Documents other than their duties, responsibilities and liabilities in their individual capacity as Lenders hereunder to the extent they are a party to this Agreement as a Lender.

ARTICLE XII
Miscellaneous

Section 12.01Notices.

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

(i)if to the Borrower, to it at

Linn Energy, LLC

600 Travis Street, Suite 5100

Houston, TX 77002

Attention: Kolja Rockov

Telephone: 281-840-4169

Fax: 281-840-4189

E-Mail: kr@linnenergy.com

with a copy to:

Linn Energy, LLC

600 Travis Street, Suite 5100

Houston, TX 77002

Attention:  Charlene A. Ripley

Telephone: 281-840-4119

Fax:  281-840-4180

E-mail: cripley@linnenergy.com

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

525 Washington Blvd., 8^th floor

Jersey City, New Jersey 07310

Attention: Dina Wilson, Loan Assistant

Telecopy:  201-850-4020

with a copy to the Administrative Agent at:

1200 Smith Street, Suite 3100

Houston, Texas  77002

Attention:  Betsy Jocher

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Telecopy: 713-659-6915

(iii)if to any other Lender, in their capacity as such, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

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

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

Section 12.02Waivers; Amendments.

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

(b)Neither this Agreement nor any provision hereof nor any Security Instrument nor any other Loan Document nor any provision thereof may be waived, amended or modified, except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the written consent of the Majority Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) modify Section 2.07 or the definition of Total Reserve Value, (iii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, or reduce any other Indebtedness hereunder or under any other Loan Document, without the written consent of each Lender affected thereby, (iv) postpone the scheduled date of payment or prepayment of the

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principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or any other Indebtedness hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone or extend the Maturity Date without the written consent of each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (vi) waive or amend Section 6.01, Section 8.14 or Section 10.02(c) change the definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, “Material Domestic Subsidiary” or “Subsidiary”, without the written consent of each Lender, (vii) release any Guarantor (except as set forth in the Guaranty Agreement), release all or substantially all of the collateral (other than as provided in Section 11.09), or reduce the percentage set forth in Section 8.14(a) to less than 80%, without the written consent of each Lender, or (viii) change any of the provisions of this Section 12.02(b) or the definition of “Majority Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or under any other Loan Documents or make any determination or grant any consent hereunder or any other Loan Documents, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or any other Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or such other Agent, as the case may be.  Notwithstanding the foregoing, any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the Administrative Agent a supplemental schedule clearly marked as such and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the Lenders.

Section 12.03Expenses, Indemnity; Damage Waiver.

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

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(b)           THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGERS AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THAN EXPENSES IN CONNECTION WITH THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS DATED OF EVEN DATE HEREWITH, WHICH EXPENSES SHALL ONLY BE PAID BY THE BORROWER TO THE EXTENT PROVIDED IN SECTION 12.03(A)) OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY OF ITS SUBSIDIARIES TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ITS SUBSIDIARIES OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY OF ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM

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

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

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

(e)All amounts due under this Section 12.03 shall be payable within ten (10) Business Days of written demand therefor.

Section 12.04Successors and Assigns.

(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this

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Section 12.04.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in Section 12.04(c)) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

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

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

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

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

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

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

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

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

(iii)Subject to Section 12.04(b)(iv) and the acceptance and recording thereof, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the

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case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.04(c).

(iv)          The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.  In connection with any changes to the Register, if necessary, the Administrative Agent will reflect the revisions on Annex I and forward a copy of such revised Annex I to the Borrower and each Lender.

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

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

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assignment pursuant to Section 12.04(b).  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a Lender, provided such Participant agrees to be subject to Section 4.01(c) as though it were a Lender.

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

(d)           Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

Section 12.05Survival; Revival; Reinstatement.

(a)All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any other Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid.  The provisions of Section 5.01, Section 5.02, Section 5.03, Section 12.03, Section 12.11 and ARTICLE XI shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans or the termination of this Agreement, any other Loan Document or any provision hereof or thereof.

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

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Section 12.06Counterparts; Integration; Effectiveness.

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

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

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

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

Section 12.08Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations (of whatsoever kind, including, without limitation, obligations under Swap Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any of its Subsidiaries against any of and all the obligations of the Borrower or any of its Subsidiaries owed to such Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured.  The rights of each Lender under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have.

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

(a)           THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED.  CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES.

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

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

(d)           EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR

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OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS Section 12.09.

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

Section 12.11         Confidentiality.  Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority or self-regulatory body, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement or any other Loan Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 12.11, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap Agreement relating to the Borrower and their obligations, (g) with the consent of the Borrower, (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower, or (i) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender.  For the purposes of this Section 12.11, “Information” means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries and their businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower or any of its Subsidiaries; provided that, in the case of information received from the Borrower or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section 12.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Each Lender acknowledges that information furnished to it pursuant to this Agreement or the other Loan Documents may include material non-public information concerning the Borrower and its Affiliates and their related parties or their respective securities, and confirms

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that it has developed compliance procedures regarding the use of material non-public information and agrees that it will handle such material non-public information in accordance with those procedures and applicable law, including federal and state securities laws.

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

Section 12.12         Interest Rate Limitation.  It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it.  Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America and the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Notes, it is agreed as follows:  (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans evidenced by the Notes until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law.  If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest

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payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.12.  To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate applicable to a Lender, such Lender elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time to time in effect.  Chapter 346 of the Texas Finance Code does not apply to the Borrower’s obligations hereunder.

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

Section 12.14         No Third Party Beneficiaries.  This Agreement, the other Loan Documents, and the agreement of the Lenders to make Loans hereunder are solely for the benefit of the Borrower, and no other Person (including, without limitation, any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent or any Lender for any reason whatsoever.  There are no third party beneficiaries.

Section 12.15         USA Patriot Act Notice.  Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.

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Section 12.16         Senior Revolving Credit Documents.  The Lenders acknowledge that, pursuant to the Senior Revolving Credit Documents, the Borrower and the Guarantors have granted first priority Liens over all of the property constituting collateral under the Security Instruments and, notwithstanding anything to the contrary in this Agreement or any other Loan Document, any representation, warranty or covenant to the effect that (a) the Liens of the Senior Revolving Credit Documents do not or shall not exist or (b) the Liens of the Security Instruments are or shall be senior or equal in priority to the Liens of the Senior Revolving Credit Documents is qualified accordingly.  In the event of any conflict between this Section 12.16 and any other provision of this Agreement or any other Loan Document, this Section 12.16 shall be controlling.

[SIGNATURES BEGIN NEXT PAGE]

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

BORROWER:	LINN ENERGY, LLC
		By:	/s/ Kolja Rockov
			Kolja Rockov
			Executive Vice President and Chief Financial Officer

1

BNP PARIBAS, as Administrative Agent and a Lender
By:	/s/ Douglas R. Liftman
Name:	Douglas R. Liftman
Title:	Managing Director
By:	/s/ Betsy Jocher
Name:	Betsy Jocher
Title:	Director

2

RBC CAPITAL MARKETS, as Syndication Agent and a Lender
By:	/s/ Don J. McKinnerney
Name:	Don J. McKinnerney
Title:	Authorized Signatory

3

SOCIETE GENERALE, as a Co-Documentation Agent and a Lender
By:	/s/ Elena Robciuc
Name:	Elena Robciuc
Title:	Director

4

COMERICA BANK, as a Lender
By:	/s/ Huma Manal
Name:	Huma Manal
Title:	Vice President

5

FORTIS CAPITAL CORP., as a Lender
By:	/s/ David Montgomery
Name:	David Montgomery
Title:	Director
By:	/s/ Deirdre Sanbom
Name:	Deirdre Sanbom
Title:	Director

6

BMO CAPITAL MARKETS FINANCING, INC., as a Lender
By:	/s/ James V. Ducote
Name:	James V. Ducote
Title:	Director

7

CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as a Lender
By:	/s/ Vanessa Gomez
Name:	Vanessa Gomez
Title:	Director
By:		/s/ Morenikeji Ajayi
Name:		Morenikeji Ajayi
Title:		Associate

8

GUARANTY BANK, FSB, as a Lender
By:	/s/ W. David McCarver IV
Name:	W. David McCarver IV
Title:	Vice President

9

LEHMAN BROTHERS COMMERCIAL BANK, as a Lender
By:	/s/ Brian McNany
Name:	Brian McNany
Title:	Authorized Signatory

10

THE ROYAL BANK OF SCOTLAND plc as a Co-Documentation Agent and a Lender
By:	/s/ Mark Lumpkin, Jr.
Name:	Mark Lumpkin, Jr.
Title:	Vice President

11

UNIONBANCAL EQUITIES, INC., as a Lender
By:		/s/ Henry Park
Name:		Henry Park
Title:		Senior Vice President
By:	/s/ Thomas Thompson
Name:	Thomas Thompson
Title:	Senior Vice President

12

CIT CAPITAL USA INC., as a Lender
By:	/s/ Larry Derrett
Name:	Larry Derrett
Title:	Managing Director

13

CALYON CORPORATE AND INVESTMENT BANK, as Co-Documentation Agent and a Lender
By:		/s/ Page Dillehunt
Name:		Page Dillehunt
Title:		Managing Director
By:	/s/ Sharada Manne
Name:	Sharada Manne
Title:	Vice President

14

THE BANK OF NOVA SCOTIA, as a Lender
By:	/s/ David Mills
Name:	David Mills
Title:	Director

15

DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, as a Lender
By:		/s/ Susan LeFevre
Name:		Susan LeFevre
Title:		Director
By:	/s/ Erin Morrissey
Name:	Erin Morrissey
Title:	Vice President

16

USB CAPITAL RESOURCES, INC., as a Lender
By:	/s/ Brian Harrer
Name:	Brian Harrer
Title:	Vice President

17

SUNTRUST BANK, as a Lender
By:	/s/ Peter Panos
Name:	Peter Panos
Title:	Vice President

18

EX-10.19

Exhibit 10.19

Execution Version

SECOND LIEN
GUARANTY AND PLEDGE AGREEMENT

DATED AS OF

JANUARY 31, 2008

MADE BY

LINN ENERGY, LLC

AND

EACH OF THE OTHER OBLIGORS (AS DEFINED HEREIN)

IN FAVOR OF

BNP PARIBAS,

AS ADMINISTRATIVE AGENT

ALL LIENS GRANTED BY THIS INSTRUMENT SHALL, TO THE EXTENT SET FORTH IN THE INTERCREDITOR AGREEMENT DATED JANUARY 31, 2008 BY AND AMONG LINN ENERGY, LLC, BNP PARIBAS, AS SENIOR ADMINISTRATIVE AGENT, BNP PARIBAS, AS SUBORDINATED ADMINISTRATIVE AGENT AND PARTIES THERETO, BE SUBORDINATE AND JUNIOR TO ALL LIENS GRANTED BY GRANTOR TO SECURE THE SENIOR INDEBTEDNESS REGARDLESS OF THE RELATIVE PRIORITY OF SUCH LIENS, SUCH INTERCREDITOR AGREEMENT BEING INCORPORATED HEREIN AND BY THIS REFERENCE BEING MADE A PART HEREOF.

TABLE OF CONTENTS

		Page
ARTICLE I Definitions		1
Section 1.01	Definitions	1
Section 1.02	Other Definitional Provisions	6
Section 1.03	Rules of Interpretation	6
ARTICLE II Guarantee		6
Section 2.01	Guarantee	6
Section 2.02	Right of Contribution	7
Section 2.03	No Subrogation	7
Section 2.04	Guaranty Amendments, Etc. with respect to the Borrower Obligations	7
Section 2.05	Waivers	8
Section 2.06	Guaranty Absolute and Unconditional	8
Section 2.07	Reinstatement	10
Section 2.08	Payments	10
ARTICLE III Grant of Security Interest		10
Section 3.01	Grant of Security Interest	10
Section 3.02	Transfer of Pledged Securities	10
ARTICLE IV Representations and Warranties		11
Section 4.01	Representations in Loan Agreement	11
Section 4.02	Title; No Other Liens	11
Section 4.03	Perfected Priority Liens	12
Section 4.04	Obligor Information	12
Section 4.05	Pledged Securities	12
Section 4.06	Benefit to the Guarantor	13
Section 4.07	Solvency	13
ARTICLE V Covenants		13
Section 5.01	Maintenance of Perfected Security Interest; Further Documentation	13
Section 5.02	Changes in Locations, Name, Etc	13
Section 5.03	Pledged Securities	14
ARTICLE VI Remedial Provisions		16
Section 6.01	Code and Other Remedies	16
Section 6.02	Pledged Securities	17
Section 6.03	Private Sales of Pledged Securities	19
Section 6.04	Waiver; Deficiency	20
Section 6.05	Non-Judicial Enforcement	20
ARTICLE VII The Administrative Agent		20
Section 7.01	Administrative Agent’s Appointment as Attorney-in-Fact, Etc	20
Section 7.02	Duty of Administrative Agent	21
Section 7.03	Execution of Financing Statements	22
Section 7.04	Authority of Administrative Agent	22
ARTICLE VIII Subordination of Indebtedness		22

i

Section 8.01	Subordination of All Obligor Claims	23
Section 8.02	Claims in Bankruptcy	23
Section 8.03	Payments Held in Trust	23
Section 8.04	Liens Subordinate	23
Section 8.05	Notation of Records	24
ARTICLE IX Miscellaneous		24
Section 9.01	Waiver	24
Section 9.02	Notices	24
Section 9.03	Payment of Expenses, Indemnities, Etc	24
Section 9.04	Amendments in Writing	25
Section 9.05	Successors and Assigns	25
Section 9.06	Survival; Revival; Reinstatement	25
Section 9.07	Counterparts; Integration; Effectiveness	26
Section 9.08	Severability	26
Section 9.09	Set-Off	26
Section 9.10	Governing Law; Submission to Jurisdiction	27
Section 9.11	Headings	28
Section 9.12	Acknowledgments	28
Section 9.13	Additional Obligors and Pledgors	28
Section 9.14	Releases	29
Section 9.15	Acceptance	29

SCHEDULES:

1              Notice Addresses of Obligors

2              Description of Pledged Securities

3              Filings and Other Actions Required to Perfect Security Interests

4              Location of Jurisdiction of Organization and Chief Executive Office

ANNEXES:

I               Form of Assumption Agreement

II             Form of Supplement

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This SECOND LIEN GUARANTY AND PLEDGE AGREEMENT, dated as of January 31, 2008, is made by LINN ENERGY, LLC, a Delaware limited liability company (the “Borrower”), and each of the signatories hereto (the Borrower and each of the signatories hereto, together with any other Subsidiary of the Borrower that becomes a party hereto from time to time after the date hereof, the “Obligors”), in favor of BNP PARIBAS, as administrative agent (in such capacity, together with its successors in such capacity, the “Administrative Agent”), for the banks and other financial institutions (the “Lenders”) from time to time party to the Second Lien Term Loan Agreement dated of even date herewith (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), among the Borrower, the Lenders and the Administrative Agent.

R E C I T A L S

A.            It is a condition precedent to the effectiveness of the Loan Agreement that the Obligors shall have executed and delivered this Agreement to the Administrative Agent for the ratable benefit of the Lenders.

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

ARTICLE IDefinitions

Section 1.01Definitions.

(a)Unless otherwise defined herein, terms defined in the Loan Agreement and used herein have the meanings given to them in the Loan Agreement, and all uncapitalized terms which are defined in the UCC on the date hereof are used herein as so defined.

(b)The following terms have the following meanings:

“Agreement” means this Second Lien Guaranty and Pledge Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Assumption Agreement” means an Assumption Agreement substantially in the form attached hereto as Annex I.

“Bankruptcy Code” means title 11, United States Code, as amended from time to time.

“Borrower Obligations” means the collective reference to the payment and performance of all Indebtedness and all obligations of the Borrower and its Subsidiaries under the Guaranteed Documents, including, without limitation, the unpaid principal of and interest on the Loans and all other obligations and liabilities of the Borrower and its Subsidiaries (including, without limitation, interest accruing at the then applicable rate provided in the Loan Agreement after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to

 the Guaranteed Creditors, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Guaranteed Documents, whether on account of principal, interest, reimbursement obligations, payments in respect of an early termination date, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Guaranteed Creditors that are required to be paid by the Borrower pursuant to the terms of any Guaranteed Document).

“Collateral” has the meaning assigned such term in Section 3.01.

“Guaranteed Creditors” means the collective reference to the Administrative Agent and the Lenders.

“Guaranteed Documents” means the collective reference to the Loan Agreement, the other Loan Documents and any other document made, delivered or given in connection with any of the foregoing.

“Guaranteed Swap Agreement” means any present or future Swap Agreement between the Borrower or any Subsidiary and any Senior Revolving Lender or any Affiliate of any Senior Revolving Lender while such Person (or, in the case of an Affiliate of a Senior Revolving Lender, the Person affiliated therewith) is a Senior Revolving Lender regardless of when such Swap Agreement was entered into.  For the avoidance of doubt, a Swap Agreement ceases to be a Guaranteed Swap Agreement if the Person that is the counterparty to the Borrower or a Subsidiary under a Swap Agreement ceases to be a Senior Revolving Lender under the Senior Revolving Credit Agreement (or, in the case of an Affiliate of a Senior Revolving Lender, the Person affiliated therewith ceases to be a Senior Revolving Lender under the Senior Revolving Credit Agreement).

“Guarantor Obligations” means with respect to any Guarantor, the collective reference to (a) the Borrower Obligations and (b) all obligations and liabilities of such Guarantor which may arise under or in connection with any Guaranteed Document to which such Guarantor is a party, in each case, whether on account of principal, interest, guarantee obligations, reimbursement obligations, payments in respect of an early termination date, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to any Guaranteed Creditor under any Guaranteed Document).

“Guarantors” means the collective reference to each Obligor other than the Borrower.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the date hereof entered into by and among the Senior Revolving Administrative Agent, the Administrative Agent, and the Borrower and the Guarantors, as the same may from time to time be amended, modified, supplemented or restated.

“Issuers” means the collective reference to the issuers of the Pledged Securities.

“LLC” means, with respect to each Pledgor, each limited liability company described or referred to in Schedule 2 in which such Pledgor has an interest.

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“LLC Agreement” means, with respect to each Pledgor, each operating agreement relating to an LLC, as each agreement has heretofore been, and may hereafter be, amended, restated, supplemented or otherwise modified from time to time.

“Obligations” means:  (a) in the case of the Borrower, the Borrower Obligations and (b) in the case of each Guarantor, its Guarantor Obligations.

“Obligor Claims” has the meaning assigned to such term in Section 8.01.

“Partnership” means, with respect to each Pledgor, each partnership described or referred to in Schedule 2 (as the same may be supplemented from time to time pursuant to a Supplement) in which such Pledgor has an interest.

“Partnership Agreement” means, with respect to each Pledgor, each partnership agreement governing a Partnership, as each such agreement has heretofore been, and may hereafter be, amended, restated, supplemented or otherwise modified.

“Pledged LLC Interests” means, with respect to each Pledgor, all right, title and interest of such Pledgor as a member of each LLC and all right, title and interest of any Pledgor in, to and under each LLC Agreement.

“Pledged Partnership Interests” means, with respect to each Pledgor, all right, title and interest of such Pledgor as a limited or general partner in all Partnerships and all right, title and interest of any Pledgor in, to and under the Partnership Agreements.

“Pledged Securities” means: (a) the Equity Interests described or referred to in Schedule 2 (as the same may be supplemented from time to time pursuant to a Supplement); and (b) (i) the certificates or instruments, if any, representing such Equity Interests, (ii) all dividends (cash, Equity Interests or otherwise), cash, instruments, rights to subscribe, purchase or sell and all other rights and Property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such securities, (iii) all replacements, additions to and substitutions for any of the Property referred to in this definition, including, without limitation, claims against third parties, (iv) the proceeds, interest, profits and other income of or on any of the Property referred to in this definition, (v) all security entitlements in respect of any of the foregoing, if any and (vi) all books and records relating to any of the Property referred to in this definition.

“Pledgor” means any Obligor that now or hereafter pledges Pledged Securities hereunder.

“Proceeds” means all “proceeds” as such term is defined in Section 9.102(64) of the UCC on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Senior Indebtedness” means and includes (a) all principal indebtedness for loans now outstanding or hereafter incurred, and all letter of credit reimbursement obligations now existing

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or hereafter arising, under the Senior Revolving Credit Agreement, (b) all amounts now or hereafter owing to any of the Senior Revolving Lenders or any of their Affiliates under any Guaranteed Swap Agreement, (c) all interest accruing on the Senior Indebtedness described in the preceding clauses (a) and (b), and (d) all other monetary obligations (whether now outstanding or hereafter incurred) for which the Borrower or any Guarantor is responsible or liable as obligor, guarantor or otherwise under or pursuant to any of the Senior Revolving Credit Documents including, without limitation, all fees, penalties, yield protections, breakage costs, damages, indemnification obligations, reimbursement obligations, and expenses (including, without limitation, fees and expenses of counsel to the Senior Indebtedness Representative and the Senior Revolving Lenders) together with interest on the foregoing to the extent provided for in the Senior Revolving Credit Documents.  The interest described in the preceding clause (c) and the premiums and penalties described in the preceding clause (d) include, without limitation, all interest accruing after the commencement of any Insolvency Proceeding under the terms of the Senior Revolving Credit Documents whether or not such interest constitutes an allowed claim in any such Insolvency Proceeding.

“Senior Indebtedness Representative” means (a) initially, BNP Paribas, as administrative agent for the Senior Revolving Lenders under the Senior Revolving Credit Agreement or (b) such other Person selected by the Majority Lenders (as such term is defined in the Senior Revolving Credit Agreement) to replace BNP Paribas or the then Senior Indebtedness Representative.

“Senior Revolving Administrative Agent” means BNP Paribas, as administrative agent for the Senior Revolving Lenders.

“Senior Revolving Borrower Obligations” means the collective reference to the payment and performance of all Senior Indebtedness and all obligations of the Borrower and its Subsidiaries under the Senior Revolving Credit Documents, including, without limitation, the unpaid principal of and interest on the Loans and the LC Exposure (as such terms are defined in the Senior Revolving Credit Agreement) and all other obligations and liabilities of the Borrower and its Subsidiaries (including, without limitation, interest accruing at the then applicable rate provided in the Senior Revolving Credit Agreement after the maturity of the Loans and LC Exposure and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to the Senior Revolving Guaranteed Creditors, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Senior Revolving Guaranteed Documents, whether on account of principal, interest, reimbursement obligations, payments in respect of an early termination date, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Senior Revolving Guaranteed Creditors that are required to be paid by the Borrower pursuant to the terms of any Senior Revolving Guaranteed Document).

“Senior Revolving Credit Agreement” means that certain Third Amended and Restated Credit Agreement dated as of August 1, 2007, as amended by that certain First Amendment to Third Amended and Restated Credit Agreement, dated November 2, 2007 and the Second Amendment to Third Amended and Restated Credit Agreement, dated January 31, 2008, among

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the Borrower, BNP Paribas, as administrative agent, and the financial institutions listed therein from time to time as Senior Revolving Lenders, as from time to time renewed, extended, amended, supplemented, or restated, and any agreements representing the refinancing, replacement, or substitution in whole or in part of the revolving credit loans and letter of credit liabilities made or incurred under such Senior Revolving Credit Agreement, provided that the terms of such refinancing, replacement or substitution and the financing documentation entered into in connection therewith are consistent with the terms of the Senior Revolving Credit Agreement and other Senior Revolving Credit Documents in effect prior to such refinancing, replacement or substitution or could have been included in such Senior Revolving Credit Documents by an amendment or other modification that would not be prohibited by the terms of the Intercreditor Agreement.

“Senior Revolving Credit Documents” means, collectively, (a) the Senior Revolving Credit Agreement and the Guaranteed Swap Agreements, (b) any note, bond or other instrument evidencing Senior Indebtedness, (c) all mortgages, security agreements, pledge agreements or financing statements evidencing, creating or perfecting any Lien to secure the Senior Indebtedness in any way, (d) all guarantees of the Senior Indebtedness, (e) all other documents, instruments or agreements relating to the Senior Indebtedness now or hereafter executed or delivered by and among the Borrower, any Subsidiary, the Senior Indebtedness Representative or any Senior Revolving Lender, including without limitation each of the other “Loan Documents” as such term is defined in the Senior Revolving Credit Agreement, and (f) all renewals, extensions, amendments, modifications or restatements of the foregoing.

“Senior Revolving Guaranteed Creditors” means the collective reference to the Senior Revolving Administrative Agent, the Senior Revolving Lenders and the Affiliates to the Senior Revolving Lenders party to the Guaranteed Swap Agreements.

“Senior Revolving Guaranteed Documents” means the collective reference to the Senior Revolving Credit Agreement, the other Senior Revolving Credit Documents, each Guaranteed Swap Agreement and any other document made, delivered or given in connection with any of the foregoing.

“Senior Revolving Guarantor Obligations” means with respect to any Guarantor, the collective reference to (a) the Senior Revolving Borrower Obligations and (b) all obligations and liabilities of such Guarantor which may arise under or in connection with any Senior Revolving Guaranteed Document to which such Guarantor is a party, in each case, whether on account of principal, interest, guarantee obligations, reimbursement obligations, payments in respect of an early termination date, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to any Senior Revolving Guaranteed Creditor under any Senior Revolving Guaranteed Document).

“Senior Revolving Lenders” means all Persons which now or hereafter constitute a “Lender” under the Senior Revolving Credit Agreement and their respective successors and assigns, and all Persons refinancing any Senior Indebtedness and their respective successors and assigns.

“Supplement” means a Supplement substantially in the form attached hereto as Annex II.

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“UCC” means the Uniform Commercial Code as from time to time in effect in the State of Texas; provided, however, that, in the event that, by reason of mandatory provisions of law, any of the attachment, perfection or priority of the Administrative Agent’s and the Guaranteed Creditors’ security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Texas, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection, the effect thereof or priority and for purposes of definitions related to such provisions.

Section 1.02           Other Definitional Provisions.  Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Pledgor, refer to such Pledgor’s Collateral or the relevant part thereof.

Section 1.03           Rules of Interpretation.  Section 1.04 and Section 1.05 of the Loan Agreement are hereby incorporated herein by reference and shall apply to this Agreement, mutatis mutandis.

ARTICLE IIGuarantee

Section 2.01           Guarantee.

(a)           Each of the Guarantors hereby jointly and severally, unconditionally and irrevocably, guarantees to the Guaranteed Creditors and each of their respective successors, indorsees, transferees and assigns, the prompt and complete payment in cash and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations.  This is a guarantee of payment and not collection and the liability of each Guarantor is primary and not secondary.

(b)           Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.02).

(c)           Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this ARTICLE II or affecting the rights and remedies of any Guaranteed Creditor hereunder.

(d)           Each Guarantor agrees that if the maturity of the Borrower Obligations is accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this guarantee without demand or notice to such Guarantor.  The guarantee contained in this ARTICLE II shall remain in full force and effect until all the Borrower Obligations shall have been satisfied by payment in full in cash.

(e)           No payment made by any Obligor, any other guarantor or any other Person or received or collected by any Guaranteed Creditor from the Borrower, any of the

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Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower Obligations are paid in full in cash.

Section 2.02           Right of Contribution.  Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment.  Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 2.03.  The provisions of this Section 2.02 shall in no respect limit the obligations and liabilities of any Guarantor to the Guaranteed Creditors, and each Guarantor shall remain liable to the Guaranteed Creditors for the full amount guaranteed by such Guarantor hereunder.

Section 2.03           No Subrogation.  Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by any Guaranteed Creditor, no Guarantor shall be entitled to be subrogated to any of the rights of any Guaranteed Creditor against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by any Guaranteed Creditor for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any indemnity, exoneration, participation, contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Guaranteed Creditors by the Borrower on account of the Borrower Obligations are irrevocably and indefeasibly paid in full in cash.  If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been irrevocably and indefeasibly paid in full in cash, such amount shall be held by such Guarantor in trust for the Guaranteed Creditors, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in accordance with Section 10.02(c) of the Loan Agreement.

Section 2.04           Guaranty Amendments, Etc. with respect to the Borrower Obligations. Each Guarantor shall remain obligated hereunder, and such Guarantor’s obligations hereunder shall not be released, discharged or otherwise affected, notwithstanding that, without any reservation of rights against any Guarantor and without notice to, demand upon or further assent by any Guarantor (which notice, demand and assent requirements are hereby expressly waived by such Guarantor), (a) any demand for payment of any of the Borrower Obligations made by any Guaranteed Creditor may be rescinded by such Guaranteed Creditor or otherwise and any of the Borrower Obligations continued; (b) the Borrower Obligations, the liability of any other Person upon or for any part thereof or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by, or any

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 indulgence or forbearance in respect thereof granted by, any Guaranteed Creditor; (c) any Guaranteed Document may be amended, modified, supplemented or terminated, in whole or in part, as the Guaranteed Creditors may deem advisable from time to time; (d) any collateral security, guarantee or right of offset at any time held by any Guaranteed Creditor for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or released; (e) any additional guarantors, makers or endorsers of the Borrower’s Obligations may from time to time be obligated on the Borrower’s Obligations or any additional security or collateral for the payment and performance of the Borrower’s Obligations may from time to time secure the Borrower’s Obligations; or (f) any other event shall occur which constitutes a defense (other than a defense of payment or performance in full) or release of sureties generally.  No Guaranteed Creditor shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or for the guarantee contained in this ARTICLE II or any Property subject thereto.

Section 2.05           Waivers.  Each Guarantor hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or proof of reliance by any Guaranteed Creditor upon the guarantee contained in this ARTICLE II or acceptance of the guarantee contained in this ARTICLE II; the Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this ARTICLE II and no notice of creation of the Borrower Obligations or any extension of credit already or hereafter contracted by or extended to the Borrower need be given to any Guarantor; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Guaranteed Creditors, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this ARTICLE II.  Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Borrower Obligations.

Section 2.06           Guaranty Absolute and Unconditional.

(a)           Each Guarantor understands and agrees that the guarantee contained in this ARTICLE II is, and shall be construed as, a continuing, completed, absolute and unconditional guarantee of payment, and each Guarantor hereby waives any defense of a surety or guarantor or any other obligor on any obligations arising in connection with or in respect of any of the following and hereby agrees that its obligations hereunder shall not be discharged or otherwise affected as a result of any of the following:

(i)            the invalidity or unenforceability of any Guaranteed Document, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Guaranteed Creditor;

(ii)           any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower or any other Person against any Guaranteed Creditor;

(iii)          the insolvency, bankruptcy arrangement, reorganization, adjustment, composition, liquidation, disability, dissolution or lack of power of the Borrower or

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any other Guarantor or any other Person at any time liable for the payment of all or part of the Obligations, including any discharge of, or bar or stay against collecting, any Obligation (or any part of them or interest therein) in or as a result of such proceeding;

(iv)          any sale, lease or transfer of any or all of the assets of the Borrower or any other Guarantor, or any changes in the shareholders of the Borrower or any other Guarantor;

(v)           any change in the corporate existence (including its constitution, laws, rules, regulations or power), structure or ownership of any Obligor or in the relationship between the Borrower and any Obligor;

(vi)          the fact that any Collateral or Lien contemplated or intended to be given, created or granted as security for the repayment of the Obligations shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other Lien, it being recognized and agreed by each of the Guarantors that it is not entering into this Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectability or value of any of the Collateral for the Obligations;

(vii)         the absence of any attempt to collect the Obligations or any part of them from any Obligor;

(viii)        (A) any Guaranteed Creditor’s election, in any proceeding instituted under chapter 11 of the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code; (B) any borrowing or grant of a Lien by the Borrower, as debtor-in-possession, or extension of credit, under Section 364 of the Bankruptcy Code; (C) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of any Guaranteed Creditor’s claim (or claims) for repayment of the Obligations; (D) any use of cash collateral under Section 363 of the Bankruptcy Code; (E) any agreement or stipulation as to the provision of adequate protection in any bankruptcy proceeding; (F) the avoidance of any Lien in favor of the Guaranteed Creditors or any of them for any reason; or (G) failure by any Guaranteed Creditor to file or enforce a claim against the Borrower or its estate in any bankruptcy or insolvency case or proceeding; or

(ix)           any other circumstance or act whatsoever, including any action or omission of the type described in Section 2.04 (with or without notice to or knowledge of the Borrower or such Guarantor), which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Borrower Obligations, or of such Guarantor under the guarantee contained in this ARTICLE II, in bankruptcy or in any other instance.

(b)           When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, any Guaranteed Creditor may, but shall be under no obligation to, join or make a similar demand on or otherwise pursue or exhaust such rights and remedies as it may have against the Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and any failure by any Guaranteed Creditor to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other

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Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Guaranteed Creditor against any Guarantor.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

Section 2.07Reinstatement.  The guarantee contained in this ARTICLE II shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Borrower Obligations is rescinded or must otherwise be restored or returned by any Guaranteed Creditor upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its Property, or otherwise, all as though such payments had not been made.

Section 2.08Payments.  Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent, for the ratable benefit of the Guaranteed Creditors, without set-off, deduction or counterclaim, in dollars, in immediately available funds, at the offices of the Administrative Agent specified in Section 12.01 of the Loan Agreement.

ARTICLE III
Grant of Security Interest

Section 3.01Grant of Security Interest.  Each Pledgor hereby pledges, assigns and transfers to the Administrative Agent, and hereby grants to the Administrative Agent, for the ratable benefit of the Guaranteed Creditors, a security interest in all of the following Property now owned or at any time hereafter acquired by such Pledgor or in which such Pledgor now has or at any time in the future may acquire any right, title or interest (collectively, the “Collateral”), as collateral security for the prompt and complete

payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Pledgor’s Obligations:

(1)all Pledged Securities;

(2)all books and records pertaining to the Pledged Securities; and

(3)to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing.

Section 3.02Transfer of Pledged Securities.  Upon the payment in full of all Senior Revolving Guarantor Obligations, the termination of the commitments under the Senior Revolving Credit Documents and the expiration, termination, or cash-collateralization of all letters of credit issued by any holder of Senior Indebtedness and to the extent the Pledge Securities constitute “securities” under Article 8 of the UCC, all certificates or instruments representing or evidencing such Pledged Securities shall be delivered to and held pursuant hereto by the Administrative Agent or a Person designated by the Administrative Agent and shall be in

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suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, and accompanied by any required transfer tax stamps to effect the pledge of the Pledged Securities to the Administrative Agent.  Notwithstanding the preceding sentence, at the Administrative Agent’s reasonable discretion, to the extent the Pledge Securities constitute “securities” under Article 8 of the UCC and upon the payment in full of all Senior Revolving Guarantor Obligations, the termination of the commitments under the Senior Revolving Credit Documents and the expiration, termination, or cash-collateralization of all letters of credit issued by any holder of Senior Indebtedness, all such Pledged Securities must be delivered or transferred in such manner as to permit the Administrative Agent to be a “protected purchaser” to the extent of its security interest as provided in Section 8.303 of the UCC (if the Administrative Agent otherwise qualifies as a protected purchaser).  During the continuance of an Event of Default, the Administrative Agent shall have the right, at any time in its discretion and without notice, to transfer to or to register in the name of the Administrative Agent or any of its nominees any or all of the Pledged Securities, subject only to the revocable rights specified in Section 6.02(b).  In addition, during the continuance of an Event of Default, after payment in full of all Senior Revolving Guarantor Obligations, the termination of the commitments under the Senior Revolving Credit Documents and the expiration, termination, or cash-collateralization of all letters of credit issued by any holder of Senior Indebtedness, the Administrative Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Securities for certificates or instruments of smaller or larger denominations.

ARTICLE IV
Representations and Warranties

To induce the Administrative Agent and the Lenders to enter into the Loan Agreement, each Obligor hereby represents and warrants to the Administrative Agent and each Lender that:

Section 4.01           Representations in Loan Agreement. In the case of each Guarantor, the representations and warranties set forth in Article VII of the Loan Agreement as they relate to such Guarantor or to the Loan Documents to which such Guarantor is a party are true and correct in all material respects, provided that each reference in each such representation and warranty to the Borrower’s knowledge shall, for the purposes of this Section 4.01, be deemed to be a reference to such Guarantor’s knowledge.

Section 4.02           Title; No Other Liens.  Except for the security interest granted to the Administrative Agent for the ratable benefit of the Guaranteed Creditors pursuant to this Agreement and the security interest granted to the Senior Revolving Administrative Agent to secure the Senior Revolving Guarantor Obligations, such Pledgor is the record and beneficial owner of its respective items of the Collateral free and clear of any and all Liens and has rights in or the power to transfer each item of the Collateral in which a Lien is granted by it hereunder, free and clear of any Lien.  No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Administrative Agent, for the ratable benefit of the Guaranteed Creditors, pursuant to this Agreement or the Security Instruments and such as have been filed in favor of the Senior Revolving Administrative Agent, for the ratable benefit of the Senior Revolving Guaranteed Creditors, pursuant to the Senior Revolving Credit Documents.

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Section 4.03Perfected Priority Liens.  The security interests granted pursuant to this Agreement (a) upon the completion of the filings and the other actions specified on Schedule 3 constitute valid perfected security interests in all of the Collateral in favor of the Administrative Agent, for the ratable benefit of the Guaranteed Creditors, as collateral security for such Pledgor’s Obligations, enforceable in accordance with the terms hereof against all creditors of such Pledgor and any Persons purporting to purchase any Collateral from such Pledgor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except for Liens securing the Senior Revolving Guarantor Obligations.

Section 4.04Obligor Information.  On the date hereof, the correct legal name of such Obligor, all names and trade names that such Obligor has used in the last five years, such Obligor’s jurisdiction of organization and each jurisdiction of organization of such Obligor over the last five years, organizational number, taxpayor identification number, and the location(s) of such Obligor’s chief executive office or sole place of business over the last five years are specified on Schedule 4.

Section 4.05Pledged Securities.

(a)The Pledged Securities required to be pledged hereunder and under the Loan Agreement by such Pledgor are listed in Schedule 2.  The shares of Pledged Securities pledged by such Pledgor hereunder constitute all the issued and outstanding shares of all classes of the Equity Interests of each Issuer owned by such Pledgor.  All the shares of the Pledged Securities have been duly and validly issued and are fully paid and nonassessable; and such Pledgor is the record and beneficial owner of, and has good title to, the Pledged Securities pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement and the security interests in favor of the Senior Revolving Administrative Agent to secure the Senior Revolving Guarantor Obligations, and has rights in or the power to transfer the Pledged Securities in which a Lien is granted by it hereunder, free and clear of any Lien except for Liens securing the Senior Revolving Guarantor Obligations.

(b)There are no restrictions on transfer (that have not been waived or otherwise consented to) in the LLC Agreement governing any Pledged LLC Interest and the Partnership Agreement governing any Pledged Partnership Interest or any other agreement relating thereto which would limit or restrict (i) the grant of a security interest in the Pledged LLC Interests and the Pledged Partnership Interests, (ii) the perfection of such security interest or (iii) the exercise of remedies in respect of such perfected security interest in the Pledged LLC Interests and the Pledged Partnership Interests, in each case, as contemplated by this Agreement.  Upon the transfer of the Pledged LLC Interests or the Pledged Partnership Interests pursuant to an exercise of remedies hereunder in respect of the Pledged LLC Interests and the Pledged Partnership Interests, a transferee of a membership interest or partnership interest, as the case may be, of such LLC or Partnership, as the case may be, shall become a member or partner, as the case may be, of such LLC or Partnership, as the case may be, entitled to participate in the management thereof and, upon the transfer of the entire interest of such Pledgor, such Pledgor ceases to be a member or partner, as the case may be.

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Section 4.06           Benefit to the Guarantor.  The Borrower is a member of an affiliated group of companies that includes each Guarantor, and the Borrower and the other Guarantors are engaged in related businesses.  Each Guarantor is a Subsidiary of the Borrower and its guaranty and surety obligations pursuant to this Agreement reasonably may be expected to benefit, directly or indirectly, it; and it has determined that this Agreement is necessary and convenient to the conduct, promotion and attainment of the business of such Guarantor and the Borrower.

Section 4.07           Solvency.  Each Obligor (a) is not insolvent as of the date hereof and will not be rendered insolvent as a result of this Agreement (after giving effect to Section 2.02), (b) is not engaged in business or a transaction, or about to engage in a business or a transaction, for which any Property remaining with it constitutes unreasonably small capital, and (c) does not intend to incur, or believe it will incur, Debt that will be beyond its ability to pay as such Debt matures.

ARTICLE V
Covenants

Each Obligor covenants and agrees with the Administrative Agent and the Lenders that, from and after the date of this Agreement until the Borrower Obligations shall have been paid in full in cash:

Section 5.01           Maintenance of Perfected Security Interest; Further Documentation.  Each Pledgor agrees that:

(a)           it shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4.03 and shall defend such security interest against the claims and demands of all Persons, other than the Senior Revolving Guaranteed Creditors, whomsoever.

(b)           it will furnish to the Administrative Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail.

(c)           At any time and from time to time, upon the written request of the Administrative Agent and the payment in full of all Senior Revolving Guarantor Obligations, the termination of the commitments under the Senior Revolving Credit Documents and the expiration, termination, or cash-collateralization of all letters of credit issued by any holder of Senior Indebtedness, and at the sole expense of such Pledgor, it will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Administrative Agent may reasonably deem necessary for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the delivery of certificated securities and the filing of any financing or continuation statements under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby.

Section 5.02           Changes in Locations, Name, Etc.  Such Obligor recognizes that financing statements pertaining to the Collateral have been or may be filed where such Obligor

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maintains any Collateral or is organized.  Without limitation of Section 8.01(l) of the Loan Agreement or any other covenant herein, such Obligor will not cause or permit any change in its (a) corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its Properties, (b) the location of its chief executive office or principal place of business, (c) its identity or corporate structure or in the jurisdiction in which it is incorporated or formed, (d) its jurisdiction of organization or its organizational identification number in such jurisdiction of organization or (e) its federal taxpayer identification number, unless, in each case, such Obligor shall (i) notify the Administrative Agent of such change within ten (10) days after any such change, and (ii) take all action reasonably requested by the Administrative Agent for the purpose of maintaining the perfection and priority of the Administrative Agent’s security interests under this Agreement.  In any notice furnished pursuant to this Section 5.02, such Obligor will expressly state in a conspicuous manner that the notice is required by this Agreement and contains facts that may require additional filings of financing statements or other notices for the purposes of continuing perfection of the Administrative Agent’s security interest in the Collateral.  At the request of the Administrative Agent, on or prior to the occurrence of such event, the Borrower will provide to the Administrative Agent and the Lenders an opinion of counsel, in form and substance reasonably satisfactory to the Administrative Agent, to the effect that such event will not impair the validity of the security interests hereunder, the perfection and priority thereof, the enforceability of the Loan Documents, and such other matters as may be reasonably requested by the Administrative Agent.

Section 5.03           Pledged Securities.

(a)           Upon the payment in full of all Senior Revolving Guarantor Obligations, the termination of the commitments under the Senior Revolving Credit Documents and the expiration, termination, or cash-collateralization of all letters of credit issued by any holder of Senior Indebtedness, if such Pledgor shall become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Equity Interests of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Securities, or otherwise in respect thereof, such Pledgor shall accept the same as the agent of the Guaranteed Creditors, hold the same in trust for the Guaranteed Creditors, segregated from other Property of such Pledgor, and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by such Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Pledgor and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent, subject to the terms hereof, as additional collateral security for the Obligations.

(b)           Without the prior written consent of the Administrative Agent, such Pledgor will not (i) unless otherwise expressly permitted hereby or under the other Loan Documents, vote to enable, or take any other action to permit, any Issuer to issue any Equity Interests of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any Equity Interests of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Pledged Securities or Proceeds thereof (except pursuant to a transaction expressly permitted by the Loan

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Agreement), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Pledged Securities or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement and the Liens securing the Senior Revolving Guarantor Obligations or (iv) enter into any agreement or undertaking restricting the right or ability of such Pledgor or the Administrative Agent to sell, assign or transfer any of the Pledged Securities or Proceeds thereof.

(c)           In the case of each Pledgor that is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Securities issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.03(a) with respect to the Pledged Securities issued by it and (iii) the terms of Sections Section 6.02(a) and Section 6.03 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 6.02(d) or Section 6.03 with respect to the Pledged Securities issued by it.

(d)           In the case of each Pledgor that is a partner in a Partnership, such Pledgor hereby consents to the extent required by the applicable Partnership Agreement to the pledge by each other Pledgor, pursuant to the terms hereof, of the Pledged Partnership Interests in such Partnership and to the transfer of such Pledged Partnership Interests to the Administrative Agent or its nominee and to the substitution of the Administrative Agent or its nominee as a substituted partner in such Partnership with all the rights, powers and duties of a general partner or a limited partner, as the case may be.  In the case of each Pledgor member of an LLC, such Pledgor hereby consents to the extent required by the applicable LLC Agreement to the pledge by each other Pledgor, pursuant to the terms hereof, of the Pledged LLC Interests in such LLC and to the transfer of such Pledged LLC Interests to the Administrative Agent or its nominee and to the substitution of the Administrative Agent or its nominee as a substituted member of the LLC with all the rights, powers and duties of a member of the LLC in question.

(e)           Such Pledgor shall not agree to any amendment of a Partnership Agreement or LLC Agreement that in any way adversely affects the perfection of the security interest of the Administrative Agent in the Pledged Partnership Interests or Pledged LLC Interests pledged by such Pledgor hereunder, including any amendment electing to treat the membership interest or partnership interest of such Pledgor as a security under Section 8-103 of the UCC without the prior written consent of the Administrative Agent.

(f)            Each Pledgor shall furnish to the Administrative Agent such stock powers and other instruments as may be required by the Administrative Agent to assure the transferability of the Pledged Securities when and as often as may be reasonably requested by the Administrative Agent.

(g)           The Pledged Securities will at all times constitute not less than 100% of the Equity Interests of the Issuer thereof owned by any Pledgor.  Each Pledgor will not permit any Issuer of any of the Pledged Securities to issue any new shares of any class of Equity Interests of such Issuer without the prior written consent of the Administrative Agent.

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ARTICLE VI
Remedial Provisions

Section 6.01           Code and Other Remedies.

(a)           Subject to the Intercreditor Agreement and the rights of the Senior Revolving Guaranteed Creditors in the Collateral, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent, on behalf of the Guaranteed Creditors, may exercise, in addition to all other rights and remedies granted to them in this Agreement, the other Loan Documents and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC or any other applicable law or otherwise available at law or equity.  Without limiting the generality of the foregoing and subject to the Intercreditor Agreement and the rights of the Senior Revolving Guaranteed Creditors in the Collateral, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Pledgor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of any Guaranteed Creditor or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  Any Guaranteed Creditor shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Pledgor, which right or equity is hereby waived and released.  If applicable to any particular item of Collateral, each Pledgor further agrees, at the Administrative Agent’s request and subject to the Intercreditor Agreement, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at such Pledgor’s premises or elsewhere.  Any such sale or transfer by the Administrative Agent either to itself or to any other Person shall be absolutely free from any claim of right by Pledgor, including any equity or right of redemption, stay or appraisal which Pledgor has or may have under any rule of law, regulation or statute now existing or hereafter adopted (and such Pledgor hereby waives any rights it may have in respect thereof).  Upon any such sale or transfer and subject to the rights of the Senior Revolving Guaranteed Creditors in the Collateral, the Administrative Agent shall have the right to deliver, assign and transfer to the purchaser or transferee thereof the Collateral so sold or transferred.  Subject to the Intercreditor Agreement, the Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.01, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent and the Guaranteed Creditors hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations, in accordance with Section 10.02(c) of the Loan Agreement, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9.615 of the UCC, need the Administrative Agent account for the surplus, if

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any, to any Pledgor.  To the extent permitted by applicable law, each Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent or any Guaranteed Creditor arising out of the exercise by them of any rights hereunder except to the extent caused by the gross negligence or willful misconduct of the Administrative Agent or such Guaranteed Creditor or their respective agents.  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

(b)           In the event that the Administrative Agent elects not to sell the Collateral, the Administrative Agent retains its rights, subject to the Intercreditor Agreement and the rights of the Senior Revolving Guaranteed Creditors in the Collateral, to dispose of or utilize the Collateral or any part or parts thereof in any manner authorized or permitted by law or in equity, and to apply the proceeds of the same towards payment of the Obligations.  Each and every method of disposition of the Collateral described in this Agreement shall constitute disposition in a commercially reasonable manner.

(c)           The Administrative Agent may appoint any Person as agent to perform any act or acts necessary or incident to any sale or transfer of the Collateral.

Section 6.02           Pledged Securities.

(a)           Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the relevant Pledgor of the Administrative Agent’s intent to exercise its corresponding rights pursuant to Section 6.02(c), each Pledgor shall be permitted to receive all cash dividends paid in respect of the Pledged Securities paid in the normal course of business of the relevant Issuer (other than liquidating or distributing dividends), to the extent permitted in the Loan Agreement.  Subject to the Intercreditor Agreement, any sums paid upon or in respect of any Pledged Securities upon the liquidation or dissolution of any Issuer, any distribution of capital made on or in respect of any Pledged Securities or any property distributed upon or with respect to any Pledged Securities pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof shall, unless otherwise subject to a perfected security interest in favor of the Administrative Agent, be delivered to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations.  If any sum of money or property so paid or distributed in respect of any Pledged Securities shall be received by such Pledgor, such Pledgor shall, until such money or property is paid or delivered to the Administrative Agent or the Senior Revolving Administrative Agent, hold such money or property in trust for the Administrative Agent, segregated from other funds of such Pledgor, as additional security for the Obligations.

(b)           Unless an Event of Default shall have occurred and be continuing and the and the Administrative Agent shall have given notice to the relevant Pledgor of the Administrative Agent’s intent to exercise its corresponding rights pursuant to Section 6.02(c), each Pledgor shall be entitled to exercise all voting, consent and corporate, partnership or limited liability rights with respect to the Pledged Securities; provided, however, that no vote shall be cast, consent given or right exercised or other action taken by such Pledgor that would impair the Collateral, be inconsistent with or result in any violation of any provision of the Loan Agreement, this Agreement or any other Loan Document or, without the prior consent of the

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 Administrative Agent and the Lenders, enable or permit any Issuer to issue any Equity Interest or to issue any other securities convertible into or granting the right to purchase or exchange for any Equity Interest of any Issuer other than as permitted by the Loan Agreement.

(c)Upon the occurrence and during the continuance of an Event of Default, upon notice by the Administrative Agent of its intent to exercise such rights to the relevant Pledgor or Pledgors, and subject in all respects to the Intercreditor Agreement, (i) the Administrative Agent shall have the right to receive any and all cash dividends, payments, Property or other Proceeds paid in respect of the Pledged Securities and make application thereof to the Borrower Obligations in accordance with Section 10.02(c) of the Loan Agreement, and (ii) any or all of the Pledged Securities shall be registered in the name of the Administrative Agent or its nominee, and (iii) the Administrative Agent or its nominee may exercise (A) all voting, consent, corporate, partnership or limited liability and other rights pertaining to such Pledged Securities at any meeting of shareholders, partners or members (or other equivalent body), as the case may be, of the relevant Issuer or Issuers or otherwise and (B) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Pledged Securities as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the organizational structure of any Issuer, or upon the exercise by any Pledgor or the Administrative Agent of any right, privilege or option pertaining to such Pledged Securities, and in connection therewith, the right to deposit and deliver any and all of the Pledged Securities with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Administrative Agent may determine), all without liability except to account for Property actually received by it, but the Administrative Agent shall have no duty to any Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

(d)Upon the occurrence and during the continuance of an Event of Default and subject in all respects to the Intercreditor Agreement, in order to permit the Administrative Agent to exercise the voting and other consensual rights that it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions that it may be entitled to receive hereunder, (i) each Pledgor shall promptly execute and deliver (or cause to be executed and delivered) to the Administrative Agent all such proxies, dividend payment orders and other instruments as the Administrative Agent may from time to time reasonably request and (ii) without limiting the effect of clause (i) above, such Pledgor hereby grants to the Administrative Agent an irrevocable proxy to vote all or any part of the Pledged Securities and to exercise all other rights, powers, privileges and remedies to which a holder of the Pledged Securities would be entitled (including giving or withholding written consents of shareholders, partners or members, as the case may be, calling special meetings of shareholders, partners or members, as the case may be, and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Securities on the record books of the Issuer thereof) by any other Person (including such Issuer or any officer or agent thereof).

(e)Subject to the Intercreditor Agreement, each Pledgor hereby authorizes and instructs each Issuer of any Pledged Securities pledged by such Pledgor hereunder to (i) 

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comply with any instruction received by it from the Administrative Agent in writing that (A) states that an Event of Default has occurred and is continuing and (B) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Pledgor, and each Pledgor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Securities directly to the Administrative Agent.

(f)Upon the occurrence and during the continuance of an Event of Default, if the Issuer of any Pledged Securities is the subject of bankruptcy, insolvency, receivership, custodianship or other proceedings under the supervision of any Governmental Authority, then all rights of the Pledgor in respect thereof to exercise the voting and other consensual rights which such Pledgor would otherwise be entitled to exercise with respect to the Pledged Securities issued by such Issuer shall cease, and all such rights shall, subject to the Intercreditor Agreement, thereupon become vested in the Administrative Agent who shall thereupon have the sole right to exercise such voting and other consensual rights, but the Administrative Agent shall have no duty to exercise any such voting or other consensual rights and shall not be responsible for any failure to do so or delay in so doing.

Section 6.03Private Sales of Pledged Securities.

(a)Each Pledgor recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Securities, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise or may determine that a public sale is impracticable or not commercially reasonable and, accordingly, may resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof.  Each Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner.  The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Securities for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.

(b)Each Pledgor agrees to use commercially reasonable efforts to do or cause to be done all such other acts as may reasonably be necessary to make such sale or sales of all or any portion of the Pledged Securities pursuant to this Section 6.03 valid and binding and in compliance with any and all other applicable Governmental Requirements.  Each Pledgor further agrees that a breach of any of the covenants contained in this Section 6.03 will cause irreparable injury to the Guaranteed Creditors, that the Guaranteed Creditors have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.03 shall be specifically enforceable against such Pledgor, and such Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred or is continuing under the Loan Agreement.

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Section 6.04           Waiver; Deficiency.  Each Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Guaranteed Creditor to collect such deficiency.

Section 6.05           Non-Judicial Enforcement.  The Administrative Agent may enforce its rights hereunder without prior judicial process or judicial hearing, and to the extent permitted by law, each Pledgor expressly waives any and all legal rights which might otherwise require the Administrative Agent to enforce its rights by judicial process.

ARTICLE VII
The Administrative Agent

Section 7.01           Administrative Agent’s Appointment as Attorney-in-Fact, Etc.

(a)           Each Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Pledgor and in the name of such Pledgor or in its own name, for the purpose of carrying out the terms of this Agreement, to, subject to the Intercreditor Agreement, take any and all reasonably appropriate action and to execute any and all documents and instruments which may be reasonably necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Pledgor hereby gives the Administrative Agent the power and right, on behalf of such Pledgor but subject to the Intercreditor Agreement, without notice to or assent by such Pledgor, to do any or all of the following:

(i)            in the name of such Pledgor or its own name, or otherwise, take possession of and indorse and collect any check, draft, note, acceptance or other instrument for the payment of moneys due with respect to any Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent for the purpose of collecting any such moneys due with respect to any other Collateral whenever payable;

(ii)           unless being disputed under Section 8.04 of the Loan Agreement, pay or discharge Taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement or any other Loan Document and pay all or any part of the premiums therefor and the costs thereof;

(iii)          execute, in connection with any sale provided for in Section 6.01 or Section 6.03, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and

(iv)          (A) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) commence

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and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (D) defend any suit, action or proceeding brought against such Pledgor with respect to any Collateral; (E) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Administrative Agent may deem appropriate; and (F) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent’s option and such Pledgor’s expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent’s and the Guaranteed Creditors’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Pledgor might do.

Anything in this Section 7.01(a) to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.01(a) unless (a) an Event of Default shall have occurred and be continuing and (b) a “Blockage Period” or “Standstill Period”, as such terms are defined in the Intercreditor Agreement, shall not have occurred and be continuing.

(b)           If any Obligor fails to perform or comply with any of its agreements contained herein within the applicable grace periods, the Administrative Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.

(c)           The expenses of the Administrative Agent incurred in connection with actions undertaken as provided in this Section 7.01, together with interest thereon at a rate per annum equal to the post-default rate specified in Section 3.02(c) of the Loan Agreement, but in no event to exceed the Highest Lawful Rate, from the date of payment by the Administrative Agent to the date reimbursed by the relevant Obligor, shall be payable by such Obligor to the Administrative Agent on demand.

(d)           Each Obligor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue and in compliance hereof.  All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated.

Section 7.02           Duty of Administrative Agent.  The Administrative Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9.207 of the UCC or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar Property for its own account and the Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which comparable secured parties accord comparable collateral.  Neither the Administrative Agent, any Guaranteed Creditor nor any of their Related Parties shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the

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request of any Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Administrative Agent and the Guaranteed Creditors hereunder are solely to protect the Administrative Agent’s and the Guaranteed Creditors’ interests in the Collateral and shall not impose any duty upon the Administrative Agent or any Guaranteed Creditor to exercise any such powers.  The Administrative Agent and the Guaranteed Creditors shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their Related Parties shall be responsible to any Obligor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.  To the fullest extent permitted by applicable law, the Administrative Agent shall be under no duty whatsoever to make or give any presentment, notice of dishonor, protest, demand for performance, notice of non-performance, notice of intent to accelerate, notice of acceleration, or other notice or demand in connection with any Collateral or the Obligations, or to take any steps necessary to preserve any rights against any Pledgor or other Person or ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not it has or is deemed to have knowledge of such matters.  Each Obligor, to the extent permitted by applicable law, waives any right of marshaling in respect of any and all Collateral, and waives any right to require the Administrative Agent or any Guaranteed Creditor to proceed against any Obligor or other Person, exhaust any Collateral or enforce any other remedy which the Administrative Agent or any Guaranteed Creditor now has or may hereafter have against any Obligor or other Person.

Section 7.03           Execution of Financing Statements.  Pursuant to the UCC and any other applicable law, each Pledgor authorizes the Administrative Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Pledgor in such form and in such offices as the Administrative Agent reasonably determines appropriate to perfect the security interests of the Administrative Agent under this Agreement.  A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.

Section 7.04           Authority of Administrative Agent.  Each Obligor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Guaranteed Creditors, be governed by the Loan Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Obligors, the Administrative Agent shall be conclusively presumed to be acting as agent for the Guaranteed Creditors with full and valid authority so to act or refrain from acting, and no Obligor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

ARTICLE VIII
Subordination of Indebtedness

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Section 8.01Subordination of All Obligor Claims.  As used herein, the term “Obligor Claims” shall mean all debts and obligations of the Borrower or any other Obligor to any other Obligor, whether such debts and obligations now exist or are hereafter incurred or arise, or whether the obligation of the debtor thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or obligations be evidenced by note, contract, open account, or otherwise, and irrespective of the Person or Persons in whose favor such debts or obligations may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by such other Obligor.  After and during the continuation of an Event of Default, no Obligor shall receive or collect, directly or indirectly, from any other Obligor in respect thereof any amount upon the Obligor Claims.

Section 8.02Claims in Bankruptcy.  In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or other insolvency proceedings involving any Obligor, the Administrative Agent on behalf of the Administrative Agent and the Guaranteed Creditors shall have the right to prove their claim in any proceeding, so as to establish their rights hereunder and receive, subject in all respects to the Intercreditor Agreement, directly from the receiver, trustee or other court custodian, dividends and payments which would otherwise be payable upon Obligor Claims.  Each Obligor hereby assigns such dividends and payments to the Administrative Agent for the benefit of the Administrative Agent and the Guaranteed Creditors for application against the Borrower Obligations as provided under Section 10.02(c) of the Loan Agreement.  Should any Agent or Guaranteed Creditor receive, for application upon the Obligations, any such dividend or payment which is otherwise payable to any Obligor, and which, as between such Obligors, shall constitute a credit upon the Obligor Claims, then upon payment in full in cash of the Borrower Obligations under the Loan Agreement, the intended recipient shall become subrogated to the rights of the Administrative Agent and the Guaranteed Creditors to the extent that such payments to the Administrative Agent and the Guaranteed Creditors on the Obligor Claims have contributed toward the liquidation of the Obligations, and such subrogation shall be with respect to that proportion of the Obligations which would have been unpaid if the Administrative Agent and the Guaranteed Creditors had not received dividends or payments upon the Obligor Claims.

Section 8.03Payments Held in Trust.  In the event that, notwithstanding Section 8.01 and Section 8.02 and subject in all respects to the Intercreditor Agreement, any Obligor should receive any funds, payments, claims or distributions which are prohibited by such Sections, then it agrees: (a) to hold in trust for the Administrative Agent and the Guaranteed Creditors an amount equal to the amount of all funds, payments, claims or distributions so received, and (b) that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions except to pay them promptly to the Administrative Agent, for the benefit of the Guaranteed Creditors or the Senior Revolving Administrative Agent, for the benefit of the Senior Revolving Guaranteed Creditors; and each Obligor covenants promptly to pay the same to the Administrative Agent or the Senior Revolving Administrative Agent.

Section 8.04Liens Subordinate.  Each Obligor agrees that, until the Borrower Obligations are paid in full in cash, any Liens securing payment of the Obligor Claims shall be and remain inferior and subordinate to any Liens securing payment of the Obligations and the Liens securing payment of the Senior Revolving Guarantor Obligations, regardless of whether

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such encumbrances in favor of such Obligor, the Administrative Agent or any Guaranteed Creditor presently exist or are hereafter created or attach.  Without the prior written consent of the Administrative Agent and subject in all respects to the Intercreditor Agreement, no Obligor, during the period in which any of the Borrower Obligations are outstanding, shall (a) exercise or enforce any creditor’s right it may have against any debtor in respect of the Obligor Claims, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceeding (judicial or otherwise, including without limitation the commencement of or joinder in any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any Lien securing payment of the Obligor Claims held by it.

Section 8.05           Notation of Records.  Upon the request of the Administrative Agent, all promissory notes and all accounts receivable ledgers or other evidence of the Obligor Claims accepted by or held by any Obligor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Agreement.

ARTICLE IX
Miscellaneous

Section 9.01           Waiver.  No failure on the part of the Administrative Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power, privilege or remedy or any abandonment or discontinuance of steps to enforce such right, power, privilege or remedy under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, privilege or remedy under this Agreement or any other Loan Document preclude or be construed as a waiver of any other or further exercise thereof or the exercise of any other right, power, privilege or remedy.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law or equity.

Section 9.02           Notices.  All notices and other communications provided for herein shall be given in the manner and subject to the terms of Section 12.01 of the Loan Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1.

Section 9.03           Payment of Expenses, Indemnities, Etc.

(a)           Each Guarantor agrees to pay or reimburse each Guaranteed Creditor and the Administrative Agent for all out-of-pocket expenses incurred by such Person, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Guaranteed Creditor, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including, without limitation, all costs and expenses incurred in collecting against such Guarantor under the guarantee contained in ARTICLE II or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Guarantor is a party.

(b)           Each Guarantor agrees to pay, and to save the Administrative Agent and the Guaranteed Creditors harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all Other Taxes which may be payable or determined to be payable

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with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.

(c)           Each Guarantor agrees to pay, and to save the Administrative Agent and the Guaranteed Creditors harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent the Borrower would be required to do so pursuant to Section 12.03 of the Loan Agreement.

Section 9.04           Amendments in Writing.  None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 12.02 of the Loan Agreement.

Section 9.05           Successors and Assigns.  The provisions of this Agreement shall be binding upon the Obligors and their successors and assigns and shall inure to the benefit of the Administrative Agent and the Guaranteed Creditors and their respective successors and assigns; provided that except as set forth in Section 9.11 of the Loan Agreement, no Obligor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and the Lenders, and any such purported assignment, transfer or delegation shall be null and void.

Section 9.06           Survival; Revival; Reinstatement.

(a)           All covenants, agreements, representations and warranties made by any Obligor herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document to which it is a party shall be considered to have been relied upon by the Administrative Agent, the other Agents and the Lenders and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the other Agents or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under the Loan Agreement is outstanding and unpaid.  The provisions of Section 9.03 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans or the termination of this Agreement, any other Loan Document or any provision hereof or thereof.

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

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Borrower shall take such action as may be reasonably requested by the Administrative Agent and the Guaranteed Creditors to effect such reinstatement.

Section 9.07           Counterparts; Integration; Effectiveness.

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

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

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

Section 9.08           Severability.  Any provision of this Agreement or any other Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

Section 9.09           Set-Off.  Subject to the Intercreditor Agreement, if an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations (of whatsoever kind, including, without limitations obligations under Swap Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of any Obligor against any of and all the obligations of the Obligor owed to such Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured.  The rights of each Lender under this Section 9.09 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have.

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Section 9.10           Governing Law; Submission to Jurisdiction.

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

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

(c)           EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OF THE LOAN AGREEMENT (OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 12.01 OF THE LOAN AGREEMENT) OR SCHEDULE 1 HERETO, AS APPLICABLE, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

(d)           EACH PARTY HEREBY (1) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (2) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (3) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (4) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS

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CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 9.10.

Section 9.11           Headings.  Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

Section 9.12           Acknowledgments.  Each Obligor hereby acknowledges that:

(a)           it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;

(b)           neither the Administrative Agent nor any Guaranteed Creditor has any fiduciary relationship with or duty to any Obligor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Obligors, on the one hand, and the Administrative Agent and Guaranteed Creditors, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c)           no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Guaranteed Creditors or among the Obligors and the Guaranteed Creditors.

(d)           Each of the parties hereto specifically agrees that it has a duty to read this Agreement, the Security Instruments and the other Loan Documents and agrees that it is charged with notice and knowledge of the terms of this Agreement, the Security Instruments and the other Loan Documents; that it has in fact read this Agreement, the Security Instruments and the other Loan Documents and is fully informed and has full notice and knowledge of the terms, conditions and effects thereof; that it has been represented by independent legal counsel of its choice throughout the negotiations preceding its execution of this Agreement and the Security Instruments; and has received the advice of its attorney in entering into this Agreement and the Security Instruments; and that it recognizes that certain of the terms of this Agreement and the Security Instruments result in one party assuming the liability inherent in some aspects of the transaction and relieving the other party of its responsibility for such liability.  EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

Section 9.13           Additional Obligors and Pledgors.  Each Subsidiary of the Borrower that is required to become a party to this Agreement pursuant to Section 8.14 of the Loan Agreement shall become an Obligor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement and shall thereafter have the same rights, benefits and obligations as an Obligor party hereto on the date hereof.  Each Guarantor that is required to pledge Equity Interests of its Subsidiaries shall execute and deliver a Supplement, if such Equity Interests were not previously pledged.

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Section 9.14           Releases.

(a)           Release Upon Payment in Full.  The grant of a security interest hereunder and of all rights, powers and remedies in connection herewith shall remain in full force and effect until the Administrative Agent has (i) retransferred and delivered all Collateral in its possession to the Pledgors, and (ii) executed a written release or termination statement and reassigned to the Pledgors without recourse or warranty any remaining Collateral and all rights conveyed hereby.  Upon the complete payment of the Borrower Obligations and the compliance by the Obligors with all covenants and agreements hereof, the Administrative Agent, at the expense of the Borrower, will promptly release, reassign and transfer the Collateral to the Pledgors and declare this Agreement to be of no further force or effect.

(b)           Partial Releases.  If any of the Collateral shall be sold, transferred or otherwise disposed of by any Pledgor in a transaction permitted by the Loan Agreement, then the Administrative Agent, at the request and sole expense of such Pledgor, shall promptly execute and deliver to such Pledgor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral and the Equity Interests of the Issuer thereof.  At the request and sole expense of the Borrower, a Guarantor shall be released from its obligations hereunder in the event that all the Equity Interests of such Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Loan Agreement; provided that the Borrower shall have delivered to the Administrative Agent, at least ten Business Days prior to the date of the proposed release, a written request of a Responsible Officer of the Borrower for release identifying the relevant Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Loan Agreement and the other Loan Documents.

(c)           Retention in Satisfaction.  Except as may be expressly applicable pursuant to Section 9.620 of the UCC, no action taken or omission to act by the Administrative Agent or the Guaranteed Creditors hereunder, including, without limitation, any exercise of voting or consensual rights or any other action taken or inaction, shall be deemed to constitute a retention of the Collateral in satisfaction of the Obligations or otherwise to be in full satisfaction of the Obligations, and the Obligations shall remain in full force and effect, until the Administrative Agent and the Guaranteed Creditors shall have applied payments (including, without limitation, collections from Collateral) towards the Obligations in the full amount then outstanding or until such subsequent time as is provided in Section 9.14(a).

Section 9.15           Acceptance.  Each Obligor hereby expressly waives notice of acceptance of this Agreement, acceptance on the part of the Administrative Agent and the Guaranteed Creditors being conclusively presumed by their request for this Agreement and delivery of the same to the Administrative Agent.

[Remainder of page intentionally left blank; signature page follows]

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IN WITNESS WHEREOF, each of the undersigned has caused this Second Lien Guaranty and Pledge Agreement to be duly executed and delivered as of the date first above written.

BORROWER:	LINN ENERGY, LLC
	By:	/s/ Kolja Rockov
		Kolja Rockov
		Executive Vice President and Chief Financial Officer
GUARANTORS:	LINN ENERGY HOLDINGS, LLC
	LINN OPERATING, INC.
	PENN WEST PIPELINE, LLC
	MID ATLANTIC WELL SERVICE, INC.
	MID-CONTINENT HOLDINGS I, LLC
	MID-CONTINENT HOLDINGS II, LLC
	MID-CONTINENT I, LLC
	MID-CONTINENT II, LLC
	LINN GAS MARKETING, LLC
	LINN EXPLORATION MIDCONTINENT, LLC
	By:	/s/ Kolja Rockov
		Kolja Rockov
		Executive Vice President and Chief Financial Officer

Signature Page - Guaranty and Pledge Agreement

Acknowledged and Agreed to as

of the date hereof by:

ADMINISTRATIVE AGENT:	BNP PARIBAS
	By:	/s/ Doug Liftman
	Name: Doug Liftman
	Title: Managing Director
	By:	/s/ Betsy Jocher
	Name: Betsy Jocher
	Title: Director

Signature Page - - Guaranty and Pledge Agreement

EX-21.1

Exhibit 21.1

SIGNIFICANT SUBSIDIARIES

As of December 31, 2007, Linn Energy, LLC directly or indirectly owns all of the voting securities of Linn Energy Holdings, LLC the “significant subsidiary” (as defined in Rule 1-02(w) of Regulation S-X).

The remaining subsidiaries of Linn Energy, LLC considered in the aggregate as a single subsidiary, do not constitute a “significant subsidiary” as of the end of the year covered by this report.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Linn Energy, LLC:

We consent to the incorporation by reference in the registration statement (No. 333-131153) on Form S-8 and in the registration statements (No. 333-146120, 333-148061, and 333-148134) on Form S-3 of Linn Energy, LLC of our reports dated February 28, 2008, with respect to the consolidated balance sheets of Linn Energy, LLC as of December 31, 2007 and 2006, and the related consolidated statements of operations, unitholders’ capital (deficit), and cash flows for each of the years in the three-year period ended December 31, 2007, and all related financial statement schedules, and the effectiveness of internal control over financial reporting as of December 31, 2007, which reports appear in the December 31, 2007 annual report on Form 10-K of Linn Energy, LLC.

/s/ KPMG, LLP

Houston, Texas

February 28, 2008

EX-23.2

Exhibit 23.2

CONSENT OF DEGOLYER AND MACNAUGHTON

We hereby consent to the use of the name DeGolyer and MacNaughton, to references to DeGolyer and MacNaughton as independent petroleum engineers, and to the inclusion of information taken from our “Appraisal Report as of December 31, 2007 on Certain Properties owned by Linn Energy, LLC” and “Appraisal Report as of December 31, 2006 on Certain Properties owned by Linn Energy, LLC” in the sections “Business and Properties - Oil and Gas Data - Proved Reserves”, “Management Discussion and Analysis of Financial Condition and Results of Operation - Risk Factors, Selected Financial Data, Summary Reserve and Operating Data”, “Notes to Consolidated Financial Statements - Use of Estimates”, and “Supplemental Oil and Gas Data (Unaudited)” of the Linn Energy, LLC Annual Report on Form 10-K, in the registration statement on Form S-8 (File No. 333-131153) and the registration statements (Nos. 333-146120, 333-148061, and 333-148134) on Form S-3.

/s/ PAUL J. SZATKOWSKI, P.E.
Name:	Paul J. Szatkowski, P.E.
Title:	Senior Vice President
	DeGolyer and MacNaughton

Dallas, Texas
February 28, 2008

EX-23.3

Exhibit 23.3

CONSENT OF SCHLUMBERGER TECHNOLOGY CORPORATION

As independent petroleum engineers, Data & Consulting Services Division of Schlumberger Data and Technology Corporation hereby consents to the incorporation by reference in the registration statement on Form S-8 (File No. 333-131153) and the registration statements (Nos. 333-146120, 333-148061, and 333-148134) on Form S-3 of Linn Energy, LLC of information from our Firm’s reserve report dated March 1, 2006 entitled “Reserve and Economic Evaluation of Proved Reserves of Certain Linn Energy, LLC Oil and Gas Interests As of December 31, 2005” and all references to our firm included in or made a part of the Linn Energy, LLC Annual Report on Form 10-K to be filed with the Securities and Exchange Commission.

/s/  CHARLES M. BOYER II, P.G
Name:	Charles M. Boyer II, P.G.
Title:	Operations Manager
	Pittsburgh Consulting Services

Pittsburgh, Pennsylvania
February 28, 2008

EX-31.1

Exhibit 31.1

I, Michael D. Linn, certify that:

1.     I have reviewed this Annual Report on Form 10-K of Linn Energy, LLC (the “registrant”);

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d—5(f)) for the registrant and have:

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 28, 2008
/s/ MICHAEL C. LINN
Michael C. Linn
Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Kolja Rockov, certify that:

1.     I have reviewed this Annual Report on Form 10-K of Linn Energy, LLC (the “registrant”);

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d—5(f)) for the registrant and have:

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 28, 2008
/s/ KOLJA ROCKOV
Kolja Rockov
Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Linn Energy, LLC (the “Company”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. Linn, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ MICHAEL C. LINN

Michael C. Linn

Chairman and Chief Executive Officer

Date: February 28, 2008

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Linn Energy, LLC (the “Company”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kolja Rockov, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  KOLJA ROCKOV

Kolja Rockov

Executive Vice President and Chief Financial Officer

Date: February 28, 2008