Exhibit 10.1

 

EXECUTION

 

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

dated as of June 30, 2014

 

among

 

SANCHEZ ENERGY CORPORATION,

 

as Borrower,

 

ROYAL BANK OF CANADA
as Administrative Agent,

 

CAPITAL ONE, NATIONAL ASSOCIATION
as Syndication Agent

 

COMPASS BANK and SUNTRUST BANK,
as Co-Documentation Agents

 

RBC CAPITAL MARKETS
as Sole Lead Arranger and
Sole Book Runner

 

and

 

THE LENDERS PARTY HERETO

 

 

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS

2

 

Section 1.01

Terms Defined Above

2

 

Section 1.02

Certain Defined Terms

2

 

Section 1.03

Types of Loans and Borrowings

32

 

Section 1.04

Terms Generally; Rules of Construction

32

 

Section 1.05

Accounting Terms and Determinations; GAAP

32

 

 

ARTICLE II THE CREDITS

32

 

Section 2.01

Commitments

32

 

Section 2.02

Loans and Borrowings

32

 

Section 2.03

Requests for Borrowings

34

 

Section 2.04

Interest Elections

34

 

Section 2.05

Funding of Borrowings

36

 

Section 2.06

Changes in the Aggregate Maximum Credit Amount; Optional Increase and Reduction
of Aggregate Elected Commitment Amount

36

 

Section 2.07

Borrowing Base

39

 

Section 2.08

Letters of Credit

42

 

 

ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

46

 

Section 3.01

Repayment of Loans

46

 

Section 3.02

Interest

46

 

Section 3.03

Alternate Rate of Interest

47

 

Section 3.04

Prepayments

47

 

Section 3.05

Fees

49

 

 

ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

49

 

Section 4.01

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

49

 

Section 4.02

Presumption of Payment by the Borrower

50

 

Section 4.03

Certain Deductions by the Administrative Agent

51

 

Section 4.04

Disposition of Proceeds

51

 

 

ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY; DEFAULTING

 

 

LENDERS

51

 

Section 5.01

Increased Costs

51

 

Section 5.02

Break Funding Payments

52

 

Section 5.03

Taxes

53

 

Section 5.04

Mitigation Obligations

56

 

Section 5.05

Illegality

56

 

Section 5.06

Defaulting Lenders

57

 

 

ARTICLE VI CONDITIONS PRECEDENT

58

 

Section 6.01

Conditions to Effectiveness

58

 

i

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Section 6.02

Each Credit Event

60

 

 

ARTICLE VII REPRESENTATIONS AND WARRANTIES

61

 

Section 7.01

Organization; Powers

61

 

Section 7.02

Authority; Enforceability

61

 

Section 7.03

Approvals; No Conflicts

62

 

Section 7.04

Financial Condition; No Material Adverse Change

62

 

Section 7.05

Litigation

62

 

Section 7.06

Environmental Matters

63

 

Section 7.07

Compliance with the Laws and Agreements; No Defaults

63

 

Section 7.08

Investment Company Act

64

 

Section 7.09

Taxes

64

 

Section 7.10

ERISA

64

 

Section 7.11

Disclosure; No Material Misstatements

64

 

Section 7.12

Insurance

65

 

Section 7.13

Restriction on Liens

65

 

Section 7.14

Subsidiaries

65

 

Section 7.15

Location of Business and Offices

65

 

Section 7.16

Properties; Titles, Etc.

65

 

Section 7.17

Maintenance of Properties

66

 

Section 7.18

Gas Imbalances, Prepayments

67

 

Section 7.19

Marketing of Production

67

 

Section 7.20

Swap Agreements

67

 

Section 7.21

Use of Loans and Letters of Credit

67

 

Section 7.22

Solvency

67

 

Section 7.23

Foreign Corrupt Practices

68

 

Section 7.24

Money Laundering

68

 

Section 7.25

OFAC

68

 

Section 7.26

Reserved

68

 

Section 7.27

Catarina Property Acquisition Representations

68

 

 

ARTICLE VIII AFFIRMATIVE COVENANTS

69

 

Section 8.01

Financial Statements; Ratings Change; Other Information

69

 

Section 8.02

Notices of Material Events

71

 

Section 8.03

Existence; Conduct of Business

71

 

Section 8.04

Payment of Obligations

72

 

Section 8.05

Performance of Obligations under Loan Documents

72

 

Section 8.06

Operation and Maintenance of Properties

72

 

Section 8.07

Insurance

73

 

Section 8.08

Books and Records; Inspection Rights

73

 

Section 8.09

Compliance with Laws

73

 

Section 8.10

Environmental Matters

73

 

Section 8.11

Further Assurances

74

 

Section 8.12

Reserve Reports

74

 

Section 8.13

Title Information

75

 

Section 8.14

Additional Collateral

76

 

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Section 8.15

ERISA Compliance

76

 

Section 8.16

New Subsidiary Requirements

77

 

 

ARTICLE IX NEGATIVE COVENANTS

77

 

Section 9.01

Financial Covenants

78

 

Section 9.02

Debt

78

 

Section 9.03

Liens

79

 

Section 9.04

Dividends, Distributions and Redemptions

79

 

Section 9.05

Investments, Loans and Advances

80

 

Section 9.06

Nature of Business; International Operations

81

 

Section 9.07

Limitation on Leases

82

 

Section 9.08

Proceeds of Notes/Loans

82

 

Section 9.09

Sale or Discount of Receivables

82

 

Section 9.10

Mergers, Etc.

82

 

Section 9.11

Sale of Assets

82

 

Section 9.12

Environmental Matters

83

 

Section 9.13

Transactions with Affiliates

84

 

Section 9.14

Subsidiaries

84

 

Section 9.15

Negative Pledge Agreements; Dividend Restrictions

84

 

Section 9.16

Gas Imbalances, Take-or-Pay or Other Prepayments

85

 

Section 9.17

Swap Agreements

85

 

Section 9.18

Sale and Leaseback Transactions

86

 

Section 9.19

ERISA

86

 

Section 9.20

Change in Business

86

 

Section 9.21

Prohibited HIL Lease Amendment

87

 

 

ARTICLE X EVENTS OF DEFAULT; REMEDIES

87

 

Section 10.01

Events of Default

87

 

Section 10.02

Remedies

89

 

 

ARTICLE XI THE ADMINISTRATIVE AGENT

90

 

Section 11.01

Appointment; Powers

90

 

Section 11.02

Duties and Obligations of Administrative Agent

90

 

Section 11.03

Action by Administrative Agent

90

 

Section 11.04

Reliance by Administrative Agent

91

 

Section 11.05

Subagents

91

 

Section 11.06

Resignation or Removal of Administrative Agent

91

 

Section 11.07

Administrative Agent as Lender

92

 

Section 11.08

No Reliance

92

 

Section 11.09

Authority to Release Collateral and Liens

93

 

Section 11.10

Filing of Proofs of Claim

93

 

Section 11.11

Syndication Agent, Documentation Agents; Arranger

94

 

 

ARTICLE XII MISCELLANEOUS

94

 

Section 12.01

Notices

94

 

Section 12.02

Waivers; Amendments

95

 

Section 12.03

Expenses, Indemnity; Damage Waiver

96

 

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Section 12.04

Successors and Assigns

98

 

Section 12.05

Survival; Revival; Reinstatement

100

 

Section 12.06

Counterparts; Integration; Effectiveness

101

 

Section 12.07

Severability

101

 

Section 12.08

Right of Setoff

101

 

Section 12.09

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

101

 

Section 12.10

Headings

103

 

Section 12.11

Confidentiality

103

 

Section 12.12

EXCULPATION PROVISIONS

103

 

Section 12.13

No Third Party Beneficiaries

104

 

Section 12.14

Collateral Matters; Swap Agreements

104

 

Section 12.15

US Patriot Act Notice

104

 

Section 12.16

Interest Rate Limitation

104

 

Section 12.17

Termination and Release

105

 

Section 12.18

Release

105

 

Section 12.19

Amendment and Restatement

105

 

Section 12.20

Termination of Commitment under 2013 Credit Agreement

106

 

Section 12.21

No Novation, Etc.

106

 

Section 12.22

Keepwell

106

 

Annex 1

List of Maximum Credit Amounts

 

 

Exhibit A

Form of Note

Exhibit B

Form of Borrowing Request

Exhibit C

Form of Interest Election Request

Exhibit D

Form of Compliance Certificate

Exhibit E

Form of Assignment and Assumption

Exhibit F

U.S. Tax Compliance Certificates (F-1 through F-4)

Exhibit G

Form of Guaranty

Exhibit H

Form of Joinder

Exhibit I

Form of Repayment Notice

Exhibit J

Form of Elected Commitment Increase Certificate

Exhibit K

Form of Additional Lender Certificate

 

 

Schedule 7.01

Corporate Organizational Chart

Schedule 7.05

Litigation

Schedule 7.14

Subsidiaries

Schedule 7.16

Title Exceptions to Properties

Schedule 7.18

Gas Imbalances

Schedule 7.19

Marketing Contracts

Schedule 7.20

Swap Agreements

Schedule 9.02

Existing Debt

Schedule 9.03

Liens

Schedule 9.05

Investments

Schedule 9.17

Existing Shell Swap Agreements

 

iv

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SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

This SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of  June 30, 2014,
is among SANCHEZ ENERGY CORPORATION, a Delaware corporation (“Borrower”), ROYAL
BANK OF CANADA (in its individual capacity, “RBC”), as administrative agent for
the Lenders (hereinafter defined) (in such capacity, together with its
successors in such capacity, the “Administrative Agent”), Capital One, National
Association, as syndication agent, Compass Bank and SunTrust Bank, each as
co-documentation agent, and each of the Lenders from time to time party hereto.

 

RECITALS

 

A.                                    Borrower, SEP Holdings III, LLC, a
Delaware limited liability company (“SEP”), and SN Marquis LLC, a Delaware
limited liability company (“SN Marquis”; Borrower, SEP and SN Marquis
collectively called the “2012 Credit Agreement Borrowers”), Capital One,
National Association, as administrative agent (the “2012 Credit Agreement
Agent”) and the lenders party thereto, including certain of the Lenders (the
“Original Lenders”) were parties to that certain Credit Agreement dated as of
November 15, 2012 (the “2012 Credit  Agreement”).

 

B.                                    In order to secure the full and punctual
payment and performance of the obligations of the 2012 Credit Agreement
Borrowers under the 2012 Credit Agreement and the other Loan Documents (as
defined in the 2012 Credit Agreement), the 2012 Credit Agreement Borrowers
executed and delivered mortgages, deeds of trust, collateral assignments,
security agreements, pledge agreements and financing statements in favor of the
2012 Credit Agreement Agent (collectively, the “2012 Security Documents”)
granting first priority mortgage liens and continuing security interests in and
to the collateral described in such 2012 Security Documents.

 

C.                                    The 2012 Credit Agreement was amended and
restated in its entirety by that certain Amended and Restated Credit Agreement
dated as of May 31, 2013 among the 2012 Credit Agreement Borrowers and SN
Cotulla Assets, LLC, a Texas limited liability company (“SN Cotulla”; SN Cotulla
together with SEP and SN Marquis collectively called the “Subsidiary Former
Borrowers”), as co-borrowers, Capital One, National Association, as resigning
administrative agent and issuing bank, Royal Bank of Canada, as successor
administrative agent and issuing bank, Capital One, National Association, as
syndication agent, and Compass Bank and SunTrust Bank, as co-documentation
agents and the lenders party thereto, including certain of the Lenders (the
“2013 Credit Agreement Lenders”)(the “2013 Credit Agreement”).

 

D.                                    The Borrower and the Subsidiary Former
Borrowers have requested certain amendments to the 2013 Credit Agreement
including, among other things, (i) making Borrower the sole borrower,
(ii) extending the Maturity Date, (iii) increasing the Maximum Credit Amount to
$1,500,000,000, (iv) increasing the Borrowing Base, and (v) making certain other
amendments.

 

E.                                     The Lenders have agreed to amend and
restate in its entirety the 2013 Credit Agreement on the terms and conditions
set forth herein, to effect such requested amendments.

 

F.                                      In consideration of the premises and the
agreements, provisions and covenants herein contained, the Borrower, the
Subsidiary Former Borrowers, the Administrative Agent, the Issuing Bank 
(hereinafter defined) and the Lenders do hereby agree that the 2013 Credit
Agreement is amended and restated in its entirety as set forth herein.  It is
the intention of the Borrower, the Subsidiary Former Borrowers, the Lenders, the
Issuing Bank, and the Administrative Agent that this Agreement supersede and
replace the 2013 Credit Agreement in its entirety; provided, that, (a) such
amendment and restatement shall operate to renew, amend and modify the rights
and obligations of the parties under the

 

1

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2013 Credit Agreement, as applicable and as provided herein, but shall not
effect a novation thereof, (b) unless otherwise provided for herein and
evidenced by a separate written agreement, amendment or release, no other Loan
Document, as defined in, and executed and/or delivered pursuant to the terms of,
the 2013 Credit Agreement (collectively, the “Existing Loan Documents”) shall be
amended, terminated or released in any respect and all of such other Existing
Loan Documents shall remain in full force and effect except that the Borrower,
Subsidiary Former Borrowers and the Lenders agree that by executing this
Agreement the definition of “Credit Agreement” contained in such Existing Loan
Documents shall be amended to include this Agreement and all future amendments
hereto, and (c) the Liens (hereinafter defined) securing the Obligations
(hereinafter defined) under and as defined in the 2013 Credit Agreement and
granted pursuant to the Existing Loan Documents and the liabilities and
obligations of the Borrower and the Subsidiary Former Borrowers shall not be
extinguished, but shall be carried forward, and such Liens shall secure such
Obligations, in each case, as renewed, amended, restated, extended and modified
hereby.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree that the 2013 Credit Agreement is
amended and restated in its entirety to read as follows:

 

ARTICLE I

 

DEFINITIONS AND ACCOUNTING MATTERS

 

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

 

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

 

“2012 Credit Agreement” has the meaning given in Recital A.

 

“2012 Credit Agreement Agent” has the meaning given in Recital A.

 

“2012 Credit Agreement Borrowers” has the meaning given in Recital A.

 

“2012 Security Documents” has the meaning given in Recital B.

 

“2013 Credit Agreement” has the meaning given in Recital C.

 

“2013 Credit Agreement Lenders” has the meaning given in Recital C.

 

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

 

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

 

“Additional Lender Certificate” has the meaning assigned to such term in
Section 2.06(c)(ii)(7).

 

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

 

2

--------------------------------------------------------------------------------

 

“Administrative Agent” has the meaning given in the introductory paragraph.

 

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

 

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

 

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

 

“Aggregate Elected Commitment  Amount” at any time shall equal the sum of the
Elected Commitments, as the same may be increased, reduced or terminated 
pursuant to Section 2.06(c). As of the Effective Date, the Aggregate Elected
Commitment Amount is $425,000,000.

 

“Aggregate Maximum Credit Amount” at any time shall equal the sum of the Maximum
Credit Amounts, as the same may be increased, reduced or terminated pursuant to
Section 2.06.  As of the Effective Date, the Aggregate Maximum Credit Amount is
$1,500,000,000.

 

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

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one
month interest period in effect on such day (or if such day is not a Business
Day, the immediately preceding Business Day) plus 1%.  Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate shall be effective from and including
the effective day of such change in the Prime Rate, the Federal Funds Effective
Rate and the Adjusted LIBO Rate, respectively.

 

“Annualized Consolidated EBITDA” means, for the purposes of calculating the
financial ratio set forth in Section 9.01(b):

 

(a)                                 for the Rolling Period ending on
September 30, 2014, the product of (x) four times (y) the First Testing Period
Pro Forma Consolidated EBITDA;

 

(b)                                 for the Rolling Period ending on
December 31, 2014, the product of (x) two times (y) the sum of (i) the First
Testing Period Pro Forma Consolidated EBITDA plus (ii) actual Consolidated
EBITDA for quarter ending December 31, 2014;

 

(c)                                  for the Rolling Period ending on March 31,
2015, the product of (x) the fraction 4/3 and (y) the sum of (i) the First
Testing Period Pro Forma Consolidated EBITDA plus (ii) actual Consolidated
EBITDA for the two quarters ending March 31, 2015; and

 

(d)                                 for the Rolling Period ending on June 30,
2015, the sum of (x) the First Testing Period Pro Forma Consolidated EBITDA plus
(y) the actual Consolidated EBITDA for the three quarters ending June 30, 2015.

 

“Applicable Margin” means, for any day with respect to any ABR Loan or
Eurodollar Loan, or with respect to the Letter of Credit Fee Rate, as the case
may be, the rate per annum set forth in the

 

3

--------------------------------------------------------------------------------

 

Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization
Percentage then in effect:

 

Borrowing Base Utilization Grid

 

 

 

 

 

 

 

 

 

 

Borrowing Base Utilization Percentage

 

<25%

 

>25% and <50%

 

>50% and <75%

 

>75% and <90%

 

>90%

ABR Loans

 

0.50%

 

0.75%

 

1.00%

 

1.25%

 

1.50%

Eurodollar Loans

 

1.50%

 

1.75%

 

2.00%

 

2.25%

 

2.50%

Letter of Credit Fee Rate

 

1.50%

 

1.75%

 

2.00%

 

2.25%

 

2.50%

 

For any day, “Applicable Margin” means, with respect to the Commitment Fee Rate,
the rate per annum set forth in the Elected Commitment Utilization Grid below
based upon the Elected Commitment Utilization Percentage then in effect:

 

Elected Commitment Utilization Grid

 

 

 

 

 

 

 

 

 

 

Elected Commitment Utilization Percentage

 

<25%

 

>25% and <50%

 

>50% and <75%

 

>75% and <90%

 

>90%

Commitment Fee Rate

 

0.375%

 

0.375%

 

0.375%

 

0.500%

 

0.500%

 

Each change in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change; provided, however, that if at any
time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a),
then the “Applicable Margin” means the rate per annum set forth on the then
applicable grid above when it is at its highest level; provided further that the
Applicable Margin shall be the Applicable Margin determined without regard to
the preceding proviso upon the Borrower’s delivery of such Reserve Report.

 

“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Elected Commitment Amount represented by such Lender’s Elected
Commitment as such percentage is set forth on Annex I or in an Assignment and
Assumption Agreement, as the case may be, as such percentage may be modified
from time to time pursuant to Section 2.06(c)(v).

 

“Approved Counterparty” means any Person who at the time a Swap Agreement was
entered into was (a) a Lender or any Affiliate of a Lender, (b) a Lender or any
Affiliate of a Lender under the 2013 Credit Agreement, (c) Shell Energy North
America (US), L.P., (d) Koch Supply & Trading, LP, (e) BP Energy Company, or
(f) any other Person whose issuer rating or long term senior unsecured debt
rating at the time of entry into the applicable Swap Agreement is A-/A3 by S&P
or Moody’s (or their equivalent) or higher (or whose obligations under the
applicable Swap Agreement are guaranteed by an Affiliate of such Person meeting
such rating standards) and who is acceptable to Administrative Agent in its sole
discretion; provided, the obligations and liabilities owed by the Borrower or a
Restricted Subsidiary to any Person designated as an “Approved Counterparty”
under clauses (c), (e) and (f) shall be  unsecured and any agreement documenting
such obligations and liabilities shall not require the posting of any collateral
or provide for margin calls; provided further, the obligations and liabilities
owed by the Borrower or a Restricted Subsidiary to Koch Supply & Trading LP may
be secured by the posting of cash collateral or the delivery of a Letter of
Credit as provided in Section 9.03(d).

 

“Approved Fund” means (a) a CLO or (b) with respect to any Lender that is a fund
which invests in bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit and is managed by
the same investment advisor as such Lender or by an Affiliate of such investment
advisor.

 

4

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“Approved Petroleum Engineers” means Ryder Scott Company or any other
independent petroleum engineer proposed by the Borrower and approved by the
Administrative Agent.

 

“Arranger” means RBC Capital Markets.

 

“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 E or any other form approved by the Administrative Agent.

 

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

 

“Bank Product” means any of the following products, services or facilities
extended to Borrower or any Subsidiary by a Lender or any of its Affiliates:
(a) cash management services including, without limitation, any services
provided in connection with operating, collections, payroll, trust, or other
depository or disbursement accounts, including automated clearinghouse,
e-payable, electronic funds transfer, wire transfer, controlled disbursement,
overdraft, depository, information reporting, lockbox and stop payment services;
(b) commercial credit card and merchant card services; and (c) leases and other
banking products or services as may be requested by Borrower or any Subsidiary,
other than Letters of Credit.

 

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is used in
Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have
beneficial ownership of all securities that such “person” has the right to
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition.  The terms “Beneficially Owns” and “Beneficially Owned” have
correlative meanings.

 

“Benefiting Loan Party” means a Loan Party for which funds or other support are
necessary for such Loan Party to constitute an Eligible Contract Participant.

 

“Board” means the Board of Governors of the Federal Reserve System of the U.S.
or any successor Governmental Authority.

 

“Board of Directors” means:

 

(a)                                 with respect to a corporation, the board of
directors of the corporation;

 

(b)                                 with respect to a partnership, the board of
directors or body serving similar function of the general partner of the
partnership; and

 

(c)                                  with respect to any other Person, the board
or committee of such Person serving a similar function.

 

“Borrower” has the meaning given in the introductory paragraph.

 

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

 

5

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“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 8.13(c) or Section 9.11(e)(4).  The initial Borrowing Base
is $437,500,000, subject to adjustment as provided in Section 2.07(a).

 

“Borrowing Base Deficiency” has the meaning given in Section 3.04(c)(iii).

 

“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Credit
Exposures of the Lenders on such day, and the denominator of which is the
Borrowing Base in effect on such day.

 

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

 

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

 

“Capital Lease Obligation” means, at the time any determination is to be made,
the amount of the liability in respect of a capital lease that would at that
time be required to be capitalized on a balance sheet prepared in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be prepaid by the lessee without payment of a penalty.

 

“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 $5,000,000.

 

“Catarina Property Acquisition” means the acquisition by Borrower (or SN
Catarina, as Borrower’s assignee) as buyer, of Oil and Gas Properties from SWEPI
and Shell Gulf, as sellers, pursuant to the Catarina Property PSA.

 

“Catarina Property Acquisition Reserve Report” means a report prepared by an
Approved Petroleum Engineer, in form and substance reasonably satisfactory to
the Arranger and Lenders, setting forth the oil and gas reserves attributable to
the proved Oil and Gas Properties proposed to be acquired pursuant to the
Catarina Property Acquisition.

 

“Catarina Property PSA” means that certain Purchase and Sale Agreement dated
May 21, 2014, together with all schedules and exhibits thereto, between SWEPI
and Shell Gulf, as sellers, and Borrower, (or SN Catarina, as Borrower’s
assignee) as buyer, providing for the sale to Borrower (or SN Catarina, as
Borrower’s assignee) of Oil and Gas Properties consisting of approximately
106,000 net acres in Dimmit, LaSalle and Webb Counties, Texas in the Eagle Ford
Shale for a purchase price (before adjustments) of  $639,000,000.

 

“Catarina Property PSA Representations” means such of the representations made
by SWEPI and Shell Gulf in the Catarina Property PSA as are material to the
interests of the Lenders, but only to the extent that Borrower (or SN Catarina,
as Borrower’s assignee) has a right to terminate its obligations

 

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under the Catarina Property PSA as a result of a breach of such representations
in the Catarina Property PSA.

 

“Catarina Property PSA Transactions” has the meaning set forth in
Section 7.27(b).

 

“CERCLA” has the meaning set forth in the definition of “Environmental Laws”.

 

“Change in Control” means the occurrence of any of the following:

 

(a)                                 the direct or indirect sale, lease,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets (including Equity Interest) of the
Borrower and its Subsidiaries taken as a whole to any “person” (as that term is
used in Section 13(d)(3) of the Exchange Act);

 

(b)                                 the adoption of a plan relating to the
liquidation or dissolution of the Borrower;

 

(c)                                  the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any “person” or “group” (as those terms are used in Section 13(d)(3) of
the Exchange Act), other than one or more members of the Sanchez Group, becomes
the Beneficial Owner, directly or indirectly, of Equity Interests representing
more than fifty percent (50%) (or such lower percentage as may be provided for
in the corresponding provision of the definition of “Change of Control” in the
Senior Unsecured Notes) of the general voting power under ordinary circumstances
to elect the directors of the Borrower other than, with respect to a merger or
consolidation, a transaction in which such Equity Interest in the Borrower
outstanding immediately prior to such transaction is converted into or exchanged
for Equity Interest (other than Disqualified Capital Stock) in the surviving or
transferee Person (or any parent thereof) constituting outstanding shares, units
or the like, of such surviving or transferee Person representing a majority of
the general voting power under ordinary circumstances to elect the directors (or
other governing persons or entities, as the case may be) of such surviving or
transferee Person (or any parent thereof) immediately after giving effect to
such transaction; or

 

(d)                                 Antonio R. Sanchez, III, ceases, for any
reason, to be the chief executive officer of Borrower and Borrower fails, within
ninety (90) days thereof, to retain and hire a replacement reasonably acceptable
to the Required Lenders.

 

“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 the Issuing Bank (or,
for purposes of Section 5.01(b), by any lending office of such Lender or by such
Lender’s or such Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement; provided
that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or any Governmental Authority with respect to the
implementation of the Basel III Accord shall, in each case, be deemed to be a
“Change in Law”, regardless of the date enacted, adopted or issued, including if
such date is before a Lender became a party to this Agreement.

 

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“CLO” means any Person (other than a natural Person) that is engaged in making,
purchasing, holding or otherwise investing in bank loans and similar extensions
of credit in the ordinary course of its business and is administered or managed
by a Lender or an Affiliate of such Lender.

 

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

 

“Collateral” means collectively, Property which is pledged to secure the
Obligations pursuant to one or more Security Instruments.

 

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

 

“Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended and any successor statute.

 

“Consolidated EBITDA” for any period means, without duplication, the
Consolidated Net Income for such period, plus the following, without duplication
and to the extent deducted (and not added back) in calculating such Consolidated
Net Income:

 

(a)                                 Consolidated Net Interest Expense;

 

(b)                                 Consolidated Income Tax Expense;

 

(c)                                  consolidated exploration cost, depletion,
depreciation and amortization expense of the Borrower and its Restricted
Subsidiaries;

 

(d)                                 other non-cash charges to the extent not
included in the foregoing clauses (a)-(c);

 

(e)                                  fees and expenses expensed and paid in cash
in connection with (1) the public offering of Borrower’s Equity Interests,
(2) the 2012 Credit Agreement, (3) the 2013 Credit Agreement, (4) the Senior
Unsecured Notes and (5) this Agreement; and

 

(f)                                   Unrestricted Person Cash Dividends;

 

and minus all non-cash income to the extent included in determining Consolidated
Net Income.

 

“Consolidated Income Tax Expense” means, with respect to any period, the
provision for federal, state, local and foreign taxes (including state franchise
taxes) based on income of the Borrower and its Restricted Subsidiaries for such
period as determined in accordance with GAAP, or (for any period in which the
Borrower is a partnership or limited liability company) the Tax Amount for such
period.

 

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“Consolidated Net Income” means, for any period, the aggregate net income (loss)
of the Borrower and its consolidated Subsidiaries determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends of such
Person, less (for any period the Borrower is a partnership or limited liability
company) the Tax Amount for such period; provided, however, that there will not
be included (to the extent otherwise included therein) in such Consolidated Net
Income:

 

(a)                                 any net income (loss) of any Person (other
than the Borrower) if such Person is not a Restricted Subsidiary, except that:

 

(i)                                     subject to the limitations contained in
clauses (c) and (d) below, the Borrower’s equity in the net income of any such
Person for such period will be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person during such
period to the Borrower or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitations contained in clause (b) below); and

 

(ii)                                  the Borrower’s equity in a net loss of any
such Person for such period will be included in determining such Consolidated
Net Income to the extent such loss has been funded with cash from the Borrower
or a Restricted Subsidiary during such period;

 

(b)                                 any net income (but not loss) of any
Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Borrower, except that:

 

(i)                                     subject to the limitations contained in
clauses (c), (d) and (e) below, the Borrower’s equity in the net income of any
such Restricted Subsidiary for such period will be included in such Consolidated
Net Income up to the aggregate amount of cash that could have been distributed
by such Restricted Subsidiary during such period to the Borrower or another
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution paid to another Restricted Subsidiary, to
the limitation contained in this clause); and

 

(ii)                                  the Borrower’s equity in a net loss of any
such Restricted Subsidiary for such period will be included in determining such
Consolidated Net Income;

 

(c)                                  any gain (loss) realized upon the sale or
other disposition of any property, plant or equipment of the Borrower or its
consolidated Subsidiaries which is not sold or otherwise disposed of in the
ordinary course of business and any gain (loss) realized upon the sale or other
disposition of any Equity Interest of any Person;

 

(d)                                 any extraordinary or nonrecurring gains or
losses or nonrecurring other income or expenses, together with any related
provision for taxes (and, without duplication, any Restricted Payment for taxes
permitted in Section 9.04) on such gains or losses or other income or expenses
and all related fees and expenses;

 

(e)                                  the cumulative effect of a change in
accounting principles;

 

(f)                                   any asset impairment write-downs,
including ceiling test writedowns, on oil and gas properties under GAAP or SEC
guidelines;

 

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(g)                                  any unrealized non-cash gains or losses or
charges in respect of obligations under Swap Agreements (including those
resulting from the application of Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 815);

 

(h)                                 income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued);

 

(i)                                     all deferred financing costs written
off, and premiums paid, in connection with any early extinguishment of Debt;

 

(j)                                    any depreciation, depletion and
amortization expense in excess of capital expenditures;

 

(k)                                 any non-cash compensation charge arising
from any grant of stock, stock options or other equity based awards; and

 

(l)                                     interest income.

 

“Consolidated Net Interest Expense” means, for any period, the total
consolidated interest expense of the Borrower and its Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, plus, to the extent
not included in such interest expense and without duplication:

 

(a)                                 interest expense for such period
attributable to Capital Lease Obligations and the interest component of any
deferred payment obligations;

 

(b)                                 amortization of debt discount and debt
issuance cost (provided that any amortization of bond premium will be credited
to reduce Consolidated Net Interest Expense unless, pursuant to GAAP, such
amortization of bond premium has otherwise reduced Consolidated Net Interest
Expense);

 

(c)                                  non-cash interest expense;

 

(d)                                 commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers’ acceptance
financing;

 

(e)                                  the interest expense on Debt of another
Person that is guaranteed by the Borrower or one of its Restricted Subsidiaries
or secured by a Lien on assets of the Borrower or one of its Restricted
Subsidiaries, to the extent such guarantee becomes payable or such Lien becomes
subject to foreclosure;

 

(f)                                   costs associated with interest rate
obligations under Swap Agreements (including amortization of fees); provided,
however, that if such interest rate obligations under Swap Agreements result in
net benefits rather than costs, such benefits shall be credited to reduce
Consolidated Net Interest Expense unless, pursuant to GAAP, such net benefits
are otherwise reflected in Consolidated Net Income;

 

(g)                                  the consolidated interest expense of the
Borrower and its Restricted Subsidiaries that was capitalized during such
period; and

 

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(h)                                 all dividends paid or payable in cash, cash
equivalents or Debt or dividends accrued during such period on any series of
Disqualified Capital Stock of the Borrower;

 

and minus, consolidated interest income and, to the extent included above,
write-off of deferred financing costs (and interest) attributable to
Dollar-Denominated Production Payments.

 

“Consolidated Subsidiaries” means each Subsidiary of a Person (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
such Person in accordance with GAAP.

 

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

 

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

 

“Debt” means, for any Person, the sum of the following (without duplication): 
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services excluding
accounts payable incurred in the ordinary course of business with respect to
which no more than 90 days have elapsed since the date of invoice; (d) all
Capital Lease Obligations; (e) all obligations under Synthetic Leases; (f) all
Debt (as defined in the other clauses of this definition) of others secured by a
Lien on any Property of such Person, whether or not such Debt is assumed by such
Person; (g) all Debt (as defined in the other clauses of this definition) of
others guaranteed by such Person or in which such Person otherwise assures a
creditor against loss of the Debt (howsoever such assurance shall be made) to
the extent of the lesser of the amount of such Debt and the maximum stated
amount of such guarantee or assurance against loss; (h) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others,
in each case, intended as a means of credit enhancement for creditors of such
others and not as a purchase and sale agreement; (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) 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;
(k) Disqualified Capital Stock; (l) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment; and (m) any deferred put premiums owed under a
Swap Agreement.  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.  For the sake of clarity,
except as provided in clause (m) of the first sentence of this definition,
obligations under Swap Agreements shall not constitute Debt.

 

“Debtor Relief Laws” means the Bankruptcy Code of the U.S., and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the U.S. or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.

 

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“December 2013 Reserve Report” means the Reserve Report setting forth, as of
December 31, 2013 (or January 1, 2014), the oil and gas reserves attributable to
the Oil and Gas Properties of the Borrower and Guarantors.

 

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

 

“Defaulting Lender” means any Lender, as determined by the Administrative Agent,
that has (a) failed to fund any portion of its Loans or participations in
Letters of Credit within three (3) Business Days of the date required to be
funded by it hereunder, (b) notified the Borrower, the Administrative Agent, or
the Issuing Bank in writing that it does not intend to comply with any of its
funding obligations under this Agreement or has made a public statement to the
effect that it does not intend to comply with its funding obligations under this
Agreement or under other agreements in which it commits to extend credit,
(c) failed, within three (3) Business Days after request by the Administrative
Agent, to confirm that it will comply with the terms of this Agreement relating
to its obligations to fund prospective Loans and purchase participations in then
outstanding Letters of Credit, (d) otherwise failed to pay over to the
Administrative Agent or any other Lender any other amount required to be paid by
it hereunder within three (3) Business Days of the date when due, unless the
subject of a good faith dispute, or (e) (i) become or is insolvent or has a
parent company that has become or is insolvent or (ii) become the subject of a
bankruptcy or insolvency proceeding, or has had a receiver, conservator,
trustee, administrator, assignee for the benefit of creditors or similar Person
charged with reorganization or liquidation of its business or custodian,
appointed for it, or has taken any action in furtherance of, or indicating its
consent to, approval of or acquiescence in any such proceeding or appointment or
has a parent company that has become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee, administrator, assignee
for the benefit of creditors or similar Person charged with reorganization or
liquidation of its business or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.

 

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

 

“Documentation Agents” means collectively Compass Bank and SunTrust Bank in
their respective capacities as documentation agents hereunder and “Documentation
Agent” individually refers to either of them.

 

“Dollar-Denominated Production Payments” means production payment obligations
recorded as liabilities in accordance with GAAP, together with all undertakings
and obligations in connection therewith.

 

“dollars” or “$” refers to lawful money of the U.S.

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
the U.S. or any state thereof or the District of Columbia.

 

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“Effective Date” means the date on which the conditions specified in
Section 6.01 and Section 6.02 are satisfied (or waived in accordance with
Section 12.02).

 

“Elected Commitment” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Elected  Commitment”, as the
same may be increased, reduced or terminated from time to time in connection
with an optional increase, reduction or termination of the Aggregate Elected
Commitment Amount pursuant to Section 2.06(c) or any mandatory reduction of the
Aggregate Elected Commitment Amount pursuant to Section 2.06(b) or
Section 2.06(c).

 

“Elected Commitment Increase Certificate” has the meaning given in
Section 2.06(c)(ii)(6).

 

“Elected Commitment Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Credit
Exposures of the Lenders on such day, and the denominator of which is the
Aggregate Elected Commitment Amount in effect on such day.

 

“Eligible Contract Participant” means an “eligible contract participant” as
defined in the Commodity Exchange Act and the regulations thereunder.

 

“Eligible Midstream Assets” means (a) real property, fixtures and personal
property (other than cash and investment property) used or useful for gathering,
marketing, treating, processing, storage, distribution, selling and/or
transportation of Hydrocarbons from the Hydrocarbon Interests of the Borrower or
any Subsidiary and from the Hydrocarbon Interests of third Persons reasonably
proximate thereto (that is, in the same fields in which the Borrower or any
Subsidiary are exploring for or producing Hydrocarbons or in the same counties
in which the Borrower or any Subsidiary are exploring for or producing
Hydrocarbons or any county adjacent thereto); and (b) easements, rights-of-way,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations in any Property of the Borrower or any Subsidiary for the purpose
of roads, pipelines, transmission lines, transportation lines, distribution
lines for the removal of gas, oil, coal or other minerals or timber, and other
like purposes, or for the joint or common use of real estate, rights of way,
facilities and equipment. For purposes of this definition, the terms “real
property,” “fixtures,” “personal property,” “cash” and “investment property”
have the meanings given to such terms in the UCC.

 

“Engineering Reports” has the meaning given in Section 2.07(c)(i).

 

“Engineered Value” means the value attributed to the Oil and Gas Properties in
the applicable Reserve Report based upon the discounted present value of the
estimated net cash flow to be realized from the production of Hydrocarbons from
such Oil and Gas Properties as set forth in such applicable Reserve Report.

 

“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety, 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, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection Governmental Requirements.  The term
“oil” shall have the meaning specified in OPA, the terms “hazardous substance”
and “release” (or

 

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“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 have the meaning specified in Section 91.1011
of the Texas Natural Resources Code (“Section 91.1011”); provided, however, that
(a) in the event either OPA, CERCLA, RCRA or Section 91.1011 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 are 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 91.1011, such
broader meaning shall apply with respect to Property located in such state or
other jurisdiction.

 

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

 

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

 

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

 

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

 

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30 day notice period is waived); (b) the existence with
respect to any Plan of a failure to meet the minimum funding standards under
Section 412 or 430 of the Code or Section 303 of ERISA; (c) the incurrence by
the Borrower or any of its ERISA Affiliates of any liability under Title IV of
ERISA with respect to the termination of any Plan; (d) the receipt by the
Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any
notice relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (e) the determination that any Plan is
considered an “at risk” plan or a plan in endangered or critical status within
the meaning of Section 430 of the Code or Section 303 of ERISA; (f) the
incurrence by the Borrower or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal from any Plan or Multiemployer
Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice,
or the receipt by any Multiemployer Plan from Borrower or any ERISA Affiliate of
any notice, concerning the imposition of withdrawal liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.

 

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

 

“Event of Default” has the meaning given in Section 10.01.

 

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“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 on pledges or deposits required in the
ordinary course of business 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 that 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 Subsidiary or materially impair the
value of such Property subject thereto; (e) Liens arising solely by virtue of
any statutory or common law provision relating to banker’s liens, rights of
set-off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
the Borrower or any of its Subsidiaries to provide collateral to the depository
institution; (f) easements, rights-of-way, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any Property of the
Borrower or any Subsidiary for the purpose of roads, pipelines, transmission
lines, transportation lines, distribution lines for the removal of gas, oil,
coal or other minerals or timber, and other like purposes, or for the joint or
common use of real estate, rights of way, facilities and equipment, which in the
aggregate do not materially impair the use of such Property for the purposes of
which such Property is held by the Borrower or any Subsidiary or materially
impair the value of such Property subject thereto; (g) Liens on cash or
securities pledged to secure performance of tenders, surety and appeal bonds,
government contracts, performance and return of money bonds, bids, trade
contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business;
(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; (i) Liens arising
from UCC financing statement filings regarding operating leases entered into by
the Borrower and its Subsidiaries in the ordinary course of business covering
only the Property under lease; (j) any Lien existing on any Property at the time
of the acquisition of such Property by the Borrower or any Subsidiary, provided
such Lien was not created in contemplation of such acquisition by the Borrower
or any Subsidiary; and (k) any Lien existing on any Property of a Person at the
time such Person becomes a Subsidiary of Borrower; provided, further that
(x) 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, (y) no
intention to subordinate the first priority Lien granted in

 

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favor of the Administrative Agent and the Lenders is to be hereby implied or
expressed by the permitted existence of such Excepted Liens and (z) a UCC
financing statement filing intended to perfect a Lien described in (a) through
(k) shall not be considered a separate or new Lien.  For the avoidance of doubt,
the parties acknowledge that the Lien created in favor of the lessor in the HIL
Lease constitutes an Excepted Lien under clause (d) of the foregoing definition
(i) so long as such Lien is not delinquent or is being contested in good faith
by appropriate action and for which adequate reserves have been maintained in
accordance with GAAP and (ii) regardless of the priority accorded such Lien.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Swap Obligation” means, with respect to any Loan Party individually
determined on a Loan Party by Loan Party basis, any Swap Obligation, if and to
the extent that, all or a portion of the joint and several liability or the
guaranty of such Loan Party for, or the grant by such Loan Party of a security
interest or other Lien to secure, such Swap Obligation (or any guarantee
thereof) is or becomes illegal under the Commodity Exchange Act or any rule,
regulation or order of the Commodity Futures Trading Commission (or the
application or official interpretation of any thereof) by virtue of such Loan
Party’s failure for any reason to constitute an Eligible Contract Participant at
the time such guarantee or the grant of such security interest or other Lien
becomes effective with respect to, or any other time such Loan Party is by
virtue of such guarantee or grant of such security interest or other Lien
otherwise deemed to enter into, such Swap Obligation.  If a Swap Obligation
arises under a master agreement governing more than one swap, such exclusion
shall apply only to the portion of such Swap Obligation that is attributable to
swaps for which such guarantee, security interest or other Lien is or becomes
illegal.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder or under any other Loan
Document, (a) income or franchise taxes imposed on (or measured by) its net
income by the U.S. 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 U.S. or any similar tax imposed by any other
jurisdiction in which the Borrower is located, (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 5.04(b)), any withholding tax that is imposed 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), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts with respect
to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c) and (d)
any federal withholding Taxes imposed under FATCA.

 

“Existing Loan Documents” has the meaning given in Recital F.

 

“Family” means (a) an individual, (b) such individual’s spouse, (c) any other
natural person who is related to such individual or such individual’s spouse
within the second degree of kinship and (d) any other natural person who has
been adopted by such individual.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantially comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code.

 

“FCPA” means the Foreign Corrupt Practices Act of 1977.

 

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“Federal Flood Insurance” means federally backed Flood Insurance available under
the National Flood Insurance Program to owners of real property improvements
located in Special Flood Hazard Areas in a community participating in the
National Flood Insurance Program.

 

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

 

“Fee Letter” means that certain letter agreement dated May 21, 2014 executed in
connection herewith by the Borrower and the Arranger pertaining to certain fees
payable to the Arranger and Administrative Agent.

 

“FEMA” means the Federal Emergency Management Agency, a component of the United
States Department of Homeland Security that administers the National Flood
Insurance Program.

 

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

 

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

 

 “First Testing Period Pro Forma Consolidated EBITDA” means pro forma
consolidated EBITDA for the three months ending September 30, 2014 calculated to
give effect to the Catarina Property Acquisition as if it had occurred on July
1, 2014.

 

“Flood Insurance” means, for any owned real property located in a Special Flood
Hazard Area, Federal Flood Insurance or private insurance that meets or exceeds
the requirements set forth by FEMA in its Mandatory Purchase of Flood Insurance
Guidelines.  Flood Insurance shall be in commercially reasonable amounts not
less than the minimum policy amounts required under the National Flood Insurance
Program.

 

“Flood Insurance Regulations” means (i) the National Flood Insurance Act of 1968
as now or hereafter in effect or any successor statute thereto, (ii) the Flood
Disaster Protection Act of 1973 as now or hereafter in effect or any successor
statute thereto, (iii) the National Flood Insurance Reform Act of 1994 (amending
42 USC 4001, et seq.), as the same may be amended or recodified from time to
time, and (iv) the Flood Insurance Reform Act of 2004 and any regulations
promulgated thereunder.

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Loan Parties are located.  For
purposes of this definition, the U.S., 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 U.S. as in effect
from time to time, subject to the terms and conditions set forth in Section
1.05.

 

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“Governmental Authority” means the government of the U.S., 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, any Subsidiary, any of their Properties, the Administrative Agent, the
Issuing Bank or any Lender.

 

“Governmental Requirement” means any applicable 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.

 

“Guaranty” means the Guaranty to be executed by the Guarantors, substantially in
the form of Exhibit G or any other form approved by the Administrative Agent.

 

“Guarantors” means collectively all Restricted Subsidiaries of Borrower and
“Guarantor” individually means any one of them.  As of the Effective Date, the
Guarantors are SEP, SN Marquis, SN Cotulla, SN Operating, SN TMS and SN
Catarina.

 

“Hazardous Materials” 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) Hydrocarbons, petroleum products, petroleum substances,
natural gas, oil, oil and gas waste, crude oil, and any components, fractions,
or derivatives thereof; and (c) radioactive materials, asbestos containing
materials, polychlorinated biphenyls, or radon.

 

“Hedge Exposure” means, at the time of determination, the amount that would be
due, if any, by the Borrower or any Restricted Subsidiary to a Secured Swap
Provider upon termination of all transactions under a Swap Agreement with that
Secured Swap Provider.

 

“Highest Lawful Rate” means, with respect to each Lender, the maximum
non-usurious interest rate, if any (or, if the context so requires, an amount
calculated at such rate), that at any time or from time to time may be
contracted for, taken, reserved, charged, or received by such Lender under
applicable laws with respect to an obligation, as such laws are presently in
effect or, to the extent allowed by applicable law, as such laws may hereafter
be in effect and which allow a higher maximum non-usurious interest rate than
such laws now allow.  The determination of the Highest Lawful Rate shall, to the
extent required by applicable law, take into account as interest paid, taken,
received, charged, reserved or contracted for any and all relevant payments or
charges under the Loan Documents.

 

“HIL Lease” means that certain Oil and Gas Lease dated as of May 12, 2010 by and
between Harrison Interests, Ltd., as lessor, and P Ranch Working Interest, LLC,
as lessee, as assigned by P Ranch Working Interest, LLC to (i) as to an
undivided 60.8697544%, SWEPI LP pursuant to that certain Conveyance of Lease
Interest dated as of November 3, 2010, and (ii) as to an undivided 39.1302456%,
Shell Offshore Inc. pursuant to that certain Conveyance of Lease Interest dated
as of November 3, 2010, which interest was assigned from Shell Offshore Inc. to
SWEPI LP pursuant to that certain Conveyance of Lease Interest dated as of
November 8, 2010, as amended by that certain First Amendment to Oil and Gas
Lease dated June 7, 2012, Second Amendment to Oil and Gas Lease dated May 10,
2013, Partial

 

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Release of Oil & Gas Lease dated June 21, 2013 and Third Amendment to Oil and
Gas Lease dated May 21, 2014.

 

“HIL Lease Effective Date Claims” means each of the claims against the HIL Lease
in effect on the Effective Date and described on part (b) of Schedule 9.03.

 

“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.

 

“Increasing Lender” has the meaning given in Section 2.06(c)(i).

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitee” has the meaning given in Section 12.03(b).

 

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

 

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

 

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

 

“Interim Redetermination” has the meaning given in Section 2.07(b)(ii).

 

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

 

“Investment” means, for any Person, any of the following: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of Equity
Interests in any other Person or any agreement to make any such acquisition
(including, without limitation, any “short sale” or any sale of any securities
at a time when such securities are not owned by the Person entering into such
short sale) or any capital

 

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contribution to any other Person; (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); or (c) 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 Company Act” means the Investment Company Act of 1940, as amended.

 

“Issuance Related Debt” means Senior Unsecured Notes, other than the Senior
Unsecured Notes described in clauses  (i) and (ii) of the definition of Senior
Unsecured Notes. For the sake of clarity, Issuance Related Debt will not be
deemed “incurred” for purposes of the definition of Issuance Related Borrowing
Base Adjustment Amount (or “issued” for purposes of any provision of the Credit
Agreement other than the definition of Senior Unsecured Notes Maximum Issuance
Amount and Section 9.01) until termination or expiration of any escrow or other
similar arrangement satisfactory to the Administrative Agent preventing Borrower
(or any Restricted Subsidiary issuing such Debt) from having unrestricted access
to and the right to use of the proceeds of such Issuance Related Debt.

 

“Issuance Related Borrowing Base Adjustment Amount” means an amount equal to 25%
of the Issuance Related Debt upon the Borrower’s or any of its Restricted
Subsidiaries’ incurrence of Issuance Related Debt.

 

“Issuing Bank” means RBC, in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.08(i).

 

“Joinder” means a Joinder to be executed in accordance with Section 8.16
substantially in the form of Exhibit H or any other form approved by
Administrative Agent.

 

“JV Entity” means a Person in which an Unrestricted Subsidiary owns an interest
which is insufficient for such Person to constitute a Subsidiary of such
Unrestricted Subsidiary.

 

“LC Commitment” at any time means Fifty Million Dollars ($50,000,000).

 

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

 

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

 

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

 

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

 

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

 

“Letter of Credit Fee Rate” has the meaning set forth in the definition of
“Applicable Margin”.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period the greater of (a) zero percent (0%) per annum and (b) the ICE Benchmark
Administration LIBO rate appearing on Reuters Libor Rates LIBOR01 (or on any
successor or substitute page of such service, or any successor to or substitute
for such service, providing rate quotations comparable to those currently
provided on such page of such service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period.  In the event that such rate is not available at such time
for any reason, then the LIBO Rate with respect to such Eurodollar Borrowing for
such Interest Period shall be the rate at which dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.

 

“Lien” means 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) royalties, production payments and the like payable
out of Oil and Gas Properties.  The term “Lien” shall include easements,
restrictions, servitudes, permits, conditions, covenants, encroachments,
exceptions or reservations.  For the purposes of this Agreement, Borrower and
its Subsidiaries shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, or leases under a
financing lease or other arrangement pursuant to which title to the Property has
been retained by or vested in some other Person in a transaction intended to
create a financing.

 

“Liquidate,” “Liquidated” and “Liquidation” when used in reference to any Swap
Agreement or any portion thereof have the correlative meanings to the term “Swap
Liquidation”.

 

“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Agreements, the Letters of Credit, the Security Instruments, the Guaranties and
all other agreements, instruments, documents and certificates, other than Swap
Agreements, executed and delivered to the Administrative Agent or any Lender in
connection with this Agreement or the transactions contemplated hereby.

 

“Loan Parties” means the Borrower, each Guarantor and each Restricted Subsidiary
that is a party to any Loan Document.

 

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement, including any True-Up Loans.

 

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

 

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“Material Indebtedness” means (a) Debt (other than the Loans and Letters of
Credit), and (b) obligations in respect of one or more Swap Agreements, of
Borrower and its Restricted 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 Restricted
Subsidiary 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 Restricted Subsidiary would be required to pay if such Swap Agreement were
Liquidated at such time.

 

“Maturity Date” means June 30, 2019.

 

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

 

“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 Restricted
Subsidiary that is subject to the Liens existing and that will exist under the
terms of the Mortgages.

 

“Mortgages” means all mortgages and deeds of trust executed in connection
herewith.

 

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

 

“National Flood Insurance Program” means the program created by the United
States Congress pursuant to the Flood Insurance Regulations, that mandates the
purchase of flood insurance to cover real property improvements located in
Special Flood Hazard Areas in participating communities and provides protection
to property owners through a federal insurance program.

 

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

 

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

 

“Obligations” means, without duplication, (a) all Debt evidenced hereunder, (b)
the obligation of the Loan Parties for the payment of the fees payable hereunder
or under the other Loan Documents, (c) all obligations and liabilities of any
Loan Party under any Swap Agreement (i) existing on the date of this Agreement
between such Loan Party and any counterparty that is a Lender or an Affiliate of
a Lender on the date of this Agreement or (ii) entered into on or after the date
of this Agreement between such Loan Party and any Person that, at the time such
obligation was entered into, was a Lender or Affiliate of a Lender hereunder,
provided that, notwithstanding anything to the contrary, with respect to any
Loan Party that is not an Eligible Contract Participant, the Obligations of such
Loan Party shall exclude any Excluded Swap Obligations of such Loan Party, (d)
the obligations of the Loan Parties relating to Bank Products, and (e) all other
obligations and liabilities (monetary or otherwise, whether absolute or
contingent, matured or unmatured) of the Loan Parties to the Administrative
Agent, the Issuing Bank and the Lenders, including reimbursement obligations
with respect to LC Disbursements, in each case now existing or hereafter
incurred under, arising out of or in connection with any Loan Document, and to
the

 

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extent that any of the foregoing includes or refers to the payment of amounts
deemed or constituting interest, only so much thereof as shall have accrued,
been earned and which remains unpaid at each relevant time of determination.

 

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

 

“OPA” has the meaning given in the definition of “Environmental Laws”.

 

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) 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 Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to Hydrocarbon Interests or the
production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to Hydrocarbon Interests; (e) all Hydrocarbons in and under and
which may be produced and saved or attributable to Hydrocarbon Interests,
including all oil in tanks, and all rents, issues, profits, proceeds, products,
revenues and other incomes from or attributable to Hydrocarbon Interests; (f)
all tenements, hereditaments, appurtenances and Properties in any manner
appertaining, belonging, affixed or incidental to 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.

 

“Operator” means SN Operating.

 

“Original Lenders” has the meaning given in Recital A.

 

“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; “Other
Taxes” shall not include Excluded Taxes.

 

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

 

“Patriot Act” has the meaning set forth in Section 12.15.

 

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

 

“Permitted Preferred Stock Distributions” means dividends to holders of the
Preferred Stock (i) to the extent described and provided for by that certain
Certificate of Designations of 4.875%  Convertible Perpetual Preferred Stock,
Series A of Borrower dated September 17, 2012 and (ii) to the

 

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extent described and provided for by that certain Certificate of Designations of
6.500% Convertible Perpetual Preferred Stock, Series B of Borrower, dated March
26, 2013.

 

“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 (other than a Multiemployer
Plan), subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Prepayment Decision Notice Date” has the meaning given in Section 3.04(c)(iii).

 

“Preferred Stock” means the shares of the series of Borrower’s preferred stock,
par value $0.01, issued pursuant to (i) that certain Certificate of Designations
of 4.875% Convertible Perpetual Preferred Stock, Series A of Borrower dated
September 17, 2012, (ii) that certain Certificate of Designations of 6.500%
Convertible Perpetual Preferred Stock, Series B of Borrower, dated March 26,
2013 and (iii) any series of preferred stock issued by the Borrower after the
date hereof.

 

“Prime Rate” means for any day, the rate of interest in effect for such day as
publicly announced from time to time by the Administrative Agent as its U.S.
“prime rate.” Such rate is a rate set by the Administrative Agent based upon
various factors including the Administrative Agent’s costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate.

 

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

 

“Proposed Borrowing Base” has the meaning given in Section 2.07(c)(i).

 

“Proposed Borrowing Base Notice” has the meaning given in Section 2.07(c)(ii).

 

“Proved Reserves” shall have the meaning given that term in the SPE/WPC
Definitions.

 

“Qualified ECP Credit Party” means, with respect to any Benefiting Loan Party in
respect of any Swap Obligation, each Loan Party that, at the time of the
guaranty by such Benefiting Loan Party of, or grant by such Benefiting Loan
Party of a security interest or other Lien securing, such Swap Obligation is
entered into or becomes effective with respect to, or at any other time such
Benefiting Loan Party is by virtue of such guaranty or grant of a security
interest or other Lien otherwise deemed to enter into, such Swap Obligation,
constitutes an Eligible Contract Participant and can cause such Benefiting Loan
Party to qualify as an Eligible Contract Participant at such time by entering
into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

“RBC” has the meaning given in the introductory paragraph.

 

“RCRA” has the meaning set forth in the definition of “Environmental Laws”.

 

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

 

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

 

“Register” has the meaning given in Section 12.04(b)(iv).

 

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

 

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

 

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

 

“Remedial Work” has the meaning given in Section 8.10(a).

 

“Repayment Notice” means a notice of repayment of a Borrowing pursuant to
Section 3.04, substantially in the form of Exhibit I or any other form approved
by the Administrative Agent.

 

“Required Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having more than fifty percent (50%) of the Aggregate
Elected Commitment Amount; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding more than fifty percent (50%) of the outstanding
aggregate principal amount of the Loans and participation interests in Letters
of Credit (without regard to any sale by a Lender of a participation in any Loan
under Section 12.04(c)); provided, however, that for purposes of (i) Section
2.07(c)(iii) and a Proposed Borrowing Base that would decrease or maintain the
Borrowing Base then in effect and (ii) any amendment to or waiver of Section
6.01, “Required Lenders” shall mean at any time while no Loans or LC Exposure is
outstanding, Lenders having at least sixty-six and two thirds percent (66 2/3%)
of the Aggregate Elected Commitment Amount and at any time while any Loans or LC
Exposure is outstanding, Lenders holding at least sixty-six and two thirds
percent (66 2/3%) of the outstanding aggregate principal amount of the Loans or
participation interests in Letters of Credit (without regard to any sale by a
Lender of a participation in any Loan under Section 12.04(c))..

 

“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each December 31st (or January
1st) or June 30th (or July 1st) (or such other date in the event of an Interim
Redetermination) the oil and gas reserves attributable to the proved Oil and Gas
Properties of the Borrower and the Guarantors, 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 pricing
assumptions consistent with SEC reporting requirements at the time, and
reflecting Swap Agreements in place with respect to such production.

 

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

 

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in any Person
or any payment (whether in cash,

 

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securities or other Property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such Equity Interests in any Person or any option, warrant or
other right to acquire any such Equity Interests in any Person.

 

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

 

“Rolling Period” means (a) for the fiscal quarters ending prior to September 30,
2015, the period commencing on July 1, 2014 and ending on the last day of such
fiscal quarter and (b) for the fiscal quarter ending on September 30, 2015, and
for each fiscal quarter thereafter, the period of four consecutive fiscal
quarters ending on the last day of such fiscal quarter.

 

“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.

 

“Sanchez/Century JV Entity” means the JV Entity formed in connection with the
Sanchez/Century Midstream JV Transaction initially owned, directly or
indirectly, 50% by Borrower and 50% by Century Midstream, LLC.

 

“Sanchez/Century JV Entity Cash Dividends” means cash dividends and other cash
distributions received by Borrower or any Restricted Subsidiary from the
Sanchez/Century JV Entity, whether directly from the Sanchez/Century JV Entity
or indirectly though cash dividends and other cash distributions received from
SN Midstream.

 

“Sanchez/Century Midstream Assets” means those Eligible Midstream Assets in
Colorado, Lavaca, Gonzales and Fayette Counties, Texas used to deliver
Hydrocarbons produced by one or more Loan Parties, which Sanchez/Century
Midstream Assets will be contributed to the Sanchez/Century JV Entity in
connection with the Sanchez/Century Midstream JV Transaction.

 

“Sanchez/Century Midstream JV Transaction” collectively means (i) the
contribution of the Sanchez/Century Midstream Assets by Borrower to the
Sanchez/Century JV Entity in exchange for 50% of the Equity Interests in the
Sanchez/Century JV Entity and (ii) subsequent cash Investments by Borrower in
the Sanchez/Century JV Entity and Letters of Credit issued hereunder to support
Debt or other obligations of the Sanchez/Century JV Entity in an amount not to
exceed the sum of (A) $50,000,000 plus (B) the aggregate amount of
Sanchez/Century JV Entity Cash Dividends from and after the Effective Date.

 

“Sanchez Family” means (a) Antonio R. Sanchez, III and A.R. Sanchez, Jr.,
(b) any spouse or descendant of any individual named in (a), (c) any other
natural person who is a member of the Family of any such individual referenced
in (a)-(b) above and (d) any other natural person who has been adopted by any
such individual referenced in (a)-(c) above.

 

“Sanchez Group” means (a) any member of the Sanchez Family, (b) the Operator,
Sanchez Energy Partners I, LP, SEP Management I, LLC and (c) any Person
Controlled by any one or more of the foregoing.

 

“Satisfactorily Bonded” means, with respect to an Excepted Lien described in
clauses (j) or (k) of the definition of “Excepted Liens,” that the claim or
claims secured by such Excepted Lien has been bonded against by a Person and in
a manner that the Administrative Agent determines to be appropriate in its
reasonable discretion consistent with its normal oil and gas lending criteria,
such determination to be made (a) at the time that the Property encumbered by
such Excepted Lien is acquired or such later date as the Borrower may request,
in the case of an Excepted Lien described in clause (j) of the definition of

 

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“Excepted Liens,” or (b) at the time that the Person that owns the Property
encumbered by such Excepted Lien becomes a Subsidiary or such later date as the
Borrower may request, in the case of an Excepted Lien described in clause (k) of
the definition of “Excepted Liens.”  For the sake of clarity, (i) where a
Property is subject to Excepted Liens described in clauses (j) or (k) of the
definition of “Excepted Liens” and some but not all of the claims secured by
such Excepted Liens have been Satisfactorily Bonded, the Administrative Agent,
acting reasonably consistent with its normal oil and gas lending criteria, shall
determine the extent to which such Excepted Liens are Satisfactorily Bonded and
(ii) the Administrative Agent has determined that each of the HIL Lease
Effective Date Claims has been Satisfactorily Bonded.

 

“Scheduled Redetermination” has the meaning given in Section 2.07(b)(i).

 

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

 

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

 

“SEP” has the meaning given in Recital A.

 

“Secured Swap Provider” means any Lender or any Affiliate of a Lender who has
entered into a Swap Agreement with the Borrower or any Restricted Subsidiary
pursuant to the terms of this Agreement.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Section 91.1011” has the meaning set forth in the definition of “Environmental
Laws”.

 

“Security Agreement”  means the Amended and Restated Security and Pledge
Agreement dated as of June 30, 2014 among the Borrower and the Restricted
Subsidiaries, as grantors, and the Administrative Agent.

 

“Security Instruments” means the mortgages, deeds of trust, security agreements,
pledge agreements, deposit account control agreements, guaranty agreements and
other agreements, instruments or certificates, and any and all other agreements,
instruments, certificates or certificates now or hereafter executed and
delivered by the Borrower or any other Person (other than Swap Agreements or
participation or similar agreements between any Lender and any other lender or
creditor with respect to any Obligations pursuant to this Agreement) in
connection with, or as security for the payment or performance of the
Obligations, the Notes, this Agreement, or reimbursement obligations under the
Letters of Credit, as such agreements may be amended, modified, supplemented or
restated from time to time, including, without limitation, the Security
Agreement, Mortgages and Transfer Letters.

 

“Senior Debt” means the sum of the principal balance of the Loans outstanding
hereunder plus any deferred put premiums under all Swap Agreements.

 

“Senior Unsecured Notes” means senior unsecured notes in an aggregate principal
amount not to exceed the Senior Unsecured Notes Maximum Issuance Amount issued
or to be issued by Borrower, and guaranteed by the other Loan Parties, (a) in
one or more Rule 144A or other private placement offerings including without
limitation (i) the Borrower’s $600,000,000 principal amount of 7.750% Senior
Notes due 2021, and (ii) the Borrower’s $850,000,000 principal amount of 6.125%%
Senior Notes due 2023 and (b) registered senior unsecured notes issued in
exchange therefor.

 

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“Senior Unsecured Notes Maximum Issuance Amount” means the maximum amount of
Senior Unsecured Notes that at the time of issuance could be issued such that,
after giving pro forma effect to such issuance, the Borrower would be in
compliance with Section 9.01.

 

“Senior Unsecured Loan Documents” means the indenture and all documents,
instruments, and agreements now or hereafter executed and/or delivered by
Borrower and any of its Affiliates in connection with the Senior Unsecured
Notes.

 

“SEP” has the meaning given in Recital A.

 

“Shell Gulf” means Shell Gulf of Mexico Inc., a Delaware corporation.

 

“SN Catarina” means SN Catarina, LLC, a Delaware limited liability company, and
wholly-owned Subsidiary of Borrower.

 

“SN Cotulla” has the meaning given in Recital C.

 

“SN Marquis” has the meaning given in Recital A.

 

“SN Midstream” means SN Midstream, LLC, a Delaware limited liability company,
and wholly-owned Subsidiary of Borrower which is an Unrestricted Subsidiary.

 

“SN Operating” means SN Operating, LLC, a Texas limited liability company.

 

“SN Services” means SN Services, LLC, a Delaware limited liability company.

 

“SN Services Transaction” means Investments in, or contributions of cash or
Property by any Loan Party to, SN Services and Letters of Credit issued
hereunder to support Debt or other obligations of SN Services in an amount not
to exceed the sum of (A) $10,000,000 plus (B) the aggregate amount of cash
dividends and other cash distributions received by Borrower or any Restricted
Subsidiary from SN Services, whether directly or indirectly, from and after the
Effective Date.

 

“SN TMS” means SN TMS, LLC, a Delaware limited liability company.

 

“Special Flood Hazard Area”  means an area that FEMA’s current flood maps
indicate has at least a one percent (1%) chance of a flood equal to or exceeding
the base flood elevation (a 100-year flood) in any given year.

 

“Specified Representations” means the representations and warranties of the Loan
Parties relating to (i) their corporate existence, power and authority,
(ii) their due authorization, execution and delivery and the enforceability of
the Loan Documents, (iii) their compliance with Federal Reserve margin
regulations, (iv) their compliance with the Investment Company Act, (v) there
being no required governmental approvals with respect to this Agreement and the
Catarina Property Acquisition that have not been obtained, (vi) there being no
conflicts with applicable law, (vii) their  organizational documents,
(vii) their solvency, (viii) their compliance with directives issued by the OFAC
and compliance with the Patriot Act and (ix) the validity, priority and
perfection of security interests to the extent required by this Agreement.

 

“SPE/WPC Definitions” means the definitions promulgated by the Society of
Petroleum Evaluation Engineers and the World Petroleum Congress and in effect
from time to time.

 

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

 

“subsidiary” means, with respect to any Person (the “parent”) at any date, any
other Person the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other Person of which Equity Interests representing more than 50% of the
ordinary voting power (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) or, in the case of a
partnership, any general partnership interests are, as of such date, owned,
controlled or held.

 

“Subsidiary” means any subsidiary of the Borrower.

 

“Subsidiary Former Borrowers” has the meaning given in Recital C.

 

“Swap Agreement” means any transaction or 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, whether or not any such transaction is
governed by or subject to any master agreement.  For the avoidance of doubt,
(a) a Swap Agreement governed by a master agreement, including any master
agreement published by the International Swaps and Derivatives
Association, Inc., shall be deemed entered into when such individual Swap
Agreement is entered into without regard to the date on which such master
agreement is entered into, and (b) any hedge position or hedging arrangement of
the type described in the immediately preceding sentence shall be considered a
Swap Agreement regardless of whether a written agreement or written confirmation
is entered into.

 

“Swap Liquidation” means the sale, assignment, novation, liquidation, unwind or
termination of all or any part of any Swap Agreement (other than, in each case,
at its scheduled maturity).

 

“Swap Obligation” means, with respect to any Loan Party, any obligation to pay
or perform under any agreement, contract or transaction that constitutes a
“swap” within the meaning of section 1a(47) of the Commodity Exchange Act,
including any such obligation comprised of a guaranty or a security interest or
other Lien.

 

“SWEPI” means SWEPI LP, a Delaware limited partnership.

 

“Syndication Agent” means Capital One, National Association in its capacity as
syndication agent hereunder.

 

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“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
obligations 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, eighty percent
(80%) of the residual value of the Property subject to such operating lease upon
expiration or early termination of such lease.

 

“Tax Amount” means, for any period, the combined federal, state and local income
taxes, including estimated taxes, that would be payable by the Borrower if it
were a Texas corporation filing separate tax returns with respect to its Taxable
Income for such period; provided that in determining the Tax Amount, the effect
thereon of any net operating loss carry-forwards or other carry-forwards or tax
attributes, such as alternative minimum tax carry-forwards, that would have
arisen if Borrower were a Texas corporation shall be taken into account;
provided, further, that, if there is an adjustment in the amount of the Taxable
Income for any period, an appropriate positive or negative adjustment shall be
made in the Tax Amount, and if the Tax Amount is negative, then the Tax Amount
for succeeding periods shall be reduced to take into account such negative
amount until such negative amount is reduced to zero. Notwithstanding anything
to the contrary, Tax Amount shall not include taxes resulting from the
Borrower’s reorganization as, or change in the status to, a corporation for tax
purposes.

 

“Taxable Income” means, for any period, the taxable income or loss of the
Borrower for such period for U.S. federal income tax purposes.

 

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

 

“Termination Date” means the earliest of (a) the Maturity Date, (b) the date of
termination of the Commitments pursuant to Section 2.06 and (c) the date of
termination of the Commitments pursuant to Section 10.02(a).

 

“Transactions” means the execution, delivery and performance by the Loan Parties
of this Agreement and each other Loan Document to which any of them is a party,
the borrowing of Loans, the use of the proceeds thereof and the issuance of
Letters of Credit hereunder and the grant of Liens by the Loan Parties on
Mortgaged Properties, other Properties and Collateral pursuant to the Security
Instruments.

 

“Transfer Letters” means, collectively, the letters in lieu of transfer orders
executed and delivered by the Loan Party executing and delivering a Mortgage.

 

“True-Up Loan” has the meaning given in Section 2.02(a).

 

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

 

“UCC” means the Uniform Commercial Code in effect from time to time in the State
of New York, or, where applicable as to specific Property, any other relevant
state.

 

“Unrestricted Cash” means Investments of the Borrower and its Restricted
Subsidiaries described in Section 9.05(d), Section 9.05(e), Section 9.05(f) and
Section 9.05(g) which are subject to no Liens other than Liens in favor of the
Lenders and Secured Swap Providers.

 

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“Unrestricted Person Cash Dividends” means, without duplication, cash dividends
and other cash distributions received by the Borrower or any Restricted
Subsidiary from any Unrestricted Subsidiary or any JV Entity, whether directly
or through the Person that owns the Equity Interests in such Unrestricted
Subsidiary or JV Entity.

 

“Unrestricted Subsidiary” means SN Midstream, SN Services and each other
Subsidiary of the Borrower that is designated by the Board of Directors of the
Borrower as an Unrestricted Subsidiary pursuant to a resolution of the Board of
Directors of Borrower, but only to the extent that such Subsidiary:

 

(a)           has no Debt other than Debt which is non-recourse to the Borrower
or any Restricted Subsidiary;

 

(b)           is not party to any agreement, contract, arrangement or
understanding with Borrower or any Restricted Subsidiary unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable to
the Borrower or such Restricted Subsidiary than those that might be obtained at
the time (or might have been obtained at the time such agreement, contract,
arrangement or understanding was entered into) from Persons who are not
Affiliates of the Borrower;

 

(c)           is a Person with respect to which neither the Borrower nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve such
Person’s financial condition or to cause such Person to achieve any specified
levels of operating results; and

 

(d)           has not guaranteed or otherwise directly or indirectly provided
credit support for any Debt of the Borrower or any of its Restricted
Subsidiaries.

 

Any designation of a Subsidiary of the Borrower as an Unrestricted Subsidiary
shall be made in an officer’s certificate delivered to the Administrative Agent
and containing a certification that such designation is in compliance with the
terms of this definition.  If, at any time, any Unrestricted Subsidiary would
fail to meet the preceding requirements as an Unrestricted Subsidiary, it will
thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement
and the other Loan Documents, any Debt of such Subsidiary will be deemed to be
incurred by a Restricted Subsidiary of the Borrower as of such date and any Lien
on the assets of such Subsidiary will be deemed to be incurred as of such date
and, if such Debt is not permitted to be incurred pursuant to Section 9.02
hereof, or such Lien is not permitted to be incurred as of such date pursuant to
Section 9.03 hereof, then in either case, the Borrower will be in default of the
relevant covenant.

 

“Unrestricted Subsidiary Maximum Cash Investment Amount” at any time means the
amount equal to (A) $50,000,000, plus (B) the aggregate amount of dividends and
other distributions received by the Borrower and the Restricted Subsidiaries in
cash from Unrestricted Subsidiaries after the Effective Date to and including
such time, minus (C) the aggregate amount drawn under Letters of Credit issued
pursuant to Section 9.05(l) which have been drawn and for which the Borrower has
not then been reimbursed by the Persons whose Debt or obligations were supported
by such Letters of Credit.

 

“U.S.”  and “United States” means the United States of America.

 

“U.S. Tax Compliance Certificate” has the meaning given in
Section 5.03(e)(ii)(1)(C).

 

“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

 

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basis, are owned by the Borrower or one or more of the Borrower’s Wholly-Owned
Subsidiaries or by the Borrower and one or more of the Wholly-Owned
Subsidiaries.

 

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

 

Section 1.04         Terms Generally; Rules of Construction.  The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be construed to have the same meaning and
effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any law shall be construed as referring to such law
as amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions
contained herein), (d) the words “herein”, “hereof” and “hereunder”, and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (e) with respect to the
determination of any time period, the word “from” means “from and including” and
the word “to” means “to and including” and (f) any reference herein to Articles,
Sections, Annexes, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Annexes, Exhibits and Schedules to, this
Agreement.  No provision of this Agreement or any other Loan Document shall be
interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

 

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

 

ARTICLE II

 

THE CREDITS

 

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

 

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Section 2.02         Loans and Borrowings.

 

(a)           Borrowings; Several Obligations.  Each Loan shall be made as part
of a Borrowing consisting of Loans made by the Lenders ratably in accordance
with their respective Commitments except that, contemporaneously with the
amendment and restatement of the 2013 Credit Agreement pursuant to this
Agreement, each Lender whose previously funded Loans are less than its
Applicable Percentage of Loans shall remit to the Administrative Agent for the
benefit of the other Lenders entitled thereto an amount equal to such deficiency
(which remittance shall be referred to as a “True-Up Loan” and shall constitute
a Loan for purposes of  this Agreement; provided that for purposes of
determining whether the condition specified in Section 2.01(b) has been
satisfied, the amount of such True-Up Loan shall be deemed to be zero) which
shall, notwithstanding anything to the contrary in Section 4.01 or otherwise in
this Agreement, be allocated to the other Lenders entitled thereto by the
Administrative Agent and constitute a repayment of the Loans of such other
Lenders.  The failure of any Lender to make any Loan required to be made by it
shall not relieve any other Lender of its obligations hereunder; provided that
the Commitments are several and no Lender shall be responsible for any other
Lender’s failure to make Loans as required.

 

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

 

(c)           Minimum Amounts; Limitation on Number of Borrowings.  At the
commencement of each Interest Period for any Eurodollar Borrowing, such
Borrowing shall be in an aggregate amount of $1,000,000 or a whole multiple of
$100,000 in excess thereof.  At the time that each ABR Borrowing is made, such
Borrowing shall be in an aggregate amount of $1,000,000 or a whole multiple of
$100,000 in excess thereof; provided that an ABR Borrowing may be in an
aggregate amount that is equal to the entire unused balance of the total
Commitments or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.08(e).  Borrowings of more than one
Type may be outstanding at the same time; provided that there shall not at any
time be more than a total of six (6) Eurodollar Borrowings outstanding. 
Notwithstanding any other provision of this Agreement, the Borrower shall not be
entitled to request, or to elect to convert or continue, any Borrowing if the
Interest Period requested with respect thereto would end after the Maturity
Date.

 

(d)           Notes.  Any Lender may request that Loans made by it be evidenced
by a single promissory note.  In such event, the Borrower shall prepare, execute
and deliver to such Lender a promissory note payable to the order of such Lender
in substantially the form of Exhibit A, dated, in the case of (i) any Lender
party hereto as of the date of this Agreement, as of the date of this Agreement
(subject to clauses (ii) and (iii) of this section), (ii) any Lender that
becomes a party hereto or that has its Maximum Credit Amount increased pursuant
to an Assignment and Assumption, as of the effective date of the Assignment and
Assumption, or (iii) any Lender that becomes a party hereto or that has its
Maximum Credit Amount increased in connection with an increase in the Aggregate
Elected Commitment Amount pursuant to Section 2.06(c), as of the effective date
of such increase, payable to the order of such Lender in a principal amount
equal to its Maximum Credit Amount as in effect on such date, and otherwise duly
completed.  If any Lender’s Maximum Credit Amount increases or decreases for any
reason (whether pursuant to Section 2.06, Section 12.04(b) or otherwise), the
Borrower shall deliver or cause to be delivered on the effective date of such
increase or decrease, a new Note payable to the order of any Lender who
requested a Note hereunder in a principal amount equal to its Maximum Credit
Amount after giving effect to such increase or decrease, and otherwise duly
completed, and such Lender agrees to promptly thereafter return the previously
issued Note held by such Lender marked canceled or otherwise similarly defaced. 
The date, amount, Type, interest rate and, if applicable, Interest Period of
each Loan made by each Lender that receives a Note, and all payments made on
account of the principal

 

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thereof, shall be recorded by such Lender on its books for its Note, and, prior
to any transfer, may be endorsed by such Lender on a schedule attached to such
Note or any continuation thereof or on any separate record maintained by such
Lender.  Failure to make any such notation or to attach a schedule shall not
affect any Lender’s or the Borrower’s rights or obligations in respect of such
Loans or affect the validity of such transfer by any Lender of its Note.

 

Section 2.03         Requests for Borrowings.  To request a Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone,
email or facsimile request or by delivery of a written Borrowing Request in
substantially the form of Exhibit B (each such signed request in the form of
Exhibit B, a “written Borrowing Request”):  (a) in the case of a Eurodollar
Borrowing, not later than 12:00 noon, Houston, Texas time, three (3) Business
Days before the date of the proposed Borrowing or (b) in the case of an ABR
Borrowing, not later than 12:00 noon, Houston, Texas time, one Business Day
before the date of the proposed Borrowing.  Each telephonic, email or facsimile
request not evidenced by a written Borrowing Request shall be confirmed promptly
by delivery to the Administrative Agent of a Borrowing Request signed by an
authorized officer of Borrower whose name and specimen signature are set forth
on the certificate delivered pursuant to Section 6.01(b) (or any subsequent
certificate delivered to Administrative Agent) which may be delivered by hand,
by courier service, by scanned pdf, or by facsimile.  Each such telephonic,
email, facsimile and written Borrowing Request shall be irrevocable and shall
specify the following information in compliance with Section 2.02:

 

(i)            the aggregate amount of the requested Borrowing;

 

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

 

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

 

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

 

(v)           the amount equal to the least of (x) the Aggregate Maximum Credit
Amount, (y) the then effective Borrowing Base and (z) the Aggregate Elected
Commitment Amount, the current total Credit Exposures (without regard to the
requested Borrowing) and the pro forma total Credit Exposures (giving effect to
the requested Borrowing); and

 

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

 

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration.  Each Borrowing
Request shall constitute a representation that the amount of the requested
Borrowing shall not cause the total Credit Exposures to exceed the least of
(x) the Aggregate Maximum Credit Amount, (y) the then effective Borrowing Base
and (z) the Aggregate Elected Commitment Amount.  Promptly following receipt of
a Borrowing Request in accordance with this Section 2.03, the Administrative
Agent shall advise each Lender of the details thereof and of the amount of such
Lender’s Loan to be made as part of the requested Borrowing.

 

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Section 2.04         Interest Elections.

 

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

 

(b)           Interest Election Requests.  To make an election pursuant to this
Section 2.04, the Borrower shall notify the Administrative Agent of such
election by telephone or by a written Interest Election Request in substantially
the form of Exhibit C signed by an authorized officer of Borrower whose name and
specimen signature are set forth on the certificate delivered pursuant to
Section 6.01(b) (or any subsequent certificate delivered to Administrative
Agent) (a “written Interest Election Request”) 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 telephonic and written Interest Election Request
shall be irrevocable and each telephonic Interest Election Request shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)           Effect of Failure to Deliver Timely Interest Election Request and
Events of Default on Interest Election.  If the Borrower fails to deliver a
timely Interest Election Request with respect to a Eurodollar Borrowing prior to
the end of the Interest Period applicable thereto, then, unless such Borrowing
is repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing.  Notwithstanding any contrary provision
hereof, if an Event of Default

 

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has occurred and is continuing:  (i) no outstanding Borrowing may be converted
to or continued as a Eurodollar Borrowing (and any Interest Election Request
that requests the conversion of any Borrowing to, or continuation of any
Borrowing as, a Eurodollar Borrowing shall be deemed to have requested an ABR
Borrowing) and (ii) unless repaid, each Eurodollar Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.

 

Section 2.05         Funding of Borrowings.

 

(a)           Funding by Lenders.  Each Lender shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately
available funds by 1:00 p.m., Houston, Texas 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 in the amount so received, in like funds, to an account of Borrower
maintained either with a Lender or a non-Lender in Houston, Texas and designated
by the Borrower in the applicable Borrowing Request; provided that ABR Loans
made to finance the reimbursement of an LC Disbursement as provided in
Section 2.08(e) shall be remitted by the Administrative Agent to the Issuing
Bank that made such LC Disbursement; provided further that if such account is
maintained with a non-Lender, such non-Lender shall have entered into an account
control agreement in form and substance reasonably satisfactory to the
Administrative Agent.

 

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

 

Section 2.06         Changes in the Aggregate Maximum Credit Amount; Optional
Increase and Reduction of Aggregate Elected Commitment Amount.

 

(a)           Scheduled Termination of Commitments.  Unless previously
terminated, the Commitments shall terminate on the Maturity Date.  If at any
time the Aggregate Maximum Credit Amount, the Borrowing Base or the Aggregate
Elected Commitment Amount is terminated or reduced to zero, then, at the option
of the Administrative Agent, the Commitments shall terminate on the effective
date of such termination or reduction  Notwithstanding the foregoing, the
parties hereto hereby agree that this Agreement shall not be terminated until
all Obligations are paid and performed in full.

 

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

 

(i)            The Borrower may at any time terminate, or from time to time
reduce, the Aggregate Maximum Credit Amount; provided that (1) each reduction of
the Aggregate Maximum Credit Amount shall be in an amount that is an integral
multiple of $1,000,000 and not less than $5,000,000 (or, if less than
$5,000,000, the entire Aggregate

 

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Maximum Credit Amount), (2) the Borrower shall not terminate or reduce the
Aggregate Maximum Credit Amount if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 3.04(c), the total Credit
Exposures would exceed the total Commitments, and (3) upon any reduction of the
Aggregate  Maximum Credit Amount that results in the Aggregate Maximum Credit
Amount being less than the Aggregate Elected Commitment Amount, the Aggregate
Elected Commitment Amount shall be automatically reduced (such reduction to be
allocated to the Elected Commitments of the Lenders ratably in accordance with
such Elected Commitments) so that it equals the Aggregate Maximum Credit Amount
as so reduced.

 

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

 

(c)           Optional Increase and Reduction of Aggregate Elected Commitment
Amount.

 

(i)            Subject to the conditions set forth in Section 2.06(c)(ii),  the
Borrower may increase the Aggregate Elected Commitment Amount then in effect by
increasing the Elected Commitment of a Lender (an “Increasing Lender”) or by
causing a Person that is acceptable  to the Administrative  Agent that at such
time is not a Lender to become a Lender (an “Additional Lender”).
Notwithstanding anything to the contrary contained  in this Agreement,  in no
case shall an Additional  Lender be the Borrower or an Affiliate of the
Borrower.

 

(ii)           Any increase in the Aggregate Elected Commitment Amount shall be
subject to the following additional conditions:

 

(1)           such increase shall not be less than $25,000,000 unless the
Administrative  Agent otherwise consents, and no such increase shall be
permitted if after giving effect thereto the Aggregate Elected Commitment Amount
exceeds the Borrowing Base then in effect;

 

(2)           following any Scheduled Redetermination Date, the Borrower may not
increase the Aggregate Elected Commitment Amount more than once before the next
Scheduled Redetermination Date;

 

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

 

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

 

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(5)           no Lender’s Elected Commitment may be increased without the
consent of such Lender;

 

(6)           if the Borrower elects to increase the Aggregate Elected
Commitment Amount by increasing the Elected Commitment of a Lender, the Borrower
and such Lender shall execute and deliver to the Administrative Agent a
certificate substantially in the form of Exhibit J (an “Elected  Commitment 
Increase Certificate”); and

 

(7)           if the Borrower elects to increase the Aggregate Elected
Commitment  Amount by causing an Additional Lender to become a party to this
Agreement, then the Borrower and such Additional Lender shall execute and
deliver to the Administrative  Agent a certificate substantially in the form of
Exhibit K (an “Additional Lender Certificate”), together with an Administrative
Questionnaire and a processing and recordation fee of $3,500, and the Borrower
shall (1) if requested by the Additional Lender, deliver a Note payable to the
order of such Additional Lender in a principal amount equal to its Maximum
Credit Amount, and otherwise duly completed and (2) pay any applicable fees as
may have been agreed to between the Borrower, the Additional Lender and/or the
Administrative  Agent.

 

(iii)          Subject to acceptance and recording thereof pursuant to
Section 2.06(c)(iv), from and after the effective date specified in the Elected
Commitment Increase Certificate or the Additional Lender Certificate (or if any
Eurodollar Borrowings are outstanding, then the last day of the Interest Period
in respect of such Eurodollar Borrowings, unless the Borrower has paid any
compensation required by Section 5.02): (A) the amount of the Aggregate Elected
Commitment Amount shall be increased as set forth therein, and (B) in the case
of an Additional Lender Certificate, any Additional Lender party thereto shall
be a party to this Agreement and have the rights and obligations of a Lender
under this Agreement and the other Loan Documents.  In addition, the Increasing
Lender or the Additional Lender, as applicable, shall purchase a pro rata
portion of the outstanding Loans (and participation interests in Letters of
Credit) of each of the other Lenders (and such Lenders hereby agree to sell and
to take all such further action to effectuate such sale) such that each Lender
(including any Increasing Lender and any Additional Lender, as applicable) shall
hold its Applicable Percentage of the outstanding Loans (and participation
interests) after giving effect to the increase in the Aggregate Elected
Commitment Amount.

 

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

 

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(v)           Upon any increase in the Aggregate Elected Commitment Amount
pursuant to this Section 2.06(c), (A) each Lender’s Applicable Percentage shall
be automatically deemed amended to the extent necessary so that each such
Lender’s Applicable Percentage equals the percentage of the Aggregate Elected
Commitment Amount represented by such Lender’s Elected Commitment, in each case
after giving effect to such increase, (B) Annex I shall be deemed amended to
reflect any changes in the Applicable Percentages of the Lenders other than any
Increasing Lenders or Additional Lenders pursuant to the foregoing clause (A),
and (C) Annex I to this Agreement shall be deemed amended to reflect the
Applicable Percentage, Maximum Credit Amount and Elected Commitment of any
Increasing Lender and any Additional Lender.

 

(vi)          The Borrower may from time to time reduce the Aggregate Elected
Commitment Amount; provided that (A) each reduction of the Aggregate Elected
Commitment Amount shall be in an amount that is an integral multiple of
$1,000,000 and not less than $1,000,000 and (B) the Borrower shall not reduce
the Aggregate Elected Commitment Amount if, after giving effect to any
concurrent  prepayment of the Loans in accordance with Section 3.04(c), the
total Credit Exposures would exceed the Aggregate Elected Commitment Amount.

 

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

 

(viii)        Upon any redetermination or other adjustment in the Borrowing Base
pursuant to this Agreement that would otherwise result in the Borrowing Base
becoming less than the Aggregate Elected Commitment Amount, the Aggregate
Elected Commitment Amount shall be automatically reduced (such reduction to be
allocated to the Elected Commitments of the Lenders ratably in accordance with
such Elected Commitments) so that they equal such redetermined Borrowing Base
(and Annex I shall be deemed amended to reflect such amendments to each Lender’s
Elected Commitment and the Aggregate Elected Commitment Amount).

 

Section 2.07         Borrowing Base.

 

(a)           Initial Borrowing Base.  For the period from and including the
Effective Date to but excluding the first Redetermination Date, the amount of
the Borrowing Base shall be Four Hundred Thirty-Seven Million Five Hundred
Thousand and No/100 Dollars ($437,500,000); provided if the Engineered Value of
Oil and Gas Properties intended to be acquired in the Catarina Property
Acquisition and not acquired (whether due to title defects, environmental
issues, preferential purchase rights, casualty loss or otherwise) is greater
than $10,000,000 (as evaluated in the Catarina Property Acquisition Reserve
Report), the Administrative Agent may, by written notice to the Borrower and the
Lenders, reduce the initial Borrowing Base to reflect the exclusion of such Oil
and Gas Properties.  Notwithstanding the

 

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foregoing, the Borrowing Base may be subject to further adjustments from time to
time pursuant to Section 2.07(b)(iii), Section 2.07(b)(iv), Section 8.13(c) or
Section 9.11.

 

(b)           Scheduled and Interim Redeterminations.

 

(i)            The Borrowing Base shall be redetermined semi-annually in
accordance with this Section 2.07(b)(i) (a “Scheduled Redetermination”), and,
subject to Section 2.07(a), such redetermined Borrowing Base shall become
effective and applicable to the Borrower, the Administrative Agent, the Issuing
Bank and the Lenders on or before April 1st and October 1st of each year 
beginning October 1, 2014 or, in each case, such date promptly thereafter as
reasonably practicable based on the engineering and other information available
to the Lenders.

 

(ii)           In addition to the foregoing and Section 2.07(b)(iii), the
Borrower may by notifying the Administrative Agent thereof, and the
Administrative Agent may, at the direction of the Required Lenders, by notifying
the Borrower thereof, each elect to cause the Borrowing Base to be redetermined
once between each Scheduled Redetermination  (each such redetermination between
Scheduled Redeterminations, together with any redetermination described in
Section 2.07(b)(iii), an “Interim Redetermination”) in accordance with this
Section 2.07.

 

(iii)          In addition to any Interim Redetermination described in
Section 2.07(b)(ii), if at any time the aggregate value of Oil and Gas
Properties sold or disposed of pursuant to Section 9.11(e)(4), together with the
Borrowing Base value (as determined by the Administrative Agent in its
reasonable judgment) of Swap Agreements in respect of commodities Liquidated, in
any period between redeterminations of the Borrowing Base, exceeds ten percent
(10%) of the value of proved developed Oil and Gas Properties included in the
most recently delivered Reserve Report, then the Administrative Agent may, at
the direction of the Required Lenders, by notifying the Borrower thereof, reduce
the Borrowing Base, effective immediately upon such sale, disposition or Swap
Liquidation by an amount equal to the Borrowing Base value (as determined by the
Administrative Agent in its reasonable judgment) of such Oil and Gas Properties
sold or disposed of and Swap Agreements in respect of commodities Liquidated and
such new Borrowing Base shall be effective and applicable to the Borrower, the
Administrative Agent, the Issuing Bank and the Lenders until the next
redetermination or modification of the Borrowing Base pursuant to this
Agreement; provided that for purposes of this Section 2.07(b)(iii), a Swap
Agreement shall not be deemed to have been Liquidated if, (x) such Swap
Agreement is novated from the existing counterparty to an Approved Counterparty,
with the Borrower or the applicable Loan Party being the “remaining party” for
purposes of such novation, or (y) upon its termination, it is replaced, in a
substantially contemporaneous transaction, with one or more Swap Agreements with
approximately the same mark-to-market value and without cash payments to any
Loan Party in connection therewith.  Upon any such redetermination, the
Administrative Agent shall promptly deliver a New Borrowing Base Notice to the
Borrower and the Lenders.

 

(iv)          In addition to the Scheduled Redeterminations and Interim
Redeterminations, and any reduction of the Borrowing Base pursuant to
Section 2.07(b)(iii), the Borrowing Base shall be automatically reduced by the
related Issuance Related Borrowing Base Adjustment Amount upon the issuance of
Issuance Related Debt.

 

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(c)           Scheduled and Interim Redetermination Procedure.

 

(i)            Each Scheduled Redetermination and each Interim Redetermination
shall be effectuated as follows:  upon receipt by the Administrative Agent of
(1) the Reserve Report and the certificate required to be delivered by the
Borrower, in the case of a Scheduled Redetermination, pursuant to Sections
8.12(a) and (c), and, in the case of an Interim Redetermination, pursuant to
Section 8.12(b) and (c), and (2) such other reports, data and supplemental
information, including, without limitation, the information provided pursuant to
Section 8.12(c), as may, from time to time, be reasonably requested by the
Required Lenders (the Reserve Report, such certificate and such other reports,
data and supplemental information being the “Engineering Reports”), the
Administrative Agent shall evaluate the information contained in the Engineering
Reports and shall, in good faith, propose a new Borrowing Base (the “Proposed
Borrowing Base”) based upon such information and such other information
(including, without limitation, the status of title information with respect to
the Oil and Gas Properties as described in the Engineering Reports and the
existence of any other Debt; provided if the Debt is Debt described in
Section 9.02(j) and is secured by an Excepted Lien described in clauses (j) or
(k) of the definition of “Excepted Liens”, then, except to the extent that such
Excepted Liens are Satisfactorily Bonded, such Oil and Gas Properties shall not
be included in calculating the Borrowing Base until such Excepted Lien is
released or evidence, satisfactory in form and substance, is delivered to the
Administrative Agent that such Excepted Lien is no longer valid or enforceable)
as the Administrative Agent deems appropriate in its sole discretion and
consistent with its normal oil and gas lending criteria as it exists at the
particular time.  In no event shall the Proposed Borrowing Base exceed the
Aggregate Maximum Credit Amount.

 

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

 

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

 

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

 

(iii)          Any Proposed Borrowing Base that would increase the Borrowing
Base then in effect must be approved or deemed to have been approved by all of
the Lenders as provided in this Section 2.07(c)(iii) and any Proposed Borrowing
Base that would

 

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decrease or maintain the Borrowing Base then in effect must be approved or be
deemed to have been approved by the Administrative Agent and the Required
Lenders as provided in this Section 2.07(c)(iii).  Upon receipt of the Proposed
Borrowing Base Notice, each Lender shall have fifteen (15) days to agree with
the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by
proposing an alternate Borrowing Base.  If at the end of such fifteen (15) days,
any Lender has not communicated its approval or disapproval in writing to the
Administrative Agent, such silence shall be deemed to be an approval of the
Proposed Borrowing Base.  If, at the end of such 15-day period, all of the
Lenders, in the case of a Proposed Borrowing Base that would increase the
Borrowing Base then in effect, or the Administrative Agent and Required Lenders,
in the case of a Proposed Borrowing Base that would decrease or maintain the
Borrowing Base then in effect, have approved or deemed to have approved, as
aforesaid, then the Proposed Borrowing Base shall become the new Borrowing Base,
effective on the date specified in Section 2.07(d).  If, however, at the end of
such 15-day period, all of the Lenders or the Required Lenders, as applicable,
have not approved or been deemed to have approved, as aforesaid, then the
Administrative Agent shall (1) notify the Borrower of the Proposed Borrowing 
Base and which Lenders have not approved or been deemed to have approved the
Proposed Borrowing Base and (2) poll the Lenders to ascertain the highest
Borrowing Base then acceptable to a number of Lenders sufficient to constitute
the Required Lenders for purposes of this Section 2.07 and, so long as such
amount does not increase the Borrowing Base then in effect, such amount shall
become the new Borrowing Base, effective on the date specified in
Section 2.07(d).

 

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

 

Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under ‘Section 8.13(c) or Section 9.11,
whichever occurs first.  Notwithstanding the foregoing, no Scheduled
Redetermination or Interim Redetermination shall become effective until the New
Borrowing Base Notice related thereto is received by the Borrower.

 

Section 2.08         Letters of Credit.

 

(a)           General.  Subject to the terms and conditions set forth herein,
the Borrower may request the Issuing Bank to issue Letters of Credit in dollars
for its own account or for the account of any of its Restricted Subsidiaries
(or, subject to the limitations of Section 9.05(l), any of its Unrestricted
Subsidiaries or JV Entities), in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Availability Period.  In the event of any inconsistency between the
terms and conditions of this Agreement and the terms and conditions of any
Letter of Credit Agreement, the terms and conditions of this Agreement shall
control.

 

(b)           Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions.  To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the

 

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Administrative Agent (not less than three (3) Business Days in advance of the
requested date of issuance, amendment, renewal or extension) a notice:
(i) requesting the issuance of a Letter of Credit or identifying the outstanding
Letter of Credit to be amended, renewed or extended; (ii) specifying the date of
issuance, amendment, renewal or extension (which shall be a Business Day);
(iii) specifying the date on which such Letter of Credit is to expire (which
shall comply with Section 2.08(c)); (iv) specifying the amount of such Letter of
Credit; (v) specifying the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit; and (vi) specifying the amount of the then effective Borrowing
Base, the current total Credit Exposures (without regard to the requested Letter
of Credit or the requested amendment, renewal or extension of an outstanding
Letter of Credit) and the pro forma total Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of
an outstanding Letter of Credit).  If requested by the Issuing Bank, the
Borrower shall submit a letter of credit application on the Issuing Bank’s
standard form in connection with any request for a Letter of Credit.  A Letter
of Credit shall be issued, amended, renewed or extended only if (and with
respect to each notice provided by the Borrower above and any issuance,
amendment, renewal or extension of each Letter of Credit, the Borrower shall be
deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension (1) the LC Exposure shall not exceed the LC
Commitment and (2) the total Credit Exposures shall not exceed the total
Commitments (i.e. the least of (x) the Aggregate Maximum Credit Amount, (y) the
then effective Borrowing Base and (z) the Aggregate Elected Commitment Amount).

 

(c)           Expiration Date.  Each Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal, which
renewal may be provided for in the initial Letter of Credit, or extension
thereof, one year after such renewal or extension; provided no such renewal or
extension shall extend beyond the date referred to in clause (ii) of this
subsection) and (ii) the date that is twenty (20) Business Days prior to the
Maturity Date.

 

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

 

(e)           Reimbursement.  If the Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying the Issuing Bank, through the Administrative Agent, an
amount equal to such LC Disbursement (i) not later than 2:00 p.m., Houston,
Texas time, on the date such LC Disbursement is made, if the Borrower shall have
received notice of such LC Disbursement prior to 12:00 noon, Houston Texas time,
on such date (provided it shall not be an Event of Default if the Borrower fails
to reimburse such LC Disbursement pursuant to this clause (i) if such LC
Disbursement is reimbursed on the first Business Day immediately following the
day that the Borrower received notice of such LC Disbursement), or (ii) not
later than 12:00 noon, Houston,

 

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Texas time, on the first Business Day immediately following the day that the
Borrower received such notice, if such notice is not received prior to 12:00
noon on the date such LC Disbursement was made.  If the Borrower fails to make
such payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the Borrower in respect
thereof and such Lender’s Applicable Percentage thereof.  Promptly following
receipt of such notice, each Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.05 with respect to Loans made by such Lender
(and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of
the Lenders), and the Administrative Agent shall promptly pay to the Issuing
Bank the amounts so received by it from the Lenders.  Promptly following receipt
by the Administrative Agent of any payment from the Borrower pursuant to this
Section 2.08(e), the Administrative Agent shall distribute such payment to the
Issuing Bank or, to the extent that Lenders have made payments pursuant to this
Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders and the
Issuing Bank as their interests may appear.  Any payment made by a Lender
pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any LC
Disbursement shall not constitute a Loan and shall not relieve the Borrower of
its obligation to reimburse such LC Disbursement.

 

(f)            Obligations Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein,
(ii) any draft or other document presented under a Letter of Credit proving to
be forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit or any Letter of Credit
Agreement, or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section 2.08(f), constitute a legal or equitable discharge of, or provide a
right of setoff against, the Borrower’s obligations hereunder.  Neither the
Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related
Parties shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any document
required to make a drawing thereunder), any error in interpretation of technical
terms or any consequence arising from causes beyond the control of the Issuing
Bank; provided that the foregoing shall not be construed to excuse the Issuing
Bank from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the
Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof.  The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised all requisite care in each such
determination.  In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank may, in its sole reasonable discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.

 

(g)           Disbursement Procedures.  The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit.

 

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The Issuing Bank shall promptly notify the Administrative Agent and the Borrower
by telephone (confirmed by telecopy) of such demand for payment and whether such
Issuing Bank has made or will make an LC Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse the Issuing Bank and the Lenders with
respect to any such LC Disbursement.

 

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

 

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

 

(j)            Cash Collateralization.  If (i) any Event of Default shall occur
and be continuing and the Borrower receives notice from the Administrative Agent
or the Required Lenders demanding the deposit of cash collateral pursuant to
this Section 2.08(j), or (ii) the Borrower is required to pay to the
Administrative Agent the excess attributable to an LC Exposure in connection
with any prepayment pursuant to Section 3.04(c), then the Borrower shall
deposit, in an account with the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Lenders, an amount in cash equal
to, in the case of an Event of Default, the LC Exposure, and in the case of a
payment required by Section 3.04(c), the amount of such excess as provided in
Section 3.04(c), as of such date plus any accrued and unpaid interest thereon to
the extent not otherwise included in such payment; provided that the obligation
to deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice
of any kind, upon the occurrence of any Event of Default with respect to the
Borrower or any Restricted Subsidiary described in Section 10.01(g) or
Section 10.01(h).  The Borrower hereby grants to the Administrative Agent, for
the benefit of the Issuing Bank and the Lenders, an exclusive first priority and
continuing perfected security interest in and Lien on such account and all cash,
checks, drafts, certificates and instruments, if any, from time to time
deposited or held in such account, all deposits or wire transfers made thereto,
any and all investments purchased with funds deposited in such account, all
interest, dividends, cash, instruments, financial assets and other Property from
time to time received, receivable or otherwise payable in respect of, or in
exchange for, any or all of the foregoing, and all proceeds, products,
accessions, rents, profits, income and benefits therefrom, and any substitutions
and replacements therefor.  The Borrower’s obligation to deposit amounts
pursuant to this Section 2.08(j) shall be absolute and unconditional, without
regard to whether any beneficiary of any such Letter of Credit has attempted to
draw down all or a portion of such amount

 

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under the terms of a Letter of Credit, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Borrower or any of its
Subsidiaries may now or hereafter have against any such beneficiary, the Issuing
Bank, the Administrative Agent, the Lenders or any other Person for any reason
whatsoever.  Such deposit shall be held as collateral securing the payment and
performance of the Borrower’s obligations under this Agreement and the other
Loan Documents in a “securities account” (within the meaning of Article 8 of the
UCC) over which the Administrative Agent shall have “control” (within the
meaning of the UCC).  Notwithstanding the foregoing, the Borrower may direct the
Administrative Agent and the “securities intermediary” (within the meaning of
the UCC) to invest amounts credited to the securities account, at the Borrower’s
risk and expense, in Investments described in Section 9.05(d) through (g). 
Interest or profits, if any, on such investments shall accumulate in such
account.  Moneys in such account shall be applied by the Administrative Agent to
reimburse, on a pro rata basis, the Issuing Bank for LC Disbursements for which
it has not been reimbursed and, to the extent not so applied, shall be held for
the satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated, be
applied to satisfy other obligations of the Borrower under this Agreement or the
other Loan Documents pursuant to Section 10.02(c).  If the Borrower is required
to provide an amount of cash collateral hereunder as a result of the occurrence
of an Event of Default, and the Borrower is not otherwise required to pay to the
Administrative Agent the excess attributable to an LC Exposure in connection
with any prepayment pursuant to Section 3.04(c), then such amount (to the extent
not applied as aforesaid) shall be returned to the Borrower within three
(3) Business Days after all Events of Default have been cured or waived.

 

ARTICLE III

 

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

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

 

Section 3.02                            Interest.

 

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

 

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

 

(c)                                  Post-Default Rate.  Notwithstanding the
foregoing, if any principal of or interest on any Loan or any fee or other
amount payable by the Borrower hereunder or under any other Loan Document is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to two percent (2%) plus the rate applicable to ABR Loans as
provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.

 

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

 

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of such repayment or prepayment, and (iii) in the event of any conversion of any
Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.

 

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

 

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

 

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

 

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

 

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

 

Section 3.04                            Prepayments.

 

(a)                                 Optional Prepayments.  The Borrower shall
have the right at any time and from time to time to prepay any Borrowing in
whole or in part, subject to prior notice in accordance with Section 3.04(b). 
Partial optional prepayments pursuant to this Section 3.04 shall be in an
aggregate principal amount of $250,000 or any whole multiple of $50,000 in
excess thereof.

 

(b)                                 Notice and Terms of Optional Prepayment. 
The Borrower shall notify the Administrative Agent by telephone (confirmed by
telecopy of a signed Repayment Notice) of any prepayment hereunder (i) in the
case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon,
Houston, Texas time, three (3) Business Days before the date of prepayment, or
(ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m.,
Houston, Texas time, on the Business Day of prepayment.  Each such notice shall
be irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid.  Promptly following receipt of
any such notice relating to a Borrowing, the Administrative Agent shall advise
the Lenders of the contents thereof.  Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing.  Prepayments
shall be accompanied by accrued interest to the extent required by Section 3.02.

 

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(c)                                  Mandatory Prepayments.

 

(i)                                     Upon any adjustments to the Borrowing
Base pursuant to Section 2.07(b)(iii), Section 2.07(b)(iv) or
Section 9.11(e)(4), if the total Credit Exposures exceeds the Borrowing Base as
adjusted, then the Borrower shall (A) prepay the Borrowings in an aggregate
principal amount equal to such excess, and (B) if, as a result of LC Exposure,
any excess remains after prepaying all of the Borrowings, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as cash collateral as provided in Section 2.08(j).  The Borrower shall
be obligated to make such prepayment and/or deposit of cash collateral on the
date it receives cash proceeds as a result of such disposition or such
incurrence of Debt; provided that all payments required to be made pursuant to
this Section 3.04(c)(i) must be made on or prior to the Termination Date.

 

(ii)                                  If, after giving effect to any termination
or reduction of the Aggregate Maximum Credit Amount pursuant to Section 2.06(b),
or any reduction of the Aggregate Elected Commitment  Amount pursuant to
Section 2.06(c), the total Credit Exposures exceed the total Commitments, then
the Borrower shall (A) prepay the Borrowings on the date of such termination or
reduction in an aggregate principal amount equal to such excess, and (B) if any
excess remains after prepaying all of the Borrowings as a result of LC Exposure,
pay to the Administrative Agent on behalf of the Lenders an amount equal to such
excess to be held as cash collateral as provided in Section 2.08(j).

 

(iii)                               Upon any redetermination of or adjustment to
the amount of the Borrowing Base in accordance with Section 2.07 (other than
Section 2.07(b)(iii) or Section 2.07(b)(iv)) or Section 8.13(c), if the total
Credit Exposures exceed the redetermined or adjusted Borrowing Base, then the
Borrower shall, within ten (10) days after written notice is received from the
Administrative Agent that the total Credit Exposure exceeds the redetermined or
adjusted Borrowing Base (the amount of such excess, a “Borrowing Base
Deficiency”), notify Administrative Agent of its decision (the date of such
notice, the “Prepayment Decision Notice Date”) to do any (or any combination) of
the following which will result in the Borrowing Base Deficiency being
eliminated in the applicable time frame(s): (A) prepay Borrowings (i) in a lump
sum on or before the date which is twenty (20) days after the Prepayment
Decision Notice Date, or (ii) in five (5) equal monthly payments beginning on
the one month anniversary of the Prepayment Decision Notice Date and continuing
on the corresponding day of the four following months, and in any case, if any
Borrowing Base Deficiency remains after prepaying all of the Borrowings as a
result of LC Exposure, deposit with the Administrative Agent on behalf of the
Lenders an amount equal to such excess to be held as cash collateral as provided
in Section 2.08(j), and/or (B) within ninety (90) days of the Prepayment
Decision Notice Date, pledge additional Collateral acceptable to the Lenders to
the Administrative Agent for the benefit of the Lenders, which Collateral shall
be sufficient in Administrative Agent’s opinion to increase the Borrowing Base
and eliminate the Borrowing Base Deficiency.

 

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

 

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Borrowing with the most number of days remaining in the Interest Period
applicable thereto.

 

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

 

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

 

Section 3.05                            Fees.

 

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

 

(b)                                 Letter of Credit Fees.  The Borrower agrees
to pay (i) to the Administrative Agent, for the account of each Lender, ratably
in accordance with its Applicable Percentage, an annual Letter of Credit fee on
the aggregate undrawn amount of all outstanding Letters of Credit at such time,
which shall accrue at the Letter of Credit Fee Rate and be payable in arrears on
the Termination Date and the last day of each calendar quarter, (ii) to the
Issuing Bank, for its own account, a fronting fee equal to the greater of
(a) $500 or 0.125% of the face amount of each outstanding Letter of Credit and
(iii) to the Issuing Bank, for its own account, its standard and customary fees
with respect to the issuance, amendment, renewal or extension of any Letter of
Credit issued by such Issuing Bank or processing of drawings thereunder, which
shall be payable upon issuance and upon any renewal of such Letter of Credit. 
Any other fees payable to an Issuing Bank pursuant to this Section 3.05(b) shall
be payable within 10 days after demand.  All Letter of Credit fees and fronting
fees (as set forth herein or in the Fee Letter) shall be computed on the basis
of a year of 360 days, unless such computation would cause interest to accrue at
a rate in excess of the Highest Lawful Rate, in which case interest shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).

 

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

 

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ARTICLE IV

 

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

 

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

 

(a)                                 Payments by the Borrower.  The Borrower
shall make each payment required to be made by the Borrower hereunder (whether
of principal, interest, fees or reimbursement of LC Disbursements, or of amounts
payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to
12:00 noon, Houston, Texas time, on the date when due, in dollars that
constitute immediately available funds, without defense, deduction, recoupment,
set-off or counterclaim.  Fees, once paid, shall not be refundable under any
circumstances absent manifest error (e.g., as a result of a clerical mistake). 
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, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Section 5.01,
Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
Persons entitled thereto.  The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof.  If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension. 
All payments hereunder shall be made in dollars.

 

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

 

(c)                                  Sharing of Payments by Lenders.  If the
Administrative Agent or any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participations in LC Disbursements resulting in
such Lender receiving payment of a greater proportion of the aggregate amount of
its Loans and participations in LC Disbursements and accrued interest thereon
than the proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the
Loans and participations in LC Disbursements of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and participations in LC
Disbursements; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this
Section 4.01(c) shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this Agreement
or any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans or participations in LC
Disbursements to any assignee or participant, other than to the Borrower or any
Subsidiary or Affiliate thereof (as to which the provisions of this
Section 4.01(c) shall apply).  The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower  rights of set-off and counterclaim with respect
to such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.

 

Section 4.02                            Presumption of Payment by the Borrower. 
Unless the Administrative Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the

 

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

 

Section 4.03                            Certain Deductions by the Administrative
Agent.  If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(a), 2.08(d) or (e), 4.02 or 12.03(c), then the
Administrative Agent may, in its discretion and notwithstanding any contrary
provision hereof, (a) apply any amounts thereafter received by the
Administrative Agent for the account of such Lender and for the benefit of the
Administrative Agent or the Issuing Bank to satisfy such Lender’s obligations
under such Sections until all such unsatisfied obligations are fully paid,
and/or (b) hold any such amounts in a segregated account as cash collateral for,
and application to, any future funding obligations of such Lender under such
Sections; in the case of each of (a) and (b) above, in any order as determined
by the Administrative Agent in its discretion.

 

Section 4.04                            Disposition of Proceeds.  The Mortgages
contain an assignment by the Borrower and other Loan Parties unto and in favor
of the Administrative Agent for the benefit of (i) the Lenders and (ii) the
Secured Swap Providers, of all of the Borrower’s interest in and to production
and all proceeds attributable thereto that may be produced from or allocated to
the Mortgaged Property.  The Mortgages further provide in general for the
application of such proceeds to the satisfaction of the Obligations and other
obligations described therein and secured thereby.  Notwithstanding the
assignment contained in such Mortgages, until the occurrence 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 (including, without limitation, the sending of a Transfer Letter to the
purchaser or purchasers of such production), but the Lenders will instead permit
such proceeds to be paid to the Borrower and its Restricted Subsidiaries and
(b) the Lenders hereby authorize the Administrative Agent to take such actions
as may be necessary to cause such proceeds to be paid to the Borrower and/or
such Restricted Subsidiaries.  Upon the expiration or termination of the
Commitments and the payment in full of the Obligations, the Administrative Agent
shall, at the expense of the Borrower, execute and deliver such documentation as
Borrower shall reasonably request to re-convey to the Borrower or Guarantor any
property purportedly conveyed to the Administrative Agent under the Security
Instruments.

 

ARTICLE V

 

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY; DEFAULTING LENDERS

 

Section 5.01                            Increased Costs.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(d)                                 Effect of Failure or Delay in Requesting
Compensation.  Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section 5.01 shall not constitute a waiver
of such Lender’s or such Issuing Bank’s right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender or an
Issuing Bank pursuant to this Section 5.01 for any increased costs or reductions
incurred more than ninety (90) days prior to the date that such Lender or such
Issuing Bank, as the case may be, notifies the Borrower of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or such
Issuing Bank’s intention to claim compensation therefor; provided further that,
if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 90-day period referred to above shall be extended to
include the period of retroactive effect thereof.

 

Section 5.02                            Break Funding Payments.  In the event of
(a) the payment of any principal of any Eurodollar Loan other than on the last
day of an Interest Period applicable thereto (including as a result of an Event
of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other
than on the last day of the Interest Period applicable thereto, (c) the failure
to borrow, convert, continue or prepay any Eurodollar Loan on the date specified
in any notice delivered pursuant hereto, or (d) the assignment of any Eurodollar
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Borrower pursuant to Section 5.04(b), 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

 

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Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the Eurodollar
market.  A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section 5.02 and reasonably
detailed calculations therefor shall be delivered to the Borrower and shall be
conclusive absent manifest error.  The Borrower shall pay such Lender the amount
shown as due on any such certificate within ten (10) days after receipt thereof.

 

Section 5.03                            Taxes.

 

(a)                                 Payments Free of Taxes.  Any and all
payments by or on account of any obligation of the Borrower 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 shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 5.03(a)), the Administrative Agent, Lender or Issuing Bank
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

 

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

 

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

 

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

 

(e)                                  Foreign Lenders.

 

(i)                                     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

 

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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.

 

(ii)                                  Without limiting the generality of the
foregoing:

 

(1)                                 any Foreign Lender shall deliver to the
Borrower and the Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), whichever of
the following is applicable:

 

(A)                               in the case of a Foreign Lender claiming the
benefits of an income tax treaty to which the U.S. is a party (x) with respect
to payments of interest under any Loan Document, executed originals of IRS
Form W-8BEN establishing an exemption from, or reduction of, U.S. federal
withholding tax pursuant to the “interest” article of such tax treaty and
(y) with respect to any other applicable payments under any Loan Document, IRS
Form W-8BEN establishing an exemption from, or reduction of, U.S. federal
withholding tax pursuant to the “business profits” or “other income” article of
such tax treaty;

 

(B)                               executed originals of IRS Form W-8ECI;

 

(C)                               in the case of a Foreign Lender claiming the
benefits of the exemption for portfolio interest under Section 881(c) of the
Code, (x) a certificate substantially in the form of Exhibit F-1 to the effect
that such Foreign Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of Borrower within
the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN; or

 

(D)                               to the extent a Foreign Lender is not the
beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS
Form W 8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in
the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9, and/or other certification
documents from each beneficial owner, as applicable; provided that if the
Foreign Lender is a partnership and one or more direct or indirect partners of
such Foreign Lender are claiming the portfolio interest exemption, such Foreign
Lender may provide a U.S. Tax Compliance Certificate substantially in the form
of Exhibit F-4 on behalf of each such direct and indirect partner.

 

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(2)                                 any Foreign Lender shall, to the extent it
is legally entitled to do so, deliver to the Borrower and the Administrative
Agent (in such number of copies as shall be requested by the recipient) on or
prior to the date on which such Foreign Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the reasonable request of the
Borrower or the Administrative Agent), executed originals of any other form
prescribed by applicable law as a basis for claiming exemption from or a
reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by applicable law to permit the
Borrower or the Administrative Agent to determine the withholding or deduction
required to be made.

 

(f)                                   FATCA.  If a payment made to a Lender
under any Loan Document would be subject to U.S. federal withholding Tax imposed
by FATCA if such Lender were to fail to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or
1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower
and the Administrative Agent at the time or times prescribed by law and at such
time or times reasonably requested by the Borrower or the Administrative Agent
such documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Borrower or the Administrative Agent as may be
necessary for the Borrower and the Administrative Agent to comply with their
obligations under FATCA and to determine that such Lender has complied with such
Lender’s obligations under FATCA or to determine the amount to deduct and
withhold from such payment.  Solely for purposes of this clause (f), “FATCA”
shall include any amendments made to FATCA after the date of this Agreement.

 

(g)                                  U.S. Lenders.  Any Lender that is a U.S.
Person shall deliver to the Borrower and the Administrative Agent on or prior to
the date on which such Lender becomes a Lender under this Agreement (and from
time to time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), executed originals of IRS Form W-9 certifying that such
Lender is exempt from U.S. federal backup withholding tax.

 

(h)                                 Certifications.  Each Lender agrees that if
any form or certification it previously delivered expires or becomes obsolete or
inaccurate in any respect, it shall update such form or certification or
promptly notify the Borrower and the Administrative Agent in writing of its
legal inability to do so.

 

(i)                                     Tax Refunds.  If the Administrative
Agent or a Lender determines, in its reasonable discretion, that it has received
a refund of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section 5.03, it shall pay over such refund to the Borrower
(but only to the extent of indemnity payments made, or additional amounts paid,
by the Borrower under this Section 5.03 with respect to the Taxes or Other Taxes
giving rise to such refund), net of all out-of-pocket expenses of the
Administrative Agent or such Lender and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund); provided, that the Borrower, upon the request of the Administrative
Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority.  This Section 5.03 shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.

 

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Section 5.04                            Mitigation Obligations.

 

(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 Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender.  The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

(b)                                 Replacement of Lenders.  If (i) any Lender
requests compensation under Section 5.01, (ii) the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 5.03, (iii) any Lender becomes a
Defaulting Lender, (iv) any Lender has not approved (or is not deemed to have
approved) an increase in the Borrowing Base proposed by the Administrative Agent
pursuant to Section 2.07(c)(iii), or (v) any Lender has not approved (or is not
deemed to have approved) any amendment to, or waiver of, the terms of this
Agreement or any other Loan Document approved by Administrative Agent and
Required Lenders, then the Borrower may, at its sole expense and effort, upon
notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 12.04(b)), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that, (1) the Borrower shall have received the prior
written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (2) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (3) in the case of any such assignment resulting from a claim
for compensation under Section 5.01 or payments required to be made pursuant to
Section 5.03, such assignment will result in a reduction in such compensation or
payments.  A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such  assignment
and delegation cease to apply.

 

Section 5.05                            Illegality.  Notwithstanding any other
provision of this Agreement, in the event that it becomes unlawful for any
Lender or its applicable lending office to honor its obligation to make or
maintain Eurodollar Loans either generally or having a particular Interest
Period hereunder, then (a) such Lender shall promptly notify the Borrower and
the Administrative Agent thereof and such Lender’s obligation to make such
Eurodollar Loans shall be suspended (the “Affected Loans”) until such time as
such Lender may again make and maintain such Eurodollar Loans and (b) all
Affected Loans which would otherwise be made by such Lender shall be made
instead as ABR Loans (and, if such Lender so requests by notice to the Borrower
and the Administrative Agent, all Affected Loans of such Lender then outstanding
shall be automatically converted into ABR Loans on the date specified by such
Lender in such notice) and, to the extent that Affected Loans are so made as (or
converted into) ABR Loans, all payments of principal which would otherwise be
applied to such Lender’s Affected Loans shall be applied instead to its ABR
Loans.

 

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Section 5.06                            Defaulting Lenders.  Notwithstanding any
provision of this Agreement to the contrary, if any Lender becomes a Defaulting
Lender, the following provisions shall apply for so long as such Lender is a
Defaulting Lender:

 

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

 

(b)                                 the Elected Commitment and Credit Exposure
of such Defaulting Lender shall not be included in determining whether all
Lenders or the Required Lenders have taken or may take any action hereunder
(including any consent to any amendment or waiver pursuant to Section 12.02),
provided that any waiver, amendment or modification requiring the consent of all
Lenders or each affected Lender which affects such Defaulting Lender differently
than other affected Lenders shall require the consent of such Defaulting Lender;

 

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

 

(i)                                     all or any part of such LC Exposure
shall be reallocated among the non-Defaulting Lenders in accordance with their
respective Applicable Percentages but only to the extent (x) the sum of all
non-Defaulting Lenders’ Credit Exposures does not exceed the least of (1) the
sum of all non-Defaulting Lenders’ Maximum Credit Amounts, (2) the sum of all
non-Defaulting Lenders’ Applicable Percentages of the Borrowing Base, and
(3) the sum of all non-Defaulting Lenders’ Elected Commitments and (y) the
conditions set forth in Section 6.02 (other than the conditions set forth in
Section 6.02(f) are satisfied at such time; and

 

(ii)                                  if the reallocation described in clause
(i) above cannot, or can only partially, be effected, the Borrower shall within
one Business Day following notice by the Administrative Agent cash collateralize
such Defaulting Lender’s LC Exposure (after giving effect to any partial
reallocation pursuant to clause (i) above) in accordance with the procedures set
forth in Section 2.08(j) for so long as such LC Exposure is outstanding;

 

(iii)                               if the Borrower cash collateralizes any
portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above,
the Borrower shall not be required to pay any Letter of Credit fees for the
account of such Defaulting Lender pursuant to Section 3.05(b) with respect to
such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s
LC Exposure is cash collateralized;

 

(iv)                              if the LC Exposure of the non-Defaulting
Lenders is reallocated pursuant to clause (i) above, then the fees payable to
the Lenders pursuant to Section 3.05 shall be adjusted in accordance with such
non-Defaulting Lenders’ Applicable Percentages; or

 

(v)                                 if any Defaulting Lender’s LC Exposure is
neither cash collateralized nor reallocated pursuant to this Section 5.06(c),
then, without prejudice to any rights or remedies of the Issuing Bank or any
Lender hereunder, all commitment fees that otherwise would have been payable to
such Defaulting Lender (solely with respect to the portion of such Defaulting
Lender’s Commitment that was utilized by such LC Exposure) and letter of credit
fees payable under Section 3.05(b) with respect to such Defaulting Lender’s LC
Exposure shall be payable to the Issuing Bank until such LC Exposure is cash
collateralized and/or reallocated;

 

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(d)                                 so long as any Lender is a Defaulting
Lender, the Issuing Bank shall not be required to issue, amend or increase any
Letter of Credit, unless it is satisfied that the related LC Exposure will be
100% covered by the Commitments of the non-Defaulting Lenders and/or cash
collateral will be provided by the Borrower in accordance with Section 5.06(c),
and participating interests in any such newly issued or increased Letter of
Credit shall be allocated among non-Defaulting Lenders in a manner consistent
with Section 5.06(c)(i) (and Defaulting Lenders shall not participate therein);
and

 

(e)                                  In the event that the Administrative Agent,
the Borrower and the Issuing Bank each agrees that a Defaulting Lender has
adequately remedied all matters that caused such Lender to be a Defaulting
Lender, then the LC Exposure of the Lenders shall be readjusted to reflect the
inclusion of such Lender’s Commitment and on such date such Lender shall
purchase at par such of the Loans of the other Lenders as the Administrative
shall determine may be necessary in order for such Lender to hold such Loans in
accordance with its Applicable Percentage.

 

ARTICLE VI

 

CONDITIONS PRECEDENT

 

Section 6.01                            Conditions to Effectiveness.  The
amendment and restatement of the 2013 Credit Agreement and the obligation of
each Lender to make Loans (including, without limitation, the True-Up Loans, if
any) 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)                                 Satisfactory evidence that (i) the Catarina
Property Acquisition has been (or on the Effective Date, will be) consummated
for a purchase price not to exceed $639,000,000 (subject to adjustment as
provided in the Catarina Property PSA) consistent with the material terms of the
Catarina Property PSA, with no material amendments or waivers not consented to
by the Arranger and (ii) any Liens (other than Liens permitted under
Section 9.03) on the Oil and Gas Properties acquired in the Catarina Property
Acquisition shall have been or will be released on the Effective Date. For
purposes of satisfying the foregoing requirement, Liens on Oil and Gas
Properties acquired pursuant to the Catarina Property Acquisition shall be
deemed released at such time as the relevant Person shall have executed and
delivered a release with respect thereto and counsel or agents to the
Administrative Agent shall be in the possession of such release for recording;

 

(b)                                 The Administrative Agent shall have received
a certificate of a Responsible officer or the Secretary or an Assistant
Secretary of each Loan Party setting forth (i) resolutions of its Board of
Directors with respect to the authorization of such Loan Party to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of such Loan
Party (y) who are authorized to sign the Loan Documents to which such Loan Party
is a party and (z) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
this Agreement and the Transactions, (iii) specimen signatures of such
authorized officers, and (iv) the articles or certificate of incorporation and
bylaws or other comparable organizational documents of such Loan Party,
certified as being true and complete.  The Administrative Agent and the Lenders
may conclusively rely on such certificate until the Administrative Agent
receives notice in writing from 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 each Loan Party;

 

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

 

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

 

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

 

(g)                                  The Administrative Agent shall have
received from each party thereto duly executed counterparts (in such number as
may be requested by the Administrative Agent) of the Security Instruments
granting the Administrative Agent a first priority Lien (subject to Excepted
Liens) on (i) the Collateral securing the 2013 Credit Agreement, (ii) 100% of
the Equity Interest in all Domestic Subsidiaries (excluding Unrestricted
Subsidiaries), (iii) Oil and Gas Properties representing at least eighty percent
(80%) by value of the Engineered Value (based on the Catarina Property
Acquisition Reserve Report) of the Oil and Gas Properties acquired pursuant to
the Catarina Property Acquisition, and (iv) substantially all other material
personal property of the Loan Parties, including operating equipment, accounts
receivable, inventory, contract rights, general intangibles and all products,
proceeds and other interests relating to the ownership, operation and/or
production of oil and gas properties.  For purposes of satisfying the foregoing
requirement, properties acquired pursuant to the Catarina Property Acquisition
shall be deemed mortgaged at such time as the relevant Loan Party shall have
executed and delivered a Mortgage with respect thereto and counsel or agents to
the Administrative Agent shall be in possession of such Mortgage for recording.
Notwithstanding anything to the contrary, Liens granted in the Collateral by any
Loan Party shall not secure any obligation in respect of any Excluded Swap
Obligation;

 

(h)                                 The Administrative Agent shall have
received, in form and substance reasonably satisfactory to Administrative Agent,
an opinion of Akin Gump Strauss Hauer & Feld LLP, counsel to the Loan Parties;

 

(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 of Borrower certifying that the
Borrower has received all consents and approvals required by Section 7.03 or
otherwise necessary for the continued operations of the Loan Parties;

 

(k)                                 The Administrative Agent shall have
received, in form and substance reasonably satisfactory to the Administrative
Agent, (i)  title information setting forth the status of title to at least
eighty percent (80%) of the Engineered Value of the Oil and Gas Properties
covered by the December 2013 Reserve Report and (ii) title information setting
forth the status of title to at least eighty percent (80%) of the Engineered
Value of the Oil and Gas Properties evaluated in the Catarina Property
Acquisition Reserve Report;

 

(l)                                     The Administrative Agent shall be
reasonably satisfied with the environmental condition of the Oil and Gas
Properties of the Borrower and its Subsidiaries, including Oil and Gas
Properties to be acquired in the Catarina Property Acquisition;

 

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(m)                             The Administrative Agent shall have received UCC
search certificates reflecting no Liens encumbering the Properties of the
Borrower or any other Loan Party for each of the following jurisdictions:
Louisiana, Texas, 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;

 

(n)                                 The Administrative Agent shall have received
duly executed Guaranties from all direct and indirect Domestic Subsidiaries of
Borrower that are not Unrestricted Subsidiaries;

 

(o)                                 The Administrative Agent shall have received
all documentation and other information that is required by regulatory
authorities under applicable “know your customer” and anti-money-laundering
rules and regulations, including, without limitation, the Patriot Act;

 

(p)                                 RBC shall have received a fully executed
Assignment and Assumption (as defined in the 2013 Credit Agreement) from each
Lender party to the 2013 Credit Agreement that is not becoming a Lender under
this Agreement;

 

(q)                                 The Administrative Agent shall have received
such other documents as the Administrative Agent or its special counsel may
reasonably request;

 

(r)                                    The Administrative Agent, Arranger and
the Lenders shall have received all fees and other amounts due and payable,
including, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder;

 

(s)                                   No default (as defined in the 2013 Credit
Agreement) shall have occurred and be continuing under the 2013 Credit
Agreements; and

 

(t)                                    The Effective Date shall have occurred on
or before August 19, 2014.

 

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

 

(a)                                 The Administrative Agent and the Lenders
shall have received all fees and other amounts due and payable, 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)                                 At the time of and immediately after giving
effect to such Borrowing or the issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, no Default or Borrowing Base Deficiency
shall have occurred and be continuing;

 

(c)                                  [Reserved];

 

(d)                                 The representations and warranties of the
Loan Parties set forth in this Agreement and in the other Loan Documents,
including regarding the absence of any event, development or circumstance giving
rise to a Material Adverse Effect and no litigation as set forth in Sections
7.04(b) and 7.05, respectively, shall be true and correct on and as of the date
of such Borrowing or the date of issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, except, in each case, to the extent any
such representations and warranties are expressly limited to an earlier date, in
which case, on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, such
representations and warranties shall continue to be true and correct as of such
specified earlier date.  Notwithstanding the foregoing, and notwithstanding
Section 6.01(s) as it

 

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relates to the representations and warranties under the 2013 Credit Agreement,
the only representations the accuracy of which shall be a condition to the
availability of Loans under this Agreement on the Effective Date shall be the
Catarina Property PSA Representations and the Specified Representations.  The
failure of any representation or warranty with respect to the Borrower or any of
its Subsidiaries (other than the Catarina Property PSA Representations or the
Specified Representations) to be accurate on the Effective Date will not
constitute the failure of a condition precedent to the funding of the initial
Loan under this Agreement but will instead constitute a Default which may be
cured within a period of 10 days after the Effective Date and which will not in
and of itself constitute a failure of a condition precedent to funding;

 

(e)                                  The making of such Loan or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, would
not conflict with, or cause any Lender or the Issuing Bank to violate or exceed,
any applicable Governmental Requirement, and no Change in Law shall have
occurred, and no litigation shall be pending or threatened, which does or, with
respect to any threatened litigation, seeks to, enjoin, prohibit or restrain,
the making or repayment of any Loan, the issuance, amendment, renewal, extension
or repayment of any Letter of Credit or any participations therein or the
consummation of the transactions contemplated by this Agreement or any other
Loan Document; and

 

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

 

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

 

ARTICLE VII

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the Lenders that:

 

Section 7.01                            Organization; Powers.  The Borrower and
each of 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, every jurisdiction where such qualification is required,
except where failure to have such power, authority, licenses, authorizations,
consents, approvals and qualifications could not reasonably be expected to have
a Material Adverse Effect.  Schedule 7.01 is an accurate corporate
organizational chart of Borrower and its Subsidiaries and shows the ownership of
all Equity Interests in such Persons.

 

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

 

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Section 7.03                            Approvals; No Conflicts.  The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority or any other
third Person (including members, shareholders or any class of directors, whether
interested or disinterested, of any Loan Party or any other Person), nor is any
such consent, approval, registration, filing or other action necessary for the
validity or enforceability of any Loan Document or the consummation of the
transactions contemplated thereby, except such as have been obtained or made and
are in full force and effect other than (i) the recording and filing of any
Security Instruments as required by the Loan Documents and (ii) those third
party approvals or consents which, if not made or obtained, would not cause a
Default hereunder, could not reasonably be expected to have a Material Adverse
Effect or do not have an adverse effect on the enforceability of the Loan
Documents, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of Borrower or any Subsidiary 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 Borrower or any
Subsidiary or its Properties, or give rise to a right thereunder to require any
payment to be made by Borrower or such Subsidiary and (d) will not result in the
creation or imposition of any Lien on any Property of Borrower or any Subsidiary
(other than the Liens created by the Loan Documents).

 

Section 7.04                            Financial Condition; No Material Adverse
Change.

 

(a)                                 Borrower has heretofore furnished to the
Lenders its (i) audited consolidated balance sheet and statement of income,
stockholders equity and cash flows as of and for the fiscal year ended
December 31, 2013, all reported on by BDO USA, LLP and (ii) unaudited
consolidated balance sheet and statements of income, stockholders’ equity and
cash flows as of and for the fiscal quarter and the portion of the fiscal year
ended March 31, 2014, certified by a Financial Officer.  Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of Borrower and its Consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year-end audit adjustments and the absence of footnotes in the case
of the unaudited quarterly financial statements.

 

(b)                                 Since March 31, 2014, (i) there has been no
event, development or circumstance that has had or could reasonably be expected
to have a Material Adverse Effect and (ii) the business of the Borrower and its
Subsidiaries has been conducted only in the ordinary course consistent with past
business practices.

 

(c)                                  Neither the Borrower nor any of its
Subsidiaries has incurred, created, assumed or suffered to exist any Debt except
as permitted by Section 9.02.

 

Section 7.05                            Litigation.

 

(a)                                 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 in writing against or affecting Borrower or any Subsidiary (i) as to
which there is a reasonable possibility of an adverse determination that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect or (ii) that involve any Loan
Document or the Transactions.

 

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

 

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Section 7.06                            Environmental Matters.  Except as could
not reasonably be expected to have a Material Adverse Effect (or with respect to
(c), (d) and (e) below, where the failure to take such actions could not be
reasonably expected to have a Material Adverse Effect), to the knowledge of
Borrower:

 

(a)                                 neither any Property of Borrower or any
Subsidiary nor the operations conducted thereon violate any order or requirement
of any court or Governmental Authority or any Environmental Laws.

 

(b)                                 no Property of Borrower or any Subsidiary
nor the operations currently conducted thereon or by any prior owner or operator
of such Property or operation, are in violation of or subject to any existing,
pending or threatened action, suit, investigation, inquiry or proceeding by or
before any court or Governmental Authority or to any remedial obligations under
Environmental Laws.

 

(c)                                  all Environmental Permits, if any, required
to be obtained or filed in connection with the operation or use of any and all
Property of Borrower and each Subsidiary, including, without limitation, past or
present treatment, storage, disposal or release of a hazardous substance, oil
and gas waste or solid waste into the environment, have been duly obtained or
filed, and Borrower and each Subsidiary are in compliance with the terms and
conditions of all such Environmental Permits.

 

(d)                                 all hazardous substances, solid waste and
oil and gas waste, if any, generated at any and all Property of the Borrower or
any Subsidiary have in the past been transported, treated and disposed of in
accordance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment, and all
such transport carriers and treatment and disposal facilities have been and are
operating in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Authority in connection
with any Environmental Laws.

 

(e)                                  Borrower has taken all steps reasonably
necessary to determine and has determined that no oil, hazardous substances,
solid waste or oil and gas waste, have been disposed of or otherwise released
and there has been no threatened Release of any oil, hazardous substances, solid
waste or oil and gas waste on or to any Property of the Borrower or any
Subsidiary except in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment.

 

(f)                                   to the extent applicable, all Property of
the Borrower and each Subsidiary currently satisfies all design, operation, and
equipment requirements imposed by the OPA, and the Borrower does not have any
reason to believe that such Property, to the extent subject to the OPA, will not
be able to maintain compliance with the OPA requirements during the term of this
Agreement.

 

(g)                                  neither the Borrower nor any Subsidiary has
any known contingent liability or Remedial Work in connection with any release
or threatened release of any oil, hazardous substance, solid waste or oil and
gas waste into the environment.

 

Section 7.07                            Compliance with the Laws and Agreements;
No Defaults.  Except as could not reasonably be expected to have a Material
Adverse Effect:

 

(a)                                 Borrower and each Subsidiary 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
governmental authorizations (other than Environmental Permits) necessary for the
ownership of its

 

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Property and the conduct of its business, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect;

 

(b)                                 Neither the Borrower nor any Subsidiary 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 a Subsidiary to
Redeem or make any offer to Redeem under any indenture, note, credit agreement
or instrument pursuant to which any Material Indebtedness is outstanding or by
which the Borrower or any Subsidiary or any of their Properties is bound; and

 

(c)                                  No Default has occurred and is continuing.

 

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

 

Section 7.09                            Taxes.  Borrower and its Subsidiaries
have timely filed or caused to be filed all Tax returns and reports required to
have been filed and have 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 relating to Taxes described in the first sentence of this
Section 7.09 has been filed and, to the knowledge of the Borrower, no claim is
being asserted with respect to any such Tax or other such governmental charge.

 

Section 7.10                            ERISA.  No ERISA Event has occurred or
is reasonably expected to occur that, when taken together with all other such
ERISA Events for which liability is reasonably expected to occur, could
reasonably be expected to result in a Material Adverse Effect.  The present
value of all accumulated benefit obligations under each Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $1,000,000.00 the fair market value
of the assets of such Plan, and the present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $1,000,000.00 the fair market value of the assets of all such underfunded
Plans.

 

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

 

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the knowledge of Borrower there is no fact peculiar to the Borrower or any
Subsidiary which could reasonably be expected to have a Material Adverse Effect
or in the future is reasonably likely to have a Material Adverse Effect and
which has not been set forth in this Agreement or the Loan Documents or the
other documents, certificates and statements furnished to the Administrative
Agent or the Lenders by or on behalf of the Borrower or any Subsidiary prior to,
or on, the date hereof in connection with the transactions contemplated hereby. 
There are no statements or conclusions known to the Borrower in the Catarina
Property Acquisition Reserve Report or 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 the Catarina Property Acquisition
Reserve Report and each Reserve Report are necessarily based upon professional
opinions, estimates and projections and that the Borrower and the Subsidiaries
do not warrant that such opinions, estimates and projections will ultimately
prove to have been accurate.

 

Section 7.12                            Insurance.  The Loan Parties have
(a) all insurance policies sufficient for the compliance by each of them with
all material Governmental Requirements and all material agreements including,
without limitation, Flood Insurance, if required 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
Loan Parties.  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.  No Loan Party owns any material Building (as defined in the
applicable Flood Insurance Regulation) or material Manufactured (Mobile) Home
(as defined in the applicable Flood Insurance Regulation) for which such Loan
Party has not delivered to the Administrative Agent evidence reasonably
satisfactory to the Administrative Agent that either (A) such Loan Party
maintains Flood Insurance for such Building or Manufactured (Mobile) Home or
(B) such Building or Manufactured (Mobile) Home is not located in a Special
Flood Hazard Area.

 

Section 7.13                            Restriction on Liens.  Neither the
Borrower nor any of the Restricted Subsidiaries is a party to any material
agreement or arrangement, 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 Obligations and the Loan Documents.

 

Section 7.14                            Subsidiaries.  Schedule 7.14 sets forth
the name of, and the ownership interest of Borrower in, each Subsidiary of the
Borrower.  As of the Effective Date there are no Unrestricted Subsidiaries other
than SN Midstream and SN Services.

 

Section 7.15                            Location of Business and Offices. The
jurisdiction of organization of Borrower is Delaware; the name of the Borrower
as listed in the public records of Delaware or Texas is Sanchez Energy
Corporation; the federal taxpayer identification number of the Borrower is
45-3090102 and the organizational identification number of the Borrower is
5027889 (or, in each case, as set forth in a notice delivered to the
Administrative Agent pursuant to Section 8.01(j) in accordance with
Section 12.01).  Each Subsidiary’s jurisdiction of organization, name as listed
in the public records of its jurisdiction of organization, federal taxpayer
identification number and organizational identification number in its
jurisdiction of organization is stated on Schedule 7.14 (or as set forth in a
notice delivered pursuant to Section 8.01(j)).

 

Section 7.16                            Properties; Titles, Etc.

 

(a)                                 Except as disclosed in Schedule 7.16, the
Borrower and each of the Restricted Subsidiaries has good and defensible title
to the proved Oil and Gas Properties evaluated in the most

 

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recently delivered Reserve Report (excluding, to the extent this representation
and warranty is deemed to be made after the Effective Date, any such Oil and Gas
Properties sold or transferred in compliance with Section 9.11) 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, Borrower or the Restricted Subsidiary 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 such
Restricted Subsidiary 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 such Restricted Subsidiary’s net revenue interest
in such Property.  For purposes of this Section 7.16(a), prior to the delivery
of the first Reserve Report after the Effective Date, the phrase “most recently
delivered Reserve Report” shall be read to mean the “most recently delivered
Reserve Report and the Catarina Property Acquisition Reserve Report.”

 

(b)                                 All material leases and agreements necessary
for the conduct of the business of the Borrower and the 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 agreement, which could
reasonably be expected to result in a Material Adverse Effect.

 

(c)                                  The rights and Properties presently owned,
leased or licensed by the Borrower and the 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 in the same manner as its business has been conducted
prior to the date hereof.

 

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

 

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

 

Section 7.17                            Maintenance of Properties.  Except for
such acts or failures to act as could not be reasonably expected to have a
Material Adverse Effect, the Oil and Gas Properties (and Properties unitized
therewith) have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all Governmental Requirements and in
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties.  Specifically in
connection with the foregoing, except for those as could not be reasonably
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) to
the knowledge of Borrower, none of the wells comprising a part

 

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of the Oil and Gas Properties (or Properties unitized therewith) is deviated
from the vertical more than the maximum permitted by Governmental Requirements,
and such wells are, in fact, bottomed under and are producing from, and the well
bores are wholly within, the Oil and Gas Properties (or in the case of wells
located on Properties unitized therewith, such unitized Properties).  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 that are operated by the Borrower or any of its
Subsidiaries, in a manner consistent with the Borrower’s or its Subsidiaries’
past practices (other than those the failure of which to maintain in accordance
with this Section 7.17 could not reasonably be expect to have a Material Adverse
Effect).

 

Section 7.18                            Gas Imbalances, Prepayments.  As of the
date hereof, except as set forth on Schedule 7.18 or on the most recent
certificate delivered pursuant to Section 8.12(c), on a net basis there are no
gas imbalances, take or pay or other prepayments which would require Borrower or
any of the Restricted Subsidiaries to deliver Hydrocarbons produced from the Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor.

 

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

 

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

 

Section 7.21                            Use of Loans and Letters of Credit.  The
proceeds of the Loans and the Letters of Credit shall be used to (i) refinance
Debt existing under the 2013 Credit Agreement, (ii) pay fees, commissions and
expenses in connection with the refinancing of the Debt existing under the 2013
Credit Agreement, (iii) finance ongoing working capital requirements and other
general corporate purposes (including financing the Catarina Property
Acquisition, other acquisitions and the development of the Borrower’s and the
other Loan Parties’ oil and gas assets and making Investments permitted under
Section 9.05).  The Borrower and its Subsidiaries are not engaged principally,
or as one of their important activities, in the business of extending credit for
the purpose, whether immediate, incidental or ultimate, of buying or carrying
margin stock (within the meaning of Regulation T, U or X of the Board).  No part
of the proceeds of any Loan or Letter of Credit will be used for any purpose
which violates the provisions of Regulations T, U or X of the Board.

 

Section 7.22                            Solvency.  Before and after giving
effect to the Transactions, (a) the aggregate assets, at a fair valuation, of
the Borrower and its Subsidiaries, taken as a whole, will exceed the aggregate
debt of the Borrower on a consolidated basis, (b) none of the Borrower nor any
Subsidiary has

 

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incurred, or has intended to incur, debt beyond its ability to pay such debt as
such debt matures and (c) none of the Borrower nor any Subsidiary will have (nor
will have any reason to believe that it will have thereafter) unreasonably small
capital for the conduct of its business as such business is now conducted and is
now proposed to be conducted following the date hereof.  For purposes of this
section, “debt” shall have the meaning given such term under the U.S. Bankruptcy
Code.

 

Section 7.23                            Foreign Corrupt Practices.  Neither the
Borrower nor any of its Subsidiaries, nor any director, officer, agent, employee
or Affiliate of the Borrower or any of its Subsidiaries is aware of or has taken
any action, directly or indirectly, that would result in a material violation by
such Persons of the FCPA, including without limitation, making use of the mails
or any means or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization of the giving
of anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA; and, the Borrower, its
Subsidiaries and their respective Affiliates have conducted their business in
material compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.

 

Section 7.24                            Money Laundering.  The operations of the
Borrower and its Subsidiaries are and have been conducted at all times in
material compliance with applicable financial recordkeeping and reporting
requirements of the money laundering laws, and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Borrower or any of its Subsidiaries with respect to the money
laundering laws is pending or, to the best knowledge of the Borrower,
threatened.

 

Section 7.25                            OFAC.  Neither the Borrower nor any of
its Subsidiaries, nor any director, officer, agent, employee or Affiliate of the
Borrower or any of its Subsidiaries is currently subject to any material U.S.
sanctions administered by OFAC, and the Borrower will not directly or indirectly
use the proceeds from the Loans or lend, contribute or otherwise make available
such proceeds to any Subsidiary, joint venture partner or other Person, for the
purpose of financing the activities of any Person currently subject to any U.S.
sanctions administered by OFAC.

 

Section 7.26                            Reserved.

 

Section 7.27                            Catarina Property Acquisition
Representations. The Borrower represents and warrants to the Administrative
Agent and the Lenders as of the later of the Effective Date and the date of the
first Borrowing on or after the Effective Date that:

 

(a)                                 The copy of the Catarina Property PSA
previously delivered by Borrower to the Administrative Agent is true, accurate
and complete and has not been amended, modified or waived in any manner which
would be material and adverse to the Lenders not consented to by the Arranger.

 

(b)                                 The transactions contemplated by the
Catarina Property PSA (the “Catarina Property PSA Transactions”) to be entered
into by Borrower and/or SN Catarina are within such Loan Party’s corporate or
limited liability company powers and have been duly authorized by all necessary
corporate and, if required, stockholder or member action (including, without
limitation, any action required to be taken by any class of directors of such
Loan Party or any other Person, whether interested or disinterested, in order to
ensure the due authorization of the Catarina Property PSA Transactions).

 

(c)                                  No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is necessary to be obtained or made by Borrower or any of its

 

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Subsidiaries in connection with Borrower’s and/or SN Catarina’s execution,
delivery and performance of the Catarina Property PSA or the consummation by
Borrower and/or SN Catarina of the Catarina Property PSA Transactions, except
for (i) consents, approvals and governmental filings that have been made or
obtained and (ii) such governmental consents, qualifications or filings as are
customarily obtained or made following the transfer of interests in oil and gas
properties, except in each case where the failure to obtain or take such
actions, individually or in the aggregate, has not had and would not reasonably
be expected to have a Material Adverse Effect.

 

ARTICLE VIII

 

AFFIRMATIVE COVENANTS

 

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

 

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

 

(a)                                 Annual Financial Statements.  As soon as
available, but in any event in accordance with then applicable law and not later
than one hundred and twenty (120) days after the end of each fiscal year of
Borrower, its audited consolidated (and, if there are any Unrestricted
Subsidiaries, consolidating) balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported on by BDO USA, LLP or another firm of independent public
accountants proposed by Borrower and approved by 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 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 in accordance with then applicable law and not later
than forty-five (45) days after the end of each fiscal quarter of each fiscal
year of Borrower, its consolidated (and, if there are any Unrestricted
Subsidiaries, consolidating) balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of 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 of
Borrower in substantially the form of Exhibit D 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 and if a Default has not occurred, certifying compliance with the
covenants of the Loan Documents, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Section 8.13(a) and Section 9.01 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 7.04 and, if

 

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any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate.

 

(d)                                 Certificate of Financial Officer — Swap
Agreements.  Concurrently with the delivery of financial statements under
Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer of 
Borrower, in form and substance reasonably satisfactory to the Administrative
Agent, setting forth as of a recent date, a true and complete list of all Swap
Agreements of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark-to-market value therefor, any new credit support
agreements relating thereto not listed on Schedule 7.20, any margin required or
supplied under any credit support document, and the counterparty to each such
agreement.

 

(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 (except standard and
customary correspondence) submitted to 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 Borrower or any such Subsidiary, or the Board of Directors of
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
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.

 

(h)                                 Reserved.

 

(i)                                     Notice of Casualty Events.  Prompt
written notice, and in any event within five (5) 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.

 

(j)                                    Information Regarding the Loan Parties. 
Prompt written notice (and in any event within ten (10) Business Days prior
thereto) of any change (i) in any Loan Party’s corporate name or in any trade
name used to identify Borrower in the conduct of its business or in the
ownership of its Properties, (ii) in any Loan Party’s identity or corporate
structure or in the jurisdiction in which such Loan Party is incorporated or
formed, (iii) in any Loan Party’s jurisdiction of organization or any Loan
Party’s organizational identification number in such jurisdiction of
organization, and (iv) in any Loan Party’s federal taxpayer identification
number.

 

(k)                                 Production Report and Lease Operating
Statements.  Concurrently with the delivery of the semi-annual Reserve Reports
under Section 8.12(a)(i), a report setting forth, for the period covered by such
Reserve Report, 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 month during the period covered by such Reserve Report 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 month during such period, all certified by a Responsible Officer of
Borrower as presenting fairly

 

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in all respects the information contained therein, and to the extent applicable,
all based on the actual lease operating statements for such Oil and Gas
Properties.

 

(l)                                     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
organizational document of Borrower or any Subsidiary.

 

(m)                             Notice of Alleged Breach of HIL Lease. 
Promptly, but in any event within five (5) Business Days after receipt by any
Loan Party thereof, copies of any notice received by any Loan Party alleging a
breach of the HIL Lease.

 

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

 

Section 8.02                            Notices of Material Events.  Promptly,
and in any event within five (5) Business Days after any Responsible Officer of
the Borrower obtains knowledge thereof, the Borrower will furnish to the
Administrative Agent written notice of the following:

 

(a)                                 the occurrence of any Default;

 

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

 

(c)                                  the occurrence of any ERISA Event that,
alone or together with any other ERISA Events that have occurred, could
reasonably be expected to result in a Material Adverse Effect; and

 

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

 

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

 

Section 8.03                            Existence; Conduct of Business.  The
Borrower will, and will cause each Subsidiary to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business and maintain, if necessary, its qualification to
do business in each other jurisdiction in which its Oil and Gas Properties are
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 9.10.

 

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Section 8.04                            Payment of Obligations.  The Borrower
will, and will cause each Subsidiary 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 and Borrower or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP or (b) 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 Borrower or any
Subsidiary.

 

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

 

Section 8.06                            Operation and Maintenance of
Properties.  Borrower, at its own expense, will, and will cause each Restricted
Subsidiary to (in each case, except where the failure to do so, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect):

 

(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 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
pro ration 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.

 

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

 

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

 

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

 

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

 

(f)                                   notwithstanding anything to the contrary
in this Section 8.06, to the extent Borrower or one of its Restricted
Subsidiaries is not the operator of any Property, the Borrower shall not

 

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be obligated itself to perform or cause any of its Restricted Subsidiaries to
perform the covenants in this Section 8.06, but shall use reasonable efforts to
cause the operator to comply with this Section 8.06.

 

(g)                                  notwithstanding anything to the contrary in
this Section 8.06, the Borrower and its Restricted Subsidiaries shall not be
required to maintain any lease or interest which is no longer capable of
producing Hydrocarbons in paying quantities.

 

Section 8.07                            Insurance.  The Borrower will, and will
cause each other Loan Party to, maintain, with financially sound and reputable
insurance companies, (a) 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 and (b) in accordance with all
Governmental Requirements including, without limitation, Flood Insurance, if
required.  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 endeavor to give at least 30 days
prior notice of any cancellation to the Administrative Agent.

 

Section 8.08                            Books and Records; Inspection Rights. 
The Borrower will, and will cause each Restricted Subsidiary to, keep proper
books of record and account in which full, true and correct entries are made of
all dealings and transactions in relation to its business and activities.  The
Borrower will, and will cause each Restricted Subsidiary to, permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its Properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times during normal business hours and as often as reasonably
requested on an individual and aggregate basis.

 

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

 

Section 8.10                            Environmental Matters.

 

(a)                                 The Borrower shall at its sole expense:
(i) comply, and shall cause its Properties and operations and each Subsidiary
and each Subsidiary’s Properties and operations to comply, with all applicable
Environmental Laws, the breach of which could be reasonably expected to have a
Material Adverse Effect; (ii) not dispose of or otherwise Release, and shall
cause each Subsidiary not to dispose of or otherwise release, any oil, oil and
gas waste, hazardous substance, or solid waste on, under, about or from any of
the Borrower’s or its Subsidiaries’ Properties or any other Property to the
extent caused by 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
Environmental Permits, if any, required under applicable Environmental Laws to
be obtained or filed in connection with the operation or use of 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 Release or threatened Release of any Hazardous Material
on, under, about or from any of the Borrower’s or its Subsidiaries’

 

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Properties, which failure to commence and diligently prosecute to completion
could reasonably be expected to have a Material Adverse Effect; (v) conduct, and
cause each Subsidiary to conduct their respective operations and business in a
manner that will not expose any Property or Person to Hazardous Materials in
circumstances that could reasonably be expected to form the basis for a claim
for damages or compensation; and (vi) establish and implement, and shall cause
each Subsidiary to establish and implement, such reasonable procedures as may be
necessary to 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. 
To the extent that 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 8.10(a).

 

(b)                                 The Borrower will promptly, but in no event
later than five (5) Business Days of the occurrence of a triggering event,
notify the Administrative Agent 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 applicable Environmental Laws (excluding routine testing and
corrective action) if the Borrower reasonably anticipates that such action could
reasonably result in a Material Adverse Effect.

 

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

 

Section 8.11                            Further Assurances.

 

(a)                                 Borrower at its sole expense will, and will
cause each Restricted Subsidiary to, promptly execute and deliver to the
Administrative Agent all such other documents, agreements and instruments
reasonably requested by the Administrative Agent to comply with, cure any
defects or accomplish the conditions precedent, covenants and agreements of the
Borrower or any Restricted Subsidiary, as the case may be, in the Loan
Documents, including the Notes, or to further evidence and more fully describe
the Collateral intended as security for the Obligations, 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. 
A carbon, photographic or other reproduction of the Security Instruments or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

 

Section 8.12                            Reserve Reports.

 

(a)                                 (i) On or before September 1, 2014, and
thereafter semi-annually on each March 1st and September 1st of each year, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report evaluating the Oil and Gas Properties of the Loan Parties as of the
immediately

 

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preceding June 30 (or July 1), in the case of the Reserve Report required to be
delivered by September 1 and as of the preceding December 31 (or January 1), in
the case of the Reserve Report required to be delivered by March 1.  The Reserve
Reports required to be delivered on or before March 1 shall be prepared by one
or more Approved Petroleum Engineers, and the Reserve Report required to be
delivered on or before September 1 shall be prepared by or under the supervision
of the chief engineer of the Borrower.

 

(ii)                                  For each Reserve Report prepared pursuant
to clause (i) above, the chief engineer of Borrower 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  Reserve Report.

 

(b)                                 In the event of an Interim Redetermination,
the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report prepared by or under the supervision of the chief engineer of the
Borrower who shall certify such Reserve Report to be to be true and accurate and
to have been prepared in accordance with the procedures used in the most
recently delivered Reserve Report prepared by an Approved Petroleum Engineer. 
For any Interim Redetermination requested by the Administrative Agent or the
Borrower pursuant to Section 2.07(b), the Borrower shall provide such Reserve
Report with an “as of” date as required by the Administrative Agent as soon as
possible, but in any event no later than forty-five (45) days following the
receipt of such request.

 

(c)                                  With the delivery of each Reserve Report,
the Borrower shall provide to the Administrative Agent and the Lenders a
certificate from a Responsible Officer from Borrower certifying that in all
material respects: (i) the information contained in the Reserve Report and any
other information delivered in connection therewith is true and correct,
(ii) the Loan Parties own 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 its Oil and Gas Properties evaluated in such Reserve Report
which would require any Loan Party to deliver Hydrocarbons either generally or
produced from such Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor, (iv) none of the Loan Parties’ Oil
and Gas Properties have been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its proved Oil and Gas Properties sold and in such
detail as reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
later of the date hereof or the most recently delivered Reserve Report which the
Borrower could reasonably be expected to have been obligated to list on
Schedule 7.19 had such agreement been in effect on the date hereof and
(vi) attached thereto is a schedule of the Oil and Gas Properties evaluated by
such Reserve Report that are Collateral and that the Engineered Value of such
Oil and Gas Properties represents at least eighty percent (80%) (by value) of
the proved Oil and Gas Properties of the Loan Parties evaluated in the Reserve
Report delivered to the Administrative Agent most recently prior to the Reserve
Report attached to such certificate.

 

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, the Borrower will deliver title information in form and substance
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, satisfactory
title information on at least eighty percent  (80%) of the Engineered Value of
the proved Oil and Gas Properties evaluated by such Reserve Report.

 

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(b)                                 If the Borrower has provided title
information for additional Properties under Section 8.13(a), the Borrower shall,
within sixty (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 Collateral which constitutes Oil and Gas
Properties and with no title defects or exceptions except for Excepted Liens
(other than Excepted Liens described in clauses (e), (g) and (h) of such
definition) having an equivalent value or (iii) deliver title information in
form and substance acceptable to the Administrative Agent so that it shall have
received, together with title information previously delivered, satisfactory
title information on at least eighty percent (80%) of the value of the proved
Oil and Gas Properties evaluated by such Reserve Report.

 

(c)                                  If the Borrower is unable to cure any title
defect requested by the Administrative Agent or Lenders to be cured within the
60-day period or the Borrower does not comply with the requirements to provide
acceptable title information covering eighty percent (80%) of the value of the
proved Oil and Gas Properties evaluated in the most recent Reserve Report, such
default shall not be a Default, but instead the Administrative Agent and/or the
Required 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 Required Lenders are not satisfied with title to any Mortgaged
Property after the 60-day period has elapsed, such unacceptable Mortgaged
Property shall not count towards the eighty percent (80%) requirement, and the
Administrative Agent may send a notice to the Borrower and the Lenders that the
then outstanding Borrowing Base shall be reduced by an amount as determined by
the Required Lenders to cause the Borrower to be in compliance with the
requirement to provide acceptable title information on eighty percent (80%) of
the value of the proved Oil and Gas Properties.  This new Borrowing Base shall
become effective immediately after receipt of such notice.

 

Section 8.14                            Additional Collateral.  In connection
with each redetermination of the Borrowing Base, the Borrower shall review the
Reserve Report and the list of current Mortgaged Properties (as described in
Section 8.12(c)) to ascertain whether the Mortgaged Properties represent at
least eighty percent (80%) of the Engineered Value of the proved Oil and Gas
Properties owned by Borrower and the Loan Parties and 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 eighty percent (80%) of
such Engineered Value, then the Borrower shall, and shall cause the other Loan
Parties to, grant within thirty (30) days of delivery of the certificate
required under Section 8.12(c) to the Administrative Agent as security for the
Obligations a first-priority Lien interest (subject only to Excepted Liens of
the type described in clauses (a) to (d) and (f) of the definition thereof, 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 Mortgages such that after giving
effect thereto, the Mortgaged Properties will represent at least eighty percent
(80%) of such Engineered Value.  All such Liens will be created and perfected by
and in accordance with the provisions of mortgages, deeds of trust, security
agreements and financing statements or other Security Instruments, all in form
and substance satisfactory to the Administrative Agent and in sufficient
executed (and acknowledged where necessary or appropriate) counterparts for
recording purposes.

 

Section 8.15                            ERISA Compliance.  In addition to and
without limiting the generality of Section 8.09, the Borrower shall and shall
cause each of its Subsidiaries to (a) comply in all material respects with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder with respect to all employee benefit plans (as defined in ERISA),
(b) not take any action or fail to take action the result of which could be
(i) a liability to the PBGC (other than liability for PBGC premiums) or (ii) a
past due liability to any Multiemployer Plan, (c) not participate in any
prohibited

 

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transaction that could result in any material civil penalty under ERISA or any
tax under the Code, (d) operate each employee benefit plan in such a manner that
will not incur any material tax liability under Section 4980B of the Code or any
liability to any qualified beneficiary as defined in Section 4980B of the Code
except to the extent such failure to comply could not reasonably be expected to
have Material Adverse Effect and (e) furnish to the Administrative Agent upon
the Administrative Agent’s request such additional information about any
employee benefit plan as may be reasonably requested by the Administrative
Agent.

 

Section 8.16                            New Subsidiary Requirements.

 

(a)                                 If either a Domestic Subsidiary that is not
a Loan Party on the Effective Date shall be formed or acquired and not be
designated an Unrestricted Subsidiary at the time such Domestic Subsidiary is
formed or acquired, or an Unrestricted Subsidiary that is a Domestic Subsidiary
shall fail to satisfy the requirements of an Unrestricted Subsidiary, then
within 30 days after such event giving rise to a new Restricted Subsidiary the
Borrower shall cause to be delivered to the Administrative Agent for the benefit
of the Lenders, (i) a Guaranty and a Joinder with respect to the Security
Agreement executed by such Restricted Subsidiary, (ii) all documents and
instruments, including UCC Financing Statements (Form UCC-1), required by law or
reasonably requested by the Administrative Agent to be filed, registered or
recorded to create or perfect the Liens intended to be created under such
Security Agreement and to include the Equity Interests of such Domestic
Subsidiary as additional Collateral pledged by the owner thereof pursuant to the
Security Agreement, (iii) if requested, UCC searches in form and substance
satisfactory to the Administrative Agent, and evidence reasonably satisfactory
to the Administrative Agent that any Liens indicated in such UCC searches are
Excepted Liens or have been released, (iv) the corporate resolutions or similar
approval documents of such Restricted Subsidiary approving the execution and
delivery of the Joinder by such Restricted Subsidiary, (v) if requested, the
corporate resolutions or similar approval documents of the Borrower or other
Loan Party approving the addition of the Equity Interests in such Restricted
Subsidiary to the collateral pledged under the Security Agreement by the
Borrower or other Loan Party, and (vi) if requested, a legal opinion acceptable
to the Administrative Agent, opining favorably on the execution, delivery and
enforceability of the Joinder and otherwise being in form and substance
reasonably satisfactory to the Administrative Agent; provided, that until the
requirements of clauses (i) through (vi) shall be met to the reasonable
satisfaction of the Administrative Agent, no Loan Party shall advance or
contribute any amounts or Property to such Domestic Subsidiary (other than
minimum organizational costs such as filing fees).

 

(b)                                 Within 30 days after the acquisition or
formation of any Domestic Subsidiary which is to be an Unrestricted Subsidiary
by any Loan Party and prior to such Loan Party’s advancing or contributing any
amounts to or into such Unrestricted Subsidiary (other than minimum
organizational costs such as filing fees), such Loan Party shall cause to be
delivered to the Administrative Agent for the benefit of the Lenders a
certificate certifying that such Subsidiary meets the requirements set forth in
the definition of “Unrestricted Subsidiary”; provided, that until the foregoing
requirement shall be met to the reasonable satisfaction of the Administrative
Agent, no Loan Party shall advance or contribute any amounts or Property to such
Domestic Subsidiary (other than minimum organizational costs such as filing
fees).  For the avoidance of doubt, no Equity Interests in any Unrestricted
Subsidiary are required to be subject to a Lien securing the Obligations.

 

ARTICLE IX

 

NEGATIVE COVENANTS

 

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid

 

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in full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:

 

Section 9.01                            Financial Covenants.

 

(a)                                 Current Ratio.  The Borrower will not
permit, at any time, commencing with the fiscal quarter ending September 30,
2014, its ratio of (i) consolidated current assets of the Borrower and the
Restricted Subsidiaries (including the unused amount of the total Commitments
(but only to the extent that the Borrower is permitted to borrow such amount
under the terms of this Agreement), but excluding non-cash assets under FAS 133)
to (ii) consolidated current liabilities of the Borrower and the Restricted
Subsidiaries (excluding outstanding Obligations hereunder to the extent included
in consolidated current liabilities, non-cash obligations under FAS 133 and any
accrual related to non-cash compensation arising from any grant of stock, stock
options or other equity based awards) to be less than 1.0 to 1.0.

 

(b)                                 Total Leverage Ratio.  The Borrower will not
permit, as of the last day of any fiscal quarter, commencing with the fiscal
quarter ending September 30, 2014, the ratio of (i) total Debt of the Borrower
and the Restricted Subsidiaries as of such date minus Unrestricted Cash to
(ii) Consolidated EBITDA of the Borrower and the Restricted Subsidiaries for the
Rolling Period ending on such day (or, in the case of any such Rolling Period
ending before September 30, 2015, Annualized Consolidated EBITDA for such
Rolling Period) to exceed 4.0 to 1.0.

 

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

 

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

 

(b)                                 Debt of Borrower and its Subsidiaries with
respect to the Senior Unsecured Notes; provided that (A) the principal amount
outstanding under the Senior Unsecured Notes, shall not, at any time, be
increased by more than the Senior Unsecured Notes Maximum Issuance Amount,
(B) the Senior Unsecured Notes are unsecured, (C) proceeds of the Senior
Unsecured Notes are used first, to repay the Loans to the extent necessary to be
in compliance with the Borrowing Base as adjusted as of the date of the issuance
of the Senior Unsecured Notes by the Issuance Related Borrowing Base Adjustment
Amount, if any second, for all or a portion of the Catarina Property
Acquisition, and third, the balance if any, may be used to finance general
corporate purposes;

 

(c)                                  Debt of the Borrower and its Restricted
Subsidiaries existing on the date hereof that is reflected in the Financial
Statements and described on Schedule 9.02;

 

(d)                                 Debt associated with worker’s compensation
claims, performance, bid, surety or similar bonds or surety obligations required
by Governmental Requirements or third parties, including, guarantees and
obligations of the Borrower and its Restricted Subsidiaries with respect to
letters of credit supporting such obligations (in each case other than an
obligation for money borrowed), in connection with the operation of the Oil and
Gas Properties in the ordinary course of business;

 

(e)                                  intercompany Debt between Borrower and any
Restricted Subsidiary or between Restricted Subsidiaries to the extent permitted
by Section 9.05; provided that such Debt is not held, assigned, transferred,
negotiated or pledged to any Person other than the Borrower or one of its
Restricted Subsidiaries;

 

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

 

(g)                                  Debt incurred in the ordinary course of
business of the Borrower and the Restricted Subsidiaries in connection with Swap
Agreements provided they are permitted under Section 9.17;

 

(h)                                 Debt in the form of guarantees and other
Debt of the type described in clause (g) of the definition of “Debt” with
respect to debt permitted under this Section 9.02 and Investments permitted
under Section 9.05(p);

 

(i)                                     unsecured Debt not otherwise permitted
by the foregoing clauses of this Section 9.02; provided that the principal
amount of such Debt shall not exceed five percent (5%) of the Borrowing Base
then in effect;

 

(j)                                    Debt in an aggregate amount not to exceed
$10,000,000 at any time outstanding secured by Excepted Liens described in
clauses (j) and (k) of the definition of “Excepted Liens”; and

 

(k)                                 refinancings, extension, renewals and
refundings of Debt permitted by this Section 9.02; provided the principal amount
of such Debt does not exceed the principal amount of the Debt being refinanced,
extended, renewed or refunded (plus all accrued interest on such Debt and the
amount of all expenses and premiums incurred in connection therewith).

 

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

 

(a)                                 Liens securing the payment of any
Obligations;

 

(b)                                 Excepted Liens;

 

(c)                                  Liens described on Schedule 9.03; and

 

(d)                                 Liens on cash collateral securing
obligations owed to Koch Supply & Trading LP under Swap Agreements permitted
under Section 9.17; provided at the time of the posting of such cash collateral,
after giving pro forma effect thereto (i) no Default exists or would exist as a
result thereof and (ii) the Elected Commitment Utilization Percentage does not
exceed ninety percent (90%).

 

The filing of a financing statement or other document or instrument in
connection with any of the foregoing Liens to perfect such Lien or otherwise
provide notice as required by applicable law is permitted.

 

Section 9.04                            Dividends, Distributions and
Redemptions.  The Borrower will not, and will not permit any Restricted
Subsidiary to, declare or make, or agree to pay or make, directly or indirectly,
any Restricted Payment, return any capital to its Equity Interest holders or
make any loan or distribution of its Property to its Equity Interest holders,
except (a) Restricted Subsidiaries may declare and pay dividends or
distributions with respect to their Equity Interests payable solely in
additional Equity Interests (other than Disqualified Capital Stock), (b) each
Restricted Subsidiary of the Borrower may make Restricted Payments to Borrower
and to any Restricted Subsidiary of the Borrower that is a Guarantor,
(c) payments (including the netting of Equity Interests) in connection with the
satisfaction of employees’ (at any of the Borrower, Restricted Subsidiaries or
Operator) tax withholding obligations

 

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pursuant to employee benefit plans or outstanding awards (and payment of any
requisite amounts to appropriate Governmental Authorities) arising out of the
sale of employees’ vested stock in Borrower, which payments are made, directly
or indirectly, from the proceeds of the sale of such vested stock (or, in the
case of such payments made on or before July 31, 2013, may be made with cash
available from any source and need not be made, directly or indirectly, from the
proceeds of the sale of such vested stock), (d) Permitted Preferred Stock
Distributions, and (e) issuances and/or sales of Equity Interests in Borrower in
exchange for, or purchase or redemption of, Preferred Stock; provided,
Restricted Payments made under this Section 9.04, other than (x) pursuant to
clauses (c) and (e) above and (y) Permitted Preferred Stock Distributions
comprised solely of common stock of Borrower, may be made only so long as no
Default or Event of Default exists or will exist after giving effect to such
Restricted Payment.

 

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

 

(a)                                 any Investment in (i) the Borrower, (ii) any
Restricted Subsidiary, or (iii) any Unrestricted Subsidiary if, after giving
effect to such Investment, such Unrestricted Subsidiary becomes a Restricted
Subsidiary and complies with the requirements of Section 8.16;

 

(b)                                 Investments reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.05;

 

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

 

(d)                                 direct obligations of the U.S. or any agency
thereof, or obligations guaranteed by the U.S. or any agency thereof, in each
case maturing within one year from the date of creation thereof;

 

(e)                                  commercial paper maturing within one year
from the date of creation thereof rated no lower than A1 or P1 by S&P or
Moody’s;

 

(f)                                   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 U.S. of any other bank or trust company
which is organized under the laws of the U.S. or any state thereof, has capital,
surplus and undivided profits aggregating at least $100,000,000 (as of the date
of such bank or trust company’s most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set forth from
time to time, by S&P or Moody’s, respectively;

 

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

 

(h)                                 any Investments received (i) in compromise
or resolution of obligations of trade creditors or customers that were incurred
in the ordinary course of business of the Borrower or the Restricted
Subsidiaries, including (A) obligations of financially troubled account debtors
to the extent reasonably necessary in order to prevent or limit loss and
(B) pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer, (ii) in compromise
or resolution of litigation, arbitration or other disputes, or (iii) on account
of any claim against, or an interest in, any other Person (A) acquired in good
faith in connection with or as a result of a bankruptcy, workout, reorganization
or recapitalization of such other Person or (B) as a result of a bona fide
foreclosure by the Borrower or any of the Restricted Subsidiaries with respect
to any claim against any other Person;

 

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(i)                                     any Investment consisting of extensions
of credit including, without limitation, accounts receivables or notes
receivables arising from the grant of trade credit or prepayments or similar
transactions, if created or acquired in the ordinary course of business and
Investments received in satisfaction or partial satisfaction thereof from
financially troubled account debtors to the extent reasonably necessary in order
to prevent or limit loss;

 

(j)                                    subject to the limits in
Section 9.06, Investments in direct ownership interests in additional Oil and
Gas Properties, gas gathering, processing and transportation systems and all
other assets contemplated by the permitted business of the Borrower located
within the geographic boundaries of the U.S.;

 

(k)                                 entry into operating agreements, working
interests, royalty interests, mineral leases, processing agreements, farm-out
agreements, contracts for the sale, transportation or exchange of oil and
natural gas, unitization agreements, pooling arrangements, area of mutual
interest agreements, production sharing agreements or other similar or customary
agreements, transactions, properties, interests or arrangements, and Investments
and expenditures in connection therewith or pursuant thereto, in each case made
or entered into in the ordinary course of the oil and gas business, excluding,
however, Investments in other Persons;

 

(l)                                     Letters of Credit issued hereunder to
support Debt or other obligations of any Unrestricted Subsidiary or any JV
Entity in an aggregate face amount at any time outstanding not exceeding the
remainder of (i) the Unrestricted Subsidiary Maximum Cash Investment Amount
minus (ii) the aggregate amount of Investments of cash in Unrestricted
Subsidiaries pursuant to Section 9.05(m); provided, that for the avoidance of
doubt the Unrestricted Subsidiary Maximum Cash Investment Amount shall not apply
to (x) Investments described in the Sanchez/Century Midstream JV Transaction,
which Investments are governed by Section 9.05(n) and (y) Investments described
in the SN Services Transaction, which Investments are governed by
Section 9.05(o);

 

(m)                             Investments in Unrestricted Subsidiaries other
than SN Midstream and SN Services (excluding Letters of Credit to support Debt
or other obligations of Unrestricted Subsidiaries and JV Entities, which shall
be permitted only to the extent permitted under Section 9.05(l)) comprised of
(i) Eligible Midstream Assets and (ii) cash in an aggregate amount at any time
outstanding not exceeding the remainder of (A) the Unrestricted Subsidiary
Maximum Cash Investment Amount minus (B) the aggregate face amount outstanding
of Letters of Credit issued pursuant to Section 9.05(l);

 

(n)                                 the Investments contemplated by the
Sanchez/Century Midstream JV Transaction;

 

(o)                                 the Investments contemplated by the SN
Services Transaction; and

 

(p)                                 Guaranties by a Loan Party of any Investment
of the type described in clauses (a), (b), (j), (k), (l), (m), (n) and (o) of
this Section 9.02;

 

provided, however, that none of the foregoing shall involve the incurrence of
any Debt not permitted by Section 9.02.

 

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

 

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not located within the geographical boundaries or territorial waters of the U.S.
and will not acquire or form any Foreign Subsidiaries.

 

Section 9.07                            Limitation on Leases.  The Borrower will
not, and will not permit any Restricted Subsidiary to, create, incur, assume or
suffer to exist any obligation for the payment of rent or hire of Property of
any kind whatsoever (real or personal but excluding Capital Leases and leases of
Hydrocarbon Interests), under leases or lease agreements which would cause the
aggregate amount of all payments made by Borrower and the Restricted
Subsidiaries pursuant to all such leases or lease agreements, including, without
limitation, any residual payments at the end of any lease, to exceed $1,000,000
in any period of twelve (12) consecutive calendar months during the life of such
leases.

 

Section 9.08                            Proceeds of Notes/Loans.  The Borrower
will not permit the Loans or the proceeds of the Loan to be used for any purpose
other than those permitted by Section 7.21.  Neither the Borrower nor any Person
acting on behalf of the Borrower has taken or will take any action which might
cause any of the Loan Documents to violate Regulations T, U or X or any other
regulation of the Board or to violate Section 7 of the Securities Exchange Act
of 1934 or any rule or regulation thereunder, in each case as now in effect or
as the same may hereinafter be in effect.  If requested by the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR
Form U-1 or such other form referred to in Regulations U, T or X of the Board,
as the case may be.

 

Section 9.09                            Sale or Discount of Receivables.  Except
for receivables obtained by the Borrower or any Restricted Subsidiary 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
Restricted Subsidiary will discount or sell (with or without recourse) to any
other Person that is not the Borrower any of its notes receivable or accounts
receivable.

 

Section 9.10                            Mergers, Etc..  Neither the Borrower nor
any Restricted Subsidiary 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 (any such transaction, a “consolidation”); provided that (a) any
Subsidiary may merge or participate in a consolidation with the Borrower
(provided that the Borrower shall be the continuing or surviving corporation) or
any Restricted Subsidiary (provided that such Restricted Subsidiary shall be the
continuing or surviving Person) and (b) in the case of an Unrestricted
Subsidiary merging into the Borrower, no Default or Event of Default shall
result.

 

Section 9.11                            Sale of Assets.  The Borrower will not,
and will not permit any Restricted Subsidiary to, sell, assign, farm-out, convey
or otherwise transfer any asset, including, without limitation, Property
containing Proved Reserves constituting a portion of the Borrowing Base or to
issue or sell any Equity Interests in the Borrower or any of its Restricted
Subsidiaries except (i) an issuance or sale of Equity Interests in or Preferred
Stock of Borrower, in each case whether as a Permitted Preferred Stock
Distribution or otherwise and without regard to whether or not there is any
Default or Event of Default, (ii) the contribution of the Sanchez/Century
Midstream Assets contemplated by the Sanchez/Century JV Transaction, (iii) the
sale of Equity Interests in an Unrestricted Subsidiary, or (iv) the following
sales, assignments, farm-outs, conveyances and/or transfers; provided, no
Default or Event of Default exists or will exist after giving effect to such
sale, assignment, conveyance, farm-out or transfer:

 

(a)                                 a transfer of assets between or among
Borrower and its Restricted Subsidiaries;

 

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(b)                                 an issuance or sale of Equity Interests in a
Restricted Subsidiary to the Borrower or to another Restricted Subsidiary;

 

(c)                                  the sale, lease or other disposition of
produced Hydrocarbons, equipment, inventory, accounts receivable or other
properties or assets in the ordinary course of business, including, without
limitation, any abandonment, farm-in, farm-out, lease or sublease of any oil and
gas properties or the forfeiture or other disposition of such properties
pursuant to standard form operating agreements, in each case in the ordinary
course of business in a manner customary in the oil and gas business;

 

(d)                                 the sale or other disposition of cash or
cash equivalents;

 

(e)                                  subject to the mandatory prepayment
requirements in Section 3.04(c), the sale or other disposition (including
Casualty Events) of any Oil and Gas Property or any interest therein or any
Restricted Subsidiary owning Oil and Gas Properties; provided that

 

(1)                                 Borrower shall provide the Administrative
Agent at least ten (10) days prior written notice of any sale, assignment,
conveyance or transfer hereunder,

 

(2)                                 100% of the consideration received in
respect of such sale or other disposition shall be cash,

 

(3)                                 the consideration received in respect of
such sale or other disposition shall be equal to or greater than the fair market
value of the Oil and Gas Property, interest therein or the Restricted Subsidiary
subject of such sale or other disposition (as reasonably determined by the Board
of Directors of the Borrower and, if requested by the Administrative Agent, the
Borrower shall deliver a certificate of a Responsible Officer of the Borrower
certifying to that effect),

 

(4)                                 if such sale or other disposition of Oil and
Gas Property when combined with any other sales under this
Section 9.11(e) occurring between Scheduled Redetermination Dates results in a
sale of more than ten percent (10%), in the aggregate, of the value of proved
developed Oil and Gas Properties included in the most recently delivered Reserve
Report, such sale or disposition shall be subject to the written consent of the
Administrative Agent, not to be unreasonably withheld, and the Borrowing Base
may be immediately redetermined pursuant to Section 2.07 and the Borrower shall
pay  any Borrowing Base Deficiency in accordance with Section 3.04(c), and

 

(5)                                 if any such sale or other disposition is of
a Restricted Subsidiary owning Oil and Gas Properties, such sale or other
disposition shall include all the Equity Interests of such Restricted
Subsidiary; and

 

(f)                                   the sale, conveyance, transfer, lease or
other disposition of (i) Eligible Midstream Assets and (ii) cash to an
Unrestricted Subsidiary pursuant to Section 9.05(m).

 

Section 9.12                            Environmental Matters.  The Borrower
will not, and will not permit any Restricted 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
applicable Environmental Laws, assuming disclosure to the applicable
Governmental Authority of all relevant facts,

 

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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 9.13                            Transactions with Affiliates.  The
Borrower will not, and will not permit any Restricted 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 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. The
guarantee by any Loan Party of the obligations of, and/or performance by,
Borrower or any Restricted Subsidiary of any such transaction is expressly
permitted.  Notwithstanding the foregoing, the restrictions set forth in this
Section 9.13 shall not apply to (i) reasonable and customary fees paid to
members of the Board of Directors of the Borrower or the Loan Parties,
(ii) compensation arrangements for members of the Board of Directors, officers
and other employees of the Borrower or the Loan Parties entered into in the
ordinary course of business, (iii) payments to Unrestricted Subsidiaries or JV
Entities in respect of aircraft charters or leases in an aggregate amount for
the Borrower and the Restricted Subsidiaries in any calendar year not to exceed
$1,000,000, or (iv) other transactions where the Borrower delivers to the
Administrative Agent: (A) for transactions with annual aggregate consideration
or a purchase price of not more than $5,000,000, a resolution of the Board of
Directors of the Borrower set forth in a Responsible Officer’s certificate,
which resolutions state that the Board of Directors has determined that such
transaction is upon fair and reasonable terms no less favorable to each Loan
Party a party thereto than such Loan Party would obtain in a comparable arm’s
length transaction with a Person not an Affiliate and has been approved by a
majority of the Board of Directors, (B) for transactions with annual aggregate
consideration or a purchase price in excess of $5,000,000 but not more than
$10,000,000, a positive opinion as to the fairness from a financial point of
view to each Loan Party a party thereto, issued by an accounting, appraisal or
investment banking firm of national standing.

 

Section 9.14                            Subsidiaries.  The Borrower shall not,
and shall not permit any Restricted Subsidiary to, create or acquire any
additional Subsidiary without the prior written consent of the Administrative
Agent and the Required Lenders, other than the creation or acquisition by the
Borrower of Subsidiaries in compliance with the definition of “Unrestricted
Subsidiary” or Section 8.16.  The Borrower shall not, and shall not permit any
Restricted Subsidiary to, sell, assign or otherwise dispose of any Equity
Interests in any Subsidiary except in compliance with Section 9.11.  Neither the
Borrower nor any Restricted Subsidiary shall have any Foreign Subsidiaries.

 

Section 9.15                            Negative Pledge Agreements; Dividend
Restrictions.  The Borrower will not, and will not permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any contract, agreement
or understanding which in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Property in favor of
the Administrative Agent and the Lenders, restricts any Loan Party from paying
dividends or making distributions to any other Loan Party, restricts any Loan
Party from making loans or advances to any other Loan Party, or restricts any
Loan Party from transferring any of its properties or assets to any other Loan
Party 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 (a) this Agreement or
the Security Instruments, (b) the Senior Unsecured Loan Documents,
(c) applicable law, rule, regulation or order, (d) any instrument governing Debt
or Equity Interests of a Person acquired by Borrower or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Debt or Equity Interests were incurred or issued in connection with such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of those instruments; provided that the amendments,
modifications, restatements, renewals, increases, supplements, refundings,

 

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replacement or refinancings are not materially more restrictive, taken as a
whole, with respect to such dividend, distribution and other payment
restrictions than those contained in those instruments; provided that, in the
case of Debt, such Debt was permitted by the terms hereof to be incurred,
(e) customary non-assignment provisions in contracts and leases entered into in
the ordinary course of business and consistent with past practices, (f) purchase
money obligations for property acquired in the ordinary course of business and
Capital Lease Obligations that impose restrictions on the transfer of any of its
properties to any Loan Party, (g) any agreement for the sale or other
disposition of a Restricted Subsidiary of the Borrower that restricts
distributions by that Restricted Subsidiary pending its sale or other
disposition, (h) agreements governing other Debt of the Borrower and one or more
Restricted Subsidiaries permitted herein; provided that the restrictions in the
agreements governing such Debt are not materially more restrictive, taken as a
whole, than those provided herein, (i) Liens permitted to be incurred under
Section 9.03 hereof that limit the right of the debtor to dispose of the assets
subject to such Liens, (j) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements, asset sale
agreements, and stock sale agreements entered into in the ordinary course of
business, and (k) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.

 

Section 9.16                            Gas Imbalances, Take-or-Pay or Other
Prepayments.  The Borrower will not allow gas imbalances, take-or-pay or other
prepayments with respect to the Oil and Gas Properties of the Borrower or any
Restricted Subsidiary that would require the Borrower or such Restricted
Subsidiary to deliver Hydrocarbons at some future time without then or
thereafter receiving full payment therefor.

 

Section 9.17                            Swap Agreements.

 

(a)                                 Neither Borrower nor any of its Subsidiaries
(including Unrestricted Subsidiaries) will be a party to or in any manner be
liable on any Swap Agreement entered into for speculative purposes.

 

(b)                                 The Borrower will not, and will not permit
any Restricted Subsidiary to, enter into any Swap Agreements with any Person
other than (a) Swap Agreements constituting floor or put options in respect of
commodities with an Approved Counterparty, (b) Swap Agreements (other than floor
or put options) in respect of commodities with an Approved Counterparty that are
limited to notional quantities at any time no more than (i) during the first two
years following such time the greater of (x) ninety percent (90%) of the volume
of proved developed producing reserves included in then most recently delivered
Reserve Report (plus, ninety percent (90%) of the volume of proved developed
producing reserves included in the Catarina Property Acquisition Reserve Report,
until such properties are included in a Reserve Report delivered pursuant to
Section 8.12) and (y) seventy-five percent (75%) of the volume of Borrower’s
total Proved Reserves (plus, seventy-five percent (75%) of the volume of total
Proved Reserves included in the Catarina Property Acquisition Reserve Report,
until such properties are included in a Reserve Report delivered pursuant to
Section 8.12)  (such amounts computed on a semi-annual basis and calculated on a
product-by-product basis), (ii) during the third and fourth years following such
time the greater of (x) eighty-five percent (85%) of the volume of proved
developed producing reserves included in then most recently delivered Reserve
Report and (y) seventy-five percent (75%) of the volume of Borrower’s total
Proved Reserves (such amounts computed on a semi-annual basis and calculated on
a product-by-product basis), and (iii) after the fourth year following such
time, zero (no commodity Swap Agreements other than floor or put options);
provided that the aggregate amount of all such commodity Swap Agreements (other
than floor or put options) shall not exceed the most recent month’s actual
production, calculated separately on a product-by-product basis, in any given
month, (c) Swap Agreements in respect of interest rates with an Approved
Counterparty, as follows: (i) Swap Agreements effectively converting interest
rates from fixed to floating, the notional amounts of which (when aggregated
with all other Swap Agreements of the Borrower and its Restricted Subsidiaries
then in

 

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effect effectively converting interest rates from fixed to floating) do not
exceed 75% of then outstanding principal amount of the Borrower’s and Restricted
Subsidiaries’ Debt for borrowed money which bears interest at a fixed rate and
(ii) Swap Agreements effectively converting interest rates from floating to
fixed, the notional amounts of which (when aggregated with all other Swap
Agreements of the Borrower and its Restricted Subsidiaries then in effect
effectively converting interest rates from floating to fixed) do not exceed 75%
of then outstanding principal amount of the Borrower’s and Restricted
Subsidiaries’ Debt for borrowed money which bears interest at a floating rate
and (d) those certain Swap Agreements existing on the date hereof and described
on Schedule 9.17 between SEP and Shell Energy North America (US), L.P. The
Borrower will not, and will not permit any other Loan Party to, Liquidate any
Swap Agreement in respect of commodities unless (x) if such Swap Liquidation
would result in an automatic redetermination of the Borrowing Base pursuant to
Section 2.07(b)(iii), the Borrower delivers reasonable prior written notice
thereof to the Administrative Agent, and (y) if a Borrowing Base Deficiency
would result from such Swap Liquidation as a result of an automatic
redetermination of the Borrowing Base pursuant to Section 2.07(b)(iii), the
Borrower prepays Borrowings, prior to or contemporaneously with the consummation
of such Swap Liquidation to the extent that such prepayment would have been
required under Section 3.04(c)(i) after giving effect to such automatic
redetermination of the Borrowing Base.

 

Section 9.18                            Sale and Leaseback Transactions.  The
Borrower will not, and will not permit any Restricted Subsidiary to, enter into
any arrangement, directly or indirectly, whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
that it intends to use for substantially the same purpose or purposes as the
property sold or transferred.

 

Section 9.19                            ERISA.  Except where non-compliance, in
each case or in combination with all other instances of non-compliance with the
provisions of this Section 9.19, could not reasonably be expected to result in a
Material Adverse Effect, the Borrower will not, and will not permit any of the
Guarantors to, at any time:

 

(a)                                 engage in, or permit any ERISA Affiliate to
engage in, any transaction in connection with which the Borrower, any of its
Subsidiaries or any ERISA Affiliate could be subjected to either a civil penalty
assessed pursuant to subsections (c), (i), (l) or (m) of Section 502 of ERISA or
a tax imposed by Chapter 43 of Subtitle D of the Code.

 

(b)                                 fail to make, or permit any ERISA Affiliate
to fail to make, full payment when due of all amounts which, under the
provisions of any Plan, agreement relating thereto or applicable law, the
Borrower, any of its Subsidiaries or any ERISA Affiliate is required to pay as
contributions thereto.

 

(c)                                  contribute to or assume an obligation to
contribute to, or permit any ERISA Affiliate to contribute to or assume an
obligation to contribute to (i) any employee welfare benefit plan, as defined in
Section 3(1) of ERISA, which may not be terminated by such entities in their
sole discretion at any time without any material liability, including, without
limitation, any such plan that is maintained to provide benefits to former
employees of such entities (other than benefits mandated by Title I, Part 6 of
ERISA and Section 4980B of the Code), or (ii) any employee pension benefit plan,
as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA,
Section 302 of ERISA or Section 412 of the Code.

 

Section 9.20                            Change in Business.

 

(a)                                 The Borrower and each of the Guarantors
shall not, and shall not permit any Subsidiary to, engage in any business or
activity other than (i) the business of the exploration for, and

 

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development, acquisition, and the production of, Hydrocarbons produced from its
Oil and Gas Properties; (ii) the business of marketing, processing, treating,
gathering, and upstream transportation of such Hydrocarbons produced by the
Borrower and its Subsidiaries; (iii) developing raw land acquired or leased by
the Borrower or its Subsidiaries in conjunction with the activities described in
clause (i) or (ii) above, and remediating such land for resale; and (iv) the
business of providing services to support any of the Borrower’s or its
Subsidiaries’ activities described in clause (i), (ii) or (iii) above.  Borrower
shall not, and shall not permit any of its Subsidiaries to engage in any
activity or business, or acquire or make any other expenditure (whether such
expenditure is capital, operating or otherwise) in or related to, any Oil and
Gas Properties or businesses, in any event, which are not located within the
geographical boundaries of the U.S. or the offshore area in the Gulf of Mexico
over which the U.S. asserts jurisdiction.

 

(b)                                 The Borrower and each of the Guarantors
shall not, and shall not permit any Subsidiary of the Borrower to, alter, amend
or modify in any manner materially adverse to the Lenders any of its
organizational documents.  In any event, the Borrower shall not permit any of
its Subsidiaries to (i) if such Subsidiary is a limited liability company, amend
its limited liability company agreement to “opt in” to “security” status in
accordance with Section 8.103 of the UCC or (ii) evidence its Equity Interests
with a certificate without, in each case, the prior consent of the
Administrative Agent.

 

(c)                                  Except as set forth in Section 1.05, the
Borrower and the Guarantors shall not, and shall not permit any of their
respective Subsidiaries to, make any significant change in accounting treatment
or reporting practices, except as required by GAAP, or change the fiscal year of
the Borrower or of any of its Subsidiaries.

 

Section 9.21                            Prohibited HIL Lease Amendment.  The
Borrower will not, and will not permit SN Catarina or any other Restricted
Subsidiary to, enter into any amendment of the HIL Lease affecting the exclusion
of mortgages and other liens and security interests to secure financings from
the general prohibition on assignments and transfers set forth in the HIL Lease.

 

ARTICLE X

 

EVENTS OF DEFAULT; REMEDIES

 

Section 10.01                     Events of Default.  The occurrence and
continuation of one or more of the following events shall constitute an “Event
of Default”:

 

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

 

(b)                                 any representation or warranty made or
deemed made by or on behalf of the Borrower or any Subsidiary 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 false, incorrect or misleading in any
material respect when made or deemed made;

 

(c)                                  Borrower or any Subsidiary shall fail to
observe or perform any covenant, condition or agreement contained in
Section 3.04(c), Section 8.01, Section 8.02, Section 8.03, Section 8.12,
Section 8.15, or ARTICLE IX;

 

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

 

(e)                                  Borrower or any Subsidiary shall fail to
make any payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become due and
payable, after the expiration of any applicable period of grace and/or notice
and cure;

 

(f)                                   any event or condition occurs that results
in any Material Indebtedness becoming due prior to its scheduled maturity or
that enables or permits (with or without the giving of notice, the lapse of time
or both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become due,
or to require the Redemption thereof or any offer to Redeem to be made in
respect thereof, prior to its scheduled maturity or require Borrower or any
Subsidiary to make an offer in respect thereof;

 

(g)                                  an involuntary proceeding shall be
commenced or an involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of Borrower or any Restricted
Subsidiary or its debts, or of a substantial part of its assets, under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Borrower or any
Restricted Subsidiary or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be entered;

 

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

 

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

 

(j)                                    one or more judgments for the payment of
money in an aggregate amount in excess of $10,000,000.00 (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) shall be
rendered against Borrower, any Subsidiary or any combination thereof and the
same shall remain undischarged for a period of 60 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
Subsidiary to enforce any such judgment;

 

(k)                                 any Loan Document 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 Borrower or a Guarantor party thereto or shall be

 

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repudiated by any of them, or cease to create a valid and perfected Lien of the
priority required thereby on any of the Collateral purported to be covered
thereby, except to the extent permitted by the terms of this Agreement, or
Borrower, any Guarantor or any Subsidiary or any of their Affiliates shall so
state in writing;

 

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

 

(m)                             a Change in Control shall occur.

 

Section 10.02                     Remedies.

 

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

 

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

 

(c)                                  All proceeds realized from the liquidation
or other disposition of Collateral or otherwise received after maturity of the
Loans or the Notes, whether by acceleration or otherwise, shall be applied: 
first, to payment or reimbursement of expenses and indemnities provided for in
this Agreement and the Security Instruments; second, to accrued interest on the
Loans; third, to fees referred to in clause (b) of the definition of
“Obligations”; fourth, pro rata to principal outstanding on the Loans and other
Obligations referred to in clauses (c) of the definition of “Obligations”;
fifth, to any other Obligations; sixth, to serve as cash collateral to be held
by the Administrative Agent to secure the LC Exposure; and any excess shall be
paid to the Borrower or as otherwise required by any Governmental Requirement. 
Notwithstanding the foregoing, amounts received from the Borrower or any Loan
Party that is not an Eligible Contract Participant shall not be applied to any
Excluded Swap Obligations owing to a Secured Swap Provider (it being understood,
that in the event that any amount is applied to Obligations other than Excluded
Swap Obligations as a result of this clause, the Administrative Agent shall make
such adjustments as it determines are appropriate to distributions pursuant to
clause fourth above from amounts received from Eligible Contract Participants to
ensure, as nearly as possible, that the proportional

 

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aggregate recoveries with respect to Obligations described in clause fourth
above by Secured Swap Providers that are the holders of any Excluded Swap
Obligations are the same as the proportional aggregate recoveries with respect
to other Obligations pursuant to clause fourth above).

 

ARTICLE XI

 

THE ADMINISTRATIVE AGENT

 

Section 11.01                     Appointment; Powers.  Each of the Lenders and
the Issuing Bank hereby irrevocably (subject to Section 11.06) appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof and the other Loan Documents,
together with such actions and powers as are reasonably incidental thereto.

 

Section 11.02                     Duties and Obligations of Administrative
Agent.  The Administrative Agent shall not have any duties or obligations except
those expressly set forth in the Loan Documents.  Without limiting the
generality of the foregoing, the Administrative Agent, Syndication Agent and
Documentation Agents (a) 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, Syndication Agent and Documentation Agents 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) shall
not have any duty to take any discretionary action or exercise any discretionary
powers, except, with respect to the Administrative Agent, as provided in
Section 11.03, and (c) except as expressly set forth herein with respect to the
Administrative Agent, shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as the 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 it 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 it or as to those conditions precedent specifically
required to be to its satisfaction, (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 Administrative Agent.  The
Administrative Agent shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and

 

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powers expressly contemplated hereby or by the other Loan Documents that it is
required to exercise in writing as directed by the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02) and in all cases it 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 Required
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 shall be binding on all of the Lenders.  If a Default has occurred and
is continuing, then the Administrative Agent shall take such action with respect
to such Default as shall be directed by the requisite Lenders in the written
instructions (with indemnities) described in this Section 11.03, provided that,
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interests of the Lenders.  In no event, however,
shall the Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law.  The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise the Administrative Agent shall not be
liable for any action taken or not taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith INCLUDING ITS OWN
ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.

 

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

 

Section 11.05                     Subagents.  The Administrative Agent may
perform any and all its duties and exercise its rights and powers by or through
any one or more sub-agents appointed by the Administrative Agent, including
without limitation a collateral agent.  The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties.  The exculpatory provisions of the
preceding Sections of this ARTICLE XI shall apply to any such sub-agent and to
the Related Parties of the Administrative Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as
Administrative Agent.

 

Section 11.06                     Resignation or Removal of Administrative
Agent.  Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this Section 11.06, the Administrative Agent may resign at
any time by notifying the Lenders, the Issuing Bank and the Borrower, and the

 

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Administrative Agent may be removed at any time with or without cause by the
Required Lenders.  Upon any such resignation or removal, and so long as there
are Lenders hereunder, the Required Lenders shall have the right, in
consultation with and upon the approval of the Borrower (so long as no Event of
Default has occurred and is continuing), which approval shall not be
unreasonably withheld, to appoint a successor.  If no successor shall have been
so appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation or removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint
a successor Administrative Agent which shall be a bank with an office in
Houston, Texas, or an Affiliate of any such bank.  If upon such resignation by
the Administrative Agent there are no Required Lenders (i) because all of the
Loans have been repaid, (ii) the LC Exposure extinguished, and (iii) the
Commitments terminated, but Obligations remain under the Swap Agreements that
are secured by the Security Instruments, such appointment of a successor shall
be made by then current Administrative Agent if it is a counterparty under a
Swap Agreement and if it is not, such appointment shall be made by the Secured
Swap Providers holding more than 50% of the Hedge Exposure on the date of such
Administrative Agent’s resignation notice.  Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, the retiring Administrative Agent
shall execute such instruments as may be reasonably necessary to give effect to
such succession, and the retiring Administrative Agent shall be discharged from
any further duties and obligations hereunder.  The fees payable by the Borrower
to a successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor. 
After the Administrative Agent’s resignation hereunder, the provisions of this
ARTICLE XI and Section 12.03 shall continue in effect for the benefit of such
retiring Administrative Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Administrative Agent.

 

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

 

Section 11.08                     No Reliance.

 

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

 

(b)                                 The Lenders acknowledge that the
Administrative Agent is acting solely in an administrative capacity with respect
to structuring and syndication of this facility and has no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than its administrative duties, responsibilities and liabilities
specifically as set forth in the Loan Documents and in its capacity as a
Lender.  In structuring, arranging or syndicating this Agreement, each Lender
acknowledges that the Administrative Agent may be an agent or lender under these
Notes, other loans or other securities and waives any existing or future
conflicts of interest associated with its role in such other debt instruments.

 

Section 11.09                     Authority to Release Collateral and Liens. 
Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to
release any Collateral that is permitted to be sold or released pursuant to the
terms of the Loan Documents.  Each Lender and the Issuing Bank hereby authorizes
the Administrative Agent to execute and deliver to the Borrower, at the
Borrower’s sole cost and expense, any and all releases of Liens, termination
statements, assignments or other documents reasonably requested by the Borrower
in connection with any sale or other disposition of Property to the extent such
sale or other disposition is permitted by the terms of Section 9.11 or is
otherwise authorized by the terms of the Loan Documents.

 

Section 11.10                     Filing of Proofs of Claim.  In case of any
Default or Event of Default under Section 10.01(g), Section 10.01(h) or
Section 10.01(i), the Administrative Agent (regardless of whether the principal
of any Loan or LC Exposure shall then be due and payable and regardless of
whether the Administrative Agent has made any demand on the Borrower) shall be
entitled and empowered, by intervention in such proceeding or otherwise:

 

(a)                                 to (i) file and prove a claim for the whole
amount of the principal and interest owing and unpaid in respect of the Loans,
LC Exposure and all other Obligations that is owing and unpaid and (ii) 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,
the Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders and the Administrative Agent under Section 3.03 and
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.

 

Each Lender hereby authorizes any custodian, receiver, assignee, trustee,
conservator, sequestrator or other similar official in any such judicial
proceeding: (i) to make such payments to the Administrative Agent; and (ii) if
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 3.03 and 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 Obligations
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.  Each Lender retains
its right to file and prove a claim separately.

 

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Section 11.11                     Syndication Agent, Documentation Agents;
Arranger.  None of the Lenders or other Persons identified on the cover page or
signature pages of this Agreement as a “syndication agent,” as a “documentation
agent,” any other type of agent (other than the Administrative Agent),
“arranger,” or “book runner” shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such.  Without limiting the foregoing, none of the Lenders so
identified shall have or be deemed to have any fiduciary relationship with any
Lender.  Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders so identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.

 

ARTICLE XII

 

MISCELLANEOUS

 

Section 12.01                     Notices.

 

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

 

(i)                                     if to the Borrower, to it at Sanchez
Energy Corporation, 1111 Bagby Street, Suite 1800, Houston, Texas 77002,
Attention: Alfredo Gutierrez (Telecopy No. (713) 756-2784), with a copy to Akin
Gump Strauss Hauer & Feld LLP, 1111 Louisiana Street, 44th Floor, Houston, Texas
77002, Attention: David Elder (Telecopy No. (713) 236-0822);

 

(ii)                                  if to the Administrative Agent, to it at
Royal Bank of Canada Agency Services Group, 4th Floor, 20 King Street West,
Toronto, Ontario, Canada M5H 1C4, Attention Manager Agency (Fax No. (416)
842-4023), with a copy to 2800 Post Oak Boulevard, Suite 3900, Houston, Texas
77056, Attention Mark Lumpkin (Fax No. (713) 403-5624), and for all
correspondence related to Letter of Credit requests One Liberty Plaza, 3rd
Floor, New York, New York 10006-1404, Attention Manager Trade Products
(Telephone No. (212) 428-6235) (Fax No. (212) 428-6332);

 

(iii)                               if to any other Lender, in its capacity as
such, or any other Lender in its capacity as an Issuing Bank, to it at its
address (or telecopy number) set forth in its Administrative Questionnaire.

 

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

 

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

 

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Section 12.02                     Waivers; Amendments.

 

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

 

(b)                                 Neither this Agreement nor any provision
hereof nor any Security Instrument nor any provision thereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall (i) increase the Elected Commitment or the Maximum Credit
Amount of any Lender without the written consent of such Lender, (ii) increase
the Borrowing Base without the written consent of each Lender, decrease or
maintain the Borrowing Base without the consent of the Administrative Agent and
the Required Lenders, or modify Section 2.07 in any manner adverse to the
Lenders without the consent of each Lender (other than a Defaulting Lender),
(iii) reduce the principal amount of any Loan or LC Disbursement or reduce the
rate of interest thereon, or reduce any fees payable hereunder, or reduce any
other Obligations hereunder or under any other Loan Document, without the
written consent of each Lender affected thereby, (iv) postpone the scheduled
date of payment of the principal amount of any Loan or LC Disbursement, or any
interest thereon, or any fees payable hereunder, or any other Obligations
hereunder or under any other Loan Document, or forgive or reduce the amount of,
waive or excuse any such payment, or postpone or extend the Termination Date
without the written consent of each Lender affected thereby, (v) change
Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata
sharing of payments required thereby in a manner adverse to any Lender, without
the written consent of each Lender or change the pro rata share of any Lender
(other than as a result of the occurrence of any reallocation as a result of a
Lender becoming or ceasing to be a Defaulting Lender or as a result of changes
in Lenders’ pro rata shares as a result of changes in Lenders’ Elected
Commitments) without the written consent of each Lender, (vi) waive or amend
Section 8.14, without the written consent of each Lender, (vii) release any
Guarantor, release any of the Collateral (other than as provided in
Section 11.09), or reduce the percentage set forth in Section 8.14 to less than
eighty percent (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 “Required Lenders” or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
under any other Loan Documents or make any determination or grant any consent
hereunder or any other Loan Documents, without the written consent of each
Lender (other than a Defaulting Lender); provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or the Issuing Bank hereunder or under any other Loan
Document without the prior written consent of the Administrative Agent or the
Issuing Bank, as the case may be.  Notwithstanding the foregoing, any supplement
to Schedule 7.01 (Corporate Organization Chart) or Schedule 7.14 (Subsidiaries)
shall be

 

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

 

Section 12.03                     Expenses, Indemnity; Damage Waiver.

 

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

 

(b)                                 THE BORROWER SHALL INDEMNIFY THE
ADMINISTRATIVE AGENT, THE ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY
OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”)
AGAINST, AND 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 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, THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT OR ANY ENFORCEMENT OR
COLLECTION ACTIONS IN CONNECTION THEREWITH INCLUDING REASONABLE ATTORNEYS’ FEES
AND SETTLEMENT COSTS, (ii) THE FAILURE OF BORROWER OR ANY OF THE GUARANTORS 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 BORROWER OR ANY OF THE GUARANTORS SET
FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR
CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF
CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION,
(1) ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER
OF CREDIT IF THE

 

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DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
THE TERMS OF SUCH LETTER OF CREDIT, OR (2) THE PAYMENT OF A DRAWING UNDER ANY
LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH,
(v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS
OF THE BORROWER AND THE GUARANTORS BY THE BORROWER AND THE GUARANTORS, (vii) ANY
ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO
THE BORROWER OR ANY OF THE GUARANTORS 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 THE
GUARANTORS WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OF THE
GUARANTORS, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY OF THE GUARANTORS 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 THE GUARANTORS OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS
MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF
THE GUARANTORS, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE
BORROWER OR ANY OF THE GUARANTORS, 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 the Administrative Agent or the
Issuing Bank under Section 12.03(a) or Section 12.03(b), each Lender severally
agrees to pay to the Administrative Agent or the Issuing Bank, as the case may
be, such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent or the Issuing Bank in its capacity as
such.

 

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

 

(e)                                  All amounts due under this Section 12.03
shall be payable not later than ten (10) days after written demand therefor.

 

Section 12.04                     Successors and Assigns.

 

(a)                                 The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby (including any Affiliate of the Issuing
Bank that issues any Letter of Credit), except that (i) the Borrower may not
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any attempted assignment or
transfer by Borrower without such consent shall be null and void) and (ii) no
Lender may assign or otherwise transfer its rights or obligations hereunder
except in accordance with this Section 12.04.  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
(including any Affiliate of the Issuing Bank that issues any Letter of Credit),
Participants (to the extent provided in Section 12.04(c)) and, to the extent
expressly contemplated hereby, the Related Parties of each of the Administrative
Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

 

(b)                                 (i)                                    
Subject to the conditions set forth in Section 12.04(b)(ii), any Lender may
assign to one or more assignees all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans
at the time owing to it) with the prior written consent (such consent not to be
unreasonably withheld or delayed) of:  (1) the Borrower, provided that no
consent of the Borrower shall be required for an assignment to (A) a Lender that
is not a Defaulting Lender, (B) an Affiliate of a Lender that is not a
Defaulting Lender, (C) an Approved Fund (other than an Approved Fund that is
administered by or managed by a Defaulting Lender or an Affiliate of a
Defaulting Lender) or (D) if an Event of Default has occurred and is continuing,
any other commercial bank with primary capital of not less than $250,000,000;
provided, further, that Borrower’s failure to respond to a Lender’s request for
consent to an assignment within five (5) Business Days of such request shall be
deemed to constitute Borrower’s written consent to such request; and (2) the
Administrative Agent (such consent not to be unreasonably withheld or delayed),
provided that no such consent of the Administrative Agent shall be required for
an assignment to an assignee that is a Lender that is not a Defaulting Lender
immediately prior to giving effect to such assignment.

 

(ii)                                  Assignments shall be subject to the
following additional conditions:  (1) except in the case of an assignment to a
Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender’s Commitment, the amount of the Commitment of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $2,500,000 (which minimum amount
may be comprised of concurrent assignments from more than one Lender), and the
Commitments of any assigning Lender remaining a party hereto after giving effect
to the assignment shall be at least $2,500,000, unless, in each case, the
Borrower and the Administrative Agent otherwise consents, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;  (2) 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; (3) the

 

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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; (4) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire and shall deliver notice of
the Assignment and Assumption to the Borrower; and (5) in the case of an
assignment to a CLO, the assigning Lender shall retain the sole right to approve
any amendment, modification or waiver of any provision of this Agreement,
provided that the Assignment and Assumption between such Lender and such CLO may
provide that such Lender will not, without the consent of such CLO, agree to any
amendment, modification or waiver described in the first proviso to
Section 12.02 that affects such CLO.

 

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

 

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

 

(v)                                 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 or the
Issuing Bank, sell participations to one or more banks or other entities (a
“Participant”) in all or a portion of such Lender’s rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans owing
to it); provided that (1) such Lender’s obligations under this Agreement shall
remain unchanged, (2) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (3) the Borrower, the
Administrative Agent, the Issuing Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement.  Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall

 

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retain the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such Participant.  In
addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03.  Subject to Section 12.04(c)(ii), the Borrower
agrees that each Participant shall be entitled to the benefits of Section 5.01,
Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(b).  To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.

 

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

 

(d)                                 Any Lender may at any time pledge or assign
a security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank or other central bank, and this
Section 12.04 shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.

 

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

 

Section 12.05                     Survival; Revival; Reinstatement.

 

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

 

(b)                                 To the extent that any payments on the
Obligations or proceeds of any Collateral are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to

 

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a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Obligations so
satisfied shall be revived and continued 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 or the Lenders
to effect such reinstatement.

 

Section 12.06                     Counterparts; Integration; Effectiveness.

 

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

 

(b)                                 This Agreement, the other Loan Documents and
the Fee Letter 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)                                  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, facsimile,
photocopy or by sending a scanned copy by electronic mail shall be effective as
delivery of a manually executed counterpart of this Agreement.

 

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

 

Section 12.08                     Right of Setoff.  If an Event of Default shall
have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other obligations (of
whatsoever kind, including, without limitation obligations under Swap
Agreements) at any time owing by such Lender or Affiliate to or for the credit
or the account of the Borrower or any Restricted Subsidiary against any of and
all the obligations of the Borrower or any Restricted Subsidiary 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 12.09                     GOVERNING LAW; JURISDICTION; CONSENT TO
SERVICE OF PROCESS.

 

(a)                                 THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO ANY CHOICE-OF-LAW PROVISIONS THAT WOULD REQUIRE THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION; PROVIDED, TO THE EXTENT ANY OF
THE SECURITY INSTRUMENTS RECITE THAT THEY ARE GOVERNED BY THE LAW OF ANOTHER
JURISDICTION, OR ANY ACTION OR EVENT TAKEN THEREUNDER (SUCH AS FORECLOSURE OF
THE MORTGAGED PROPERTY) REQUIRES APPLICATION OF OR COMPLIANCE WITH THE LAW OF
ANOTHER JURISDICTION, SUCH PROVISIONS AND CONCEPTS SHALL APPLY.

 

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

 

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

 

(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 OR COUNSEL
FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT
SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED
IN THIS SECTION 12.09.

 

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

 

Section 12.11                     Confidentiality.  Each of the Administrative
Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality
of the Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates’ directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to 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; provided, unless
prohibited by applicable laws or regulations, Borrower has been given reasonable
advance notice thereof and been afforded an opportunity to limit or protest the
disclosure, (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 its obligations,
(g) with the consent of the Borrower or (h) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section 12.11 or (ii) becomes available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis from a source other than the
Borrower.  For the purposes of this Section 12.11, “Information” means all
information received from the Borrower or any Subsidiary relating to the
Borrower or any Subsidiary and their businesses, other than any such information
that is available to the Administrative Agent, the Issuing Bank or any Lender on
a nonconfidential basis prior to disclosure by the Borrower or a Subsidiary. 
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.  Notwithstanding anything herein to the contrary, any
party hereto (and each employee, representative or other agent of such party)
may disclose without limitation of any kind, any information with respect to the
“tax treatment” and “tax structure” (in each case, within the meaning of
Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby
and all materials of any kind (including opinions or other tax analyses) that
are provided to that party relating to such tax treatment or tax structure;
provided that with respect to any document or similar item that in either case
contains information concerning the tax treatment or tax structure of the
transactions, as well as other information, this sentence shall only apply to
such portions of the document or similar item that relate to the tax treatment
or tax structure of the transactions contemplated hereby.

 

Section 12.12                     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 AND CONDITIONS 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 MAY RESULT, SUBJECT TO THE TERMS HEREOF AND

 

103

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THEREOF AND APPLICABLE LAW, 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 12.13                     No Third Party Beneficiaries.  This Agreement,
the other Loan Documents, and the agreement of the Lenders to make Loans and the
Issuing Bank to issue, amend, renew or extend Letters of Credit hereunder are
solely for the benefit of the Borrower, and no other Person (including, without
limitation, any Subsidiary of the Borrower, any obligor, contractor,
subcontractor, supplier or materialmen) shall have any rights, claims, remedies
or privileges hereunder or under any other Loan Document against the
Administrative Agent, the Issuing Bank or any Lender for any reason whatsoever. 
There are no third party beneficiaries.

 

Section 12.14                     Collateral Matters; Swap Agreements.  The
benefit of the Security Instruments and of the provisions of this Agreement
relating to any Collateral securing the Obligations shall also extend to and be
available to (in addition to Lenders and their Affiliates), any Person which was
a 2013 Credit Agreement Lender or an Affiliate of a 2013 Credit Agreement Lender
or a Lender or Affiliate of a Lender, when it entered into any Swap Agreement
with any Loan Party; provided that, notwithstanding anything to the contrary,
with respect to any Loan Party that is not an Eligible Contract Participant, the
Obligations of such Loan Party shall exclude any Excluded Swap Obligations of
such Loan Party.  No Approved Counterparty shall have any voting rights under
any Loan Document as a result of the existence of obligations owed to it under
any such Swap Agreements.

 

Section 12.15                     US Patriot Act Notice.  Each Lender hereby
notifies each Loan Party that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
“Patriot Act”), it is required to obtain, verify and record information that
identifies each Loan Party, which information includes the name and address of
such Loan Party and other information that will allow such Lender to identify
such Loan Party in accordance with the Patriot Act.

 

Section 12.16                     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
U.S. and the State of New York or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows:  (a) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum non-usurious 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
Debt (or, to the extent that the principal amount of the Debt shall have been or
would thereby be paid in full, refunded by such Lender to the Borrower); and
(b) in the event that the maturity of the Notes is accelerated by reason of an
election of the holder thereof resulting from any Event of Default under this
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to any
Lender may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in this Agreement or otherwise
shall be canceled automatically by such Lender as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by such
Lender on the

 

104

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principal amount of the Debt (or, to the extent that the principal amount of the
Debt 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 (a) 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 12.16 and (b) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Lender would
be less than the amount of interest payable to such Lender computed at the
Highest Lawful Rate applicable to such Lender, then the amount of interest
payable to such Lender in respect of such subsequent interest computation period
shall continue to be computed at the Highest Lawful Rate applicable to such
Lender until the total amount of interest payable to such Lender shall equal the
total amount of interest which would have been payable to such Lender if the
total amount of interest had been computed without giving effect to this
Section 12.16.

 

Section 12.17                     Termination and Release.  To the extent that a
Loan Document provides for the termination of such Loan Document or the release
of any Lien thereunder upon the payment in full of the Obligations, or words of
similar effect, notwithstanding anything to the contrary in such Loan Document,
such Loan Document shall terminate and the Administrative Agent shall release
such Liens upon payment in full of the Obligations other than contingent
Obligations which are intended to survive the termination of such Loan Document
and with respect to which the contingency giving rise to such Obligation has not
occurred.

 

Section 12.18                     Release.  As additional consideration for the
execution, delivery and performance of this Agreement by the parties hereto and
to induce the Administrative Agent and the Lenders to enter into this Agreement,
the Borrower warrants and represents to the Administrative Agent and the Lenders
that no facts, events, statuses or conditions exist or have existed which,
either now or with the passage of time or giving of notice, or both, constitute
or will constitute a basis for any claim or cause of action against the
Administrative Agent or any Original Lender or any 2013 Credit Agreement Lender
or any defense to (i) the payment of Obligations under the Notes and/or the Loan
Documents, or (ii) the performance of any of their respective obligations with
respect to the Notes and/or the Loan Documents.  In the event any such facts,
events, statuses or conditions exist or have existed, Borrower unconditionally
and irrevocably hereby RELEASES, RELINQUISHES and forever DISCHARGES
Administrative Agent, the Original Lenders and the 2013 Credit Agreement
Lenders, as well as their predecessors, successors, assigns and Related Parties,
of and from any and all claims, demands, actions and causes of action of any and
every kind or character, past or present, which any Loan Party may have against
any of them or their predecessors, successors, assigns and Related Parties
arising out of or with respect to (a) any right or power to bring any claim for
usury or to pursue any cause of action based on any claim of usury, and (b) any
and all transactions relating to the Loan Documents occurring prior to the
Effective Date hereof, including any loss, cost or damage, of any kind or
character, arising out of or in any way connected with or in any way resulting
from the acts, actions or omissions of any of them, and their predecessors,
successors, assigns and Related Parties, including any breach of fiduciary duty,
breach of any duty of fair dealing, breach of confidence, breach of funding
commitment, undue influence, duress, economic coercion, conflict of interest,
negligence, bad faith, malpractice, intentional or negligent infliction of
mental distress, tortious interference with contractual relations, tortious
interference with corporate governance or prospective business advantage, breach
of contract, deceptive trade practices, libel, slander or conspiracy, but in
each case only to the extent permitted by applicable law.

 

Section 12.19                     Amendment and Restatement.  The parties hereto
agree that this Agreement amends, restates and rearranges the 2013 Credit
Agreement in its entirety and that all Loans outstanding

 

105

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under the 2013 Credit Agreement on the Effective Date shall be and be deemed to
be Loans (of the same Type and having the same Interest Periods) made and
Letters of Credit issued under this Agreement, and shall thereafter be evidenced
and governed by the terms and conditions of this Agreement. The Lenders are
subrogated to the rights of the 2013 Lenders under the 2013 Credit Agreement to
the extent of the Obligations renewed and rearranged hereby.  All Liens created
and existing in connection with the 2013 Credit Agreement, except as otherwise
provided in this Agreement with respect to Excluded Swap Obligations, shall
continue in force and effect to secure the Obligations of the Borrower to the
Lenders pursuant to the Notes and this Agreement, and Borrower and each other
Loan Party hereby ratifies, adopts and confirms all such prior Liens.

 

Section 12.20                     Termination of Commitment under 2013 Credit
Agreement.  As of the Effective Date, the “Commitments” as defined in the 2013
Credit Agreement are hereby terminated and the Administrative Agent and the
Lenders hereby waive any right to receive prior notice of such termination. 
Each Lender agrees upon the Effective Date to return to the Borrower within 30
days all “Notes” as defined in the 2013 Credit Agreement which were delivered by
the Borrower and Subsidiary Former Borrowers, and, to the extent such Notes are
not returned within such time period, the Borrower shall be entitled to receive
a lost note affidavit containing customary indemnities in favor of the Borrower
and Subsidiary Former Borrowers.

 

Section 12.21                     No Novation, Etc.. To the extent of the
Commitment outstanding under the 2013 Credit Agreement in the amount of
$325,000,000, nothing contained herein shall be deemed a new Commitment and, to
the extent of the Loans under the 2013 Credit Agreement, no Loan hereunder shall
be deemed a novation of or a repayment or new advance of any obligation of the
Borrower thereunder.  Only to the extent of an increase in the Commitment over
that amount shall there be deemed to be a new advance by the Lenders to the
Borrower under this Agreement.  The Obligations owing under the 2013 Credit
Agreement are renewed, rearranged, extended and carried forward by this
Agreement and all of the Liens securing the “Obligations” as defined in the 2013
Credit Agreement (other than Excluded Swap Obligations) are carried forward and
secure, without interruption or loss or priority, the Obligations under this
Agreement.

 

Section 12.22                     Keepwell.

 

(a)                                 Borrower is a Qualified ECP Credit Party and
hereby guarantees the payment and performance of all Obligations of each Loan
Party (other than the Borrower) and absolutely, unconditionally and irrevocably
undertakes to provide such funds or other support as may be needed from time to
time by each Benefitting Loan Party in order for such Benefitting Loan Party to
honor its obligations (without giving effect to Section 12.22(b)) under the
Guaranty and any other Security Instrument including obligations with respect to
Swap Agreements (provided, however, that the Borrower shall only be liable under
this Section 12.22(a) for the maximum amount of such liability that can be
hereby incurred without rendering its obligations under this Section 12.22(a),
or otherwise under this Agreement or any Loan Document, as it relates to such
Benefitting Loan Party, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount). The
obligations of the Borrower under this Section 12.22(a) shall remain in full
force and effect until all Obligations are paid in full to the Lenders, the
Administrative Agent and all Secured Swap Providers, and all of the Lenders’
Commitments are terminated. The Borrower intends that this
Section 12.22(a) constitute, and this Section 12.22(a) shall be deemed to
constitute, a “keepwell, support, or other agreement” for the benefit of each
Benefitting Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the
Commodity Exchange Act.

 

106

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(b)                                 Notwithstanding any other provisions of this
Agreement or any other Loan Document, Obligations guaranteed by any Loan Party,
or secured by the grant of any Lien by any Loan Party under any Security
Instrument, shall exclude all Excluded Swap Obligations with respect to such
Loan Party.

 

[Signatures Begin Next Page]

 

107

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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:

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

 

By:

/s/ Michael G. Long

 

 

Michael G. Long

 

 

Executive Vice President, Chief Financial Officer and Secretary

 

 

 

OTHER LOAN PARTIES:

 

 

 

 

 

 

SEP HOLDINGS III, LLC,

 

a Delaware limited liability company

 

 

 

SN MARQUIS LLC,

 

a Delaware limited liability company

 

 

 

SN COTULLA ASSETS, LLC,

 

a Texas limited liability company

 

 

 

SN OPERATING, LLC,

 

a Texas limited liability company

 

 

 

SN TMS, LLC,

 

a Delaware limited liability company

 

 

 

SN CATARINA, LLC,

 

a Delaware limited liability company

 

 

 

 

 

 

By:

/s/ Michael G. Long

 

 

Michael G. Long

 

 

Executive Vice President — Chief Financial Officer

 

Signature Page 1 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

ADMINISTRATIVE AGENT:

 

 

 

ROYAL BANK OF CANADA,

 

as Administrative Agent

 

 

 

 

 

By:

/s/ Ann Hurley

 

Name:

Ann Hurley

 

Title:

Manager, Agency

 

Signature Page 2 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

LENDERS:

 

 

 

ISSUING BANK AND LENDER:

 

 

 

ROYAL BANK OF CANADA,

 

as Issuing Bank and a Lender

 

 

 

 

 

 

By:

/s/ Evans Swann, Jr.

 

Name:

Evans Swann, Jr.

 

Title:

Authorized Signatory

 

Signature Page 3 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

LENDERS:

 

 

 

CAPITAL ONE, NATIONAL ASSOCIATION,

 

as a Lender

 

 

 

 

 

By:

/s/ Michael Higgins

 

Name:

Michael Higgins

 

Title:

Director

 

Signature Page 4 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

COMPASS BANK,

 

as a Lender

 

 

 

 

 

By:

/s/ Ian Payne

 

Name:

Ian Payne

 

Title:

Vice President

 

Signature Page 5 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

SUNTRUST BANK,

 

as a Lender

 

 

 

 

 

 

 

By:

/s/ John Kovarik

 

Name:

John Kovarik

 

Title:

Vice President

 

Signature Page 6 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

 

as a Lender

 

 

 

 

 

By:

/s/ Michael Spaight

 

Name:

Michael Spaight

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

By:

/s/ Samuel Miller

 

Name:

Samuel Miller

 

Title:

Authorized Signatory

 

Signature Page 7 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

BRANCH BANKING AND TRUST COMPANY,

 

as a Lender

 

 

 

 

By:

/s/ Ryan K. Michael

 

Name:

Ryan K. Michael

 

Title:

Senior Vice President

 

Signature Page 8 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

ING CAPITAL LLC,

 

as a Lender

 

 

 

 

 

 

By:

/s/ Josh Strong

 

Name:

Josh Strong

 

Title:

Director

 

 

 

 

By:

/s/ Charles Hall

 

Name:

Charles Hall

 

Title:

Managing Director

 

Signature Page 9 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

UNION BANK, N.A.,

 

as a Lender

 

 

 

By:

/s/ Damien G. Meiburger

 

Name:

Damien G. Meiburger

 

Title:

Senior Vice President

 

Signature Page 10 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

SOCIÉTÉ GENÉRALÉ,

 

as a Lender

 

 

 

By:

/s/ Elena Robciuc

 

Name:

Elena Robciuc

 

Title:

Managing Director

 

Signature Page 11 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

IBERIABANK,

 

as a Lender

 

 

 

 

By:

/s/ W. Bryan Chapman

 

Name:

W. Bryan Chapman

 

Title:

Executive Vice President

 

Signature Page 12 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

BMO HARRIS BANK, N.A.,

 

as a Lender

 

 

 

 

By:

/s/ James V. Ducote

 

Name:

James V. Ducote

 

Title:

Managing Director

 

Signature Page 13 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK,

 

as a Lender

 

 

 

By:

/s/ Mark Roche

 

Name:

Mark Roche

 

Title:

Managing Director

 

 

 

 

 

 

 

By:

/s/ Michael D. Willis

 

Name:

Michael D. Willis

 

Title:

Managing Director

 

Signature Page 14 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

SUMITOMO MITSUI BANKING CORPORATION,

 

as a Lender

 

 

 

 

 

By:

/s/ James D. Weinstein

 

Name:

James D. Weinstein

 

Title:

Managing Director

 

Signature Page 15 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

U.S. BANK NATIONAL ASSOCIATION,

 

as a Lender

 

 

 

 

By:

/s/ Justin M. Alexander

 

Name:

Justin M. Alexander

 

Title:

Senior Vice President

 

Signature Page 16 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

COMERICA BANK,

 

as a Lender

 

 

 

 

 

 

By:

/s/ Jeffery Treadway

 

Name:

Jeffery Treadway

 

Title:

Senior Vice President

 

Signature Page 17 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

 

FIFTH THIRD BANK,

 

as a Lender

 

 

 

 

By:

/s/ Byron L. Cooley

 

Name:

Byron L. Cooley

 

Title:

Executive Director

 

Signature Page 18 to Second Amended

and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 

ANNEX I

 

LIST OF MAXIMUM CREDIT AMOUNTS

 

Name of Lender

 

Applicable Percentage

 

Elected Commitment

 

Maximum Credit Amount

 

Royal Bank of Canada

 

10.196078

%

$

43,333,333.34

 

$

152,941,176.45

 

Capital One, National Association

 

10.196078

%

$

43,333,333.34

 

$

152,941,176.45

 

Compass Bank

 

8.921569

%

$

37,916,666.67

 

$

133,823,529.42

 

SunTrust Bank

 

8.921569

%

$

37,916,666.67

 

$

133,823,529.42

 

Credit Suisse AG, Cayman Islands Branch

 

6.372549

%

$

27,083,333.33

 

$

95,588,235.29

 

Branch Banking and Trust Company

 

6.372549

%

$

27,083,333.33

 

$

95,588,235.29

 

ING Capital LLC

 

6.372549

%

$

27,083,333.33

 

$

95,588,235.29

 

Union Bank, National Association

 

6.372549

%

$

27,083,333.33

 

$

95,588,235.29

 

Sociètè Genèralè

 

6.372549

%

$

27,083,333.33

 

$

95,588,235.29

 

IBERIABANK

 

6.372549

%

$

27,083,333.33

 

$

95,588,235.29

 

BMO Harris Bank, N.A.

 

4.705882

%

$

20,000,000.00

 

$

70,588,235.30

 

Credit Agricole Corporate and Investment Bank

 

4.705882

%

$

20,000,000.00

 

$

70,588,235.30

 

Sumitomo Mitsui Banking Corporation

 

3.529412

%

$

15,000,000.00

 

$

52,941,176.48

 

U.S. Bank National Association,

 

3.529412

%

$

15,000,000.00

 

$

52,941,176.48

 

Comerica Bank

 

3.529412

%

$

15,000,000.00

 

$

52,941,176.48

 

Fifth Third Bank

 

3.529412

%

$

15,000,000.00

 

$

52,941,176.48

 

TOTAL

 

100

%

$

425,000,000.00

 

$

1,500,000,000.00

 

 

Annex I-1

--------------------------------------------------------------------------------

 

EXHIBIT A

 

FORM OF NOTE

 

$[                  ]

[                                ], [          ]

 

FOR VALUE RECEIVED, SANCHEZ ENERGY CORPORATION, a Delaware corporation (the
“Borrower”), hereby promises to pay to the order of
[                                  ] (the “Lender”), the lesser of
(i) [                              ] DOLLARS ($[                        ]) and
(ii) the aggregate unpaid Loans made by the Lender pursuant to the Credit
Agreement, as hereinafter defined, in lawful money of the U.S. and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement referred to below.  All capitalized terms used herein
and not otherwise defined that are defined in the Credit Agreement have the
meanings as defined in the Credit Agreement.

 

The Borrower promises to pay interest on the unpaid principal amount of this
Note outstanding from time to time from the date hereof until such principal
amount is paid in full, at the place and at such interest rates as are specified
in the Credit Agreement.

 

This Note is one of the Notes referred to in, and the Note and all provisions
herein are entitled to the benefits and are subject to the terms of, the Second
Amended and Restated Credit Agreement, dated as of June 30, 2014, among the
Borrower, Royal Bank of Canada, as Administrative Agent, and the other agents
and lenders signatory thereto (including the Lender) (as the same may be amended
or otherwise modified from time to time, the “Credit Agreement”).

 

The obligations of the Borrower hereunder are secured by the Security Documents
(subject to the limitations contained in the Security Documents and the Credit
Agreement).  The Credit Agreement, among other things, (a) provides for the
making of advances by the Lender and other Lenders to the Borrower from time to
time, and (b) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events, for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified, and for limitations on the amount of interest paid such that no
provision of the Credit Agreement or this Note shall require the payment or
permit the collection of interest in excess of interest accruing at the Highest
Lawful Rate.

 

The Borrower waives grace, demand, presentment for payment, notice of dishonor
or default, notice of intent to accelerate or acceleration, protest and notice
of protest and diligence in collecting and bringing of suit against any party
hereto.

 

Exhibit A-1

--------------------------------------------------------------------------------

 

This Note shall be governed by and construed under the laws of the State of New
York and the applicable laws of the U.S.

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit A-2

--------------------------------------------------------------------------------

 

EXHIBIT B

 

FORM OF BORROWING REQUEST

 

 

[                            ], 20[    ]

 

SANCHEZ ENERGY CORPORATION, a Delaware corporation (the “Borrower”), pursuant to
Section 2.03 of the Second Amended and Restated Credit Agreement dated as of
June 30, 2014 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”), among the Borrower, Royal Bank
of Canada, as Administrative Agent and the lenders (the “Lenders”) which are or
become parties thereto (unless otherwise defined herein, each capitalized term
used herein is defined in the Credit Agreement), hereby requests a Borrowing as
follows:

 

(i)                                     Aggregate amount of the requested
Borrowing is $[                        ];

 

(ii)                                  Date of such Borrowing is
[                        ], 20[      ];

 

(iii)                               Requested Borrowing is to be [an ABR
Borrowing] [a Eurodollar Borrowing];

 

(iv)                              In the case of a Eurodollar Borrowing, the
initial Interest Period applicable thereto is [                        ];

 

(v)                                 The amount equal to the least of (x) the
Aggregate Maximum Credit Amount, (y) the currently effective Borrowing Base in
effect on the date hereof and (z) the Aggregate Elected Commitment Amount is
$[                        ];

 

(vi)                              Total Credit Exposures on the date hereof
(i.e., outstanding principal amount of Loans and total LC Exposure) is
$[                        ]; and

 

(vii)                           Pro forma total Credit Exposures (giving effect
to the requested Borrowing) is $[                        ]; and

 

(viii)                        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 of the Credit Agreement, is as follows:

 

[                                                                                                                                           
]

 

[                                                                                                                                           
]

 

Exhibit B-1

--------------------------------------------------------------------------------

 

The undersigned certifies that he/she is the [                        ] of the
Borrower, and that as such he/she is authorized to execute this certificate on
behalf of the Borrower.  The undersigned further certifies, represents and
warrants on behalf of the Borrower that (a) the Borrower is entitled to receive
the requested Borrowing under the terms and conditions of the Credit Agreement,
(b) that no Default or Event of Default exists, and (c) after giving effect to
the Borrowing request made herein the total Credit Exposure will not exceed the
least of (x) the Aggregate Maximum Credit Amount, (y) the Borrowing Base and
(z) the Aggregate Elected Commitment Amount, in each case, as now in effect.

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit B-2

--------------------------------------------------------------------------------

 

EXHIBIT C

 

FORM OF INTEREST ELECTION REQUEST

 

 

[                        ], 200[      ]

 

SANCHEZ ENERGY CORPORATION, a Delaware corporation (the “Borrower”), pursuant to
Section 2.04 of the Second Amended and Restated Credit Agreement dated as of
June 30, 2014 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”), among the Borrower, Royal Bank
of Canada, as Administrative Agent and the lenders (the “Lenders”) which are or
become parties thereto (unless otherwise defined herein, each capitalized term
used herein is defined in the Credit Agreement), hereby makes an Interest
Election Request as follows:

 

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

 

(ii)                                  The effective date of the election made
pursuant to this Interest Election Request is [                        ],
20[      ];[and]

 

(iii)                               The resulting Borrowing is to be [an ABR
Borrowing] [a Eurodollar Borrowing][; and]

 

(iv)                              [If the resulting Borrowing is a Eurodollar
Borrowing] The Interest Period applicable to the resulting Borrowing after
giving effect to such election is [                        ]].

 

The undersigned certifies that he/she is the [                        ] of the
Borrower, and that as such he/she is authorized to execute this certificate on
behalf of the Borrower.  The undersigned further certifies, represents and
warrants on behalf of the Borrower that the Borrower is entitled to receive the
requested continuation or conversion under the terms and conditions of the
Credit Agreement.

 

 

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit C-1

--------------------------------------------------------------------------------

 

EXHIBIT D

 

FORM OF
COMPLIANCE CERTIFICATE

 

The undersigned hereby certifies that he/she is the [                        ]
of SANCHEZ ENERGY CORPORATION, a Delaware corporation (the “Borrower”), and that
as such he/she is authorized to execute this certificate on behalf of the
Borrower.  With reference to the Second Amended and Restated Credit Agreement
dated as of June 30, 2014 (together with all amendments, restatements,
supplements or other modifications thereto being the “Agreement”), among the
Borrower, Royal Bank of Canada, as Administrative Agent and the lenders (the
“Lenders”) which are or become a party thereto, the undersigned represents and
warrants as follows (each capitalized term used herein having the same meaning
given to it in the Agreement unless otherwise specified), to my knowledge after
reasonable investigation:

 

(a)                                 The representations and warranties of the
Borrower contained in ARTICLE VII of the Agreement and in the Loan Documents and
otherwise made in writing by or on behalf of the Borrower pursuant to the
Agreement and the Loan Documents were true and correct when made, and are
repeated at and as of the time of delivery hereof and are true and correct in
all material respects at and as of the time of delivery hereof, except to the
extent such representations and warranties are expressly limited to an earlier
date or the Required Lenders have expressly consented in writing to the contrary
[and except to the extent attributable to [the breach[es] or non-compliance[s]
described under clause (b) below][,][and][the event described in clause
(c) below][and][the Default[s] or Event[s] of Default described in clause
(d) below].

 

(b)                                 The Borrower has performed and complied with
all agreements and conditions contained in the Agreement and in the Loan
Documents required to be performed or complied with by the Borrower prior to or
at the time of delivery hereof [or specify default and describe].

 

(c)                                  Since March 31, 2014, no change has
occurred, either in any case or in the aggregate, in the condition, financial or
otherwise, of the Borrower or any Subsidiary which could reasonably be expected
to have a Material Adverse Effect [or specify event].

 

(d)                                 There exists no Default or Event of Default
[or specify Default and describe].

 

(e)                                  Borrower has timely paid all royalties and
complied with the terms of the HIL Lease, or caused SN Catarina (or any
Affiliate successor thereto as lessee under the HIL Lease) to timely pay all
royalties and comply with the terms of the HIL Lease [or describe any
exception].

 

(f)                                   Attached hereto as Exhibit A are the
detailed computations necessary to determine whether the Borrower is in
compliance with Section 8.13(a) and Section 9.01 as of the end of the [fiscal
quarter][fiscal year] ending [                        ].

 

Exhibit D-1

--------------------------------------------------------------------------------

 

EXECUTED AND DELIVERED this [            ] day of [                        ],
20[    ].

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit D-2

--------------------------------------------------------------------------------

 

FINANCIAL COVENANT CALCULATION WORKSHEET

 

Summary of Financial Ratios

Section 9.01 Financial Covenants

 

 

 

 

 

 

 

In Compliance?

 

 

 

Current Ratio

 

min. 1.0 to 1.0

 

 

 

 

 

 

 

Total Leverage Ratio

 

max. 4.0 to 1.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Current Assets (including unused Commitments to the extent that the
Borrower is permitted to borrow such amount under the terms of the Agreement,
but excluding non-cash assets under FAS 133)

 

 

 

$

 

 

 

 

Consolidated Current Liabilities (excluding outstanding Obligations to the
extent included in consolidated current liabilities, non-cash obligations under
FAS 133 and any accrual related to non-cash compensation arising from any grant
of stock, stock options or other equity based awards)

 

=

 

$

 

 

=

 

 

 

 

 

 

 

 

 

Total Leverage Ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt (minus Unrestricted Cash)

 

 

 

$

 

 

 

 

Consolidated EBITDA [or Annualized Consolidated EBITDA through 9/30/15]

 

=

 

$

 

 

=

 

 

Exhibit D-3

--------------------------------------------------------------------------------

 

Section 8.13(a)

[Provide details of compliance/non-compliance]

 

Exhibit D-4

--------------------------------------------------------------------------------

 

Current Ratio

Section 9.01 Financial Covenants

 

Consolidated Current Assets

 

$

 

 

 

(+) Unused Commitments to the extent that the Borrower is permitted to borrow
such amount under the terms of the Agreement

 

$

 

 

 

(-) Non-cash assets under FAS 133

 

$

Total Consolidated Current Assets

 

$

 

 

 

Consolidated Current Liabilities

 

$

 

 

 

(-) Outstanding Obligations to the extent included in consolidated current
liabilities

 

$

 

 

 

(-)Non-cash obligations under FAS 133

 

$

 

 

 

(-) accrual related to non-cash compensation arising from any grant of stock,
stock options or other equity based awards

 

$

 

 

 

Total Consolidated Current Liabilities

 

$

 

 

 

Current Ratio

 

 

 

Exhibit D-5

--------------------------------------------------------------------------------

 

Total Leverage Coverage Ratio

Section 9.01 Financial Covenants

 

Debt (without duplication)

 

Q     20     

 

 

 

(a) all obligations of the Borrower and its Restricted Subsidiaries for borrowed
money or evidenced by bonds, bankers’ acceptances, debentures, notes or other
similar instruments

 

$

 

 

 

(b) all obligations of the Borrower and its Restricted Subsidiaries (whether
contingent or otherwise) in respect of letters of credit, surety or other bonds
and similar instruments

 

$

 

 

 

(c) all accounts payable and all accrued expenses, liabilities or other
obligations of Borrower and its Restricted Subsidiaries to pay the deferred
purchase price of Property or services excluding accounts payable incurred in
the ordinary course of business with respect to which no more than 90 days have
elapsed since the date of invoice

 

$

 

 

 

(d) all Capital Lease Obligations of the Borrower and its Restricted
Subsidiaries

 

$

 

 

 

(e) all obligations of the Borrower and its Restricted Subsidiaries under
Synthetic Leases

 

$

 

 

 

(f) all Debt of others secured by a Lien on any Property of Borrower and its
Restricted Subsidiaries, whether or not such Debt is assumed by such Person

 

$

 

 

 

(g) all Debt of others guaranteed by the Borrower and its Restricted
Subsidiaries or in which such Person otherwise assures a creditor against loss
of the Debt (howsoever such assurance shall be made) to the extent of the lesser
of the amount of such Debt and the maximum stated amount of such guarantee or
assurance against loss

 

$

 

 

 

(h) all obligations or undertakings of the Borrower and its Restricted
Subsidiaries to maintain or cause to be maintained the financial position or
covenants of others or to purchase the Debt or Property of others, in each case,
intended as a means of credit enhancement for creditors of such others and not
as a purchase and sale agreement

 

$

 

 

 

(i) all obligations the Borrower and its Restricted Subsidiaries 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) any Debt of a partnership for which Borrower and its Restricted Subsidiaries
is liable either by agreement, by operation of law or by a Governmental
Requirement but only to the extent of such liability

 

$

 

 

 

(k) Disqualified Capital Stock

 

$

 

 

 

(l) the undischarged balance of any production payment created by Borrower or
its Restricted Subsidiaries or for the creation of which such Person directly or
indirectly received payment

 

$

 

 

 

(m) any deferred put premiums owed by Borrower or its Restricted Subsidiaries
under a Swap Agreement

 

$

 

 

 

Total Debt

 

$

 

Exhibit D-6

--------------------------------------------------------------------------------

 

Consolidated EBITDA

 

Q     20

 

 

 

Consolidated Net Income (the following to be added, without duplication and to
the extent deducted (and not added back) in calculating such Consolidated Net
Income)

 

$

 

 

 

(+) Consolidated Net Interest Expense

 

$

 

 

 

(+) Consolidated Income Tax Expense

 

$

 

 

 

(+) consolidated depletion, depreciation and amortization expense of the
Borrower and its Restricted Subsidiaries

 

$

 

 

 

(+) other non-cash charges to the extent not included in the foregoing

 

$

 

 

 

(+) fees and expenses expensed and paid in cash in connection with (1) the
public offering of Borrower’s Equity Interests, (2) the 2012 Credit Agreement,
(3) the 2013 Credit Agreement, (4) the Senior Unsecured Notes and (5) this
Agreement

 

$

 

 

 

(+) Unrestricted Person Cash Dividends

 

$

 

 

 

(-) all-non-cash income to the extent included in determining Consolidated Net
Income

 

$

 

 

 

First Testing Period Pro Forma Consolidated EBITDA

 

$

 

 

 

For the Rolling Period ending on 9/ 30/14
First Testing Period Pro Forma Consolidated EBITDA X 4

 

$

 

 

 

For the Rolling Period ending on 12/ 31/14
First Testing Period Pro Forma Consolidated EBITDA

 

$

 

 

 

(+) Consolidated EBITDA for the 1 quarter ending 12/31/14

 

$

 

 

 

Sum:

 

$

 

 

 

Multiply sum by 2

 

$

 

 

 

For the Rolling Period ending on 3/ 31/15
First Testing Period Pro Forma Consolidated EBITDA

 

$

 

 

 

(+) Consolidated EBITDA for 2 quarters ending 3/31/15

 

$

 

 

 

Sum:

 

$

 

 

 

Multiply sum by 4/3

 

$

 

 

 

For the Rolling Period ending 6/30/15
First Testing Period Pro Forma Consolidated EBITDA

 

$

 

 

 

(+) Consolidated EBITDA for 3 quarters ending 6/30/15

 

$

 

 

 

Sum:

 

$

 

 

 

For Rolling Periods ending on and after 9/30/15
Consolidated EBITDA for prior 4 quarters

 

$

 

 

 

Total Leverage Ratio

 

 

 

Exhibit D-7

--------------------------------------------------------------------------------

 

EXHIBIT E

 

FORM OF ASSIGNMENT AND ASSUMPTION

 

Reference is made to the Second Amended and Restated Credit Agreement, dated as
of June 30, 2014 (as amended, restated, supplemented or otherwise modified from
time to time and in effect on the date hereof, the “Credit Agreement”), among
SANCHEZ ENERGY CORPORATION, a Delaware corporation (the “Borrower”), the Lenders
named therein and Royal Bank of Canada, as Administrative Agent for the
Lenders.  Capitalized terms defined in the Credit Agreement are used herein with
the same meanings.

 

The Assignor named below hereby sells and assigns, without recourse, to the
Assignee named below, and the Assignee hereby purchases and assumes, without
recourse, from the Assignor, effective as of the Assignment Date set forth
below, the interests set forth below (the “Assigned Interest”) in the Assignor’s
rights and obligations under the Credit Agreement, including, without
limitation, the interests set forth below in the Elected Commitment of the
Assignor on the Assignment Date and Loans owing to the Assignor which are
outstanding on the Assignment Date, together with the participations in Letters
of Credit and LC Disbursements held by the Assignor on the Assignment Date, but
excluding accrued interest and fees to and excluding the Assignment Date.  The
Assignee hereby acknowledges receipt of a copy of the Credit Agreement.  From
and after the Assignment Date (i) the Assignee shall be a party to and be bound
by the provisions of the Credit Agreement and, to the extent of the Assigned
Interest, have the rights and obligations of a Lender thereunder and (ii) the
Assignor shall, to the extent of the Assigned Interest, relinquish its rights
and be released from its obligations under the Credit Agreement.

 

This Assignment and Assumption is being delivered to the Administrative Agent
(with a copy to the Borrower) together with (i) if the Assignee is a Foreign
Lender, any documentation required to be delivered by the Assignee pursuant to
Section 5.03 of the Credit Agreement, duly completed and executed by the
Assignee, and (ii) if the Assignee is not already a Lender under the Credit
Agreement, an Administrative Questionnaire in the form supplied by the
Administrative Agent, duly completed by the Assignee.  The [Assignee/Assignor]
shall pay the fee payable to the Administrative Agent pursuant to
Section 12.04(b) of the Credit Agreement.

 

This Assignment and Assumption shall be governed by and construed in accordance
with the laws of the State of New York.

 

Date of Assignment:

Legal Name of Assignor:

Legal Name of Assignee:

Assignee’s Address for Notices:

Effective Date of Assignment (“Assignment Date”):

 

Exhibit E-1

--------------------------------------------------------------------------------

 

Facility

 

Principal Amount of
Maximum Credit
Amount Assigned

 

Principal Amount of
Elected Commitment
Assigned

 

Percentage Assigned of
Maximum Credit Amount
and Elected Commitment
Amount (set forth, to at
least 8 decimals)

 

Loans:

 

 

 

 

 

 

 

 

The terms set forth above and on the reverse side hereof are hereby agreed to:

 

 

[Name of Assignor], as Assignor

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

[Name of Assignee], as Assignee

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit E-2

--------------------------------------------------------------------------------

 

The undersigned hereby consent to the within assignment:(1)

 

ROYAL BANK OF CANADA, as Administrative Agent

 

By:

 

 

Name:

 

Title:

 

 

--------------------------------------------------------------------------------

(1)              Consents to be included to the extent required by
Section 12.04(b) of the Credit Agreement.

 

Exhibit E-3

--------------------------------------------------------------------------------

 

EXHIBIT F-1

 

[FORM OF]

 

U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Second Amended and Restated Credit Agreement
dated as of June 30, 2014 (as amended, supplemented or otherwise modified from
time to time, the “Credit Agreement”), among Sanchez Energy Corporation, Royal
Bank of Canada, as Administrative Agent, and each lender from time to time party
thereto.

 

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and
(iv) it is not a controlled foreign corporation related to any Borrower as
described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Administrative Agent and the Borrower with a
certificate of its non-U.S. Person status on IRS Form W-8BEN (or applicable
successor form).  By executing this certificate, the undersigned agrees that
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent, and (2) the
undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER]

 

 

By:

 

Name:

 

Title:

 

 

 

Date:                     , 20[      ]

 

 

Exhibit F-1-1

--------------------------------------------------------------------------------

 

EXHIBIT F-2

 

[FORM OF]

 

U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Second Amended and Restated Credit Agreement
dated as of June 30, 2014 (as amended, supplemented or otherwise modified from
time to time, the “Credit Agreement”), among Sanchez Energy Corporation, Royal
Bank of Canada, as Administrative Agent, and each lender from time to time party
thereto.

 

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of any Borrower within the meaning of
Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign
corporation related to any Borrower as described in Section 881(c)(3)(C) of the
Code.

 

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN (or applicable successor form). By
executing this certificate, the undersigned agrees that (1) if the information
provided on this certificate changes, the undersigned shall promptly so inform
such Lender in writing, and (2) the undersigned shall have at all times
furnished such Lender with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT]

 

 

By:

 

Name:

 

Title:

 

 

 

Date:                     , 20[      ]

 

 

Exhibit F-2-1

--------------------------------------------------------------------------------

 

EXHIBIT F-3

 

[FORM OF]

 

U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Second Amended and Restated Credit Agreement
dated as of June 30, 2014 (as amended, supplemented or otherwise modified from
time to time, the “Credit Agreement”), among Sanchez Energy Corporation, Royal
Bank of Canada, as Administrative Agent, and each lender from time to time party
thereto.

 

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of any
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with IRS Form W-8IMY (or
applicable successor form) accompanied by one of the following forms from each
of its partners/members that is claiming the portfolio interest exemption:
(i) an IRS Form W-8BEN (or applicable successor form) or (ii) an IRS Form W-8IMY
(or applicable successor form) accompanied by an IRS Form W-8BEN (or applicable
successor form) from each of such partner’s/member’s beneficial owners that is
claiming the portfolio interest exemption.  By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender and (2) the
undersigned shall have at all times furnished such Lender with a properly
completed and currently effective certificate in either the calendar year in
which each payment is to be made to the undersigned, or in either of the two
calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT]

 

 

By:

 

Name:

 

Title:

 

 

 

Date:                    , 20[      ]

 

 

Exhibit F-3-1

--------------------------------------------------------------------------------

 

EXHIBIT F-4

 

[FORM OF]

 

U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Second Amended and Restated Credit Agreement
dated as of June 30, 2014 (as amended, supplemented or otherwise modified from
time to time, the “Credit Agreement”), among Sanchez Energy Corporation, Royal
Bank of Canada, as Administrative Agent, and each lender from time to time party
thereto.

 

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it
is providing this certificate, (ii) its direct or indirect partners/members are
the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing
such Loan(s)), (iii) with respect to the extension of credit pursuant to this
Credit Agreement or any other Loan Document, neither the undersigned nor any of
its direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of any Borrower within
the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to any
Borrower as described in Section (c)(3)(C) of the Code.

 

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-81MY (or applicable successor form) accompanied by one of the following
forms from each of its partners/members that is claiming the portfolio interest
exemption: (i) an IRS Form 8BEN (or applicable successor form) or (ii) an IRS
Form W-81MY (or applicable successor form) accompanied by an IRS Form W-8BEN (or
applicable successor form) from each of such partner’s/member’s beneficial
owners that is claiming the portfolio interest exemption.  By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent, and (2) the undersigned shall have at all times
furnished the Borrower and the Administrative Agent with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER]

 

By:

 

Name:

 

Title:

 

 

 

Date:                    , 20[      ]

 

 

Exhibit F-4-1

--------------------------------------------------------------------------------

 

EXHIBIT G

 

FORM OF GUARANTY

 

GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT (as amended, supplemented or otherwise modified from
time to time, this “Guaranty”), dated as of                     , 20    , is
made by each of the undersigned Restricted Subsidiaries of the Borrower (as
defined below) (together with any other entity that may become a party hereto as
provided herein each, a “Guarantor,” and collectively, the “Guarantors”), in
favor of Royal Bank of Canada, as Administrative Agent (the “Agent”) for the
benefit of the Lenders pursuant to that certain Second Amended and Restated
Credit Agreement dated as of June 30, 2014 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), by and among the
Borrower (defined below), the Agent and the Lenders.

 

W I T N E S S E T H

 

WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make Loans
and other extensions of credit to Sanchez Energy Corporation, a Delaware
corporation (the “Borrower”) in a manner and upon the terms and conditions set
forth therein;

 

WHEREAS, in accordance with the Credit Agreement, the Agent requires that the
Guarantors execute a guaranty agreement guaranteeing the Obligations of the
Borrower;

 

NOW, THEREFORE, in consideration of the premises and agreements herein and in
order to induce the Lenders to make the Loans and other extensions of credit
pursuant to the Credit Agreement, the Guarantors hereby agree as follows:

 

Section 1.              Definitions.  Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned thereto in the Credit
Agreement.

 

Section 2.              Guaranty of Payment.  Each Guarantor (not merely as a
surety or guarantor of collection) hereby jointly, severally, unconditionally
and irrevocably, guarantees the punctual payment when due, whether at stated
maturity, as an installment, by prepayment or by demand, acceleration or
otherwise, of all Obligations heretofore or hereafter existing.  If any or all
of the Obligations become due and payable under the Credit Agreement, the
Guarantors jointly and severally and unconditionally promise to pay such
Obligations, on demand, together with any and all expenses (including reasonable
counsel fees and expenses), which reasonably may be incurred by the Agent in
collecting any of the Obligations and in connection with the protection, defense
and enforcement of any rights under the Credit Agreement or under any other Loan
Document (the “Expenses”).  The Guarantors guarantee that the Obligations shall
be paid in accordance with the terms of the Credit Agreement, any applicable
Loan Document and any applicable Swap Agreement.  The Obligations include,
without limitation, interest accruing after the commencement of a proceeding
under bankruptcy, insolvency or similar laws of any jurisdiction at the rate or
rates provided in the Credit Agreement.  The Agent shall not be required to
exhaust any right or remedy or take any action against the Borrower or any other
person or entity or any collateral prior to any demand or other action hereunder
against the Guarantors.  The Guarantors agree that, as between the Guarantors
and the Agent, the Obligations may be declared to be due and payable for the
purposes of this Guaranty notwithstanding any stay, injunction or other
prohibition which may prevent, delay or vitiate any declaration as regards the
Borrower and that in the event of a declaration or attempted declaration, the
Obligations shall immediately become due and payable by the Guarantors for the
purposes of this Guaranty and each Guarantor shall forthwith pay the Obligations
specified by the Agent to be paid as provided in the Credit Agreement without
further notice or demand.  Notwithstanding

 

Exhibit G-1

--------------------------------------------------------------------------------

 

anything contained herein or in the Credit Agreement, any Loan Document or any
other document or any other agreement, security document or instrument relating
hereto or thereto to the contrary, the maximum liability of each Guarantor
hereunder shall never exceed the maximum amount that said Guarantor could pay
without having such payment set aside as a fraudulent transfer or fraudulent
conveyance or similar action under the U.S. Bankruptcy Code or applicable state
or foreign law.

 

Section 3.              Guaranty Absolute.  The liability of each Guarantor
under this Guaranty is absolute and unconditional irrespective of:  (a) any
change in the time, manner or place of payment of, or in any other term of, the
Credit Agreement or the Obligations, or any other amendment or waiver of or any
consent to departure from any of the terms of the Credit Agreement, any other
Loan Document or any other agreement or instrument governing or evidencing the
Obligations, including any increase or decrease in the rate of interest thereon;
(b) any release or amendment or waiver of, or consent to departure from, any
other guaranty or support document, or any exchange, release or non-perfection
of any collateral, for the Credit Agreement or the Obligations; (c) any present
or future law, regulation or order of any jurisdiction (whether of right or in
fact) or of any agency thereof purporting to reduce, amend, restructure or
otherwise affect any term of the Credit Agreement or the Obligations; (d) any
lack of validity or enforceability against the Borrower or any Loan Party or any
other guarantor of any of the Obligations, for any reason relating to the Credit
Agreement, any Loan Document or any other agreement or instrument evidencing the
Obligations; (e) any other setoff, defense or counterclaim whatsoever (in any
case, whether based on contract, tort or any other theory) with respect to the
Credit Agreement or the transactions contemplated thereby (other than actual
payment) which might constitute a legal or equitable defense available to, or
discharge of, the Borrower or the Guarantors and (f) any claim or assertion that
any payment by any Guarantor hereunder should be set aside pursuant to Section 2
in connection with any stay, injunction or other prohibition or event, in which
case each Guarantor shall be unconditionally required to pay all amounts
demanded of it hereunder prior to any determination of the maximum liability of
each Guarantor hereunder in accordance with Section 2 and the recipient of such
payment, if so required by a court of competent jurisdiction by a final and
non-appealable judgment, shall then be liable for the refund of any excess
amounts.  If any such rebate or refund is ever required, then subject to the
limitations of Section 2, all other Guarantors shall be fully liable for the
repayment thereof to the maximum extent allowed by applicable law.

 

Section 4.              Guaranty Irrevocable.  This Guaranty is a continuing
guaranty of the payment of all Obligations now or hereafter existing and shall
remain in full force and effect until payment in full of all Obligations and
other amounts payable under this Guaranty and until all Commitments of the
Lenders shall be terminated in accordance with the terms of the Credit
Agreement.  A Guarantor shall be automatically released from its obligations
under this Guaranty upon it ceasing to be a “Guarantor” for purposes of the
Credit Agreement (subject to the satisfaction of any conditions set forth
therein).

 

Section 5.              Reinstatement.  This Guaranty shall continue to be
effective, or be automatically reinstated, as the case may be, if at any time
any payment of any of the Obligations is rescinded or must otherwise be returned
by the Agent on the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower, any Guarantor, or any other Person that is a
party to the Loan Documents, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to the Borrower, any Guarantor or any other Person that is a party to the Loan
Documents, or otherwise, all as though the payment had not been made.

 

Section 6.              Subrogation.  Each Guarantor hereby agrees that it shall
not exercise any rights which it may acquire by way of subrogation, by any
payment made under this Guaranty or otherwise, until all the Obligations have
been paid in full and all of the Commitments have been terminated and are no
longer in effect.  Any amounts paid to a Guarantor on account of subrogation
rights under this Guaranty at any time when all the Obligations have not been
paid in full, shall be held in trust for the benefit of the Agent and shall
promptly be paid to the Agent to be credited and applied to the Obligations,

 

Exhibit G-2

--------------------------------------------------------------------------------

 

whether matured or unmatured or absolute or contingent, in accordance with the
terms of the Credit Agreement.  If a Guarantor has made a payment to the Agent
hereunder of all or any part of the Obligations and all the Obligations are paid
in full and all of the Commitments have been terminated and are no longer in
effect, the Agent shall, at such Guarantor’s request, execute and deliver to the
Guarantor the appropriate documents, without recourse and without representation
or warranty, necessary to evidence the transfer by subrogation to the Guarantor
of an interest in the Obligations resulting from the payment.

 

Section 7.              Subordination.  Any liabilities owed by the Borrower to
the Guarantors in connection with any extension of credit or financial
accommodation by the Guarantors to or for the account of the Borrower, including
but not limited to interest accruing at the agreed contract rate after the
commencement of a bankruptcy or similar proceeding, are hereby subordinated to
the Obligations, and such liabilities of the Borrower to the Guarantors, if the
Agent so requests, shall be collected, enforced and received by the Guarantors
as trustee for the Agent and shall be paid over to the Agent on account of the
Obligations.

 

Section 8.              Certain Taxes.  The Guarantors further agree that all
payments to be made hereunder shall be made without setoff or counterclaim and
free and clear of, and without deduction for Taxes.  If any Taxes are required
to be withheld from any amounts payable to the Agent hereunder, the amounts so
payable to the Agent shall be increased to the extent necessary to yield to the
Agent (after payment of all Taxes) the amounts payable hereunder in the full
amounts so to be paid.  Whenever any Tax is paid by a Guarantor, as promptly as
possible thereafter, such Guarantor shall send the Agent an official receipt
showing payment thereof, together with such additional documentary evidence as
may be required from time to time by the Agent.

 

Section 9.              Representations and Warranties.  Each of the Guarantors
represents and warrants that: (a) this Guaranty (i) has been authorized by all
necessary corporate or other organizational action; (ii) does not violate any
agreement, instrument, law, regulation or order applicable to it; (iii) does not
require the consent or approval of any Person, or any filing or registration of
any kind; and (iv) is the legal, valid and binding obligation of such Guarantor
enforceable against such Guarantor in accordance with its terms, except to the
extent that enforcement may be limited by applicable bankruptcy, insolvency and
other similar laws affecting creditors’ rights generally; and (b) in executing
and delivering this Guaranty, such Guarantor has not relied and will not rely
upon any representations or warranties of the Agent not embodied herein or any
acts heretofore or hereafter taken by the Agent (including but not limited to
any review by the Agent of the affairs of the Borrower).

 

Section 10.            Remedies Generally.  The remedies provided in this
Guaranty are cumulative and not exclusive of any remedies provided by law.

 

Section 11.            Setoff.  Each Guarantor agrees that, in addition to (and
without limitation of) any right of setoff, banker’s lien or counterclaim the
Agent or the Lenders may otherwise have, the Agent and each of the Lenders shall
be entitled, at their option, to offset balances (general or special, time or
demand, provisional or final) held by them for the account of such Guarantor at
any of the Agent’s or any Lender’s offices, in U.S. dollars or in any other
currency, against any amount payable by such Guarantor under this Guaranty which
is not paid when due, in which case it shall promptly notify such Guarantor
thereof; provided that the Agent’s or any Lender’s failure to give such notice
shall not affect the validity thereof.

 

Section 12.            Formalities.  Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations, the Credit Agreement and this Guaranty and any liability to which
the Credit Agreement and this Guaranty applies or may apply, and waives
presentment, demand of payment, notice of intent to accelerate, notice of
acceleration, notice of

 

Exhibit G-3

--------------------------------------------------------------------------------

 

dishonor or nonpayment, and any requirement that the Agent institute suit,
collection proceedings or take any other action to collect the Obligations,
including any requirement that the Agent protect, secure, perfect or insure any
security interest or Lien against any Property or exhaust any right or take any
action against the Borrower or any other Person (including the other Guarantors)
or any Collateral (it being the intention of the Agent and each Guarantor that
the obligations of such Guarantor under this Guaranty are to be a guaranty of
payment and not of collection) or that the Borrower or any other Person
(including the other Guarantors) be joined in any action hereunder.  Each
Guarantor hereby waives marshaling of assets and liabilities, notice by the
Agent of the creation of any Obligation or liability to which it applies or may
apply, any amounts received by the Agent, notice of disposition or substitution
of Collateral and of the creation, advancement, increase, existence, extension,
renewal, rearrangement and/or modification of the Obligations.

 

Section 13.            Amendments and Waivers.  No amendment or waiver of any
provision of this Guaranty, nor consent to any release by any Guarantor
therefrom, shall be effective unless it is in writing and signed by the Agent
and such Guarantor, and then the waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.  No failure
on the part of the Agent to exercise, and no delay in exercising, any right
under this Guaranty shall operate as a waiver or preclude any other or further
exercise thereof or the exercise of any other right.

 

Section 14.            Expenses.  The Guarantors shall reimburse the Agent on
demand for all Expenses without duplication of any reimbursements affected under
the Credit Agreement.  The obligations of the Guarantors under this
Section shall survive the termination of this Guaranty.

 

Section 15.            Assignment.  This Guaranty shall be binding on, and shall
inure to the benefit of the Guarantors, the Agent and their respective
successors and assigns; provided that the Guarantors may not assign or transfer
their respective rights or obligations under this Guaranty.  Without limiting
the generality of the foregoing: (a) the obligations of the Guarantors under
this Guaranty shall continue in full force and effect and shall be binding on
any successor partnership and on previous partners and their respective estates
if any of the Guarantors is a partnership, regardless of any change in the
partnership as a result of death, retirement or otherwise; and (b) the Agent may
assign, sell participations in or otherwise transfer its rights under the Credit
Agreement to any other person or entity in accordance with the terms and
conditions thereof, and the other person or entity shall then become vested with
all the rights granted to the Agent in this Guaranty or otherwise.  Guarantor
may merge into the Borrower or another Guarantor as provided in the Credit
Agreement.

 

Section 16.            Captions.  The headings and captions in this Guaranty are
for convenience only and shall not affect the interpretation or construction of
this Guaranty.

 

Section 17.            Governing Law, Etc.  THIS GUARANTY SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO ANY CHOICE-OF-LAW PROVISIONS THAT WOULD REQUIRE THE APPLICATION OF THE
LAW OF ANOTHER JURISDICTION.  EACH GUARANTOR CONSENTS TO THE NONEXCLUSIVE
JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE
BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN
DISTRICT OF NEW YORK.  SERVICE OF PROCESS BY THE AGENT IN CONNECTION WITH ANY
SUCH DISPUTE SHALL BE BINDING ON EACH GUARANTOR IF SENT TO SUCH GUARANTOR BY
REGISTERED MAIL AT THE ADDRESS SPECIFIED BELOW OR AS OTHERWISE SPECIFIED BY SUCH
GUARANTOR FROM TIME TO TIME.  EACH GUARANTOR (AND, BY ITS ACCEPTANCE HEREOF, THE
AGENT) WAIVES ANY RIGHT IT MAY HAVE TO JURY TRIAL IN ANY ACTION RELATED TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY AND FURTHER WAIVES ANY RIGHT TO
INTERPOSE ANY COUNTERCLAIM RELATED TO THIS GUARANTY OR THE

 

Exhibit G-4

--------------------------------------------------------------------------------

 

TRANSACTIONS CONTEMPLATED HEREBY IN ANY SUCH ACTION.  TO THE EXTENT THAT ANY
GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER FROM SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF A JUDGMENT, EXECUTION OR
OTHERWISE), EACH SUCH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY.

 

Section 18.            Integration; Effectiveness.  This Guaranty alone sets
forth the entire understanding of the Guarantors and the Agent relating to the
guarantee of the Obligations and constitutes the entire contract between the
parties relating to the subject matter hereof and supersedes any and all
previous agreements and understandings, oral or written, relating to the subject
matter hereof.  This Guaranty shall become effective when it shall have been
executed and delivered by the Guarantors to the Agent.

 

Section 19.            Credit Agreement.  To the extent there are any conflicts
or inconsistencies between this Guaranty and the Credit Agreement, the
provisions of the Credit Agreement will control.

 

Section 20.            Counterparts.  This Guaranty 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. Delivery of an executed counterpart of a
signature page of this Guaranty by telecopy, facsimile, photocopy or by sending
a scanned copy by electronic mail shall be effective as delivery of a manually
executed counterpart signature page of this Guaranty.

 

Section 21.            Excluded Swap Obligations.  Notwithstanding anything to
the contrary, the Obligations guaranteed by any Guarantor shall exclude all
Excluded Swap Obligations with respect to such Guarantor.

 

[END OF TEXT]

 

Exhibit G-5

--------------------------------------------------------------------------------

 

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

 

 

GUARANTOR(S):

 

 

 

 

 

[By:

 

 

Name:

 

 

Title:

 

 

 

 

Address for Service of Process:

 

 

 

[                                    ]

 

[                                    ]]

 

Exhibit G-6

--------------------------------------------------------------------------------

 

EXHIBIT H

 

JOINDER

 

THIS SECURITY AND PLEDGE AGREEMENT JOINDER (this “Joinder”) dated as of
                        , 20    , is among
                                        , a                              (the
“New Obligor”) and                           , a                           
(“New Obligor Parent”) in favor of the Lenders (as defined in the Credit
Agreement) and Royal Bank of Canada, as Administrative Agent for the Lenders (in
such capacity, the “Administrative Agent”).

 

WHEREAS, the New Obligor Parent, together with Sanchez Energy Corporation, a
Delaware corporation  (the “Borrower”), the Guarantors party thereto, the
Lenders, and the Administrative Agent (collectively, the “Original Parties”) are
parties to that certain Second Amended and Restated Credit Agreement dated
June 30, 2014 (as the same has been or may be amended, modified or supplemented
from time to time, the “Credit Agreement”);

 

WHEREAS, the New Obligor Parent and the Guarantors are parties to that certain
Amended and Restated Security and Pledge Agreement, dated June 30, 2014 (as the
same has been or may be amended, modified or supplemented from time to time, the
“Security Agreement”);

 

WHEREAS, the New Obligor Parent and the New Obligor are required to execute this
Joinder pursuant to Section 8.16(a) of the Credit Agreement;

 

WHEREAS, the New Obligor desires to become a party to the Security Agreement as
a “Debtor” and to receive all of the benefits of and to become subject to the
obligations thereof as a Guarantor and Debtor, respectively;

 

WHEREAS, as a condition to the New Obligor becoming a party to the Security
Agreement, the New Obligor Parent is required to pledge its ownership interest
in the New Obligor;

 

NOW THEREFORE, in consideration of the benefits to be derived by the New Obligor
under the Credit Agreement and as a Guarantor under the Guaranty and for Ten
Dollars ($10.00) and other valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the above-named parties agree as follows:

 

1.             Terms.  Capitalized terms used in the opening paragraph, the
recitals and otherwise herein and not defined have the same meaning assigned to
such terms in the Credit Agreement.

 

2.             Joinder to and Ratification of Credit Agreement and Security
Agreement.  By executing and delivering this Joinder, the New Obligor hereby
(i) becomes a party to the Security Agreement as a Debtor as if the New Obligor
had originally signed such Security Agreement and (ii) expressly assumes all
obligations and liabilities of a Debtor thereunder, as applicable.  The New
Obligor hereby makes as of the date hereof each of the representations and
warranties made by the Debtors in the Security Agreement except (a) any such
representations and warranties that were made by the other Debtors as of an
earlier specific date and (b) any such representations and warranties deemed to
be made by the New Obligor are only made as to information, disclosures and
matters as it relates to such New Obligor, and (c) any such representations and
warranties made as to matters disclosed or set forth in a Schedule or an Annex
to such documents are deemed to be made as to the corresponding Schedule or
Annex attached hereto.  The New Obligor Parent hereby makes as of the date
hereof each of the representations and warranties made by it in the Credit
Agreement, if any, and the Security Agreement except (a) any such
representations and warranties that were made with respect to the Borrower (if
the New Obligor Parent is not the Borrower) as of an earlier specific date and
(b) any such representations

 

Exhibit H-1

--------------------------------------------------------------------------------

 

and warranties deemed to be made by the New Obligor Parent are only made as to
information, disclosures and matters as it relates to such New Obligor Parent,
and (c) any such representations and warranties made as to matters disclosed or
set forth in a Schedule or an Annex to such documents are deemed to be made as
to the corresponding Schedule or Annex attached hereto.  After giving effect to
this Joinder, the Security Agreement shall serve as security for the obligations
of each New Obligor contained in the Credit Agreement.

 

3.             Security Interest (New Obligor).  As security for the
Obligations, the New Obligor hereby grants to the Administrative Agent, for the
benefit of the Lenders, to the maximum extent allowed by applicable law, a lien
and security interest on all of the assets of the New Obligor described as
Collateral in the Security Agreement, subject to the exclusions contained in the
Security Agreement, whether now held or hereafter acquired, of any kind,
pursuant to, and in accordance with the terms of the Security Agreement.

 

4.             Security Interest (New Obligor Parent).  As security for the
Obligations, the New Obligor Parent hereby grants to the Administrative Agent,
for the benefit of the Lenders, to the maximum extent allowed by applicable law,
a lien and security interest on all of the Securities Collateral (as defined in
the Security Agreement) of the New Obligor, including, without limitation, the
Equity Interests of the New Obligor owned by the New Obligor Parent and
identified on Annex 3 (as updated pursuant to this Joinder) whether now held or
hereafter acquired, pursuant to, and in accordance with the terms of the
Security Agreement.

 

5.             Authorization to Take Further Action.  The New Obligor hereby
authorizes the Administrative Agent to file such financing statements and any
amendments and extensions thereof as may be necessary or desirable in order to
perfect the Liens under the Security Agreement or any modification, extension or
ratification thereof.

 

6.             Reliance.  All parties hereto acknowledge that the Administrative
Agent and the Lenders are relying on this Joinder, the accuracy of the
statements herein contained and the performance of the conditions placed upon
the New Obligor hereunder.

 

7.             Delivery of Certificates; Further Assurances.  Concurrently with
the execution and delivery of this Joinder, the New Obligor Parent shall deliver
all membership or stock certificates, as applicable, of the New Obligor as
described on Annex 3 to the Security Agreement (as updated pursuant to this
Joinder) to the Administrative Agent together with related stock or membership
powers, as applicable, executed in blank by the New Obligor Parent.  In addition
to the foregoing, the New Obligor Parent and New Obligor shall execute such
further documents and undertake any such measure as may be reasonably necessary
to effect and carry out the terms of this Joinder and the implementation
thereof.

 

8.             Warranties.  The New Obligor (a) represents and warrants that it
is legally authorized to enter into this Joinder, (b) confirms that it has
received copies of the Credit Agreement, Guaranty and the Security Agreement and
all related documents, and that on the basis of its review and analysis of this
information has decided to enter into this Joinder and (c) confirms that it is a
Subsidiary of the Borrower that it is required to enter into this Joinder
pursuant to Section 8.16 of the Credit Agreement.

 

9.             Updated Information.  Concurrently with this Joinder, the New
Obligor is delivering a completed New Obligor Information List, attached as
Attachment A hereto.  Borrower and the New Obligor acknowledge and agree that
Schedules 7.01 and 7.14, of the Credit Agreement and Annexes 1 through 16,
inclusive, of the Security Agreement, have been updated with respect to the New
Obligor only by the information contained in Attachment A hereto, and, with
respect to the New Obligor only, are true, accurate and complete representations
of the information described and referenced in the

 

Exhibit H-2

--------------------------------------------------------------------------------

 

corresponding sections of the Credit Agreement and Security Agreement, as
applicable, after giving effect to this Joinder.

 

10.                               Choice of Law.  This Joinder shall be governed
by and construed under the laws of the State of New York.

 

11.                               Ratification.  Except as modified hereby, the
Credit Agreement and the Security Agreement remain in full force and effect
according to their terms.

 

12.                               Counterparts.  This Joinder 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. Delivery of an executed counterpart of a
signature page of this Joinder by telecopy, facsimile, photocopy or by sending a
scanned copy by electronic mail shall be effective as delivery of a manually
executed counterpart signature page of this Joinder.  Any signature page of a
counterpart may be detached therefrom without impairing the legal effect of the
signatures thereon and attached to another counterpart identical in form thereto
but having attached to it one or more additional signature pages signed by other
parties.

 

13.                               Effectiveness.  Upon execution of this Joinder
by the New Obligor, this Joinder shall become immediately effective and
enforceable as to the New Obligor.

 

[Signatures on following pages]

 

Exhibit H-3

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have executed this Agreement and agreed to the
provisions contained herein effective as of                                 ,
20    .

 

NEW OBLIGOR:

 

 

 

 

 

a

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

NEW OBLIGOR PARENT:

 

 

 

 

 

a

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

ADMINISTRATIVE AGENT:

 

 

 

ROYAL BANK OF CANADA

 

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

Exhibit H-4

--------------------------------------------------------------------------------

 

Acknowledged for purposes of Section 9:

 

 

 

BORROWER:

 

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

Exhibit H-5

--------------------------------------------------------------------------------

 

ATTACHMENT A

 

ADDITIONAL INFORMATION REGARDING THE NEW OBLIGOR

 

1.                                      The following Schedules as described in
the Credit Agreement:

 

Schedule 7.01

Organization; Powers

Schedule 7.14

Subsidiaries

 

2.                                      The following Annexes as described in
the Security Agreement:

 

Annex 1

Intellectual Property Licenses

Annex 2

Patent Collateral

Annex 3

Securities Collateral

Annex 4

Trademark Collateral

Annex 5

Filing Offices

Annex 6

Debtor Information

Annex 7

Previous Names and Transactions

Annex 8

Offices and Locations of Records

Annex 9

Locations of Inventory and Equipment

Annex 10

Deposit Accounts

Annex 11

Securities Accounts and Commodity Accounts

Annex 12

Instruments and Tangible Chattel Paper

Annex 13

Electronic Chattel Paper

Annex 14

Letters of Credit

Annex 15

Commercial Tort Claims

Annex 16

Third Party Locations

 

Exhibit H-6

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Entity Documents

 

 

Provide a copy of all that apply:

 

 

 

 

 

Corporation:

 

Filed Articles of Incorporation/Amendments and Bylaws/Resolutions with
Incumbency Certificate

Partnership:

 

Partnership Agreement and filed/recorded Certificate of Partnership

Limited Liability Company (LLC):

 

Article of Organization and Operating Agreement/Member or Manager Consent with
Incumbency Certificate

Limited Liability Partnership (LLP):

 

Certificate of registered partnership and partnership agreement

Fictitious Name Filing:

 

Trade Name-Entities doing business under fictitious name; if applicable

 

Exhibit H-7

--------------------------------------------------------------------------------

 

EXHIBIT I

 

FORM OF REPAYMENT NOTICE

 

[                            ], 201[    ]

 

Reference is made to that certain Second Amended and Restated Credit Agreement
dated as of June 30, 2014 by and among SANCHEZ ENERGY CORPORATION, a Delaware
corporation (the “Borrower”), Royal Bank of Canada, as Administrative Agent and
the lenders (the “Lenders”) which are or become parties thereto (unless
otherwise defined herein, each capitalized term used herein is defined in the
Credit Agreement) (together with all amendments, restatements, supplements or
other modifications thereto, the “Credit Agreement”).

 

The Borrower is repaying Borrowings as follows:

 

1.                                      Borrowings outstanding prior to the
repayment referred to herein: $         

 

2.                                      Amount of repayment: $          

 

3.                                      Date of repayment:
                              , 201  .

 

4.                                      Type of Borrowing and amount to which
repayment applies:

 

(a)                                 ABR Borrowing for $             

 

(b)                                 Eurodollar Borrowing(s) with Interest
Period(s) ending on                         (2)

 

(i)                                     one
month                                                                                                                                    
  $           

(ii)                                  three
months                                                                                                                        
 $            

(iii)                               six
months                                                                                                                                    
$                    ]

 

The repayment referred to herein is being made pursuant to and complies with
[Section 3.04(a) — Optional Prepayments] OR [Section 3.04(c) — Mandatory
Prepayments] of the Credit Agreement.

 

[Signature Page follows]

 

--------------------------------------------------------------------------------

(2) If more than one Interest Period ends on a particular date, or if necessary
to allocate repayment among Interest Periods, Borrower shall specify how such
repayment is to be allocated.

 

Exhibit I Page 1

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF this instrument is executed as of
                            , 201  .

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit I Page 2

--------------------------------------------------------------------------------

 

EXHIBIT J

 

FORM OF ELECTED COMMITMENT INCREASE CERTIFICATE

 

[                            ], 201[    ]

 

To:                             Royal Bank of Canada.,

as Administrative Agent

 

The Borrower, the Administrative Agent and certain Lenders and other agents have
heretofore entered into an Second Amended and Restated Credit Agreement, dated
as of June 30, 2014(as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”).  Capitalized terms not otherwise
defined herein shall have the meaning given to such terms in the Credit
Agreement.

 

This Elected Commitment Increase Certificate is being delivered pursuant to
Section 2.06(c) of the Credit Agreement.  Please be advised that the undersigned
Increasing Lender has agreed (a) to increase it Elected Commitment under the
Credit Agreement effective               , 20     from [$            ] to
[$            ] and (b) that is shall continue to be a party in all respects to
the Credit Agreement and the other Loan Documents.

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Accepted and Agreed:

 

 

 

ROYAL BANK OF CANADA, as Administrative Agent

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

Accepted and Agreed:

 

 

 

[Name of Increasing Lender]

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

Fifth Amendment to Sanchez

Second Amended and Restated Credit Agreement

 

Exhibit J Page 1

--------------------------------------------------------------------------------

 

EXHIBIT K

 

FORM OF ADDITIONAL LENDER CERTIFICATE

 

[                            ], 201[    ]

 

To:                             Royal Bank of Canada.,

as Administrative Agent

 

The Borrower, the Administrative Agent and certain Lenders and other agents have
heretofore entered into an Second Amended and Restated Credit Agreement, dated
as of June 30, 2014(as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”).  Capitalized terms not otherwise
defined herein shall have the meaning given to such terms in the Credit
Agreement.

 

This Additional Lender Certificate is being delivered pursuant to
Section 2.06(c) of the Credit Agreement.  Please be advised that the undersigned
Additional Lender has agreed (a) to become a Lender under the Credit Agreement
effective               , 20     with a Maximum Aggregate Credit Amount of
[$            ] and an Elected Commitment of [$            ] and (b) that it
shall be a party in all respects to the Credit Agreement and the other Loan
Documents

 

This Additional Lender Certificate is being delivered to the Administrative
Agent together with (i) if the Additional Lender is a Foreign Lender, any
documentation required to be delivered by such Additional Lender pursuant to
Section 5.03(e) of the Credit Agreement, duly completed and executed by the
Additional Lender, and (ii) an Administrative Questionnaire in the form supplied
by the Administrative Agent, duly completed by the Additional Lender. The
[Borrower/Additional Lender] shall pay the fee payable to the Administrative 
Agent pursuant to Section 2.06(c)(ii)(7) of the Credit Agreement.

 

 

SANCHEZ ENERGY CORPORATION,

 

a Delaware corporation

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

Accepted and Agreed:

 

 

 

ROYAL BANK OF CANADA, as Administrative Agent

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

Fifth Amendment to Sanchez

Second Amended and Restated Credit Agreement

 

Exhibit K Page 1

--------------------------------------------------------------------------------

 

Accepted and Agreed:

 

 

 

[Name of Additional Lender]

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

Fifth Amendment to Sanchez

Second Amended and Restated Credit Agreement

 

Exhibit K Page 2

--------------------------------------------------------------------------------

 

SCHEDULE 7.01

 

CORPORATE ORGANIZATIONAL CHART

 

[g150252kq35i001.jpg]

 

All of the membership interests in each of SEP Holdings III, LLC, SN Marquis
LLC, SN Cotulla Assets, LLC, SN Operating, LLC, SN Midstream, LLC, SN TMS, LLC,
SN Services, LLC, and SN Catarina, LLC are owned by Sanchez Energy Corporation.

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.05

 

LITIGATION

 

In re Sanchez Energy Derivative Litigation, Consolidated C.A. No. 9132-VCG, City
of Roseville Employees’ Retirement System, Delaware County Employees Retirement
Fund, and Friedman, each derivatively on behalf of, against Sanchez Energy
Corporation, certain of its officers and directors, Sanchez Resources, LLC,
Altpoint Capital Partners LLC, and Altpoint Sanchez Holdings, LLC, Court of
Chancery of the State of Delaware, December 20, 2013.

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.14

 

SUBSIDIARIES

 

Name of Subsidiary

 

Jurisdiction of
Organization

 

Federal Taxpayer ID

 

Ownership Interest

SEP Holdings III, LLC

 

Delaware

 

45-3193696

 

100% Membership Interest held by Borrower

SN Marquis LLC

 

Delaware

 

45-3090102

 

100% Membership Interest held by Borrower

SN Cotulla Assets, LLC

 

Texas

 

45-3090102

 

100% Membership Interest held by Borrower

SN Operating, LLC

 

Texas

 

38-3902143

 

100% Membership Interest held by Borrower

SN Midstream, LLC

 

Delaware

 

45-3090102

 

100% Membership Interest held by Borrower

SN TMS, LLC

 

Delaware

 

45-3090102

 

100% Membership Interest held by Borrower

SN Catarina, LLC

 

Delaware

 

45-3090102

 

100% Membership Interest held by Borrower

SN Services, LLC

 

Delaware

 

45-3090102

 

100% Membership Interest held by Borrower

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.16

 

TITLE EXCEPTIONS TO PROPERTIES

 

None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.18

 

GAS IMBALANCES

 

None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.19

 

MARKETING CONTRACTS

 

Gathering and Processing Agreement between SWEPI LP and ETC Texas Pipeline, Ltd.
effective October 1, 2012.

 

Gathering and Natural Gas Services Agreement between SWEPI LP and ETC Texas
Pipeline, Ltd. effective December 1, 2010.

 

Gas Processing Agreement between SWEPI LP and ExxonMobil Gas & Power Marketing
Co. effective February 28, 2011.

 

Gas Gathering and Processing Agreement between SWEPI LP and Frio LaSalle
Pipeline, LP effective November 1, 2012.

 

Raw Make Purchase Agreement between SWEPI LP and Frio LaSalle Pipeline, LP
effective October 15, 2012.

 

Gibson Energy Marketing-Trucking NGL Mix Agreement between SWEPI LP and Gibson
Energy Marketing, LLC effective September 1, 2012.

 

Gas Transmission Agreement-Humble 311 Interruptible Agreement between SWEPI LP
and Humble Gas Pipeline Company effective March 1, 2011.

 

Gas Transmission Agreement-Humble 311 Intra Interruptible Agreement between
SWEPI LP and Humble Gas Pipeline Company effective March 1, 2011.

 

Gas Services Agreement between SWEPI LP and Kinder Morgan (Eagle Ford Gathering
LLC) effective November 1, 2011.

 

Oil Gathering Agreement between SWEPI LP and Plains All American Pipeline, L.P.
(Velocity Midstream Partners, LLC) effective April 18, 2011

 

Purchase and Sale Agreement between SWEPI LP and Gazelle Transportation Inc.,
effective March 6, 2012

 

Intrastate Natural Gas Transportation Service Agreement between SWEPI LP and
Houston Pipe Line Company LP effective December 1, 2010.

 

Evergreen Mix Purchase Contract between SWEPI LP and Gibson Energy Marketing,
LLC effective June 1, 2013.

 

Camino Real Gas Gathering Agreement Dated April 7, 2011 (Kinder Morgan)

 

Camino Real Gas Gathering Agreement Dated April 7, 2011 (Kinder Morgan)

 

--------------------------------------------------------------------------------

 

Eagle Ford Gathering LLC Gas Services Agreement Dated January, 1, 2012

 

Plains Pipeline, L.P. Oil Gathering Agreement Dated May 2, 2012

 

Amended and Restated Facility Agreement Frio LaSalle Pipeline, LP effective
April 1, 2012

 

Frio LaSalle Pipeline L.P. Gas Gathering Agreement dated February 1, 2012

 

Frio LaSalle Pipeline, LP Gas Gathering and Processing Agreement dated May 1,
2012

 

Frio LaSalle Pipeline, LP Natural Gas Purchase & Sales Contract (mo. to mo.)

 

Warrior Gas Company Gas Purchase Contract dated January 1, 2012

 

DCP Midstream, LP Gas Purchase Contract dated December 1, 2011

 

Regency Field Services LLC Gas Gathering Agreement Dated March 1, 2012

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.20

 

SWAP AGREEMENTS

 

Master Agreement dated as of June 8, 2012 between Shell Energy North America
(US), L.P. and SEP Holdings III, LLC.

 

Master Agreement dated October 4, 2013 between BP Energy Company and Sanchez
Energy Corporation.

 

Master Agreement dated as of August 21, 2013 between ING Capital Markets LLC and
Sanchez Energy Corporation.

 

Master Agreement dated as of August 26, 2013 between Credit Suisse International
and Sanchez Energy Corporation.

 

Master Agreement dated as of August 27, 2013 between Royal Bank of Canada and
Sanchez Energy Corporation.

 

Master Agreement dated as of July 3, 2013 between Societe Generale and Sanchez
Energy Corporation.

 

All other information as set forth in the certificate of a Financial Officer of
Borrower most recently delivered pursuant to Section 8.01(d) of the Credit
Agreement.

 

--------------------------------------------------------------------------------

 

SCHEDULE 9.02

 

EXISTING DEBT

 

None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 9.03

 

LIENS

 

None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 9.05

 

INVESTMENTS

 

None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 9.17

 

EXISTING SHELL ENERGY NORTH AMERICA (US) L.P.

 

SWAP AGREEMENTS

 

Master Agreement dated as of June 8, 2012 between SEP Holdings III, LLC and
Shell Energy North America (US), L.P. and all other information related thereto
as set forth in the certificate of a Financial Officer of Borrower most recently
delivered pursuant to Section 8.01(d) of the Credit Agreement.

 

--------------------------------------------------------------------------------