Exhibit 10.1

 

 

 

MULTIDRAW TERM LOAN AGREEMENT

dated as of October 17, 2016,

among

PETROQUEST ENERGY, L.L.C.,

as Borrower,

PETROQUEST ENERGY, INC.

FRANKLIN CUSTODIAN FUNDS – FRANKLIN INCOME FUND

and the other Lenders party hereto from time to time

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent

 

 

 

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TABLE OF CONTENTS

 

         Page  

SECTION 1.

 

INTERPRETATION

     1   

SECTION 2.

 

MULTIDRAW TERM LOAN FACILITY

     1   

2.1

  Term Loans      1   

2.2

  Procedure for Advance      1   

2.3

  Repayment      2   

2.4

  Optional Prepayments; Commitment Reductions      2   

2.5

  Mandatory Prepayments; Commitment Reductions      2   

2.6

  No Reborrowings      4   

SECTION 3.

 

GENERAL LOAN PROVISIONS

     4   

3.1

  Interest      4   

3.2

  Fees      4   

3.3

  Manner of Payment      5   

3.4

  Evidence of Indebtedness      5   

3.5

  Sharing of Payments by Lenders      5   

3.6

  Increased Costs      6   

3.7

  Taxes      7   

3.8

  Mitigation Obligations; Replacement of Lenders      11   

3.9

  Defaulting Lenders      12   

3.10

  Acknowledgement and Consent to Bail-In of EEA Financial Institutions      13
  

SECTION 4.

 

CONDITIONS OF CLOSING AND BORROWING

     14   

4.1

  Conditions to Closing and Initial Term Loans      14   

4.2

  Conditions to All Term Loans      16   

SECTION 5.

 

REPRESENTATIONS

     16   

5.1

  Organization; Powers      16   

5.2

  Authority; Enforceability      17   

5.3

  Approvals; No Conflicts      17   

5.4

  Financial Condition; No Material Adverse Change      17   

5.5

  Litigation      18   

5.6

  Environmental Matters      18   

5.7

  Compliance with the Laws and Agreements; No Defaults      19   

 

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TABLE OF CONTENTS

(continued)

 

         Page  

5.8

  Investment Company Act      20   

5.9

  Taxes      20   

5.10

  ERISA      20   

5.11

  Disclosure; No Material Misstatements      21   

5.12

  Insurance      21   

5.13

  Restriction on Liens      22   

5.14

  Subsidiaries      22   

5.15

  Location of Business and Offices      22   

5.16

  Properties; Titles      22   

5.17

  Maintenance of Properties      23   

5.18

  Gas Imbalances, Prepayments      23   

5.19

  Marketing of Production      24   

5.20

  Swap Agreements      24   

5.21

  Use of Proceeds      24   

5.22

  Solvency      24   

5.23

  Anti-Corruption Laws and Sanctions      24   

SECTION 6.

 

AFFIRMATIVE COVENANTS

     25   

6.1

  Financial Statements; Other Information      25   

6.2

  Notices of Material Events      30   

6.3

  Existence; Conduct of Business      31   

6.4

  Payment of Obligations      31   

6.5

  Performance of Obligations      31   

6.6

  Operation and Maintenance of Properties      31   

6.7

  Insurance      32   

6.8

  Books and Records; Inspection Rights      32   

6.9

  Compliance with Laws      32   

6.10

  Environmental Matters      33   

6.11

  Further Assurances      34   

6.12

  Reserve Reports      34   

6.13

  Title Information      35   

 

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TABLE OF CONTENTS

(continued)

 

         Page  

6.14

  Additional Collateral; Additional Guarantors      35   

6.15

  ERISA Compliance      37   

6.16

  Swap Agreements      37   

6.17

  Marketing Activities      37   

6.18

  Use of Proceeds      37   

6.19

  Compliance with Anti-Corruption Laws and Sanctions      38   

6.20

  Deposit Accounts      38   

6.21

  Excluded Property      38   

SECTION 7.

 

NEGATIVE COVENANTS

     38   

7.1

  Financial Covenant      38   

7.2

  Debt      39   

7.3

  Liens      40   

7.4

  Restricted Payments      40   

7.5

  Investments      41   

7.6

  Nature of Business; International Operations      42   

7.7

  Limitation on Leases      42   

7.8

  Use of Proceeds      43   

7.9

  ERISA Compliance      43   

7.10

  Sale or Discount of Receivables      43   

7.11

  Mergers      44   

7.12

  Asset Dispositions      44   

7.13

  Environmental Matters      45   

7.14

  Transactions with Affiliates      46   

7.15

  Subsidiaries      46   

7.16

  Negative Pledge Agreements; Dividend Restrictions      46   

7.17

  Gas Imbalances, Take-or-Pay or Other Prepayments      46   

7.18

  Swap Agreements      46   

7.19

  Holding Company      47   

7.20

  Repayment of Certain Debt; Amendment of Certain Debt Documents      48   

 

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TABLE OF CONTENTS

(continued)

 

         Page  

SECTION 8.

 

DEFAULT AND REMEDIES

     49   

8.1

  Events of Default      49   

8.2

  Remedies      51   

8.3

  Right of Setoff      51   

8.4

  Rights and Remedies Cumulative; Non-Waiver      52   

8.5

  Crediting of Payments and Proceeds      52   

8.6

  Administrative Agent May File Proofs of Claim      53   

8.7

  Credit Bidding      53   

8.8

  Injunctive Relief      54   

SECTION 9.

 

AGENCY

     54   

9.1

  Appointment and Authority      54   

9.2

  Rights as a Lender      54   

9.3

  Exculpatory Provisions      54   

9.4

  Reliance by Administrative Agent      57   

9.5

  Delegation of Duties      58   

9.6

  Resignation of Administrative Agent      58   

9.7

  Non-Reliance on Administrative Agent and Other Lenders      59   

9.8

  Collateral and Guaranty Matters      59   

SECTION 10.

 

MISCELLANEOUS

     60   

10.1

  Governing Law      60   

10.2

  Expenses; Indemnity; Damage Waiver      60   

10.3

  Amendments, Waivers and Consents      62   

10.4

  Successors and Assigns      63   

10.5

  Treatment of Certain Information; Confidentiality      67   

10.6

  Submission to Jurisdiction; Venue; Waiver of Jury Trial      68   

10.7

  Notices      69   

10.8

  Reinstatement of Obligations      70   

10.9

  Severability      70   

10.10

  Integration      70   

10.11

  No Implied Waivers      71   

10.12

  Beneficial Owner      71   

10.13

  USA PATRIOT Act      71   

10.14

  Counterparts; Effectiveness      71   

 

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ANNEXES       Annex A    –    Rules of Construction Annex B    –    Term Loan
Commitments and Commitment Percentages Annex C    –    Addresses for Notice
Annex D    –    Closing Deliverables Annex E    –    Excluded Property
(Galveston 186-L) EXHIBITS       Exhibit A    –    Form of Term Loan Note
Exhibit B    –    Form of Notice of Borrowing Exhibit C    –    Form of Notice
of Prepayment Exhibit D    –    Form of Officer’s Compliance Certificate Exhibit
E    –    Form of Assignment and Assumption Exhibit F-1    –    Form of U.S. Tax
Compliance Certificate (Non-Partnership Foreign Lenders) Exhibit F-2    –   
Form of U.S. Tax Compliance Certificate (Non-Partnership Foreign Participants)
Exhibit F-3    –    Form of U.S. Tax Compliance Certificate (Foreign Participant
Partnerships) Exhibit F-4    –    Form of U.S. Tax Compliance Certificate
(Foreign Lender Partnerships) SCHEDULES               Schedule 5.5    –   
Litigation Schedule 5.14    –    Subsidiaries Schedule 5.15    –    Locations
Schedule 5.20    –    Swap Agreements Schedule 7.2    –    Existing Debt
Schedule 7.5    –    Existing Investments

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MULTIDRAW TERM LOAN AGREEMENT

This Multidraw Term Loan Agreement, dated as of October 17, 2016 (this
“Agreement”), is among PetroQuest Energy, L.L.C., a Louisiana limited liability
company (the “Borrower”), PetroQuest Energy, Inc., a Delaware corporation (the
“Parent”), the Lenders (as defined below) party hereto from time to time, and
Wells Fargo Bank, National Association, as administrative agent (in such
capacity, the “Administrative Agent” and, together with the Borrower, the Parent
and the Lenders, the “Parties” and each, a “Party”).

PRELIMINARY STATEMENT:

The Borrower has requested, and subject to the terms and conditions set forth in
this Agreement, the Lenders have agreed to extend, term loans to the Borrower.

AGREEMENT:

In consideration of the foregoing and the mutual agreements contained in this
Agreement, the receipt and sufficiency of which are acknowledged, the Parties
hereby agree as follows:

SECTION 1. INTERPRETATION:

This Agreement is to be interpreted in accordance with the rules of construction
set forth on Annex A. Capitalized terms used in this Agreement and not otherwise
defined have the meanings set forth for such terms on Annex A. All annexes,
schedules and exhibits to this Agreement are deemed to be a part of this
Agreement.

SECTION 2. MULTIDRAW TERM LOAN FACILITY:

2.1 Term Loans. Subject to the terms and conditions of this Agreement and the
other Loan Documents, and in reliance upon the representations set forth in this
Agreement and the other Loan Documents, each Lender shall severally make Term
Loans to the Borrower from time to time during the Availability Period in an
aggregate original principal amount equal to such Lender’s Term Loan Commitment.
Each Lender’s Term Loan Commitment permanently reduces on a dollar for dollar
basis by the principal amount of Term Loans made by such Lender and as provided
in Section 2.5(E).

2.2 Procedure for Advance. The Borrower shall give the Administrative Agent an
irrevocable Notice of Borrowing prior to 11:00 a.m. at least three Business Days
before its intention to borrow specifying (a) the date of such borrowing, which
must be a Business Day, (b) the amount of such borrowing, which must be in an
aggregate principal amount of $10,000,000 or a whole multiple of $10,000,000 in
excess thereof and (c) the Person or Persons to whom the proceeds of such
borrowing are to be disbursed (the “Proceeds Recipients”). If not previously
provided to the Administrative Agent in connection with a prior borrowing, the
Borrower shall deliver appropriate tax forms relating to a Proceeds Recipient to
the Administrative Agent at least five Business days before the applicable
borrowing date. A Notice of Borrowing received after 11:00 a.m. is deemed
received on the next Business Day. Not later than 1:00 p.m. on the proposed
borrowing date, each Lender will make available to the Administrative Agent, for
the account of the Borrower, at the office of the Administrative Agent in funds
immediately

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available to the Administrative Agent, such Lender’s Commitment Percentage of
the Term Loans to be made on such borrowing date. The Borrower hereby
irrevocably authorizes the Administrative Agent to disburse the proceeds of the
Term Loans received by the Administrative Agent in immediately available funds
by wire transfer to such Persons as may be designated by the Borrower in
writing. The Administrative Agent is not obligated to disburse the portion of
the proceeds of any Term Loan requested pursuant to this Section 2 to the extent
that any Lender has not made available to the Administrative Agent its
Commitment Percentage of such Term Loan. If a Lender does not make available to
the Administrative Agent its Commitment Percentage of any requested Term Loan,
then the Administrative Agent shall return the funds it received from the other
Lenders with respect to such requested Term Loan.

2.3 Repayment. The Borrower shall repay the aggregate outstanding principal
amount of the Term Loans in full, together with accrued interest thereon, on the
Maturity Date.

2.4 Optional Prepayments; Commitment Reductions.

(A) Prepayments. The Borrower may from time to time, without premium or penalty,
prepay the Term Loans, including, at its option, pursuant to Section 7.1(B), in
whole or in part, upon delivery to the Administrative Agent of a Notice of
Prepayment not later than 11:00 a.m. at least three Business Days before its
intention to prepay specifying the date, which must be a Business Day, and
amount of prepayment. Each optional prepayment of the Term Loans hereunder must
be in an aggregate principal amount of at least $1,000,000 or any whole multiple
of $1,000,000 in excess thereof. A Notice of Prepayment received after 11:00
a.m. is deemed received on the next Business Day. The Administrative Agent shall
promptly notify the Lenders of each Notice of Prepayment. Notwithstanding the
foregoing, any Notice of Prepayment delivered in connection with any refinancing
of all of the Term Loans with the proceeds of such refinancing or of any other
incurrence of Debt may be, if expressly so stated to be, contingent upon the
consummation of such refinancing or incurrence and may be revoked by the
Borrower in the event such refinancing or incurrence is not consummated.

(B) Commitment Reductions. The Borrower may from time to time, without premium
or penalty, permanently reduce or terminate in full, including, at its option,
pursuant to Section 7.1(B), the then outstanding Term Loan Commitments upon
delivery to the Administrative Agent of a written notice to the effect thereof
not later than 11:00 a.m. at least three Business Days before the effectiveness
of such reduction specifying the date, which must be a Business Day, and amount
of such reduction. Each reduction of the Term Loan Commitments hereunder must be
in an aggregate principal amount of at least $1,000,000 or any whole multiple of
$1,000,000 in excess thereof and shall be allocated among the Lenders according
to their respective Commitment Percentages. The Administrative Agent shall
promptly notify the Lenders of any such reduction of the Term Loan Commitments.

2.5 Mandatory Prepayments; Commitment Reductions.

(A) Debt Issuances. The Borrower shall make mandatory principal prepayments of
the Term Loans in an amount equal to the aggregate Net Cash Proceeds from any
Debt Issuance not otherwise permitted pursuant to Section 7.2. The Borrower
shall make such prepayment within three Business Days after the date of receipt
of the Net Cash Proceeds of any such Debt Issuance.

 

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(B) Equity Issuances. The Borrower shall make mandatory principal prepayments of
the Term Loans in an amount equal to the aggregate Net Cash Proceeds from any
Equity Issuance other than (i) the exercise price on stock options issued as
part of employee or management compensation and (ii) so long as no Default or
Event of Default exists, 50% of the aggregate Net Cash Proceeds from an Equity
Issuance the proceeds of which are used to acquire or develop Oil and Gas
Properties to the extent permitted by this Agreement and the other Loan
Documents. The Borrower shall make, or cause to be made, such prepayment within
three Business Days after the date of receipt of the Net Cash Proceeds of any
such Equity Issuance.

(C) Asset Dispositions and Insurance and Condemnation Events. Except as provided
in Section 2.5(D), the Borrower shall make mandatory principal prepayments of
the Term Loans in amounts equal to the aggregate Net Cash Proceeds from (i) any
Asset Disposition described in Section 7.12(D) (other than Asset Dispositions
consisting of ventures (as described in Section 7.5(H)) or any interest therein)
to the extent required thereby, (ii) any Asset Disposition not otherwise
permitted pursuant to Section 7.12 and (iii) any Insurance and Condemnation
Event to the extent that the aggregate amount of such Net Cash Proceeds (in the
case of this clause (iii)) exceed $1,000,000 during any calendar year. The
Borrower shall make, or cause to be made, such prepayments within three Business
Days after the date of receipt of the Net Cash Proceeds.

(D) Reinvestment Option. With respect to any Net Cash Proceeds realized or
received with respect to any Asset Disposition or any Insurance and Condemnation
Event by any Loan Party or any Subsidiary thereof (in each case, to the extent
not excluded pursuant to Section 2.5(C)), the Loan Parties may, at the
Borrower’s option, reinvest all or any portion of such Net Cash Proceeds in
assets used or useful for the business of the Loan Parties and their
Subsidiaries so long as any Net Cash Proceeds relating to Collateral are
reinvested in assets constituting Collateral. No prepayment with respect of Net
Cash Proceeds to be reinvested is required under Section 2.5(C) if the Borrower
gives the Administrative Agent written notice of its intent to reinvest in
accordance with this Section 2.5(D) on or prior to the date such prepayment is
required. Any such reinvestment must be made within twelve months following
receipt of such Net Cash Proceeds. If any Net Cash Proceeds are no longer
intended to be or cannot be so reinvested at any time after delivery of a notice
of reinvestment election, the Borrower shall make mandatory principal
prepayments of the Term Loans in amounts equal to such Net Cash Proceeds within
three Business Days after the applicable Loan Party reasonably determines that
such Net Cash Proceeds are no longer intended to be or cannot be so reinvested.
Pending the final application of any Net Cash Proceeds to be reinvested, the
applicable Loan Party may invest an amount equal to such Net Cash Proceeds in
any manner that is not prohibited by this Agreement.

(E) Notice; Reduction of Term Loan Commitments. Upon the occurrence of any event
triggering the prepayment requirement under this Section 2.5, the Borrower shall
promptly deliver a Notice of Prepayment to the Administrative Agent and upon
receipt of such notice, the Administrative Agent shall promptly so notify the
Lenders. If the amount of a prepayment required under this Section 2.5 is
greater than the outstanding principal amount of the Term Loans at such time,
then after giving effect to the prepayment of the outstanding Term Loans,

 

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any Term Loan Commitment of the Lenders at such time will be permanently reduced
on a pro rata basis in accordance with such Lenders’ Commitment Percentage by
the amount of such required prepayment not applied to prepay the outstanding
Term Loan, until the Term Loan Commitments have been reduced to zero.

2.6 No Reborrowings. The Borrower may not reborrow any amounts repaid or prepaid
under the Term Loans.

SECTION 3. GENERAL LOAN PROVISIONS:

3.1 Interest.

(A) Interest Rate Options. Subject to the provisions of this Section 3.1, the
Borrower shall pay interest on the aggregate outstanding principal amount of the
Term Loans at the Applicable Rate.

(B) Default Rate. Subject to Section 8.4, (i) immediately upon the occurrence
and during the continuance of an Event of Default under Section 8.1(A), 8.1(B),
8.1(I) or 8.1(J) or (ii) at the election of the Required Lenders upon the
occurrence and during the continuance of any other Event of Default, the
Borrower shall pay interest on the aggregate outstanding principal amount of the
Term Loans and any other Obligations at the Applicable Rate plus 2.00% per
annum, such interest being due and payable on demand. Interest continues to
accrue on the Obligations after the filing by or against the Borrower of any
petition seeking any relief in bankruptcy or under any Debtor Relief Law.

(C) Interest Payment and Computation. The Borrower shall pay interest in arrears
semiannually on May 15 and November 15 of each year, commencing November 15,
2016. All computations of interest are made on the basis of a 360-day year and
actual days elapsed.

(D) Maximum Rate. In no contingency or event whatsoever will the aggregate of
all amounts deemed interest under this Agreement charged or collected pursuant
to the terms of this Agreement exceed the highest rate permissible under any
Applicable Law that a court of competent jurisdiction, in a final determination,
deems applicable hereto. In the event that such a court determines that the
Lenders have charged or received interest hereunder in excess of the highest
applicable rate, the rate in effect hereunder automatically is reduced to the
maximum rate permitted by Applicable Law and the Lenders shall apply such excess
to the principal balance of the Obligations. It is the intent hereof that the
Borrower not pay or contract to pay, and that neither the Administrative Agent
nor any Lender receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by the Borrower
under Applicable Law.

3.2 Fees.

(A) Commitment Fee. On the Closing Date, the Borrower shall pay to each Lender,
for its own account, a non-refundable commitment fee equal to 5.00% of such
Lender’s Term Loan Commitment.

 

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(B) Other Fees. The Borrower shall pay to the Administrative Agent for its own
account fees in the amounts and at the times separately agreed upon in writing.
The Borrower shall pay to the Lenders such fees as have been separately agreed
upon in writing in the amounts and at the times so specified.

3.3 Manner of Payment. The Borrower shall make each payment on account of the
principal of or interest on the Term Loans or of any fee, commission or other
amounts payable to the Lenders under this Agreement not later than 1:00 p.m. on
the date specified for payment under this Agreement to the Administrative Agent
at the Administrative Agent’s Office for the account of the Lenders entitled to
such payment in Dollars, in immediately available funds and without any set off,
counterclaim or deduction whatsoever. Any payment received after 1:00 p.m. is
deemed to have been made on the next succeeding Business Day for all purposes.
Upon receipt by the Administrative Agent of each such payment, the
Administrative Agent shall distribute to each Lender its Commitment Percentage
(or other applicable share as provided herein) of such payment and shall provide
notice of the amount of such credit to each Lender. The Borrower shall pay each
payment to the Administrative Agent of Administrative Agent’s fees, expenses or
other amounts payable to the Administrative Agent for the account of the
Administrative Agent and shall pay any amount payable to any Lender under
Sections 3.6, 3.7 or 10.2 to the Administrative Agent for the account of the
applicable Lender. If any payment under this Agreement is specified to be made
upon a day that is not a Business Day, it shall be made on the next succeeding
day that is a Business Day and such extension of time is included in computing
any interest if payable along with such payment. Notwithstanding the foregoing,
each payment by the Borrower to a Defaulting Lender is applied in accordance
with Section 3.9(A)(ii).

3.4 Evidence of Indebtedness. The Term Loans made by each Lender will be
evidenced by one or more accounts or records maintained by such Lender in the
ordinary course of business and by the Administrative Agent in accordance with
this Agreement. The accounts or records maintained by the Administrative Agent
and each Lender are conclusive absent manifest error of the amount of the Term
Loans made by the Lenders to the Borrower and the interest and payments thereon.
Any failure to so record or any error in doing so do not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing with respect to the Obligations. In the event of any conflict between the
accounts and records maintained by any Lender and the accounts and records of
the Administrative Agent in respect of such matters, the accounts and records of
the Administrative Agent control in the absence of manifest error. Upon the
request of any Lender made through the Administrative Agent, the Borrower shall
execute and deliver to such Lender (through the Administrative Agent) a Term
Loan Note which will evidence such Lender’s Term Loans in addition to such
accounts or records. Each Lender may attach schedules to its Term Loan Note and
endorse thereon the date, amount and maturity of its Term Loans and payments
with respect thereto. If any Term Loan Notes are executed and delivered
hereunder, surrender of such Term Loan Notes is not required in connection with
any payments on the Term Loans, including any final payment.

3.5 Sharing of Payments by Lenders. If any Lender, by exercising any right of
setoff or counterclaim or otherwise, obtains payment in respect of any principal
of or interest on any of its Term Loans or other obligations hereunder resulting
in such Lender receiving payment of a proportion of the aggregate amount of its
Term Loans and accrued interest thereon or other such

 

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obligations greater than its pro rata share thereof as provided herein, then the
Lender receiving such greater proportion shall (a) notify the Administrative
Agent of such fact and (b) purchase (for cash at face value) participations in
the Term Loans and such other obligations of the other Lenders, or make such
other adjustments as are equitable, so that the benefit of all such payments are
shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Term Loans and other
amounts owing them; provided:

 

  (A) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations are rescinded and
the purchase price restored to the extent of such recovery, without interest;
and

 

  (B) the provisions of this Section 3.5 may not be construed to apply to
(i) any payment made by the Borrower pursuant to and in accordance with the
express terms of this Agreement (including the application of funds arising from
the existence of a Defaulting Lender) or (ii) any payment obtained by a Lender
as consideration for the assignment of or sale of a participation in any of its
term Loans to any assignee or participant.

Each Loan Party 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 each
Loan Party rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of each Loan Party in the
amount of such participation.

3.6 Increased Costs.

(A) Increased Costs Generally. If any Change in Law:

(i) imposes, modifies or deems applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by,
any Lender;

(ii) subjects any Recipient to any Taxes (other than (a) Indemnified Taxes,
(b) Taxes described in clauses (B) through (D) of the definition of Excluded
Taxes and (c) Connection Income Taxes) on its loans, loan principal, commitments
or other obligations, or its deposits, reserves, other liabilities or capital
attributable thereto; or

(iii) imposes on any Lender any other condition, cost or expense (other than
Taxes) affecting this Agreement or Term Loans made by such Lender;

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

 

6

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(B) Capital Requirements. If any Lender determines that any Change in Law
affecting such Lender or any lending office of such Lender or such Lender’s
holding company, if any, regarding capital or liquidity requirements, has or
would have the effect of reducing the rate of return on such Lender’s capital or
on the capital of such Lender’s holding company, if any, as a consequence of
this Agreement or such Lender’s Term Loan Commitment or Term Loans to a level
below that which such Lender or such Lender’s holding company could have
achieved but for such Change in Law (taking into consideration such Lender’s
policies and the policies of such Lender’s holding company with respect to
capital adequacy), then from time to time the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender’s holding company for any such reduction suffered.

(C) Certificates for Reimbursement. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in Sections 3.6(A) or 3.6(B) and delivered to the
Borrower, is conclusive absent manifest error. The Borrower shall pay such
Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

(D) Delay in Requests. Failure or delay on the part of any Lender to demand
compensation pursuant to this Section 3.6 does not constitute a waiver of such
Lender’s right to demand such compensation; provided the Borrower is not
required to compensate a Lender pursuant to this Section 3.6 for any increased
costs incurred or reductions suffered more than nine months prior to the date
that such Lender notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period
referred to above is extended to include the period of retroactive effect
thereof).

3.7 Taxes.

(A) Defined Terms. For purposes of this Section 3.7, the term “applicable law”
includes FATCA.

(B) Payments Free of Taxes. Any and all payments by or on account of any
obligation of any Loan Party under any Loan Document shall be made without
deduction or withholding for any Taxes, except as required by applicable law. If
any applicable law (as determined in the good faith discretion of an applicable
Withholding Agent) requires the deduction or withholding of any Tax from any
such payment by a Withholding Agent, then the applicable Withholding Agent is
entitled to make such deduction or withholding and shall timely pay the full
amount deducted or withheld to the relevant Governmental Authority in accordance
with applicable law and, if such Tax is an Indemnified Tax, then the sum payable
by the applicable Loan Party is increased as necessary so that after such
deduction or withholding has been made (including such deductions and
withholdings applicable to additional sums payable under this Section 3.7) the
applicable Recipient receives an amount equal to the sum it would have received
had no such deduction or withholding been made.

 

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(C) Payment of Other Taxes by the Borrower. The Loan Parties shall timely pay to
the relevant Governmental Authority in accordance with applicable law, or at the
option of the Administrative Agent timely reimburse it for the payment of, any
Other Taxes.

(D) Indemnification by the Borrower. The Loan Parties shall jointly and
severally indemnify each Recipient, within 10 days after demand therefor, for
the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or
asserted on or attributable to amounts payable under this Section) payable or
paid by such Recipient or required to be withheld or deducted from a payment to
such Recipient and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes were correctly or legally imposed
or asserted by the relevant Governmental Authority, and shall indemnify the
Administrative Agent, as Withholding Agent, in connection with any tax
withholdings. A certificate as to the amount of such payment or liability
delivered to the Borrower by a Lender (with a copy to the Administrative Agent),
or by the Administrative Agent on its own behalf or on behalf of a Lender, is
conclusive absent manifest error.

(E) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within 10 days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that any
Loan Party has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Loan Parties to do
so), (ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 10.4(D) relating to the maintenance of a Participant
Register and (iii) any Excluded Taxes attributable to such Lender, in each case,
that are payable or paid by the Administrative Agent in connection with any Loan
Document, and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to any Lender by the Administrative Agent is conclusive
absent manifest error. Each Lender hereby authorizes the Administrative Agent to
set off and apply any and all amounts at any time owing to such Lender under any
Loan Document or otherwise payable by the Administrative Agent to the Lender
from any other source against any amount due to the Administrative Agent under
this Section 3.7(E).

(F) Evidence of Payments. As soon as practicable after any payment of Taxes by
any Loan Party to a Governmental Authority pursuant to this Section 3.7, such
Loan Party 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 Required Lenders.

(G) Status of Lenders. (i) Any Lender that is entitled to an exemption from or
reduction of withholding Tax with respect to payments made under any Loan
Document shall deliver to the Borrower and the Administrative Agent, at the time
or times reasonably requested by the Borrower or the Administrative Agent, such
properly completed and executed documentation reasonably requested by the
Borrower or the Administrative Agent as will permit such payments to be made
without withholding or at a reduced rate of withholding. In addition, any
Lender, if reasonably requested by the Borrower or the Administrative Agent,
shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to

 

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determine whether or not such Lender is subject to backup withholding or
information reporting requirements. Notwithstanding anything to the contrary in
the preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in Section 3.7(G)(ii)(a),
3.7(G)(ii)(b) and 3.7(G)(ii)(d)) is not required if in the Lender’s reasonable
judgment such completion, execution or submission would subject such Lender to
any material unreimbursed cost or expense or would materially prejudice the
legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that the
Borrower is a U.S. Borrower:

 

  (a) 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 copies
of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup
withholding tax;

 

  (b) 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), whichever of the following is applicable:

 

  (1) in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (A) with respect to payments of
interest under any Loan Document, executed copies 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 (B) 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;

 

  (2) executed copies of IRS Form W-8ECI;

 

  (3) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (A) 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 the 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
(B) executed copies of IRS Form W-8BEN; or

 

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  (4) to the extent a Foreign Lender is not the beneficial owner, executed
copies 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, or other certification documents from each beneficial
owner, as applicable; provided 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;

 

  (c) 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 copies 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; and

 

  (d) 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
Section 3.7(G)(ii)(d), “FATCA” includes any amendments made to FATCA after the
date of this Agreement.

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.

Wells Fargo Bank, National Association, both in its individual capacity and in
its capacity as the Administrative Agent, has no liability to the Borrower, the
Lenders or any other Person in connection with any tax withholding amounts paid
or withheld from any payment pursuant to Applicable Law or arising from the
Borrower’s or a Lender’s failure, as applicable, to timely provide an accurate,
correct and complete IRS Form W-9, an appropriate IRS Form W-8 or such other
documentation contemplated under this Agreement.

 

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(H) Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 3.7 (including by
the payment of additional amounts pursuant to this Section 3.7), it shall pay to
the indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Section 3.7 with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses (including Taxes) of
such indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund). Such indemnifying
party, upon the request of such indemnified party, shall repay to such
indemnified party the amount paid over pursuant to this Section 3.7(H) (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this Section 3.7(H), in no event will the indemnified party be required to
pay any amount to an indemnifying party pursuant to this Section 3.7(H) the
payment of which would place the indemnified party in a less favorable net
after-Tax position than the indemnified party would have been in if the Tax
subject to indemnification and giving rise to such refund had not been deducted,
withheld or otherwise imposed and the indemnification payments or additional
amounts with respect to such Tax had never been paid. This Section 3.7(H) may
not be construed to require any indemnified party to make available its Tax
returns (or any other information relating to its Taxes that it deems
confidential) to the indemnifying party or any other Person.

(I) Survival. Each Party’s obligations under this Section 3.7 survives the
resignation or replacement of the Administrative Agent or any assignment of
rights by, or the replacement of, a Lender, the termination of the Term Loan
Commitments and the repayment, satisfaction or discharge of all obligations
under any Loan Document.

3.8 Mitigation Obligations; Replacement of Lenders.

(A) Designation of a Different Lending Office. If any Lender requests
compensation under Section 3.6, or requires the Borrower to pay any Indemnified
Taxes or additional amounts to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 3.7, then such Lender shall (at the
request of the Borrower) use reasonable efforts to designate a different lending
office for funding or booking its Term 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 3.6 or 3.7, 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 shall pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

(B) Replacement of Lenders. If any Lender requests compensation under
Section 3.6, or if the Borrower is required to pay any Indemnified Taxes or
additional amounts to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 3.7 and, in

 

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each case, such Lender has declined or is unable to designate a different
lending office in accordance with Section 3.8(A), or if any Lender is a
Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in, and consents required by,
Section 10.4), all of its interests, rights (other than its existing rights to
payments pursuant to Section 3.6 or 3.7) and obligations under this Agreement
and the related Loan Documents to an Eligible Assignee that assumes such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided:

 

  (i) the Borrower has paid to the Administrative Agent the assignment fee (if
any) specified in Section 10.4;

 

  (ii) such Lender has received payment of an amount equal to the outstanding
principal of its Term Loans, accrued interest thereon and all other amounts
payable to it hereunder and under the other Loan Documents from the assignee (to
the extent of such outstanding principal and accrued interest) or the Borrower
(in the case of all other amounts);

 

  (iii) in the case of any such assignment resulting from a claim for
compensation under Section 3.6 or payments required to be made pursuant to
Section 3.7, such assignment will result in a reduction in such compensation or
payments thereafter;

 

  (iv) such assignment does not conflict with Applicable Law; and

 

  (v) in the case of any assignment resulting from a Lender becoming a
Non-Consenting Lender, the applicable assignee has consented to the applicable
amendment, waiver or consent.

A Lender is not required to make any such assignment or 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.

3.9 Defaulting Lenders.

(A) Defaulting Lender Adjustments. Notwithstanding anything to the contrary
contained in this Agreement, if any Lender becomes a Defaulting Lender, then,
until such time as such Lender is no longer a Defaulting Lender, to the extent
permitted by Applicable Law:

 

  (i) Such Defaulting Lender’s right to approve or disapprove any amendment,
waiver or consent with respect to this Agreement is restricted as set forth in
the definition of Required Lenders.

 

  (ii)

Any payment of principal, interest, fees or other amounts received by the
Administrative Agent for the account of such Defaulting Lender (whether
voluntary or mandatory, at maturity, pursuant to Section 8 or otherwise) or
received by the Administrative Agent from a Defaulting Lender pursuant to
Section 8.3 shall be applied at such time or times as may be determined by the

 

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  Administrative Agent as follows: first, to the payment of any amounts owing by
such Defaulting Lender to the Administrative Agent hereunder; second, as the
Borrower may request (so long as no Default or Event of Default exists), to the
funding of any Term Loan in respect of which such Defaulting Lender has failed
to fund its portion thereof as required by this Agreement; third, if so
determined by the Administrative Agent and the Borrower, to be held in a deposit
account and released pro rata in order to satisfy such Defaulting Lender’s
potential future funding obligations with respect to Term Loans under this
Agreement; fourth, to the payment of any amounts owing to the Lenders as a
result of any judgment of a court of competent jurisdiction obtained by any
Lender against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement; fifth, so long as no Default or
Event of Default exists, to the payment of any amounts owing to the Borrower as
a result of any judgment of a court of competent jurisdiction obtained by the
Borrower against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement; and sixth, to such Defaulting
Lender or as otherwise directed by a court of competent jurisdiction; provided
that if (a) such payment is a payment of the principal amount of any Term Loans
in respect of which such Defaulting Lender has not fully funded its appropriate
share and (b) such Term Loans were made at a time when the conditions set forth
in Section 4.2 were satisfied or waived, such payment is applied solely to pay
the Term Loans of all Non-Defaulting Lenders on a pro rata basis prior to being
applied to the payment of any Term Loans of such Defaulting Lender until such
time as all Term Loans are held by the Lenders pro rata in accordance with the
Term Loan Commitments. Any payments, prepayments or other amounts paid or
payable to a Defaulting Lender that are applied (or held) to pay amounts owed by
a Defaulting Lender pursuant to this Section 3.9(A)(ii) are deemed paid to and
redirected by such Defaulting Lender, and each Lender irrevocably consents
hereto.

(B) Defaulting Lender Cure. If the Borrower and the Required Lenders agree in
writing that a Lender is no longer a Defaulting Lender, the Administrative Agent
shall so notify the Parties, whereupon as of the effective date specified in
such notice and subject to any conditions set forth therein, that Lender shall,
to the extent applicable, purchase at par that portion of outstanding Term Loans
of the other Lenders or take such other actions as may be necessary to cause the
Term Loans to be held pro rata by the Lenders in accordance with the Term Loan
Commitments, whereupon such Lender will cease to be a Defaulting Lender. Except
to the extent otherwise expressly agreed by the affected Parties, no change
hereunder from Defaulting Lender to Lender constitutes a waiver or release of
any claim of any Party arising from that Lender’s having been a Defaulting
Lender.

3.10 Acknowledgement and Consent to Bail-In of EEA Financial Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other
agreement, arrangement or understanding among any such parties, each Party
acknowledges that any liability of any EEA Financial Institution arising under
any Loan Document, to the extent such liability is unsecured, may be subject to
the write-down and conversion powers of an EEA Resolution Authority and agrees
and consents to, and acknowledges and agrees to be bound by:

 

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  (A) the application of any Write-Down and Conversion Powers by an EEA
Resolution Authority to any such liabilities arising hereunder which may be
payable to it by any Party that is an EEA Financial Institution; and

 

  (B) the effects of any Bail-in Action on any such liability, including, if
applicable:

 

  (i) a reduction in full or in part or cancellation of any such liability;

 

  (ii) a conversion of all, or a portion of, such liability into shares or other
instruments of ownership in such EEA Financial Institution, its parent
undertaking, or a bridge institution that may be issued to it or otherwise
conferred on it, and that such shares or other instruments of ownership will be
accepted by it in lieu of any rights with respect to any such liability under
this Agreement or any other Loan Document; or

 

  (iii) the variation of the terms of such liability in connection with the
exercise of the write-down and conversion powers of any EEA Resolution
Authority.

SECTION 4. CONDITIONS OF CLOSING AND BORROWING:

4.1 Conditions to Closing and Initial Term Loans. The obligation of the Lenders
to close this Agreement and to make the initial Term Loans is subject to the
satisfaction of each of the following conditions:

 

  (A) Executed Loan Documents. Each agreement, instrument or other document set
forth on Annex D has been duly authorized, executed and delivered to the
Administrative Agent by the parties thereto and is in full force and effect.

 

  (B) Payoff and Lien Release. The Borrower’s existing credit facility under the
Credit Agreement dated as of October 8, 2008, as amended or otherwise modified,
among the Borrower, the Parent, the lenders party thereto and JPMorgan Chase
Bank, N.A., as administrative agent, has been terminated and all liens granted
in connection therewith have been released.

 

  (C) Filings and Recordings. The Lenders have received all filings and
recordations that are necessary to perfect the security interests of the
Administrative Agent, on behalf of the Secured Parties, in the Collateral and
the Administrative Agent has received evidence reasonably satisfactory to the
Lenders that upon such filings and recordations such security interests
constitute valid and perfected first priority Liens thereon (subject to Liens
permitted hereunder). If all filings and recordations necessary to perfect the
security interests of the Administrative Agent, on behalf of the Secured
Parties, in the Collateral are not completed as of the Closing Date and all
Lenders waive such requirement in their sole discretion (subject to a
post-closing obligation to make such filings and recordings), then the Parent
shall promptly file a Form 8-K with the SEC at the time such filings and
recordings are completed announcing that fact.

 

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  (D) Governmental and Third Party Approvals. The Loan Parties have received all
material governmental, shareholder (if applicable) and third party consents and
approvals necessary (or any other material consents as determined in the
reasonable discretion of the Lenders) in connection with the transactions
contemplated by this Agreement and the other Loan Documents and all applicable
waiting periods have expired without any action being taken by any Person that
could reasonably be expected to restrain, prevent or impose any material adverse
conditions on any of the Loan Parties or such other transactions or that could
seek or threaten any of the foregoing, and no law or regulation is applicable
which in the reasonable judgment of the Lenders could reasonably be expected to
have such effect.

 

  (E) No Injunction. No action, proceeding or investigation has been instituted,
threatened or proposed before any Governmental Authority to enjoin, restrain, or
prohibit, or to obtain substantial damages in respect of, or which is related to
or arises out of this Agreement or the other Loan Documents or the consummation
of the transactions contemplated hereby or thereby, or which, in the Lenders’
sole discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement or the other Loan Documents or the consummation
of the transactions contemplated hereby or thereby.

 

  (F) Due Diligence. The Lenders have completed, to their satisfaction, all
legal, tax, environmental, business and other due diligence with respect to the
business, assets, liabilities, operations and condition (financial or otherwise)
of the Parent and its Subsidiaries in scope and determination satisfactory to it
in its sole discretion.

 

  (G) PATRIOT Act. The Parent, the Borrower and each of the Subsidiary
Guarantors have provided to the Administrative Agent and the Lenders the
documentation and other information requested to comply with requirements of the
PATRIOT Act, applicable “know your customer” and anti-money laundering rules and
regulations.

 

  (H) Payment at Closing. The Borrower has paid or made arrangements to pay
contemporaneously with closing (i) to the Administrative Agent and the Lenders
the fees set forth or referenced in Section 3.2 and any other accrued and unpaid
fees or commissions due hereunder, (ii) all fees, charges and disbursements of
counsel to the Administrative Agent and the Lenders (directly to such counsel if
requested by the Administrative Agent) to the extent accrued and unpaid and
submitted to the Borrower prior to or on the Closing Date, plus such additional
amounts of such fees, charges and disbursements as constitute its reasonable
estimate of such fees, charges and disbursements incurred or to be incurred by
it through the closing proceedings (provided that such estimate does not
thereafter preclude a final settling of accounts between the Borrower and the
Administrative Agent and the Lenders) and (iii) to any other Person such amount
as may be due thereto in connection with the transactions contemplated hereby,
including all taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of any of the Loan Documents.

 

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Without limiting the generality of the provisions of Section 9.3, for purposes
of determining compliance with the conditions specified in this Section 4.1,
each Lender that has signed this Agreement is 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 has received notice
from such Lender prior to the proposed Closing Date specifying its objection
thereto.

4.2 Conditions to All Term Loans. The obligations of the Lenders to make any
Term Loan (including the initial Term Loan) are subject to the satisfaction of
the following conditions precedent on the relevant borrowing date:

 

  (A) The Administrative Agent shall have received a Notice of Borrowing from
the Borrower in accordance with Section 2.2.

 

  (B) The representations contained in this Agreement and the other Loan
Documents are true and correct in all material respects, on and as of such
borrowing date with the same effect as if made on and as of such date (except
for any such representation that by its terms is made only as of an earlier
date, which representation remains true and correct in all material respects as
of such earlier date).

 

  (C) No Default or Event of Default exists on the borrowing date with respect
to such Term Loans or after giving effect to the Term Loans to be made on such
date.

 

  (D) No event, development or circumstance has occurred or exists that has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect.

SECTION 5. REPRESENTATIONS:

To induce the Administrative Agent and Lenders to enter into this Agreement and
to induce the Lenders to make the Term Loans, the Loan Parties represent to the
Administrative Agent and the Lenders both before and after giving effect to the
transactions contemplated hereunder, which representations and warranties are
deemed made on the Closing Date and as otherwise set forth in Section 4.2, that:

5.1 Organization; Powers. It and its Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority, and has all material
governmental licenses, authorizations, consents and approvals necessary, to own
its assets and to carry on its business as now conducted, and is qualified to do
business in, and is in good standing in, 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.

 

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5.2 Authority; Enforceability. The Transactions are within the Borrower’s and
each Guarantor’s corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action (including any action required to
be taken by any class of directors of the Parent, the Borrower or any other
Person, whether interested or disinterested, in order to ensure the due
authorization of the Transactions). Each Loan Document to which the Borrower and
each Guarantor is a party has been duly executed and delivered by the Borrower
and such Guarantor and constitutes a legal, valid and binding obligation of the
Borrower and such Guarantor, as applicable, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

5.3 Approvals; No Conflicts. The Transactions (a) do not require any consent or
approval of, registration or filing with, or any other action by, any
Governmental Authority or any other third Person (including shareholders or any
class of directors, whether interested or disinterested, of the Parent, the
Borrower or any other Person), nor is any such consent, approval, registration,
filing or other action necessary for the validity or enforceability of any Loan
Document or the consummation of the transactions contemplated thereby, except
such as have been obtained or made and are in full force and effect other than
(i) the recording and filing of the Security Documents as required by this
Agreement 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 it or
any of its Subsidiaries or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture, agreement or other
instrument binding upon it or any of its Subsidiaries or its Properties, or give
rise to a right thereunder to require any payment to be made by it or such
Subsidiary and (d) will not result in the creation or imposition of any Lien on
any Property of it or any of its Subsidiaries (other than the Liens created by
the Loan Documents).

5.4 Financial Condition; No Material Adverse Change.

(A) The Parent has furnished to the Lenders its consolidated balance sheet and
statements of income, stockholders equity and cash flows (i) as of and for the
fiscal year ended December 31, 2015, reported on by Ernst & Young LLP,
independent public accountants, and (ii) as of and for the fiscal quarter and
the portion of the fiscal year ended June 30, 2016, certified by its chief
financial officer. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Parent and its consolidated Subsidiaries as of such dates and for such periods
in accordance with GAAP, subject to year-end audit adjustments and the absence
of footnotes in the case of the unaudited quarterly financial statements.

(B) Since December 31, 2015, (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 Parent and its Subsidiaries has been
conducted only in the ordinary course consistent with past business practices.

 

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(C) Neither the Parent nor any of its Subsidiaries has on the date hereof any
material Debt (including Disqualified Capital Stock) or any contingent
liabilities, off-balance sheet liabilities or partnerships, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments, except for amounts that could be
requested after the Closing Date in connection with the Borrower’s bonding
obligations or as referred to or reflected or provided for in the financial
statements described in Section 5.4(A) or as set forth on Schedule 7.2.

5.5 Litigation.

(A) There are no actions, suits, investigations or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of the
Parent, threatened against or affecting the Parent or any of the Parent’s
Subsidiaries (i) that 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 (other than those solely involving a mortgage or
deed of trust (and no other Loan Documents) and which relate to a claim
regarding the title of the Borrower or any Subsidiary to any Oil and Gas
Property; provided (a) the mortgage and title requirements under Sections 6.13
and 6.14 would remain satisfied if such Oil and Gas Property was deemed to be
not mortgaged or deemed to be a property for which satisfactory evidence of
title was not delivered for purposes of such calculations and (b) the aggregate
value attributed to such Oil and Gas Properties in the most recently delivered
Reserve Report which are subject to such actions, suits, investigations,
proceedings or arbitrations does not exceed $2,000,000 at the time).

(B) Since the Closing Date, there has been no change in the status of the
matters disclosed in Schedule 5.5 that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.

5.6 Environmental Matters. Except for such matters that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect:

 

  (A) the Borrower and the Borrower’s Subsidiaries and each of their respective
Properties and operations thereon are, and within all applicable statute of
limitation periods have been, in compliance with all applicable Environmental
Laws;

 

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

 

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

 

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

 

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

 

  (F) neither the Borrower nor any of the Borrower’s Subsidiaries has received
any written notice asserting an alleged liability or obligation under any
applicable Environmental Laws with respect to the investigation, remediation,
abatement, removal, or monitoring of any Hazardous Materials at, under, or
Released or threatened to be Released from any real properties offsite the
Borrower or any of the Borrower’s Subsidiaries’ Properties and, to the
Borrower’s knowledge, there are no conditions or circumstances that could
reasonably be expected to result in the receipt of such written notice;

 

  (G) there has been no exposure of any Person or Property to any Hazardous
Materials as a result of or in connection with the operations and businesses of
the Borrower’s or any of the Borrower’s Subsidiaries’ Properties that could
reasonably be expected to form the basis for a claim for damages or
compensation; and

 

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

5.7 Compliance with the Laws and Agreements; No Defaults.

(A) It and each of its Subsidiaries is in compliance with all Applicable Laws
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
necessary for the ownership of its Property and the conduct of its business,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

 

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(B) Neither it nor any of its Subsidiaries is in default nor has any event or
circumstance occurred which, but for the expiration of any applicable grace
period or the giving of notice, or both, would constitute a default or would
require it or any of its Subsidiaries 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 it or any of its Subsidiaries
or any of their Properties is bound.

(C) No Default has occurred and is continuing.

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

5.9 Taxes. It and its Subsidiaries each has timely filed or caused to be filed
all Tax returns and reports required to have been filed and has paid or caused
to be paid all Taxes required to have been paid by it, except (a) Taxes that are
being contested in good faith by appropriate proceedings and for which it 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 it and its Subsidiaries in respect of
Taxes and other governmental charges are, in the reasonable opinion of it,
adequate. No Tax Lien has been filed and, to the knowledge of it, no claim is
being asserted with respect to any such Tax or other such governmental charge.

5.10 ERISA.

(A) The Borrower, each of the Borrower’s Subsidiaries and each ERISA Affiliate
have complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.

(B) Each Plan is, and has been, established and maintained in substantial
compliance with its terms, ERISA and, where applicable, the Code.

(C) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any of the Borrower’s Subsidiaries or any ERISA
Affiliate (whether directly or indirectly) of (i) either a civil penalty
assessed pursuant to subsections (c), (i), (l) or (m) of section 502 of ERISA or
a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of
fiduciary duty liability damages under section 409 of ERISA.

(D) Full payment when due has been made of all amounts which the Borrower, any
of the Borrower’s Subsidiaries or any ERISA Affiliate is required under the
terms of each Plan or Applicable Law to have paid as contributions to such Plan
as of the date hereof.

 

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(E) None of the Borrower, any of the Borrower’s Subsidiaries or any ERISA
Affiliate sponsors, maintains, or contributes to an employee welfare benefit
plan, as defined in section 3(1) of ERISA, including any such plan maintained to
provide benefits to former employees of such entities, that may not be
terminated by the Borrower, any of the Borrower’s Subsidiaries or any ERISA
Affiliate in the Borrower’s sole discretion at any time without any material
liability.

(F) None of the Borrower, any of the Borrower’s Subsidiaries or any ERISA
Affiliate sponsors, maintains or contributes to, or has at any time in the
six-year period preceding the date hereof sponsored, maintained or contributed
to, any employee pension benefit plan, as defined in section 3(2) of ERISA, that
is subject to Title IV of ERISA, section 302 of ERISA or section 412 of the
Code.

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

5.12 Insurance. The Borrower has, and has caused all of the Borrower’s
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Applicable Laws and all material agreements
and (b) insurance coverage in at least amounts and against such risk (including
public liability) that are usually insured against by companies similarly
situated and engaged in the same or a similar business for the assets and
operations of the Borrower and the Borrower’s Subsidiaries. The Administrative
Agent and the Lenders have been named as additional insureds in respect of such
insurance policies insuring against physical damage to equipment and facilities
owned by the Borrower and the Administrative Agent has been named as loss payee
with respect to Property loss insurance.

 

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5.13 Restriction on Liens. Neither the Parent nor any of the Parent’s
Subsidiaries is a party to any material agreement or arrangement (other than
Capital Leases creating Liens permitted by Section 7.3(C), but then only on the
Property subject of such Capital Lease), or subject to any order, judgment, writ
or decree, which either restricts or purports to restrict its ability to grant
Liens to the Administrative Agent for the benefit of the Secured Parties on or
in respect of their Properties to secure the Obligations.

5.14 Subsidiaries. Except as set forth on Schedule 5.14 or as disclosed in
writing to the Administrative Agent pursuant to Section 7.15, (a) it has no
Subsidiaries, (b) each of its Subsidiaries is a Wholly-Owned Subsidiary and
(c) it has no Foreign Subsidiaries. As of the Closing Date, all Excluded
Subsidiaries are listed on Schedule 5.14.

5.15 Location of Business and Offices. The (a) jurisdiction of organization,
(b) name as listed in the public records of its jurisdiction of organization,
(c) type, identity or organizational structure, (d) the location of its
principal place of business and chief executive office, (e) organizational
identification number in its jurisdiction of organization and (f) federal
taxpayer identification number, in each case for each Loan Party, is stated on
Schedule 5.15 (or as set forth in a notice delivered pursuant to
Section 6.1(M)).

5.16 Properties; Titles.

(A) The Borrower and the Borrower’s Subsidiaries each has good and defensible
title to the Oil and Gas Properties evaluated in the most recently delivered
Reserve Report and good title to all its personal Properties, in each case, free
and clear of all Liens except Liens permitted by Section 7.3. After giving full
effect to the Excepted Liens, the Borrower or any of the Borrower’s Subsidiaries
specified as the owner owns the net interests in production attributable to the
Hydrocarbon Interests as reflected in the most recently delivered Reserve
Report, and the ownership of such Properties does not in any material respect
obligate the Borrower or such 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 the Borrower’s or such Subsidiary’s net revenue interest
in such Property.

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

(C) The rights and Properties presently owned, leased or licensed by the
Borrower and the Borrower’s Subsidiaries including all easements and rights of
way, include all rights and Properties necessary to permit the Borrower and the
Borrower’s Subsidiaries to conduct their business in all material respects in
the same manner as the Borrower’s business has been conducted prior to the
Closing Date.

 

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(D) All of the Properties of the Borrower and the Borrower’s 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) The Borrower and each of the Borrower’s Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
Property material to the Borrower’s business, and the use thereof by the
Borrower and such Subsidiary does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. The Borrower and the Borrower’s 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.

5.17 Maintenance of Properties. Except for such acts or failures to act as could
not be reasonably expected to have a Material Adverse Effect, the Oil and Gas
Properties (and Properties unitized therewith) of the Borrower and the
Borrower’s Subsidiaries have been maintained, operated and developed in a good
and workmanlike manner and in conformity with all Applicable Laws and in
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Borrower and the
Borrower’s Subsidiaries. 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 of the Borrower or any of the Borrower’s
Subsidiaries is subject to having allowable production reduced below the full
and regular allowable (including the maximum permissible tolerance) because of
any overproduction (whether or not the same was permissible at the time) and
(b) none of the wells comprising a part of the Oil and Gas Properties (or
Properties unitized therewith) of the Borrower or any of the Borrower’s
Subsidiaries is deviated from the vertical more than the maximum permitted by
Applicable Law, and such wells are, in fact, bottomed under and are producing
from, and the well bores are wholly within, the Oil and Gas Properties (or in
the case of wells located on Properties unitized therewith, such unitized
Properties) of the Borrower or such Subsidiary. 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 the Borrower’s
Subsidiaries that are necessary to conduct normal operations are being
maintained in a state adequate to conduct normal operations, and with respect to
such of the foregoing which are operated by the Borrower or any of the
Borrower’s Subsidiaries, in a manner consistent with the Borrower’s or the
Borrower’s Subsidiaries’ past practices (other than those the failure of which
to maintain in accordance with this Section 5.17 could not reasonably be
expected to have a Material Adverse Effect).

5.18 Gas Imbalances, Prepayments. Except as set forth on the most recent
certificate delivered pursuant to Section 6.12(B), on a net basis there are no
gas imbalances, take or pay or other prepayments which would require the
Borrower or any of the Borrower’s Subsidiaries to deliver Hydrocarbons produced
from their Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor exceeding one-half bcf of gas (on an mcf
equivalent basis) in the aggregate.

 

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5.19 Marketing of Production. Except for contracts in effect after the Closing
Date and either disclosed in writing to the Administrative Agent or included in
the most recently delivered Reserve Report (with respect to all of which
contracts the Borrower represents or that the Borrower or the Borrower’s
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 or the Borrower’s Subsidiaries’ Hydrocarbons (including 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 months from the Closing
Date.

5.20 Swap Agreements. Schedule 5.20, as of the Closing Date, and after the
Closing Date, each report required to be delivered by it pursuant to
Section 6.1(D), sets forth, a true and complete list of all Swap Agreements of
the Parent and each of its Subsidiaries, the material terms thereof (including
the type, term, effective date, termination date and notional amounts or
volumes), the net mark to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.

5.21 Use of Proceeds. It has used the proceeds of the Term Loans solely as
permitted in Section 6.18. It and its Subsidiaries are not engaged principally,
or as one of its or their important activities, in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of buying or
carrying margin stock (within the meaning of Regulation T, U or X of the Board).

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

5.23 Anti-Corruption Laws and Sanctions.

(A) None of (i) the Parent, the Borrower, any Subsidiary or, to the knowledge of
the Parent, the Borrower or such Subsidiary, any of their respective directors,
officers, employees or Affiliates or (ii) any agent or representative of the
Parent, the Borrower or any Subsidiary that will act in any capacity in
connection with or benefit from the Term Loans, (a) is a Sanctioned

 

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Person or currently the subject or target of any Sanctions, (b) has its assets
located in a Sanctioned Country, (c) directly or indirectly derives revenues
from investments in, or transactions with, Sanctioned Persons or (d) has taken
any action, directly or indirectly, that would result in a violation by such
Persons of any Anti-Corruption Laws. Each of the Parent, the Borrower and their
respective Subsidiaries has implemented and maintains in effect policies and
procedures designed to ensure compliance by the Parent, the Borrower and their
respective Subsidiaries and their respective directors, officers, employees,
agents and Affiliates with the Anti-Corruption Laws. Each of the Parent, the
Borrower and their respective Subsidiaries, and to the knowledge of the Parent
and the Borrower, each director, officer, employee, agent and Affiliate of the
Parent, the Borrower and each such Subsidiary, is in compliance with the
Anti-Corruption Laws in all material respects.

(B) No proceeds of any Term Loan have been used, directly or indirectly, by the
Parent, the Borrower, any of their respective its Subsidiaries or any of its or
their respective directors, officers, employees and agents (i) in furtherance of
an offer, payment, promise to pay, or authorization of the payment or giving of
money, or anything else of value, to any Person in violation of any
Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating
any activities, business or transaction of or with any Sanctioned Person, or in
any Sanctioned Country, including any payments (directly or indirectly) to a
Sanctioned Person or a Sanctioned Country or (iii) in any manner that would
result in the violation of any Sanctions applicable to any Party.

SECTION 6. AFFIRMATIVE COVENANTS:

Until all of the Obligations (other than contingent indemnification obligations
not then due) have been paid and satisfied in full in cash and the Term Loan
Commitments terminated or expired, each Loan Party shall, and shall cause each
of its Subsidiaries to:

6.1 Financial Statements; Other Information. The Parent shall furnish to the
Administrative Agent (who shall make such information available to each Lender):

 

  (A) Annual Financial Statements. As soon as available, but in any event in
accordance with then Applicable Law and not later than 90 days after the end of
each fiscal year of the Parent, its audited consolidated 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 Ernst & Young LLP or
other independent public accountants of recognized national standing (without a
“going concern” or like qualification or exception and without any qualification
or exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Parent and its consolidated
subsidiaries on a consolidated basis in accordance with GAAP consistently
applied.

 

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  (B) Quarterly Financial Statements. As soon as available, but in any event in
accordance with then Applicable Law and not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Parent, its
consolidated 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 Responsible Officers as presenting fairly in all material respects
the financial condition and results of operations of the Parent 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) Compliance Certificate; Public Announcements. Concurrently with any
delivery of financial statements under Section 6.1(A) or Section 6.1(B), an
Officer’s Compliance Certificate (i) certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Section 6.14(A)
and Section 7.1 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 5.4 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate. Concurrently with the filing of the Parent’s financial
statements with the SEC for any quarterly or annual period, the Parent shall
publically announce, either in a press release or in such reports, that no
Default or Event of Default exists at such time and that the Borrower is in
compliance with the financial covenant set forth in Section 7.1(A), or if a
Default or Event of Default exists or if the Borrower is not so in compliance,
specifying the details thereof and any action taken or proposed to be taken with
respect thereto.

 

  (D) Swap Agreement Certificate. Concurrently with the delivery of each Reserve
Report hereunder, a certificate of a Responsible Officer, in form and substance
satisfactory to the Required Lenders, setting forth as of a recent date, a true
and complete list of all Swap Agreements of the Parent and each Subsidiary, the
material terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes set forth on a monthly basis for the
remaining term of each Swap Agreement), the net mark-to-market value thereof,
any new credit support agreements relating thereto not listed on Schedule 5.20,
and confirming no margin required or supplied under any credit support document,
and any amendments relating thereto and the counterparty to each such agreement.

 

  (E) Insurance Coverage Certificate. Each year, promptly upon renewal thereof,
a certificate of insurance coverage from each insurer with respect to the
insurance required by Section 5.12, in form and substance reasonably
satisfactory to the Required Lenders, and, if requested by the Administrative
Agent or any Lender, all copies of the applicable policies.

 

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  (F) Other Accounting Reports. Promptly upon receipt thereof, a copy of each
other report or letter submitted to the Parent 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 Parent or any such Subsidiary, and a copy of
any response by the Parent or any such Subsidiary, or the board of directors or
other relevant governing body of the Parent or any such Subsidiary, to such
letter or report.

 

  (G) SEC and Other Filings; Reports to Shareholders. Promptly after the same
become publicly available, copies of all periodic and other reports, proxy
statements and other materials filed by the Parent or any Subsidiary with the
SEC, or with any national securities exchange, or distributed by the Parent to
its shareholders generally, as the case may be.

 

  (H) Notices Under Material Instruments. Promptly after the furnishing thereof,
copies of any financial statement, report or notice furnished to or by any
Person pursuant to the terms of any preferred stock designation, indenture, loan
or credit or other similar agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 6.1.

 

  (I) Lists of Purchasers. Concurrently with the delivery of each Reserve Report
effective as of the previous January 1, a list of all Persons purchasing
Hydrocarbons from the Parent or any Subsidiary.

 

  (J) Notice of Sales of Oil and Gas Properties. In the event the Borrower or
any of the Borrower’s Subsidiaries intends to sell, transfer, assign or
otherwise dispose of any Oil or Gas Properties or any Equity Interests in any
Subsidiary in accordance with Section 7.12, prior written notice of such
disposition, the price thereof and the anticipated date of closing and any other
details thereof requested by any Lender.

 

  (K) Notice of Insurance and Condemnation Events. Prompt written notice, and in
any event within three Business Days after it obtains knowledge thereof, of the
occurrence of any Insurance and Condemnation Event or the commencement of any
action or proceeding that could reasonably be expected to result in an Insurance
and Condemnation Event.

 

  (L) Issuance of Permitted Refinancing Debt. In the event the Parent or the
Borrower intends to refinance any Debt with the proceeds of Permitted
Refinancing Debt as contemplated by Section 7.2(B) or 7.2(I), prior written
notice of such intended offering therefor, the amount thereof and the
anticipated date of closing and, promptly when available, a copy of the
preliminary offering memorandum (if any) and the final offering memorandum
therefor (if any).

 

  (M) Information Regarding Loan Parties. Prompt written notice (and in any
event within 30 days prior thereto) of any change in any Loan Party’s
(i) jurisdiction of organization, (ii) name as listed in the public records of
its jurisdiction of organization, (iii) type, identity or organizational
structure, (iv) the location of its principal place of business and chief
executive office, (v) organizational identification number in its jurisdiction
of organization or (vi) federal taxpayer identification number.

 

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  (N) Forecasted and Actual Production Report and Lease Operating Statements. As
soon as available, but in any event not later than 45 days after the end of each
fiscal quarter of the Parent, a report setting forth (i) for each calendar month
for the most recently ended twelve calendar month period as of the last day of
the most recently ended fiscal quarter of the Parent, the volume of production,
sales attributable to production (and the prices at which such sales were made
and the revenues derived from such sales) and the volume of production which was
hedged for each such calendar month from the Oil and Gas Properties of the
Borrower and its Subsidiaries, and setting forth the related ad valorem,
severance and production taxes and lease operating expenses attributable thereto
and incurred for each calendar month and (ii) (a) the “forecasted production
from proved developed producing reserves” (as such term is defined below),
(b) the “forecasted production from total proved reserves” (as such term is
defined below) and (c) the notional amounts and volumes of each Swap Agreement
of the Parent and each Subsidiary, in each case for clauses (a), (b) and
(c) above, for each calendar month for the 60 month period following the last
day of the most recently ended fiscal quarter of the Parent. As used in this
Agreement, (1) “forecasted production from total proved reserves” means the
forecasted production of crude oil, natural gas and natural gas liquids as
reflected in the most recent Reserve Report delivered to the Administrative
Agent pursuant to Section 6.12, after giving effect to (A) any pro forma
adjustments for the consummation of any acquisitions or dispositions since the
effective date of such Reserve Report and (B) any supplements to such Reserve
Report that may be delivered from time to time by the Borrower to the
Administrative Agent setting forth updated well projections and other
information in form and substance reasonably acceptable to the Required Lenders
reflecting drilling activity and other results of operations since the effective
date of such Reserve Report and (2) “forecasted production from proved developed
producing reserves” means the forecasted production of crude oil, natural gas
and natural gas liquids from Proved Developed Producing Reserves as reflected in
the most recent Reserve Report delivered to the Administrative Agent pursuant to
Section 6.12, after giving effect to (A) any pro forma adjustments for the
consummation of any acquisitions or dispositions since the effective date of
such Reserve Report and (B) any supplements to such Reserve Report that may be
delivered from time to time by the Borrower to the Administrative Agent setting
forth updated well projections and other information in form and substance
reasonably acceptable to the Required Lenders reflecting drilling activity and
other results of operations since the effective date of such Reserve Report.

 

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

 

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  (P) Patriot Act. Promptly upon any request therefor, all documentation and
other information requested by the Administrative Agent or any Lender that is
required by any regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including the USA Patriot Act.

 

  (Q) Consolidating Information for Excluded Subsidiaries. If at any time the
net income of all Excluded Subsidiaries is greater than $1,000,000 in any fiscal
year, then concurrently with any delivery of financial statements under
Section 6.1(A) or Section 6.1(B), a certificate of a Responsible Officer setting
forth consolidating spreadsheets that show all Excluded Subsidiaries and the
eliminating entries, in such form as would be presentable to the auditors of the
Borrower.

 

  (R) Other Requested Information. Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Parent or any Subsidiary (including any Plan and any reports or
other information required to be filed with respect thereto under the Code or
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.

 

  (S) Incurrence of Permitted Second Lien Debt. In the event the Borrower
intends to incur Permitted Second Lien Debt after the Closing Date, prior
written notice of such intended incurrence, the amount thereof, and the
anticipated date of closing, which notice includes a copy of the term sheet or
description of notes relating to such Permitted Second Lien Debt for the review
and approval of the Required Lenders and subsequent thereto (but in any event
reasonably prior to the execution thereof), all material documents governing
such Permitted Second Lien Debt to the Required Lenders for approval.

 

  (T) Deposit Accounts. Promptly, and no later than five Business Days after the
opening or acquisition thereof, written notice (such notice to include
reasonably detailed information regarding the account number, purpose and
location of such Deposit Account) to the Administrative Agent of any Deposit
Account opened or acquired by the Parent or any of its Subsidiaries.

Documents required to be delivered pursuant to Section 6.1(A), Section 6.1(B) or
Section 6.1(G) (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, are deemed to have been delivered on the date (1) on which the Parent
posts such documents, or provides a link thereto on the Parent’s website on the
Internet at www.petroquest.com or (2) on which such documents are posted on the
Parent’s behalf on an Internet or intranet website, if any, to which each Lender
and the Administrative Agent have access (whether a commercial, third-party
website or whether sponsored by the Administrative Agent); provided the Borrower
provides to the Administrative Agent by electronic mail electronic versions
(i.e., soft copies) of such documents. Notwithstanding anything contained
herein, in every instance the Parent shall provide paper copies of the Officer’s
Compliance Certificate required by Section 6.1(C) to the Administrative Agent
and the Lenders. The Administrative Agent has no obligation to request the
delivery or to maintain copies of the documents referred to in this Section 6.1,
and in any event has no responsibility to monitor compliance by the Parent with
any such request for delivery, and each Lender is be solely responsible for
requesting delivery to it or maintaining its copies of such documents.

 

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The Parent and the Borrower acknowledge that (a) the Administrative Agent will
make available to the Lenders materials or information provided by or on behalf
of the Loan Parties hereunder (collectively, “Loan Party Materials”) by posting
the Borrower Materials on the Platform and (b) certain of the Lenders may be
“public-side” Lenders (i.e., Lenders that do not wish to receive material
non-public information with respect to the Parent or its securities) (each, a
“Public Lender”). The Parent and the Borrower shall use commercially reasonable
efforts to identify that portion of the Loan Party Materials that may be
distributed by the Administrative Agent to the Public Lenders and that (i) all
such Loan Party Materials will be clearly and conspicuously marked “PUBLIC”
which, at a minimum, means that the word “PUBLIC” appears prominently on the
first page thereof, (ii) by marking Loan Party Materials “PUBLIC,” the Parent
and the Borrower are deemed to have authorized the Administrative Agent and the
Lenders to treat such Loan Party Materials as not containing any material
non-public information (although it may be sensitive and proprietary) with
respect to the Parent or its securities for purposes of United States Federal
and state securities laws (provided that, to the extent such Loan Party
Materials constitute Information, they shall be treated as set forth in
Section 10.5), (iii) all Loan Party Materials marked “PUBLIC” are permitted to
be made available by the Administrative Agent through a portion of the Platform
designated “Public Investor” and (iv) the Administrative Agent is entitled to
treat any Loan Party Materials that are not marked “PUBLIC” as being suitable
only for posting on a portion of the Platform not designated “Public Investor.”

6.2 Notices of Material Events. The Parent and the Borrower shall furnish to the
Administrative Agent (who shall make such notice available to each Lender)
prompt written notice of the following:

 

  (A) the occurrence of any Default;

 

  (B) the filing or commencement of, or the threat in writing of, any action,
suit, proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting the Parent or any Affiliate thereof
not previously disclosed in writing to the Lenders or any material adverse
development in any action, suit, proceeding, investigation or arbitration
(whether or not previously disclosed to the Lenders) that, in either case, if
adversely determined, could reasonably be expected to result in liability in
excess of $2,000,000; and

 

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

Each notice delivered under this Section 6.2 shall be accompanied by a statement
of a Responsible Officer setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect
thereto.

 

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6.3 Existence; Conduct of Business. It shall, and shall 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 is located or the ownership of its Properties
requires such qualification, except where the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect; provided the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution
permitted under Section 7.11.

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

6.5 Performance of Obligations. The Borrower shall pay the Obligations in
accordance with the terms thereof, and the Parent and the Borrower each shall,
and shall cause each of its Subsidiaries to, do and perform every act and
discharge all of the obligations to be performed and discharged by them under
the Loan Documents at the time or times and in the manner specified therein.

6.6 Operation and Maintenance of Properties. The Borrower, at the Borrower’s own
expense, shall, and shall cause each of the Borrower’s Subsidiaries to:

 

  (A) operate its Oil and Gas Properties and other material Properties or cause
such Oil and Gas Properties and other material Properties to be operated in a
careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
with all Applicable Laws, including applicable pro ration requirements and
Environmental Laws, and all rules and regulations of every other Governmental
Authority from time to time constituted to regulate the development and
operation of its Oil and Gas Properties and the production and sale of
Hydrocarbons and other minerals therefrom, except, in each case, where the
failure to comply could not reasonably be expected to have a Material Adverse
Effect;

 

  (B) keep and maintain all Property material to the conduct of its business in
good working order and condition (ordinary wear and tear excepted), preserve,
maintain and keep in good repair, working order and efficiency (ordinary wear
and tear excepted) all of its material Oil and Gas Properties and other material
Properties, including all equipment, machinery and facilities;

 

  (C) promptly pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness, except those contested in good faith by appropriate proceedings,
accruing under the leases or other agreements affecting or pertaining to its Oil
and Gas Properties and shall do all other things necessary to keep unimpaired
their respective rights with respect thereto and prevent any forfeiture thereof
or default thereunder;

 

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

 

  (E) to the extent it is not the operator of any Property, use reasonable
efforts to cause the operator to comply with this Section 6.6.

6.7 Insurance. The Borrower shall, and shall cause each of the Borrower’s
Subsidiaries to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations. The loss payable clauses or provisions in such
insurance policy or policies insuring against physical damage to equipment and
facilities owned by the Borrower shall be, as soon as commercially reasonable
but in no event later than 45 days after the Closing Date and at all times
thereafter, endorsed in favor of and made payable to the Administrative Agent as
its interests may appear and such policies shall name the Administrative Agent
and the Lenders as “additional insureds” and provide that the insurer will give
prior notice as required under such insurance policies of any cancellation to
the Administrative Agent. With respect to Mortgaged Property located in the
State of Texas, the Borrower (a) is required to (i) keep such Mortgaged Property
insured against damage in the amount the Administrative Agent (at the direction
of the Required Lenders) specifies, (ii) purchase the insurance from an insurer
that is authorized to do business in the State of Texas or an eligible surplus
lines insurer and (iii) name the Administrative Agent as the person to be paid
under the policy in the event of a loss and (b) must deliver to the
Administrative Agent a copy of such policy and proof of the payment of premiums.
If the Borrower fails to meet any requirement listed in clause (a) or (b) above,
the Administrative Agent (at the direction of the Required Lenders) may obtain
collateral protection insurance on behalf of the Borrower at the Borrower’s
expense.

6.8 Books and Records; Inspection Rights. The Parent shall, and shall cause each
of its Subsidiaries to, keep proper books of record and account in which full,
true and correct entries are made of all dealings and transactions in relation
to its business and activities. The Parent shall, and shall cause each of its
Subsidiaries to, permit any representatives designated by the Administrative
Agent or any Lender, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.

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

 

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6.10 Environmental Matters.

(A) The Borrower shall, at the Borrower’s sole expense: (i) comply, and shall
cause the Borrower’s Properties and operations and each of the Borrower’s
Subsidiaries and each such Subsidiary’s Properties and operations to comply,
with all applicable Environmental Laws, the breach of which could be reasonably
expected to have a Material Adverse Effect; (ii) not Release or threaten to
Release, and shall cause each Subsidiary not to Release or threaten to Release,
any Hazardous Material on, under, about or from any of the Borrower’s or the
Borrower’s Subsidiaries’ Properties or any other property offsite the Property
to the extent caused by the Borrower or any of the Borrower’s Subsidiaries’
operations except in compliance with applicable Environmental Laws, the Release
or threatened Release of which could reasonably be expected to have a Material
Adverse Effect; (iii) timely obtain or file, and shall cause each Subsidiary to
timely obtain or file, all Environmental Permits, if any, required under
applicable Environmental Laws to be obtained or filed in connection with the
operation or use of the Borrower or the Borrower’s 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 the Borrower’s Subsidiaries’ Properties, which failure to commence
and diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect; (v) conduct, and cause its Subsidiaries to conduct,
their respective operations and businesses in a manner that will not expose any
Property or Person to Hazardous Materials that could reasonably be expected to
form the basis for a claim for damages or compensation; and (vi) establish and
implement, and shall cause each Subsidiary to establish and implement, such
procedures as may be necessary to continuously determine and assure that the
Borrower’s and the Borrower’s Subsidiaries’ obligations under this
Section 6.10(A) are timely and fully satisfied.

(B) The Borrower shall promptly, but in no event later than five days of the
occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any Person against
it or its Subsidiaries or their Properties of which the Borrower has knowledge
in connection with any Environmental Laws if the Borrower could reasonably
anticipate that such action will result in liability (whether individually or in
the aggregate) in excess of $2,000,000.

(C) The Borrower shall, and shall cause each of the Borrower’s Subsidiaries 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 Required 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 future acquisitions of Oil and Gas Properties or other Properties.

 

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6.11 Further Assurances.

(A) It shall, and shall cause each of its Subsidiaries to, at its own expense,
promptly execute and deliver to the Administrative Agent all such other
documents, agreements and instruments reasonably requested by the Required
Lenders to comply with, cure any defects or accomplish the conditions precedent,
covenants and agreements of it or any of its Subsidiaries, as the case may be,
in the Loan Documents 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 other Loan Documents, or to state more fully the
obligations secured by the Loan Documents, or to perfect, protect or preserve
any Liens created pursuant to this Agreement or any of the Loan Documents 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 Required Lenders, in connection therewith.

(B) Each Loan Party authorizes the Administrative Agent (at the written
direction of the Required Lenders) to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of such Loan Party where permitted by law. A
carbon, photographic or other reproduction of the Security Documents or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

(C) Notwithstanding any provision in any of the Loan Documents to the contrary,
in no event will any Excluded Deposit Account be encumbered by any Security
Document; provided, the Parent shall not, and shall not permit any of its
Subsidiaries to, permit to exist any Lien on any Excluded Deposit Account except
Liens permitted by Section 7.3(E).

6.12 Reserve Reports.

(A) On or before March 1, May 10, August 10 and November 10 of each year,
commencing November 10, 2016, the Borrower shall furnish to the Administrative
Agent (who shall make such information available to the Lenders) a Reserve
Report evaluating the Oil and Gas Properties, including oil and gas Swap
Agreements in place at the end of each quarter, of the Borrower and the
Borrower’s Subsidiaries as of the immediately preceding
January 1, April 1, July 1 and October 1, respectively. The Reserve Report as of
January 1 of each year shall be prepared by one or more Approved Petroleum
Engineers, and the April 1, July 1 and October 1 Reserve Reports of each year
shall be prepared by or under the supervision of the chief engineer of the
Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately
preceding January 1st Reserve Report. The values of the Oil and Gas Properties
set forth in a Reserve Report are the present values of such Oil and Gas
Properties discounted at 10% per annum.

(B) With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects (i) the information contained in the
Reserve Report and any other information delivered in connection therewith is
true and correct in all material respects, (ii) the Borrower or the Borrower’s
Subsidiaries owns good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for

 

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Liens permitted by Section 7.3, (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 5.18 with respect to
the Oil and Gas Properties evaluated in such Reserve Report which would require
the Borrower or any of the Borrower’s Subsidiaries to deliver Hydrocarbons
either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv) none of
their Oil and Gas Properties have been sold since the date of the most recently
delivered Reserve Report except as set forth on an exhibit to the certificate,
which certificate shall list all of its Oil and Gas Properties sold and in such
detail as reasonably required by the Required Lenders, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
later of the Closing Date or the most recently delivered Reserve Report which
the Borrower could reasonably be expected to have been obligated to disclose
under Section 5.19 had such agreement been in effect on the Closing Date and
(vi) attached thereto is a schedule of the Oil and Gas Properties evaluated by
such Reserve Report that are Mortgaged Properties and demonstrating that such
Mortgaged Properties represent at least the Threshold Amount of the total value
of the Oil and Gas Properties in compliance with Section 6.14(A).

6.13 Title Information.

(A) On or before the delivery to the Administrative Agent and the Lenders of
each Reserve Report required by Section 6.12(A), the Borrower will deliver title
information in form and substance acceptable to the Required Lenders 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 has received, together with title information previously
delivered to the Administrative Agent, satisfactory title information on at
least the Threshold Amount of the total value of the Proved Reserves
attributable to the Oil and Gas Properties evaluated by such Reserve Report.

(B) If the Borrower has provided title information for additional Properties
under Section 6.13(A), the Borrower shall, within 90 days of notice from the
Required Lenders 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 7.3 raised by such information, (ii) substitute acceptable Mortgaged
Properties with no title defects or exceptions except for Excepted Liens (other
than Excepted Liens described in clauses (E), (G) and (H) of such definition)
having an equivalent value or (iii) deliver title information in form and
substance acceptable to the Required Lenders so that the Administrative Agent
has received, together with title information previously delivered to the
Administrative Agent, satisfactory title information on at least the Threshold
Amount of the value of the Oil and Gas Properties evaluated by such Reserve
Report.

6.14 Additional Collateral; Additional Guarantors.

(A) In connection with each delivery of a Reserve Report, the Borrower shall
review such Reserve Report and the list of current Mortgaged Properties (as
described in Section 6.12(B)(vi)) to ascertain whether the Mortgaged Properties
represent at least the Threshold

 

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Amount of the total value of the Oil and Gas Properties evaluated in the most
recently completed Reserve Report after giving effect to exploration and
production activities, acquisitions, dispositions and production. In the event
that the Mortgaged Properties do not represent at least the Threshold Amount of
such total value, then (i) the Borrower shall, and shall cause the Borrower’s
Subsidiaries to, grant, within 30 days of delivery of the certificate required
under Section 6.12(B), to the Administrative Agent as security for the
Obligations a first-priority Lien interest (provided that Excepted Liens of the
type described in clauses (A) to (D) and (F) of the definition thereof may
exist, but subject to the provisos at the end of such definition) on additional
Oil and Gas Properties not already subject to a Lien of the Security Documents
such that after giving effect thereto, the Mortgaged Properties represent at
least the Threshold Amount of such total value and (ii) the Parent shall
promptly file a Form 8-K, or include such information as part of any filing of
the Parent’s financial statements, with the SEC announcing that the Borrower has
complied with this Section 6.14(A). All such Liens will be created and perfected
by and in accordance with the provisions of the Security Documents, all in form
and substance reasonably satisfactory to the Required Lenders and in sufficient
executed (and acknowledged where necessary or appropriate) counterparts for
recording purposes.

(B) It shall promptly cause each of its Subsidiaries (other than the Borrower
and the Excluded Subsidiaries) to guarantee the Obligations pursuant to the
Guaranty Agreement. If at any time the net income of all Excluded Subsidiaries
is greater than $1,000,000 in any fiscal year, then within 30 days after the
thee delivery of financial statements under Section 6.1(A) with respect to such
fiscal year, it shall cause each Excluded Subsidiary to guarantee the
Obligations pursuant to the Guaranty Agreement. The Parent shall at all times
guarantee the Obligations pursuant to the Guaranty Agreement. In connection with
any such guarantee, it shall, or shall cause such Subsidiary to promptly (but
with respect to any Subsidiary formed or acquired after the date hereof, no
later than ten days after the date of such formation or acquisition),
(i) execute and deliver the Guaranty Agreement or a supplement to the Guaranty
Agreement as required by the Required Lenders, (ii) pledge all of the Equity
Interests of such Subsidiary (including delivery of original certificates
evidencing the Equity Interests of such Subsidiary, together with an appropriate
undated stock or equity powers for each certificate duly executed in blank by
the registered owner thereof) and (iii) execute and deliver such other
additional closing documents, certificates and legal opinions as are reasonably
requested by the Required Lenders in connection with this Section 6.14(B).

(C) The Parent and the Borrower shall not, and shall not permit any of their
Subsidiaries to, permit to exist any Lien on any “building” or “manufactured
(mobile) home” (each as defined in Regulation H promulgated under the Flood
Insurance Laws) except Excepted Liens.

(D) The Parent shall, and shall cause each of the Parent’s Subsidiaries to,
grant to the Administrative Agent, contemporaneously with the granting of a Lien
on any Property to secure any Permitted Second Lien Debt, as security for the
Obligations, a first priority, perfected Lien (subject only to Excepted Liens)
on the same Property pursuant to Security Documents in form and substance
reasonably satisfactory to the Required Lenders. In connection therewith, the
Parent shall and shall cause each of the Parent’s Subsidiaries to execute and
deliver such other additional closing documents, certificates and legal opinions
as are reasonably requested by the Required Lenders.

 

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(E) The Parent shall cause any Person guaranteeing any Permitted Second Lien
Debt to contemporaneously become a Guarantor hereunder in accordance with
Section 6.14(B).

6.15 ERISA Compliance. The Parent shall promptly furnish and shall cause the
Parent’s Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (a) promptly after the filing thereof with the United
States Secretary of Labor or the IRS, copies of each annual and other report
with respect to each Plan or any trust created thereunder and (b) immediately
upon becoming aware of the occurrence of any “prohibited transaction,” as
described in section 406 of ERISA or in section 4975 of the Code, in connection
with any Plan or any trust created thereunder, a written notice signed by a
Responsible Officer, the Subsidiary or the ERISA Affiliate, as the case may be,
specifying the nature thereof, what action the Parent, the Parent’s Subsidiaries
or the ERISA Affiliate is taking or proposes to take with respect thereto, and,
when known, any action taken or proposed by the IRS or the Department of Labor
with respect thereto.

6.16 Swap Agreements. The Parent or its Subsidiaries may enter into Swap
Agreements from time to time in accordance with Section 7.18. The Parent or the
Borrower shall maintain the hedge position established by the Swap Agreements
identified in the most recent certificate delivered under Section 6.1(D) during
the period specified therein until sold, assigned, monetized, transferred,
cancelled, terminated, unwound or otherwise disposed of in accordance with
Section 7.18.

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

6.18 Use of Proceeds. The Borrower shall use the proceeds of the Term Loans to
repay existing Debt, to pay transaction fees and expenses, to provide working
capital for exploration and production operations and for general corporate
purposes (including the repurchase of stock to the extent permitted by
Section 7.4(A)). If requested by the Administrative Agent (at the written
direction of the Required Lenders), the Borrower shall furnish to the
Administrative Agent and each Lender a statement that neither it nor any Person
acting on its behalf has taken any action that 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 conformity with the requirements of FR Form U-1 or such
other form referred to in Regulation U, Regulation T or Regulation X of the
Board, as the case may be.

 

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6.19 Compliance with Anti-Corruption Laws and Sanctions. The Parent and the
Borrower shall maintain in effect and enforce policies and procedures designed
to ensure compliance by the Parent, the Borrower, their respective Subsidiaries
and their respective directors, officers, employees and agents with
Anti-Corruption Laws and applicable Sanctions.

6.20 Deposit Accounts. Each Loan Party shall provide the Administrative Agent
with an Account Control Agreement in form and substance reasonably satisfactory
to the Required Lenders duly executed by such Loan Party and the financial
institute maintaining each Deposit Account of such Loan Party other than
(a) Excluded Deposit Accounts and (b) Deposit Accounts used for the payment of
corporate credit cards so long as the aggregate amount on deposit in such
Deposit Accounts does not exceed $100,000 at any time.

6.21 Excluded Property. As of the Closing Date, the Collateral does not include
the Excluded Property. If the Borrower has not sold the Excluded Property in
full to a purchaser on commercially reasonable terms in an arm’s length
transaction pursuant to documentation in form and substance satisfactory to the
Required Lenders within 90 days of the Closing Date, then the Borrower shall,
within ten Business Days after the running of such time period, execute and
deliver a Mortgage and such other Security Documents in favor of the
Administrative Agent for the benefit of the Secured Parties in respect of the
Excluded Property. The Net Cash Proceeds received by the Borrower from the sale
of the Excluded Property is excluded for all purposes from the requirements of
Sections 2.5(C) and 7.12(D)(ii).

SECTION 7. NEGATIVE COVENANTS:

Until all of the Obligations (other than contingent, indemnification obligations
not then due) have been paid and satisfied in full in cash and the Term Loan
Commitments terminated or expired, the Loan Parties shall not, and shall not
permit any of their respective Subsidiaries to:

7.1 Financial Covenant.

(A) The Borrower shall not permit or allow the ratio of (a) the present value,
discounted at 10% per annum, of the estimated future net revenues in respect of
all Oil and Gas Properties of the Parent and its Subsidiaries, before any state,
federal, foreign or other income taxes, attributable to Proved Developed
Reserves, using Strip Prices in effect at the end of each calendar quarter,
including oil and gas Swap Agreements in place at the end of each quarter, to
(b) the sum of the aggregate outstanding principal amount of the Term Loans plus
the then outstanding Term Loan Commitments to be less than:

(i) 1.7 to 1.0 as measured on December 31, 2016, and March 31, 2017; and

(ii) 2.0 to 1.0 as measured on June 30, 2017, and the last day of each calendar
quarter thereafter.

 

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(B) If the Borrower violates the financial covenant set forth in Section 7.1(A),
it may, at its option (exercised by giving the Administrative Agent written
notice thereof within ten days of the scheduled delivery date of the Officer’s
Compliance Certificate for the applicable calendar quarter), prepay outstanding
Term Loans or permanently reduce the then outstanding Term Loan Commitments, or
a combination thereof, such that after giving effect to such prepayments and
reductions, the financial covenant set forth in Section 7.1(A) would be
satisfied. The Borrower shall make any such prepayments or reductions within 15
days of the scheduled delivery date of the Officer’s Compliance Certificate for
the applicable calendar quarter. Nothing in this Section 7.1(B) waives any
Default or Event of Default that exists due to noncompliance with the financial
covenant set forth in Section 7.1(A) until such prepayments or reductions are
made. After giving effect to such prepayments and reductions, the Borrower is
deemed to have satisfied the financial covenant set forth in Section 7.1(A) as
of the relevant date of determination with the same effect as though there had
been no failure to comply therewith at such date and the applicable Default or
Event of Default that had occurred is deemed waived and not to have occurred for
all purposes of this Agreement and the other Loan Documents.

7.2 Debt. It shall not, and shall not permit any of its Subsidiaries to, incur,
create, assume or suffer to exist any Debt, except, without duplication:

 

  (A) the Obligations;

 

  (B) Debt of the Parent and its Subsidiaries existing on the Closing Date that
is described on Schedule 7.2 and any Permitted Refinancing Debt in respect
thereof;

 

  (C) accounts payable and accrued expenses, liabilities or other obligations to
pay the deferred purchase price of Property or services, from time to time
incurred in the ordinary course of business which are not greater than 90 days
past the date of invoice or delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP;

 

  (D) Debt under Capital Leases not to exceed $2,000,000;

 

  (E) Debt associated with bonds or surety obligations required by Applicable
Law in connection with the operation of the Oil and Gas Properties;

 

  (F) intercompany Debt between the Parent and its Subsidiaries to the extent
permitted by Section 7.5(G); provided (i) such Debt is not held, assigned,
transferred, negotiated or pledged to any Person other than the Parent or one of
the other Loan Parties and (ii) any such Debt owed by a Loan Party is
subordinated to the Obligations;

 

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

 

  (H) Debt incurred to finance premiums for insurance policies required under
Section 5.12;

 

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  (I) (i) Permitted Second Lien Debt incurred after the Closing Date and
guarantees thereof by any Guarantor and (ii) Debt that constitutes Permitted
Refinancing Debt of such Permitted Second Lien Debt permitted under the
Intercreditor Agreement and any guarantees thereof, in each case, so long as
(a) no Default or Event of Default exists at the time of, or results from, the
incurrence of any such Debt and (b) the Borrower is in pro forma compliance with
Section 7.1 at the time of incurrence of such Debt and after giving effect to
the incurrence of such Debt; and

 

  (J) other Debt not to exceed $2,000,000 in the aggregate at any one time
outstanding.

7.3 Liens. It shall not, and shall not permit any of its Subsidiaries 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 Obligations;

 

  (B) Excepted Liens;

 

  (C) Liens securing Capital Leases permitted by Section 7.2(D) but only on the
Property under lease;

 

  (D) Liens on any insurance policy or on any prepaid premiums on any such
insurance policy securing Debt related to the payment of insurance premiums with
respect to such insurance policy which Debt is permitted under Section 7.2(H);

 

  (E) Liens on (i) Property not constituting collateral for the Obligations so
long as the principal or face amount of all Debt secured under this clause
(i) does not exceed $2,000,000 in the aggregate at any one time and (ii) cash in
Excluded Deposit Accounts so long as such Liens do not secured Debt for borrowed
money; and

 

  (F) Liens on Collateral securing Permitted Second Lien Debt and Debt that
constitutes Permitted Refinancing Debt of such Permitted Second Lien Debt
permitted under the Intercreditor Agreement; provided that such Liens (i) are
subordinate to the Liens in favor of the Administrative Agent securing the
Obligations and (ii) are at all times subject to an Intercreditor Agreement.

7.4 Restricted Payments. The Parent shall not, and shall not permit any of its
Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, return any capital to its Equity Interest
holders or make any distribution of its Property to its Equity Interest holders,
except (a) the Parent may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its Equity Interests (other
than Disqualified Capital Stock), (b) the Parent’s 6.875% Series B Cumulative
Convertible Perpetual Stock (the “Preferred Stock”) outstanding on the Closing
Date may convert into Equity Interests pursuant to its terms, (c) Wholly-Owned
Subsidiaries of the Borrower may declare and pay dividends ratably with respect
to their Equity Interests, (d) the Parent may make Restricted Payments pursuant
to and in accordance with stock option plans or other benefit plans for
management or employees of the Parent and its Subsidiaries, (e) so long as no
Default or Event of Default exists or would result therefrom, the Borrower may
declare and pay dividends to Parent and (f) the Parent may voluntarily Redeem or
exchange Disqualified Capital Stock

 

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outstanding on the Closing Date, including the Preferred Stock, with the
issuance of additional Equity Interests (other than Disqualified Capital Stock)
of the Parent in exchange for all or a portion of such Disqualified Capital
Stock, including the Preferred Stock, so long as no Default has occurred and is
continuing both before and after giving effect to such Redemption or exchange
and such Redemption or exchange occurs substantially contemporaneously with, and
in any event within three Business Days following, the receipt of proceeds or
confirmation of exchange, as applicable, in respect of such Redemption or
exchange.

7.5 Investments; Acquisitions. The Parent and the Borrower shall not, and shall
not permit any of their Subsidiaries to, make or permit to remain outstanding
any Investments in or to any Person or acquire any Oil and Gas Properties,
except:

 

  (A) Investments existing on the Closing Date that are described on Schedule
7.5;

 

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

 

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

 

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

 

  (E) deposits maturing within one year from the date of creation thereof with,
including certificates of deposit issued by, any Lender or any office located in
the United States of any other bank or trust company which is organized under
the laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $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 or, in the case of any Foreign Subsidiary, a
bank organized in a jurisdiction in which the Foreign Subsidiary conducts
operations having assets in excess of $500,000,000 (or its equivalent in another
currency);

 

  (F) deposits in money market funds investing exclusively in Investments
described in Section 7.5(C), 7.5(D) or 7.5(E);

 

  (G) intercompany Investments (i) made by the Borrower in or to any Person
that, prior to such Investment, is a Guarantor and (ii) made by the Parent or
any Subsidiary in or to (a) the Borrower or (b) any Person that, prior to such
Investment, is a Guarantor;

 

  (H)

subject to the limits in Section 7.6, Investments (including capital
contributions) in general or limited partnerships or other types of entities
(each a “venture”) entered into by the Parent, the Borrower or a Subsidiary with
others in the ordinary course of business; provided (i) any such venture is
engaged exclusively in oil and gas exploration, development, production,
processing and related activities, including transportation, (ii) the interest
in such venture is acquired in

 

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  the ordinary course of business and on fair and reasonable terms and
(iii) such venture interests acquired and capital contributions made (valued as
of the date such interest was acquired or the contribution made) do not exceed,
in the aggregate at any time outstanding, an amount equal to $2,000,000;

 

  (I) acquisitions of direct ownership interests in additional Oil and Gas
Properties and gas gathering systems related thereto or related to farm-out,
farm-in, joint operating, joint venture or area of mutual interest agreements,
gathering systems, pipelines or other similar arrangements which are usual and
customary in the oil and gas exploration and production business located within
the geographic boundaries of the United States that arise in the ordinary course
of business so long as (i) the Parent or the Borrower has given prior written
notice to the Administrative Agent of such Investments and (ii) the aggregate
amount of the purchase price (including any earn-outs, valued at the maximum
amount payable thereunder, and deferred payments) for any such acquisition,
together with all other such acquisitions consummated during the twelve month
period immediately preceding such acquisition, does not exceed $2,000,000;

 

  (J) Investments in stock, obligations or securities received in settlement of
debts arising from Investments permitted under this Section 7.5 owing to the
Borrower or any of the Borrower’s Subsidiaries as a result of a bankruptcy or
other insolvency proceeding of the obligor in respect of such debts or upon the
enforcement of any Lien in favor of the Borrower or any of the Borrower’s
Subsidiaries; provided the Borrower shall give the Administrative Agent prompt
written notice in the event that the aggregate outstanding amount of all
Investments held at any one time under this Section 7.5(J) exceeds $2,000,000;

 

  (K) loans or advances to employees, officers or directors in the ordinary
course of business of the Parent or any of its Subsidiaries, in each case only
as permitted by applicable law, including Section 402 of the Sarbanes Oxley Act
of 2002, but in any event not to exceed $250,000 in the aggregate at any time;
and

 

  (L) other Investments not to exceed $2,000,000 in the aggregate outstanding at
any time.

7.6 Nature of Business; International Operations. The Borrower shall not, and
shall not permit any of the Borrower’s Subsidiaries to, (a) allow any material
change to be made in the character of its business as an independent oil and gas
exploration and production company or (b) acquire or make any expenditure
(whether such expenditure is capital, operating or otherwise) in or related to,
any Oil and Gas Properties not located within the geographical boundaries of the
United States.

7.7 Limitation on Leases. It shall not, and shall not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal but
excluding Capital Leases and leases of Hydrocarbon Interests) under leases or
lease agreements which would cause the aggregate amount of all payments made by
the Parent and any of its Subsidiaries pursuant to all such leases or lease
agreements, including any residual payments at the end of any lease, to exceed
$2,000,000 in any period of twelve consecutive calendar months during the life
of such leases.

 

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7.8 Use of Proceeds. The Borrower shall not permit the proceeds of the Term
Loans to be used for any purpose other than those permitted by Section 6.18. The
Borrower shall not permit the proceeds of any Term Loan to be used for any
purpose that violates the provisions of Regulations T, U or X of the Board. The
Borrower shall not take or permit to be taken by any Person acting on behalf of
the Borrower any action that 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. The Borrower shall not request any Term Loan, and the Borrower shall
not use, and shall ensure that its Subsidiaries and its or their respective
directors, officers, employees and agents shall not use, the proceeds of any
Term Loan, directly or indirectly, (a) in furtherance of an offer, payment,
promise to pay, or authorization of the payment or giving of money, or anything
else of value, to any Person in violation of any Anti-Corruption Laws, (b) for
the purpose of funding, financing or facilitating any activities, business or
transaction of or with any Sanctioned Person, or in any Sanctioned Country or
(c) in any manner that would result in the violation of any Sanctions applicable
to any Party.

7.9 ERISA Compliance. It shall not, and shall not permit any of its Subsidiaries
to, at any time:

 

  (A) engage in, or permit any ERISA Affiliate to engage in, any transaction in
connection with which it, 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, it, any of its Subsidiaries or any ERISA
Affiliate is required to pay as contributions thereto; or

 

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

7.10 Sale or Discount of Receivables. Except for receivables obtained by the
Borrower or any of the Borrower’s Subsidiaries in the ordinary course of
business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, the Borrower shall not, and shall not
permit any of the Borrower’s Subsidiaries to, discount or sell (with or without
recourse) any of its notes receivable or accounts receivable.

 

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7.11 Mergers. It shall not, and it shall not permit any of its Subsidiaries to,
merge into or with or consolidate with any other Person, or permit any other
Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property to any other Person (whether now owned
or hereafter acquired), or liquidate or dissolve except that so long as no
Default has occurred and is continuing at such time or would exist after giving
effect thereto (a) the Borrower may merge with any Wholly-Owned Subsidiary so
long as the Borrower is the surviving Person, (b) any Guarantor may merge with
any other Guarantor or the Borrower so long as, if a Guarantor merges with the
Borrower or the Parent, the Borrower or the Parent, as applicable, is the
surviving Person, (c) any Non-Guarantor Subsidiary may merge with any other
Non-Guarantor Subsidiary and (d) any Non-Guarantor Subsidiary may merge with any
Loan Party so long as the Loan Party is the surviving Person.

7.12 Asset Dispositions. The Borrower shall not, and shall not permit any of the
Borrower’s Subsidiaries to, make any Asset Disposition (including any forfeiture
of any Property except where such forfeiture is being contested in good faith by
appropriate proceedings) or sell, assign, monetize, transfer, cancel, terminate,
unwind or otherwise dispose of any Swap Agreement in respect of commodities,
except for:

 

  (A) the sale of Hydrocarbons in the ordinary course of business;

 

  (B) transfers of interests in undeveloped acreage or undrilled depths in the
ordinary course of the joint development of Oil and Gas Properties with ventures
(as described in Section 7.5(H)) and others including transfers to other parties
pursuant to joint development agreements, participation agreements, farm-out
agreements, farm-in agreements, exploration agreements, operating agreements and
unit agreements;

 

  (C) the sale or transfer of equipment that is no longer necessary for its
business or the business of such Subsidiary or is replaced by equipment of at
least comparable value and use;

 

  (D) the sale or other disposition (including Insurance and Condemnation
Events) of any Oil and Gas Property or any interest therein or any of its
Subsidiaries (other than the Borrower) owning Oil and Gas Properties, the sale,
assignment, monetization, transfer, cancellation, termination, unwinding or
other disposal of any Swap Agreement in respect of commodities, and any venture
(as described in Section 7.5(H)) or any interest therein; provided with respect
to this clause (D):

 

  (i)

the consideration received in respect of such sale or other disposition
(including asset exchanges under Section 1031 of the Code) or such sale,
assignment, monetization, transfer, cancellation, termination, unwinding or
other disposal of any Swap Agreement in respect of commodities is

 

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  equal to or greater than the fair market value of the Oil and Gas Property, or
any interest therein, or the Subsidiary subject of such sale or other
disposition, or the Swap Agreement subject to such sale, assignment,
monetization, transfer, cancellation, termination, unwinding or other disposal
(as reasonably determined for each such Asset Disposition (a) by a Responsible
Officer of the Borrower if such Asset Disposition involves Net Cash Proceeds of
less than $10,000,000 and (b) by the board of managers (or comparable governing
body) of the Borrower if such Asset Disposition involves Net Cash Proceeds of
$10,000,000 or more, and, if requested by the Required Lenders, the Borrower
shall deliver a certificate of its Responsible Officer certifying to that
effect);

 

  (ii) if the aggregate fair market value of such sales or other dispositions of
Oil and Gas Property (or of a Subsidiary owning Oil and Gas Properties) under
this clause (D) and included in the most recently delivered Reserve Report
together with the fair market value of such Swap Agreements sold, assigned,
monetized, transferred, cancelled, terminated, unwound or otherwise disposed of
under this clause (D), in each case, in any period of twelve consecutive months,
is in excess of 5% of the total value of the Proved Reserves attributable to the
Oil and Gas Properties and such Swap Agreements evaluated by the most recently
delivered Reserve Report, individually or in the aggregate, the Borrower shall
make a prepayment of the Term Loans as provided by Section 2.5(C); and

 

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

 

  (E) sales, assignments, monetizations, transfers, cancellations, terminations
or the unwinding or other disposition of any Swap Agreement permitted under
Section 7.18(D); and

 

  (F) sales and other dispositions of Properties not regulated by
Section 7.12(A) through Section 7.12(E) having a fair market value not to exceed
$2,000,000 during any 12-month period.

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

 

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7.14 Transactions with Affiliates. It shall not, and shall not permit any of its
Subsidiaries to, enter into any transaction, including any purchase, sale, lease
or exchange of Property or the rendering of any service, with any Affiliate
(other than with any Guarantor and the Borrower) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.

7.15 Subsidiaries. It shall not, and shall not permit any of its Subsidiaries
to, (a) create or acquire any additional Subsidiary unless it gives written
notice to the Administrative Agent of such creation or acquisition and complies
with Section 6.14(B), (b) sell, assign or otherwise dispose of any Equity
Interests in any Subsidiary except in compliance with Section 7.12(D),
(c) except as set forth on Schedule 5.14, have any Subsidiaries that are not
Wholly-Owned Subsidiaries or (d) have any Foreign Subsidiaries.

7.16 Negative Pledge Agreements; Dividend Restrictions. It shall not, and shall
not permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any contract, agreement or understanding (other than the Loan Documents or
Capital Leases creating Liens permitted by Section 7.3(C)) which in any way
prohibits or restricts the granting, conveying, creation or imposition of any
Lien on any of its Property in favor of the Administrative Agent and the Lenders
or restricts any Subsidiary from paying dividends or making distributions to any
Loan Party, or which requires the consent of or notice to other Persons in
connection therewith.

7.17 Gas Imbalances, Take-or-Pay or Other Prepayments. It shall not, and shall
not permit any of its Subsidiaries to, allow gas imbalances (except those
arising out of a third party’s election not to take its share of gas),
take-or-pay or other prepayments with respect to the Oil and Gas Properties of
it or any of its Subsidiaries that would require it or such Subsidiary to
deliver Hydrocarbons at some future time without then or thereafter receiving
full payment therefor to exceed one half bcf of gas (on an mcf equivalent basis)
in the aggregate.

7.18 Swap Agreements.

(A) It shall not, and shall not permit any of its Subsidiaries to, enter into or
maintain any Swap Agreement, except Swap Agreements entered into in the ordinary
course of business with an Approved Counterparty and not for speculative
purposes to (i) hedge or mitigate crude oil, natural gas and natural gas liquids
price risks to which it or any Subsidiary has actual exposure; provided any such
Swap Agreement (a) does not have a term greater than 60 months from the date
such Swap Agreement is entered into and (b) at all times, when aggregated with
all other Swap Agreements then in effect (other than basis differential swaps on
volumes already hedged pursuant to other Swap Agreements) on any date of
determination, would not cause the aggregate notional volume per month for each
of crude oil, natural gas and natural gas liquids, calculated separately, under
all Swap Agreements then in effect to exceed 80% of the forecasted production of
the Borrower and its Subsidiaries for any month during the next twelve months
and (ii) effectively cap, collar or exchange interest rates (from fixed to
floating rates, from one floating rate to another floating rate, from floating
to fixed rates or otherwise) with respect to any interest-bearing liability or
investment of the Parent and its Subsidiaries.

(B) It will not, and will not permit any of its Subsidiaries to, permit the
aggregate notional volumes of all Swap Agreements (other than basis differential
swaps on volumes already hedged pursuant to other Swap Agreements) of the
Borrower and its Subsidiaries in

 

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respect of each of crude oil, natural gas and natural gas liquids, calculated
separately, for any calendar month to exceed 100% of actual production volumes
of crude oil, natural gas or natural gas liquids, as applicable, in such
calendar month (as reflected in the most recent production report delivered
pursuant to Section 6.1(N)).

(C) In no event may any Swap Agreement contain any requirement, agreement or
covenant for the Borrower or any of its Subsidiaries to post collateral or
margin to secure their obligations under such Swap Agreement or to cover market
exposures.

(D) It shall not, and not permit any of its Subsidiaries to, sell, assign,
transfer, cancel, terminate, unwind or otherwise dispose of any Swap Agreements
if the effect of such action (when taken together with any other Swap Agreements
executed contemporaneously with the taking of such action) would have the effect
of canceling its positions under such Swap Agreements unless (i) the Parent or
the Borrower has given prior written notice to the Administrative Agent of such
action and (ii) the Borrower has (after giving effect to any termination
payments associated with termination) at least $25,000,000 consisting of
(a) unrestricted cash or Cash Equivalents plus (b) the aggregate Term Loan
Commitments at such time.

7.19 Holding Company; Excluded Subsidiaries.

(A) The Parent shall not conduct or otherwise engage in any business or
operations other than (i) transactions contemplated by the Loan Documents or the
provision of administrative, legal, accounting and management services to or on
behalf of the Borrower or any of its Subsidiaries and Excluded Subsidiaries,
(ii) the ownership of the equity interests of the Borrower and the Excluded
Subsidiaries and the exercise of rights and performance of obligations
(including entering into guarantees of any such obligations subject to
Section 7.5) in connection therewith, (iii) the entry into, and exercise of
rights and performance of obligations in respect of, (a) this Agreement and the
other Loan Documents to which the Parent is a party, and any other agreement to
which the Parent is a party on the date hereof, in each case as amended,
supplemented, waived or otherwise modified from time to time, and any
refinancings, refundings, renewals or extensions thereof, (b) contracts and
agreements with officers, directors and employees of the Parent or the Borrower
relating to their employment or directorships, (c) insurance policies and
related contracts and agreements and (d) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its debt and equity securities or any offering, issuance or sale thereof,
(iv) the offering, issuance and sale of its debt and equity securities, (v) the
filing of registration statements, and compliance with applicable reporting and
other obligations, under federal, state or other securities laws, (vi) the
listing of its debt and equity securities and compliance with applicable
reporting and other obligations in connection therewith, (vii) the retention of
transfer agents, private placement agents, underwriters, counsel, accountants
and other advisors and consultants, (viii) the performance of obligations under
and compliance with the Parent’s organic documents, or any Applicable Law,
ordinance, regulation, rule, order, judgment, decree or permit, including as a
result of or in connection with the activities of the Borrower and its
Subsidiaries, (ix) the incurrence and payment of its operating and business
expenses and any taxes for which it may be liable and (x) other activities
incidental or related to the foregoing.

 

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(B) The Parent shall not own, lease, manage or otherwise operate any properties
or assets (other than in connection with the activities described in
Section 7.19(A)) or incur, create, assume or suffer to exist any Debt (other
than such as may be incurred, created or assumed or exist in connection with the
activities described in Section 7.19(A)).

(C) The Parent shall not permit PQ Holdings LLC, a Louisiana limited liability
company, or PetroQuest Oil & Gas, L.L.C., a Louisiana limited liability company,
to (i) own, lease, manage or otherwise operate any properties or assets other
than (a) interests in Oil and Gas Properties that it holds as nominee for
certain third parties that hold legal title to such interests and in which
neither the Parent, the Borrower or any of their respective subsidiaries claim
an equitable interest and (b) other de minimis assets or (ii) incur, create,
assume or suffer to exist any Debt. The Parent shall not permit the Excluded
Subsidiaries (other than PQ Holdings LLC, a Louisiana limited liability company,
or PetroQuest Oil & Gas, L.L.C., a Louisiana limited liability company) to own,
lease, manage or otherwise operate any properties or assets other than de
minimis assets or incur, create, assume or suffer to exist any Debt.

7.20 Repayment of Certain Debt; Amendment of Certain Debt Documents.

(A) The Parent shall not, and shall not permit any of the Parent’s Subsidiaries
to, prior to the date that is 180 days after the Maturity Date, call, make or
offer to make any optional or voluntary Redemption of, or otherwise optionally
or voluntarily Redeem (whether in whole or in part), any Permitted Second Lien
Debt; provided (i) for the avoidance of doubt, the Borrower or the Parent may
voluntarily Redeem Senior Notes due 2017 at any time so long as no Default or
Event of Default exists at such time and (ii) the Borrower or the Parent may
voluntarily Redeem Permitted Second Lien Debt (a) with the proceeds of any
Permitted Refinancing Debt permitted hereunder and under the Intercreditor
Agreement, if applicable, (b) in accordance with the provisions of the
definition of “Permitted Second Lien Debt” and (c) with the issuance of
additional Equity Interests (other than Disqualified Capital Stock) of the
Parent in exchange for all or a portion of such Permitted Second Lien Debt so
long as no Default has occurred and is continuing both before and after giving
effect to such Redemption and such Redemption occurs substantially
contemporaneously with, and in any event within three Business Days following,
the receipt of proceeds or confirmation of exchange, as applicable, in respect
of such Redemption.

(B) The Parent shall not, and shall not permit any of the Parent’s Subsidiaries
to, amend, modify, waive or otherwise change, consent or agree to any amendment,
modification, waiver or other change to any of the terms of (i) the Permitted
Second Lien Debt Documents other than amendments or other modifications that are
permitted under the Intercreditor Agreement and (ii) any documents, including
the Senior Indenture, governing the Senior Notes due 2017 or any Permitted
Refinancing Debt in respect thereof if the effect thereof would be to shorten
its maturity or average life or increase the amount of any payment of principal
thereof or increase the rate or shorten any period for payment of interest
thereon.

 

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SECTION 8. DEFAULT AND REMEDIES:

 

8.1 Events of Default. Each of the following constitutes an Event of Default:

 

(A) the Borrower fails to pay any principal of any Term Loan when and as such
becomes due and payable, whether at the due date thereof, at a date fixed for
prepayment thereof, by acceleration or otherwise;

 

(B) the Borrower fails to pay any interest on any Term Loan or any fee or any
other amount (other than an amount referred to in Section 8.1(A)) payable under
any Loan Document, when and as such becomes due and payable, and such failure
continues unremedied for a period of three Business Days;

 

(C) any representation or warranty made or deemed made by or on behalf of the
Parent, 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, proves to have been
materially incorrect when made or deemed made;

 

(D) the Parent, the Borrower or any Subsidiary fails to observe or perform any
covenant, condition or agreement contained in Section 6.3, 6.8, 6.11, 6.14,
6.15, 6.18, 6.19, 6.20 or in Section 7;

 

(E) the Parent, the Borrower or any Subsidiary fails to observe or perform any
covenant, condition or agreement contained in Section 6.1, 6.2 or 6.12 and
(i) such failure continues unremedied for a period of 10 days after the earlier
to occur of (a) notice thereof from the Administrative Agent (at the written
direction of any Lender) or any Lender to the Borrower and (b) a Responsible
Officer of the Parent, the Borrower or such Subsidiary otherwise becoming aware
of such default and (ii) the Parent, the Borrower or any Subsidiary has not
benefitted from the ten day cure period described in clause (i) above more than
once before;

 

(F) the Parent, the Borrower or any Subsidiary fails to observe or perform any
covenant, condition or agreement contained in this Agreement (other than those
specified in Section 8.1(A), 8.1(B), 8.1(C), 8.1(D) or 8.1(E)) or any other Loan
Document, and such failure continues unremedied for a period of 30 days after
the earlier to occur of (i) notice thereof from the Administrative Agent (at the
written direction of any Lender) or any Lender to the Borrower and (ii) a
Responsible Officer of the Parent, the Borrower or such Subsidiary otherwise
becoming aware of such default;

 

(G) the Parent, the Borrower or any Subsidiary fails to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as such becomes due and payable, but subject to
the running of all grace periods as provided in the applicable documentation for
such Material Indebtedness before such failure to pay becomes a default
thereunder;

 

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(H) 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 the Parent, the Borrower or any Subsidiary to make
an offer in respect thereof;

 

(I) an involuntary proceeding is commenced or an involuntary petition is filed
seeking (i) liquidation, reorganization or other relief in respect of the
Parent, the Borrower or any Subsidiary or its or their debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Parent, the Borrower or any Subsidiary or for a
substantial part of its or their assets, and, in any such case, such proceeding
or petition continues undismissed for 30 days or an order or decree approving or
ordering any of the foregoing is entered;

 

(J) the Parent, the Borrower or any Subsidiary (i) voluntarily commences any
proceeding or files 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) consents to the institution of,
or fails to contest in a timely and appropriate manner, any proceeding or
petition described in Section 8.1(I), (iii) applies for or consents to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Parent, the Borrower or any Subsidiary or for a
substantial part of its or their assets, (iv) files an answer admitting the
material allegations of a petition filed against it or them in any such
proceeding, (v) makes a general assignment for the benefit of creditors or
(vi) takes any action for the purpose of effecting any of the foregoing;

 

(K) the Parent, the Borrower or any Subsidiary becomes unable, admit in writing
its inability or fails generally to pay its debts as they become due;

 

(L) (i) one or more judgments for the payment of money in an aggregate amount in
excess of $2,000,000 (to the extent not covered by independent third party
insurance provided by insurers of the highest claims paying rating or financial
strength as to which the insurer does not dispute coverage and is not subject to
an insolvency proceeding) or (ii) any one or more non-monetary judgments that
have, or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect, are rendered against the Parent, the Borrower, any
Subsidiary or any combination thereof and the same remain undischarged for a
period of 30 consecutive days during which execution is not effectively stayed,
or any action is legally taken by a judgment creditor to attach or levy upon any
assets of the Parent, the Borrower or any Subsidiary to enforce any such
judgment;

 

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  (M) any Loan Document for any reason, except to the extent permitted by the
terms thereof, ceases to be in full force and effect and valid, binding and
enforceable in accordance with their terms against the Borrower or a Guarantor
party thereto or is 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 the Parent, the Borrower or any Subsidiary or any of their
Affiliates so state in writing; or

 

  (N) a Change in Control occurs.

8.2 Remedies. Upon the occurrence and during the continuance of an Event of
Default, upon the written direction of the Required Lenders, the Administrative
Agent shall, by notice to the Borrower:

 

  (A) terminate the Term Loan Commitments and declare the principal of and
interest on the Term Loans at the time outstanding, and all other amounts owed
to the Lenders and to the Administrative Agent under this Agreement or any of
the other Loan Documents and all other Obligations, to be immediately due and
payable, whereupon the same immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived by each Loan Party, anything in this Agreement or the other
Loan Documents to the contrary notwithstanding; provided upon the occurrence of
an Event of Default specified in Section 8.1(I) or 8.1(J), the Term Loan
Commitments automatically terminate and all Obligations automatically become due
and payable without presentment, demand, protest or other notice of any kind,
all of which are expressly waived by each Loan Party, anything in this Agreement
or in any other Loan Document to the contrary notwithstanding; or

 

  (B) exercise on behalf of any Lender all of its other rights and remedies
under this Agreement, the other Loan Documents and Applicable Law, in order to
satisfy all of the Obligations.

8.3 Right of Setoff. If an Event of Default exists, each Lender and each of its
Affiliates is authorized at any time and from time to time, to the fullest
extent permitted by Applicable Law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final, in whatever currency)
at any time held, and other obligations (in whatever currency) at any time
owing, by such Lender or any such Affiliate, to or for the credit or the account
of the Borrower or any other Loan Party against any and all of the obligations
of the Borrower or such Loan Party now or hereafter existing under this
Agreement or any other Loan Document to such Lender or its Affiliates,
irrespective of whether or not such Lender or Affiliate has made any demand
under this Agreement or any other Loan Document and although such obligations of
the Borrower or such Loan Party may be contingent or unmatured or are owed to a
branch, office or Affiliate of such Lender different from the branch, office or
Affiliate holding such deposit or obligated on such indebtedness; provided in
the event that any Defaulting Lender exercises any such right of setoff, (a) all
amounts so set off shall be paid over immediately to the Administrative Agent
for further application in accordance with the provisions of Section 3.9 and,
pending such payment, shall be segregated by such Defaulting Lender from its
other funds and

 

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deemed held in trust for the benefit of the Administrative Agent and the Lenders
and (b) the Defaulting Lender shall provide promptly to the Administrative Agent
a statement describing in reasonable detail the Obligations owing to such
Defaulting Lender as to which it exercised such right of setoff. The rights of
each Lender and its Affiliates under this Section 8.3 are in addition to other
rights and remedies (including other rights of setoff) that such Lender or its
Affiliates may have. Each Lender shall notify the Borrower and the
Administrative Agent promptly after any such setoff and application; provided
that the failure to give such notice does not affect the validity of such setoff
and application.

8.4 Rights and Remedies Cumulative; Non-Waiver. The enumeration of the rights
and remedies of the Administrative Agent and the Lenders set forth in this
Agreement is not intended to be exhaustive and the exercise by the
Administrative Agent and the Lenders of any right or remedy does not preclude
the exercise of any other rights or remedies, all of which are cumulative, and
are in addition to any other right or remedy given hereunder or under the other
Loan Documents or that may now or hereafter exist at law or in equity or by suit
or otherwise. No delay or failure to take action on the part of the
Administrative Agent or any Lender in exercising any right, power or privilege
operates as a waiver thereof, nor does any single or partial exercise of any
such right, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Event of Default. No course of dealing between the Loan Parties,
the Administrative Agent and the Lenders or their respective agents or employees
is effective to change, modify or discharge any provision of this Agreement or
any of the other Loan Documents or to constitute a waiver of any Event of
Default.

8.5 Crediting of Payments and Proceeds. In the event that the Obligations have
been accelerated pursuant to Section 8.2 or the Administrative Agent or any
Lender has exercised any remedy set forth in this Agreement or any other Loan
Document, all payments received on account of the Obligations and all net
proceeds from the enforcement of the Obligations shall be applied by the
Administrative Agent as follows:

 

  (A) first, to payment of that portion of the Obligations constituting fees,
losses, indemnities, expenses and other amounts, including attorney fees,
payable to the Administrative Agent under the Loan Documents in its capacity as
such;

 

  (B) second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the
Lenders under the Loan Documents, including attorney fees, ratably among the
Lenders in proportion to the respective amounts described in this clause second
payable to them;

 

  (C) third, to payment of that portion of the Obligations constituting accrued
and unpaid interest on the Term Loans ratably among the Lenders in proportion to
the respective amounts described in this clause third payable to them;

 

  (D) Fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Term Loans ratably among the Lenders in proportion to the
respective amounts described in this clause fourth payable to them; and

 

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  (E) last, the balance, if any, after all of the Obligations have been
indefeasibly paid in full, to the Borrower or as otherwise required by
Applicable Law.

8.6 Administrative Agent May File Proofs of Claim. In case of the pendency of
any proceeding under any Debtor Relief Law or any other judicial proceeding
relative to any Loan Party, the Administrative Agent (irrespective of whether
the principal of any Term Loan is then be due and payable as herein expressed or
by declaration or otherwise and irrespective of whether the Administrative Agent
has made any demand on the Borrower) is entitled and empowered (but not
obligated) by intervention in such proceeding or otherwise, at the written
direction of any Lender:

 

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

 

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

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

8.7 Credit Bidding.

(A) The Administrative Agent (at the written direction of the Required Lenders),
on behalf of itself and the Lenders, has the right to credit bid and purchase
for the benefit of the Administrative Agent and the Lenders all or any portion
of Collateral at any sale thereof conducted by the Administrative Agent under
the provisions of the Uniform Commercial Code, including pursuant to Sections
9-610 or 9-620 of the Uniform Commercial Code, at any sale thereof conducted
under the provisions of the United States Bankruptcy Code, including Section 363
thereof, or a sale under a plan of reorganization, or at any other sale or
foreclosure conducted by the Administrative Agent (whether by judicial action or
otherwise) in accordance with Applicable Law. Such credit bid or purchase may be
completed through one or more acquisition vehicles formed by the Administrative
Agent to make such credit bid or purchase and, in connection therewith, the
Administrative Agent is authorized, on behalf of itself and the Lenders, to
adopt documents providing for the governance of the acquisition vehicle or
vehicles, and assign the applicable Obligations to any such acquisition vehicle
in exchange for Equity Interests or debt issued by the applicable acquisition
vehicle (which shall be deemed to be held for the ratable account of the
applicable Lenders on the basis of the Obligations so assigned by each Lender).

 

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(B) Except as otherwise provided in any Loan Document or with the written
consent of the Required Lenders, no Lender shall take any enforcement action,
accelerate obligations under any of the Loan Documents, or exercise any right
that it might otherwise have under Applicable Law to credit bid at foreclosure
sales, UCC sales or other similar dispositions of Collateral.

8.8 Injunctive Relief. The Borrower recognizes that, in the event the Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy of law may prove to be inadequate relief to the
Lenders. Therefore, the Borrower agrees that the Lenders, at the Lenders’
option, are entitled to temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages.

SECTION 9. AGENCY:

9.1 Appointment and Authority. Each of the Lenders irrevocably appoints Wells
Fargo Bank, National Association to act on its behalf as the Administrative
Agent hereunder and under the other Loan Documents to which the Administrative
Agent is a party 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 or thereof. The provisions of this Section 9 are
solely for the benefit of the Administrative Agent and the Lenders and neither
the Borrower nor any other Loan Party have rights as a third-party beneficiary
of any of such provisions. It is understood and agreed that the use of the term
“agent” herein or in any other Loan Documents (or any other similar term) with
reference to the Administrative Agent is not intended to connote any fiduciary
or other implied (or express) obligations arising under agency doctrine of any
Applicable Law. Instead such term is used as a matter of market custom, and is
intended to create or reflect only an administrative relationship between
contracting parties.

9.2 Rights as a Lender. The Person serving as the Administrative Agent hereunder
has the same rights and powers in its capacity as a Lender as any other Lender,
if applicable, and may exercise the same as though it were not the
Administrative Agent, and the term “Lender” or “Lenders” includes, unless
otherwise expressly indicated or unless the context otherwise requires, the
Person serving as the Administrative Agent hereunder in its individual capacity,
if such Person is a Lender. Such Person and its Affiliates may accept deposits
from, lend money to, own securities of, act as the financial advisor or in any
other advisory capacity for, and generally engage in any kind of business with,
the Borrower or any Subsidiary or other Affiliate thereof as if such Person were
not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.

9.3 Exculpatory Provisions. (A) The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein and in the other
Loan Documents to which it is a party, and its duties hereunder are
administrative in nature. Without limiting the generality of the foregoing, the
Administrative Agent:

 

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  (i) shall not be subject to any fiduciary or other implied duties, regardless
of whether a Default has occurred and is continuing;

 

  (ii) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of the Lenders as is expressly provided for herein or
in the other Loan Documents); provided that the Administrative Agent is not
required to take any action that, in its opinion or the opinion of its counsel,
may expose the Administrative Agent to liability or that is contrary to any Loan
Document or Applicable Law, including for the avoidance of doubt any action that
may be in violation of the automatic stay under any Debtor Relief Law or that
may affect a forfeiture, modification or termination of property of a Defaulting
Lender in violation of any Debtor Relief Law; and

 

  (iii) shall not, except as expressly set forth herein and in the other Loan
Documents to which it is a party, 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 Affiliates that is communicated to or obtained by the Person serving
as the Administrative Agent or any of its Affiliates in any capacity.

(B) The Administrative Agent shall not be liable for any action taken or not
taken by it (i) with the consent or at the request or direction of the Required
Lenders (or such other number or percentage of the Lenders as shall be
necessary, or as the Administrative Agent believes in good faith shall be
necessary, under the circumstances) or (ii) in the absence of its own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction by final and nonappealable judgment. The Administrative Agent is
not deemed to have knowledge of any Default or Event of Default unless and until
notice describing such Default or Event of Default is given to the
Administrative Agent in writing by the Borrower or a Lender.

(C) The Administrative Agent is not responsible for and has no 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 thereunder or
in connection herewith or therewith and the Administrative Agent is not required
to calculate, recalculate, verify, review or certify any calculation or any
other mathematical or numerical information, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth
herein or therein or the occurrence of any Default or Event of Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document, or the
perfection or priority of any Lien created or purported to be created by the
Security Documents or (v) the satisfaction of any condition set forth in
Section 4 or elsewhere herein other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.

 

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(D) The Lenders authorize the Administrative Agent to become a party to the
Intercreditor Agreement on behalf of the Priority Lien Secured Parties under a
Priority Substitute Credit Facility as a Priority Lien Agent under a Priority
Substitute Credit Facility under the Intercreditor Agreement for all purposes
thereof on the terms set forth therein, and to be bound by the terms of the
Intercreditor Agreement as fully as if the Administrative Agent had executed and
delivered the Intercreditor Agreement as of the date thereof. The Lenders direct
the Administrative Agent to execute and deliver the Loan Documents to which it
is a party on the Closing Date. Whether or not so expressly stated therein, in
entering into, or taking (or forbearing from) any action under or pursuant to,
the Loan Documents, the Administrative Agent has all of the rights, immunities,
indemnities and other protections granted to it under this Agreement (in
addition to those that may be granted to it under the terms of such other
agreement or agreements).

(E) The Person serving as the Administrative Agent may accept deposits from,
lend money to, act as the financial advisor or in any other advisory capacity
for and generally engage in any kind of business with the Loan Parties or any
Affiliate thereof as if such Person was not the Administrative Agent and without
any duty to account therefor to the Lenders.

(F) The powers conferred on the Administrative Agent under the Security
Documents are solely to protect the Administrative Agent’s interest in the
Collateral, do not impose any duty upon it to exercise any such powers and are
subject to the provisions of this Agreement. The Administrative Agent is
accountable only for amounts that it actually receives as a result of the
exercise of such powers and the Administrative Agent and any of its officers,
directors, employees or agents are not responsible for any act or failure to
act, except for gross negligence or willful misconduct. Unless otherwise
directed by the Required Lenders, the Administrative Agent has no responsibility
for taking any necessary steps to protect, preserve or exercise rights against
any Person with respect to any of the Collateral and is relieved of all
responsibility for the Collateral upon surrendering it to the Borrower or any
other designated Person. In no event does the Administrative Agent have any
duty, responsibility, obligation or liability with respect to monitoring the
Collateral or the condition thereof, and the Collateral Agent is not required to
take any action to protect against any diminution in value of the Collateral.

(G) Notwithstanding any provision of this Agreement or the other Loan Documents
to the contrary, the Administrative Agent is not required to (i) make or give
any determination (including whether a matter is satisfactory to the
Administrative Agent or whether to deem a matter necessary, desirable, proper or
advisable), agreement, consent, approval, request, notice, consultation,
designation, appointment, election, judgment or direction, (ii) file, record or
prepare any Uniform Commercial Code financing or continuation statements or
similar documents or instruments in any jurisdiction for purposes of creating,
perfecting or maintaining any Lien or security interest or otherwise perfect any
security interest or maintain any perfection or priority, (iii) make any
inspection or (iv) release or sell Collateral or otherwise exercise any rights
or remedies of a secured party (including voting rights), in each case, without
the written direction of the Required Lenders.

(H) Notwithstanding any provision of this Agreement or the other Loan Documents
to the contrary, before taking or omitting any action to be taken or omitted by
the Administrative Agent under the terms of this Agreement and the other Loan
Documents, the Administrative Agent may seek the written direction of the
Required Lenders (which written direction may be in the form of an e-mail), and
the Administrative Agent is entitled to rely (and is fully protected in

 

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so relying) upon such direction. The Administrative Agent is not liable with
respect to any action taken or omitted to be taken by it in accordance with such
direction. If the Administrative Agent requests such direction with respect to
any action, the Administrative Agent is entitled to refrain from such action
unless and until the Administrative Agent has received such direction, and the
Administrative Agent does not incur liability to any Person by reason of so
refraining. If the Administrative Agent so requests, it must first be
indemnified to its satisfaction by the directing Lenders against any and all
liability and expense which may be incurred by the Administrative Agent by
reason of taking or continuing to take, or omitting, any action directed by any
of the Lenders. Any provision of this Agreement or the other Loan Documents
authorizing the Administrative Agent to take any action do not obligate the
Administrative Agent to take such action.

(I) The Administrative Agent is never required to use, risk or advance its own
funds or otherwise incur financial liability in the performance of any of its
duties or the exercise of any of its rights and powers hereunder or under the
other Loan Documents (including no obligation to grant any credit extension or
to make any advance hereunder).

(J) Delivery of reports, documents and other information to the Administrative
Agent is for informational purposes only and the Administrative Agent’s receipt
of the foregoing does not constitute constructive knowledge of any event or
circumstance or any information contained therein or determinable from
information contained therein.

(K) The parties hereto acknowledge that in accordance with the Customer
Identification Program (CIP) requirements under the USA PATRIOT Act and its
implementing regulations, the Administrative Agent, in order to help fight the
funding of terrorism and money laundering, is required to obtain, verify, and
record information that identifies each person or legal entity that establishes
a relationship or opens an account with the Administrative Agent. The parties
hereto shall provide the Administrative Agent with such information as it may
request including each party’s name, physical address, tax identification number
and other information that will help the Administrative Agent identify and
verify each party’s identity such as organizational documents, certificate of
good standing, license to do business, or other pertinent identifying
information.

(L) In no event is the Administrative Agent liable on any theory of liability
for any special, indirect, consequential or punitive damages (including lost
profits) even if the Administrative Agent has been advised of the possibility of
such damages and regardless of the form of action. The Administrative Agent is
not responsible for delays or failures in performance resulting from acts beyond
its control. Such acts include, but are not limited to, acts of God, strikes,
lockouts, riots, acts of war, epidemics, governmental regulations superimposed
after the fact, fire, communication line failures, computer viruses, power
failures, earthquakes, terrorist attacks or other disasters.

9.4 Reliance by Administrative Agent. The Administrative Agent is entitled to
rely upon, and shall not incur any liability for relying upon, any notice,
request, certificate, consent, statement, instrument, document or other writing
(including any electronic message, Internet or intranet website posting or other
distribution) believed by it to be genuine and to have been signed, sent or
otherwise authenticated by the proper Person. The Administrative Agent also

 

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may rely upon any statement made to it orally or by telephone and believed by it
to have been made by the proper Person, and shall not incur any liability for
relying thereon. In determining compliance with any condition hereunder to the
making of a Term Loan that by its terms must be fulfilled to the satisfaction of
a Lender, the Administrative Agent may presume that such condition is
satisfactory to such Lender unless the Administrative Agent has received written
notice to the contrary from such Lender prior to the making of such Term Loan.
The Administrative Agent may consult with legal counsel (who may be counsel for
the Borrower), independent accountants and other experts selected by it, and is
not liable for any action taken or not taken by it in accordance with the advice
of any such counsel, accountants or experts.

9.5 Delegation of Duties. The Administrative Agent may perform any and all of
its duties and exercise its rights and powers hereunder or under any other Loan
Document by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. The exculpatory provisions of this
Section 9 apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent. The Administrative Agent is not
responsible for the negligence or misconduct of any sub-agents except to the
extent that a court of competent jurisdiction determines in a final and
nonappealable judgment that the Administrative Agent acted with gross negligence
or willful misconduct in the selection of such sub-agents.

9.6 Resignation of Administrative Agent. (A) The Administrative Agent may at any
time give notice of its resignation to the Lenders and the Borrower. Upon
receipt of any such notice of resignation, the Required Lenders have the right,
in consultation with the Borrower, to appoint a successor, which must be a bank
or trust company, but in no event may be a Defaulting Lender. If no such
successor shall have been so appointed by the Required Lenders and has accepted
such appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation (or such earlier day as is agreed by the Required
Lenders) (the “Resignation Effective Date”), then in any event such resignation
becomes effective in accordance with such notice on the Resignation Effective
Date and (i) the retiring Administrative Agent is discharged from its duties and
obligations hereunder and under the other Loan Documents, except that until a
successor Administrative Agent is appointed, any Collateral held by the
Administrative Agent on behalf of the Secured Parties under any of the Loan
Documents shall continue to be held by the resigning Administrative Agent as
bailee until such time as a successor Administrative Agent is appointed, and
(ii) except for any fees, expenses or indemnity payments owed to the retiring
Administrative Agent, all payments, communications and determinations provided
to be made by, to or through such Administrative Agent shall instead be made by
or to each Lender directly, until such time as the Required Lenders appoint a
successor Administrative Agent as provided in this Section 9.6(A). The
Administrative Agent has the right, at the cost and expense of the Borrower, to
petition a court of competent jurisdiction regarding the delivery of any
Collateral it holds as bailee.

(B) Upon the acceptance of a successor’s appointment as Administrative Agent
hereunder, such successor succeeds to and becomes vested with all of the rights,
powers, privileges and duties of the retiring Administrative Agent (other than
any rights to fees, expenses and indemnity payments owed to the retiring
Administrative Agent) and the retiring Administrative Agent is discharged from
all of its duties and obligations hereunder or under the

 

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other Loan Documents (if not discharged earlier as provided in Section 9.6(A)).
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 retiring Administrative Agent’s
resignation hereunder and under the other Loan Documents, the provisions of this
Section 9 and Section 3.2(B) and Section 10.2 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 the retiring Administrative Agent was acting as Administrative Agent.

(C) Any Person into which the Administrative Agent may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Administrative Agent is a party, or any
Person succeeding to the corporate trust services business of the Administrative
Agent is the successor of the Administrative Agent hereunder without the
execution or filing of any paper with any Party or any further act on the part
of any of the Parties.

9.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender or any of their Related Parties and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender or any of their Related Parties and
based on such documents and information as it from time to time deems
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or any related
agreement or any document furnished hereunder or thereunder.

9.8 Collateral and Guaranty Matters. (A) The Lenders irrevocably authorize and
direct the Administrative Agent, upon the written direction of the Required
Lenders and at the expense of the Borrower:

 

  (i) to release any Lien on any property granted to or held by the
Administrative Agent under any Loan Document (a) upon termination of all Term
Loan Commitments and payment in full of all Obligations (other than contingent
indemnification obligations), (b) that is sold or otherwise disposed of or to be
sold or otherwise disposed of as part of or in connection with any sale or other
disposition permitted under the Loan Documents or (c) subject to Section 10.3,
if approved, authorized or ratified in writing by the Required Lenders;

 

  (ii) to subordinate any Lien on any property granted to or held by the
Administrative Agent under any Loan Document to the holder of any Lien on such
property that is permitted by Section 7.3(C); and

 

  (iii) to release any Subsidiary Guarantor from its obligations under the
Guaranty Agreement if such Person ceases to be a Subsidiary as a result of a
transaction permitted under the Loan Documents.

 

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Upon request by the Administrative Agent at any time, the Required Lenders will
confirm in writing the Administrative Agent’s authority to release or
subordinate its interest in particular types or items of property, or to release
any Subsidiary Guarantor from its obligations under the Guaranty Agreement
pursuant to this Section 9.8.

(B) The Administrative Agent is not responsible for, and has no duty to
ascertain or inquire into any representation or warranty regarding, the
existence, value or collectability of the Collateral, the existence, priority or
perfection of the Administrative Agent’s Lien thereon, or any certificate
prepared by any Loan Party in connection therewith, nor shall the Administrative
Agent be responsible or liable to the Lenders for any failure to monitor or
maintain any portion of the Collateral.

SECTION 10. MISCELLANEOUS:

10.1 Governing Law. This Agreement and the other Loan Documents and any claims,
controversy, dispute or cause of action (whether in contract or tort or
otherwise) based upon, arising out of or relating to this Agreement or any other
Loan Document (except, as to any other Loan Document, as expressly set forth
therein) and the transactions contemplated hereby and thereby are governed by,
and construed in accordance with, the law of the State of New York.

10.2 Expenses; Indemnity; Damage Waiver.

(A) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and the Lenders (including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent and for the Lenders), and shall pay all fees and time charges and
disbursements for attorneys who may be employees of the Administrative Agent, in
connection with the preparation, negotiation, execution, delivery and
administration of this Agreement and the other Loan Documents, or any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby are consummated)
and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any
Lender (including the fees, charges and disbursements of any counsel for the
Administrative Agent or for any Lender), and shall pay all fees and time charges
for attorneys who may be employees of the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights (a) in connection
with this Agreement and the other Loan Documents, including its rights under
this Section 10.2, or (b) in connection with the Term Loans made hereunder,
including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Term Loans.

(B) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent (and any sub-agent thereof), 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 fees,
losses, claims, damages, liabilities and related expenses (including the
reasonable fees, charges and disbursements of any counsel for any Indemnitee),
and shall indemnify and hold harmless each Indemnitee from all reasonable fees
and time charges and disbursements for attorneys who may be employees of any
Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any
Person (including the Borrower or any other Loan Party) arising out of, in
connection with, or as a result of (i) the

 

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execution or delivery of this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
Parties of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, (ii) any Term
Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or Release of Hazardous Materials on or from any property owned
or operated by the Borrower or any of its Subsidiaries, or any Environmental
Liability related in any way to the Borrower or any of its Subsidiaries, or
(iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory, whether brought by a third party or by the Borrower or any other Loan
Party, and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity is not, as to any Indemnitee, 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.
This Section 10.2(B) does not apply with respect to Taxes other than any Taxes
that represent losses, claims, damages, or similar costs arising from any
non-Tax claim.

(C) Reimbursement by Lenders. To the extent that the Borrower for any reason
fails to indefeasibly pay any amount required under Section 3.2(B), 3.7(D),
10.2(A) or 10.2(B) to be paid by it to the Administrative Agent (or any
sub-agent thereof) or any Related Party of the Administrative Agent, each Lender
severally agrees to pay to the Administrative Agent (or any such sub-agent) or
such Related Party, as the case may be, such Lender’s pro rata share (determined
as of the time that the applicable unreimbursed expense or indemnity payment is
sought based on each Lender’s Commitment Percentage at such time) of such unpaid
amount (including any such unpaid amount in respect of a claim asserted by such
Lender); provided the unreimbursed expense or indemnified loss, fee, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent (or any such sub-agent) or against any
Related Party acting for the Administrative Agent (or any such sub-agent) in
connection with such capacity.

(D) Waiver of Consequential Damages. To the fullest extent permitted by
Applicable Law, the Borrower shall not assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any other
Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Term Loan or the use of the
proceeds thereof. No Indemnitee referred to in Section 10.2(B) will be liable
for any damages arising from the use by unintended recipients of any information
or other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby other
than for direct and actual damages resulting from the gross negligence or
willful misconduct of such Indemnitee as determined by a final and nonappealable
judgment of a court of competent jurisdiction.

(E) Payments. All amounts due under this Section 10.2 are payable promptly after
demand therefor.

 

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(F) Survival. Each Party’s obligations under this Section 10.2 survive the
resignation or replacement of the Administrative Agent hereunder and the
termination of the Loan Documents and payment of the obligations hereunder.

10.3 Amendments, Waivers and Consents. Except as set forth below or as
specifically provided in any Loan Document, any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents may be amended or
waived by the Lenders, and any consent given by the Lenders, if, but only if,
such amendment, waiver or consent is in writing signed by the Required Lenders
(or by the Administrative Agent at the written direction of the Required
Lenders) and delivered to the Administrative Agent and, in the case of an
amendment, signed by the Borrower; provided no amendment, waiver or consent may:

 

  (A) increase the Term Loan Commitment of any Lender (or reinstate any Term
Loan Commitment terminated pursuant to Section 8.2) or the amount of Term Loans
of any Lender, in any case, without the written consent of such Lender;

 

  (B) waive, extend or postpone any date fixed by this Agreement or any other
Loan Document for any payment (it being understood that a waiver of a mandatory
prepayment under Section 2.5 only requires the consent of the Required Lenders)
of principal, interest, fees or other amounts due to the Lenders (or any of
them) or any mandatory reduction of the Term Loan Commitment hereunder or under
any other Loan Document without the written consent of each Lender directly and
adversely affected thereby;

 

  (C) reduce the principal of, or the rate of interest specified herein on, any
Term Loan or (subject to Section 10.3(I)) any fees or other amounts payable
hereunder or under any other Loan Document without the written consent of each
Lender directly and adversely affected thereby; provided only the consent of the
Required Lenders is necessary to waive any obligation of the Borrower to pay
interest at the rate set forth in Section 3.1(B) during the continuance of an
Event of Default;

 

  (D) change Section 3.5 or Section 8.5 in a manner that would alter the pro
rata sharing of payments or order of application required thereby without the
written consent of each Lender directly and adversely affected thereby;

 

  (E) change any provision of this Section 10.3 or reduce the percentages
specified in the definition of “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any
consent hereunder, without the written consent of each Lender directly affected
thereby;

 

  (F) consent to the assignment or transfer by any Loan Party of such Loan
Party’s rights and obligations under any Loan Document to which it is a party
(except as permitted pursuant to Section 7.12), in each case, without the
written consent of each Lender;

 

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  (G) release (i) the Parent, (ii) all of the Subsidiary Guarantors or
(iii) Subsidiary Guarantors comprising substantially all of the credit support
for the Obligations, in any case, from the Guaranty Agreement (other than as
authorized in Section 9.8), without the written consent of each Lender;

 

  (H) release all or substantially all of the Collateral or release any Security
Document (other than as authorized in Section 9.8 or as otherwise specifically
permitted or contemplated in this Agreement or the applicable Security Document)
without the written consent of each Lender; or

 

  (I) affect the rights or duties of the Administrative Agent under this
Agreement or any other Loan Document without the written consent of the
Administrative Agent in addition to the Lenders required hereunder;

provided each Fee Letter may be amended, or rights or privileges thereunder
waived, in a writing executed only by the parties thereto. Notwithstanding
anything to the contrary herein, no Defaulting Lender has any right to approve
or disapprove any amendment, waiver or consent hereunder, except that the Term
Loan Commitment of such Lender may not be increased or extended without the
consent of such Lender.

10.4 Successors and Assigns.

(A) Successors and Assigns Generally. The provisions of this Agreement are
binding upon and inure to the benefit of the Parties and their respective
successors and assigns permitted hereby, except that neither the Borrower nor
any other Loan Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender, and no
Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an assignee in accordance with the provisions of
Section 10.4(B), (ii) by way of participation in accordance with the provisions
of Section 10.4(D) or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of Section 10.4(E) (and any other attempted
assignment or transfer by any Party hereto is null and void). Nothing in this
Agreement, expressed or implied, may be construed to confer upon any Person
(other than the Parties, their respective successors and assigns permitted
hereby, Participants to the extent provided in Section 10.4(D) and, to the
extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

(B) Assignments by Lenders. Any Lender may at any time 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 Term Loan Commitment and the Term Loans at
the time owing to it); provided any such assignment is subject to the following
conditions:

 

  (i) Minimum Amounts.

 

  (a) in the case of an assignment of the entire remaining amount of the
assigning Lender’s Term Loan Commitment or the Term Loans at the time owing to
it or contemporaneous assignments to related Approved Funds (determined after
giving effect to such assignments) that equal at least the amount specified in
clause (b) below in the aggregate or in the case of an assignment to a Lender,
an Affiliate of a Lender or an Approved Fund, no minimum amount need be
assigned; and

 

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  (b) in any case not described in clause (a) above, the aggregate amount of the
Term Loan Commitment (which for this purpose includes Term Loans outstanding
thereunder) or, if the applicable Term Loan Commitment is not then in effect,
the principal outstanding balance of the Term Loans of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative
Agent) is not less than $5,000,000 unless each of the Required Lenders and, so
long as no Default or Event of Default exists, the Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed).

 

  (ii) Proportionate Amounts. 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 with respect to the Term Loan or the Term Loan
Commitment assigned.

 

  (iii) Required Consents. No consent is required for any assignment except to
the extent required by Section 10.4(B)(i)(b) and, in addition:

 

  (a) the consent of the Borrower (such consent not to be unreasonably withheld
or delayed) is required unless (1) a Default or Event of Default exits at the
time of such assignment or (2) such assignment is to a Lender, an Affiliate of a
Lender or an Approved Fund; provided the Borrower is deemed to have consented to
any such assignment unless it has objected thereto by written notice to the
Administrative Agent within ten Business Days after having received notice
thereof; and

 

  (b) the consent of the Required Lenders (such consent not to be unreasonably
withheld or delayed) is required for assignments in respect of any Term Loans to
a Person who is not a Lender, an Affiliate of a Lender or an Approved Fund.

 

  (iv) Assignment and Assumption. The parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Assumption, together
with a processing and recordation fee of $3,500; provided that the
Administrative Agent may, in its sole discretion, elect to waive such processing
and recording fee in the case of any assignment. The assignee, if it is not a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.

 

  (v) No Assignment to Certain Persons. No such assignment may be made to
(1) the Borrower or any of the Borrower’s Affiliates or Subsidiaries or (2) any
Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a
Lender hereunder, would constitute a Defaulting Lender or a Subsidiary thereof.

 

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  (vi) No Assignment to Natural Persons. No such assignment may be made to a
natural Person (or a holding company, investment vehicle or trust for, or owned
and operated for the primary benefit of, a natural Person).

 

  (vii) Certain Additional Payments. In connection with any assignment of rights
and obligations of any Defaulting Lender hereunder, no such assignment is
effective unless and until, in addition to the other conditions thereto set
forth herein, the parties to the assignment make such additional payments to the
Administrative Agent in an aggregate amount sufficient, upon distribution
thereof as appropriate (which may be outright payment, purchases by the assignee
of participations or subparticipations, or other compensating actions, including
funding, with the consent of the Borrower, the applicable pro rata share of Term
Loans previously requested but not funded by the Defaulting Lender, to each of
which the applicable assignee and assignor hereby irrevocably consent), to
(1) pay and satisfy in full all payment liabilities then owed by such Defaulting
Lender to the Administrative Agent and each Lender hereunder (and interest
accrued thereon) and (2) acquire (and fund as appropriate) its full pro rata
share of all Term Loans in accordance with its Commitment Percentage.
Notwithstanding the foregoing, in the event that any assignment of rights and
obligations of any Defaulting Lender hereunder becomes effective under
Applicable Law without compliance with the provisions of this
Section 10.4(B)(iv), then the assignee of such interest is deemed to be a
Defaulting Lender for all purposes of this Agreement until such compliance
occurs.

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to Section 10.4(C), from and after the effective date specified in each
Assignment and Assumption, the assignee thereunder is a party to this Agreement
and, to the extent of the interest assigned by such Assignment and Assumption,
has the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder is, to the extent of the interest assigned by such
Assignment and Assumption, 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 ceases to be a
Party) but continues to be entitled to the benefits of Sections 3.6, 3.7 and
10.2 with respect to facts and circumstances occurring prior to the effective
date of such assignment; provided except to the extent otherwise expressly
agreed by the affected parties, no assignment by a Defaulting Lender constitutes
a waiver or release of any claim of any Party arising from that Lender’s having
been a Defaulting Lender. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph is
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section 10.4(D).

(C) Register. The Administrative Agent, acting solely for this purpose as an
agent of the Borrower, shall maintain 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 Term Loan Commitments of, and principal amounts (and stated
interest) of the Term Loans owing to, each Lender pursuant to the terms hereof
from time to time (the “Register”). The entries in the Register are conclusive
absent manifest error, and the Borrower, the Administrative Agent and the
Lenders shall 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.
The Register shall be available for inspection by the Borrower and any Lender,
at any reasonable time and from time to time upon reasonable prior notice.

 

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(D) Participations. Any Lender may at any time, without the consent of, or
notice to, the Borrower or the Administrative Agent, sell participations to any
Person (other than a natural Person, or a holding company, investment vehicle or
trust for, or owned and operated for the primary benefit of, a natural Person,
or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights or obligations under
this Agreement (including all or a portion of its Term Loan Commitment or the
Term Loans owing to it); provided (i) such Lender’s obligations under this
Agreement remain unchanged, (ii) such Lender remains solely responsible to the
other Parties for the performance of such obligations and (iii) the Borrower,
the Administrative Agent and Lenders continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this
Agreement. For the avoidance of doubt, each Lender is responsible for the
indemnity under Section 10.3(C) with respect to any payments made by such Lender
to its Participants.

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender retains the sole right to enforce
this Agreement and to approve any amendment, modification or waiver of any
provision of this Agreement; provided 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 Section 10.3 that affects such
Participant. The Borrower agrees that each Participant is entitled to the
benefits of Sections 3.6 and 3.7 (subject to the requirements and limitations
therein, including the requirements under Section 3.7(G) (it being understood
that the documentation required under Section 3.7(G) shall be delivered to the
participating Lender)) to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 10.4(B); provided such
Participant (A) agrees to be subject to the provisions of Section 3.8 as if it
were an assignee under Section 10.4(B) and (B) is not entitled to receive any
greater payment under Sections 3.6 or 3.7, with respect to any participation,
than its participating Lender would have been entitled to receive, except to the
extent such entitlement to receive a greater payment results from a Change in
Law that occurs after the Participant acquired the applicable participation.
Each Lender that sells a participation agrees, at the Borrower’s request and
expense, to use reasonable efforts to cooperate with the Borrower to effectuate
the provisions of Section 3.8(B) with respect to any Participant. To the extent
permitted by law, each Participant also is entitled to the benefits of
Section 8.3 as though it were a Lender; provided such Participant agrees to be
subject to Section 3.5 as though it were a Lender. Each Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of
the Borrower, maintain a register on which it enters the name and address of
each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under the Loan
Documents (the “Participant Register”); provided no Lender has any obligation to
disclose all or any portion of the Participant Register (including the identity
of any Participant or any information relating to a Participant’s interest in
any commitments, loans or its other obligations under any Loan Document) to any
Person except to the extent that such disclosure is necessary to establish that
such commitment, loan or other obligation is in registered form under
Section 5f.103-1(c) of the United States Treasury Regulations. The entries in
the Participant Register are conclusive absent manifest error, and such Lender
shall treat each Person whose name is recorded in the Participant Register as
the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. For the avoidance of doubt, the
Administrative Agent (in its capacity as Administrative Agent) has no
responsibility for maintaining a Participant Register.

 

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(E) Certain Pledges. 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; provided no such pledge or assignment
releases such Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a Party.

10.5 Treatment of Certain Information; Confidentiality. Each of the
Administrative Agent and the Lenders shall maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its Affiliates and to its Related Parties (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 required or requested by any regulatory authority purporting to have
jurisdiction over such Person or its Related Parties (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by Applicable Laws or regulations or
by any subpoena or similar legal process, (d) to any other Party, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any 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 10.5, to any assignee of or Participant in, or any prospective assignee
of or Participant in, any of its rights and obligations under this Agreement,
(g) on a confidential basis to (i) any rating agency in connection with rating
the Parent, the Borrower or their Subsidiaries or the Term Loans or (ii) the
CUSIP Service Bureau or any similar agency in connection with the issuance and
monitoring of CUSIP numbers with respect to the Term Loans, (h) with the consent
of the Parent or the Borrower or (i) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section 10.5 or
(ii) becomes available to the Administrative Agent, any Lender or any of their
respective Affiliates on a nonconfidential basis from a source other than the
Parent or the Borrower. In addition, the Administrative Agent and the Lenders
may disclose the existence of this Agreement and information about this
Agreement to market data collectors, similar service providers to the lending
industry and service providers to the Agents and the Lenders in connection with
the administration of this Agreement, the other Loan Documents and the Term Loan
Commitments.

For purposes of this Section, “Information” means all information received from
the Parent, the Borrower or any of their Subsidiaries relating to the Parent,
the Borrower or any of their Subsidiaries or any of their respective businesses,
other than any such information that is available to the Administrative Agent or
any Lender on a nonconfidential basis prior to disclosure by the Parent, the
Borrower or any of their Subsidiaries; provided, in the case of information
received from the Parent, the Borrower or any of their Subsidiaries after the
Closing Date, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section 10.5 is 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.

 

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10.6 Submission to Jurisdiction; Venue; Waiver of Jury Trial.

(A) Jurisdiction. The Borrower and each other Loan Party irrevocably and
unconditionally agrees that it shall not commence any action, litigation or
proceeding of any kind or description, whether in law or equity, whether in
contract or in tort or otherwise, against the Administrative Agent, any Lender
or any Related Party of the foregoing in any way relating to this Agreement or
any other Loan Document or the transactions relating hereto or thereto, in any
forum other than the courts of the State of New York sitting in New York County,
and of the United States District Court of the Southern District of New York,
and any appellate court from any thereof, and each of the Parties irrevocably
and unconditionally submits to the jurisdiction of such courts and agrees that
all claims in respect of any such action, litigation or proceeding may be heard
and determined in such New York State court or, to the fullest extent permitted
by Applicable Law, in such federal court. Each of the Parties agrees that a
final judgment in any such action, litigation or proceeding is conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement or in any other Loan Document
affects any right that the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement or any other Loan
Document against the Borrower or any other Loan Party or its properties in the
courts of any jurisdiction.

(B) Waiver of Venue. The Borrower and each other Loan Party irrevocably and
unconditionally waives, to the fullest extent permitted by Applicable Law, any
objection that it may now or hereafter have to the laying of venue of any action
or proceeding arising out of or relating to this Agreement or any other Loan
Document in any court referred to in Section 10.6(A). Each of the Parties
irrevocably waives, to the fullest extent permitted by Applicable Law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

(C) Service of Process. Each Party other than the Administrative Agent
irrevocably consents to service of process in the manner provided for notices in
Section 10.7. Nothing in this Agreement affects the right of any Party to serve
process in any other manner permitted by Applicable Law.

(D) WAIVER OF JURY TRIAL. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY
(i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (ii) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.6(D).

 

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10.7 Notices.

(A) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
Section 10.7(B)) below), 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 facsimile as follows:

 

  (i) if to the Borrower or any other Loan Party, to it at the addresses for it
as set forth on Annex C;

 

  (ii) if to the Administrative Agent, to it at the addresses for it as set
forth on Annex C;

 

  (iii) if to a Lender party to this Agreement on the Closing Date, to it at the
addresses for it as set forth on Annex C; and

 

  (iv) if to a Lender party to this Agreement after the Closing Date, to it at
its address (or facsimile number) set forth in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, are deemed to have been given when received and notices sent by
facsimile are deemed to have been given when sent (except that, if not given
during normal business hours for the recipient, is deemed to have been given at
the opening of business on the next business day for the recipient). Notices
delivered through electronic communications, to the extent provided in
Section 10.7(B), are effective as provided in Section 10.7(B).

(B) Electronic Communications. Notices and other communications to the Lenders
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved by the
Administrative Agent; provided the foregoing does not apply to notices to any
Lender pursuant to Section 2.2 if such Lender has notified the Administrative
Agent that it is incapable of receiving notices under such section by electronic
communication. The Administrative Agent or the Borrower may, in its discretion,
agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided approval of such
procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (a) notices and other
communications sent to an e-mail address are deemed received upon the sender’s
receipt of an acknowledgement from the intended recipient (such as by the
“return receipt requested” function, as available, return e-mail or other
written acknowledgement) and (b) notices or communications posted to an Internet
or intranet website are deemed received upon the deemed receipt by the intended
recipient, at its e-mail address as described in clause (a) above, of
notification that such notice or communication is available and identifying the
website address therefor; provided, for both clauses (a) and (b) above, if such
notice, email or other communication is not sent during the normal business
hours of the recipient, such notice or communication is deemed to have been sent
at the opening of business on the next business day for the recipient.

 

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(C) Change of Address. Any Party may change its address or facsimile number for
notices and other communications hereunder by notice to the other Parties.

(D) Platform.

 

  (i) Each Loan Party agrees that the Administrative Agent may, but is not
obligated to, make the Communications (as defined below) available to the
Lenders by posting the Communications on the Platform.

 

  (ii) The Platform is provided “as is” and “as available.” The Agent Parties
(as defined below) do not warrant the adequacy of the Platform and expressly
disclaim liability for errors or omissions in the Communications. No warranty of
any kind, express, implied or statutory, including any warranty of
merchantability, fitness for a particular purpose, non-infringement of
third-party rights or freedom from viruses or other code defects, is made by any
Agent Party in connection with the Communications or the Platform. In no event
will the Administrative Agent or any of its Related Parties (collectively, the
“Agent Parties”) have any liability to the Borrower or the other Loan Parties,
any Lender or any other Person for damages of any kind, including direct or
indirect, special, incidental or consequential damages, losses or expenses
(whether in tort, contract or otherwise) arising out of the Borrower’s, any Loan
Party’s or the Administrative Agent’s transmission of communications through the
Platform. “Communications” means, collectively, any notice, demand,
communication, information, document or other material provided by or on behalf
of any Loan Party pursuant to any Loan Document or the transactions contemplated
therein that is distributed to the Administrative Agent or any Lender by means
of electronic communications pursuant to this Section 10.7, including through
the Platform.

10.8 Reinstatement of Obligations. To the extent any Loan Party makes a payment
or payments to the Administrative Agent for the ratable benefit of the Lenders
or the Administrative Agent receives any payment or proceeds of the Collateral
which payments or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party under any Debtor Relief Law, other
Applicable Law or equitable cause, then, to the extent of such payment or
proceeds repaid, the Obligations or part thereof intended to be satisfied are
revived and continued in full force and effect as if such payment or proceeds
had not been received by the Administrative Agent.

10.9 Severability. Any provision of this Agreement or any other Loan Document
that is prohibited or unenforceable in any jurisdiction is, as to such
jurisdiction, ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

10.10 Integration. This Agreement and the other Loan Documents, and any separate
letter agreements with respect to fees payable to the Administrative Agent,
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof.

 

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10.11 No Implied Waivers. No failure to exercise and no delay in exercising any
right or remedy under this Agreement operates as a waiver thereof. No single or
partial exercise of any right or remedy under this Agreement, or any abandonment
or discontinuance thereof, precludes any other or further exercise thereof or
the exercise of any other right or remedy. No waiver or consent under this
Agreement is applicable to any events, acts or circumstances except those
specifically covered thereby.

10.12 Beneficial Owner. On the Closing Date, Franklin Custodian Funds – Franklin
Income Fund represents to the Loan Parties that it is the sole Lender as of the
Closing Date and that it is a beneficial owner of the Securities (as defined in
the Exchange Notes Indenture) or the Exchange Notes due 2021 or an Affiliate (as
defined in the Exchange Notes Indenture) of such a beneficial owner.

10.13 USA PATRIOT Act. The Administrative Agent and each Lender hereby notifies
the Borrower that pursuant to the requirements of the PATRIOT Act, each of them
is required to obtain, verify and record information that identifies each Loan
Party, which information includes the name and address of each Loan Party and
other information that will allow such Lender to identify each Loan Party in
accordance with the PATRIOT Act.

10.14 Counterparts; Effectiveness. This Agreement may be executed in
counterparts (and by different Parties in different counterparts), each of which
constitutes an original, but all of which when taken together constitute a
single contract. Except as provided in Section 4.1, this Agreement becomes
effective when it has been executed by the Administrative Agent and when the
Administrative Agent has received counterparts hereof that, when taken together,
bear the signatures of each of the other Parties. Delivery of an executed
counterpart of a signature page of this Agreement by facsimile or in electronic
(i.e., “pdf” or “tif”) format is effective as delivery of a manually executed
counterpart of this Agreement. The words “execution,” “signed,” “signature,” and
words of like import in any Assignment and Assumption are deemed to include
electronic signatures or the keeping of records in electronic form, each of
which is of the same legal effect, validity or enforceability as a manually
executed signature or the use of a paper-based recordkeeping system, as the case
may be, to the extent and as provided for in any Applicable Law, including the
Federal Electronic Signatures in Global and National Commerce Act, the New York
State Electronic Signatures and Records Act, or any other similar state laws
based on the Uniform Electronic Transactions Act.

(Signature page(s) follow)

 

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The Parties have executed and delivered this Agreement as of the date first
above written.

 

Borrower: PETROQUEST ENERGY, L.L.C. By:   /s/ J. Bond Clement   J. Bond Clement
  Executive Vice President, Chief Financial Officer and Treasurer Parent:
PETROQUEST ENERGY, INC. By:   /s/ J. Bond Clement   J. Bond Clement   Executive
Vice President, Chief Financial Officer and Treasurer

[Signature Page to Multidraw Term Loan Agreement]

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

Administrative Agent: WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent By:   /s/ Michael Pinzon Name: Michael Pinzon Title:
Vice President

[Signature Page to Multidraw Term Loan Agreement]

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

Lenders:

FRANKLIN CUSTODIAN FUNDS –
FRANKLIN INCOME FUND,

as a Lender

BY:   FRANKLIN ADVISERS, INC.,   as its investment manager By:   /s/ Ed Perks Ed
Perks Executive Vice President

[Signature Page to Multidraw Term Loan Agreement]

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ANNEX A

Rules of Construction

1. Definitions. As used in this Agreement, the following terms have the
following meanings:

“Account Control Agreement” means an agreement which grants the Administrative
Agent “control” as defined in the Uniform Commercial Code in effect in the
applicable jurisdiction over the applicable Deposit Account.

“Administrative Agent” has the meaning set forth for such term in the
introduction to this Agreement.

“Administrative Agent’s Office” means the office of the Administrative Agent
specified in or determined in accordance with the provisions of Section 10.7.

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

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

“Agreement” has the meaning set forth for such term in the introduction to this
Agreement.

“Anti-Corruption Laws” means all laws, rules, and regulations of any
jurisdiction applicable to the Parent, the Borrower or their respective
Subsidiaries from time to time concerning or relating to bribery or corruption,
including the United States Foreign Corrupt Practices Act of 1977 and the rules
and regulations thereunder.

“Applicable Law” means all applicable provisions of constitutions, laws,
statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of Governmental Authorities and all orders
and decrees of all courts and arbitrators.

“Applicable Rate” means a rate per annum equal to 10%.

“Approved Counterparty” means (a) a Lender or any Affiliate of a Lender and
(b) any other Person whose issuer rating or long term senior unsecured debt
rating, at the time the Swap Agreement is entered into, 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 or other credit support
provider of such Person meeting such minimum rating standards at the time the
Swap Agreement is entered into).

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

 

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“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company Petroleum Consultants, L.P. and (c) any other
independent petroleum engineers reasonably acceptable to the Required Lenders.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by Section 10.4), and accepted by the Administrative Agent, in
substantially the form of Exhibit E or any other form approved by the
Administrative Agent.

“Asset Disposition” means the sale, transfer, assignment, conveyance, farm-out,
license, lease or other disposition of any Property (including any disposition
of Equity Interests) by any Loan Party or any Subsidiary thereof (or the
granting of any option or other right to do any of the foregoing). The term
“Asset Disposition” does not include (a) the sale of inventory in the ordinary
course of business, (b) the transfer of assets to the Borrower or any Subsidiary
Guarantor pursuant to any other transaction permitted pursuant to Section 7.11,
(c) the write-off, discount, sale or other disposition of defaulted or past-due
receivables and similar obligations in the ordinary course of business and not
undertaken as part of an accounts receivable financing transaction, (d) the
disposition of any Swap Agreement, (e) dispositions of Investments in cash and
Cash Equivalents, (f) the transfer by any Loan Party of its assets to any other
Loan Party, (g) the transfer by any Non-Guarantor Subsidiary of its assets to
any Loan Party (provided that in connection with any new transfer, such Loan
Party shall not pay more than an amount equal to the fair market value of such
assets as determined in good faith at the time of such transfer) and (h) the
transfer by any Non-Guarantor Subsidiary of its assets to any other
Non-Guarantor Subsidiary.

“Availability Period” means the period from the Closing Date to October 17,
2019.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by
the applicable EEA Resolution Authority in respect of any liability of an EEA
Financial Institution.

“Bail-In Legislation” means, with respect to any EEA Member Country implementing
Article 55 of Directive 2014/59/EU of the European Parliament and of the Council
of the European Union, the implementing law for such EEA Member Country from
time to time which is described in the EU Bail-In Legislation Schedule.

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

“Borrower” has the meaning set forth for such term in the introduction to this
Agreement.

“Business Day” means any day other than a Saturday, Sunday or legal holiday on
which banks in New York City are closed.

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

 

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“Cash Equivalents” means Investments of the type described in Sections 7.5(C),
7.5(D) and 7.5(E).

“Change in Control” means an event or series of events by which:

 

  (A) at any time, the Parent fails to own all of the Equity Interests of the
Borrower; or

 

  (B) (i) any “person” or “group” (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act, but excluding any employee benefit plan of such
person or its Subsidiaries, and any person or entity acting in its capacity as
trustee, agent or other fiduciary or administrator of any such plan) becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a “person” or “group” shall be deemed to have “beneficial ownership”
of all Equity Interests that such “person” or “group” has the right to acquire,
whether such right is exercisable immediately or only after the passage of time
(such right, an “option right”)), directly or indirectly, of more than 35% of
the Equity Interests of the Parent entitled to vote in the election of members
of the board of directors (or equivalent governing body) of the Parent or (ii) a
majority of the members of the board of directors (or other equivalent governing
body) of the Parent do not constitute Continuing Directors; or

 

  (C) there has occurred under any indenture or other instrument evidencing any
Debt or Equity Interests in excess of $1,000,000 any “change in control” or
similar provision (as set forth in the indenture, agreement or other evidence of
such Debt) obligating the Parent, the Borrower or any of their respective
Subsidiaries to repurchase, redeem or repay all or any part of the Debt or
Equity Interests provided for therein.

“Change in Law” means the occurrence, after the Closing Date, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or
treaty; (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any
Governmental Authority; or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided notwithstanding anything herein to the
contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (ii) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, are in each
case deemed to be a “Change in Law,” regardless of the date enacted, adopted or
issued.

“Closing Date” means the date of this Agreement.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means the collateral security for the Obligations pledged or
granted pursuant to the Security Documents.

 

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“Commitment Percentage” means, with respect to any Lender at any time, the
percentage of the total Term Loan Commitments of all the Lenders represented by
such Lender’s Term Loan Commitment. If the Term Loan Commitments have terminated
or expired, the Commitment Percentage means, with respect to any Lender at any
time, the percentage of the total outstanding principal balance of the Term
Loans represented by the outstanding principal balance of such Lender’s Term
Loans. The Commitment Percentage of each Lender as of the Closing Date is set
forth opposite the name of such Lender on Annex B.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

“Continuing Directors” means the directors (or equivalent governing body) of the
Parent on the Closing Date and each other director (or equivalent) of the Parent
if, in each case, such other Person’s nomination for election to the board of
directors (or equivalent governing body) of the Parent is approved by more than
50% of the then Continuing Directors.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person. “Controlling” and
“Controlled” have meanings correlative thereto.

“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; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of the
amount of such Debt and the maximum stated amount of such guarantee or assurance
against loss; (h) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (i) obligations to deliver commodities,
goods or services, including Hydrocarbons, in consideration of one or more
advance payments, other than gas balancing arrangements in the ordinary course
of business; (j) obligations to pay for goods or services even if such goods or
services are not actually received or utilized by such Person; (k) any Debt of a
partnership for which such Person is liable either by agreement, by operation of
Applicable Law but only to the extent of such liability; (l) Disqualified
Capital Stock; and (m) the undischarged balance of any production payment
created by such Person or for the creation of which such Person directly or

 

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indirectly received payment. The Debt of any Person includes 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.

“Debt Issuance” means the issuance of any Debt for borrowed money by any Loan
Party or any of its Subsidiary.

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

“Default” means any of the events specified in Section 8.1 that with the passage
of time, the giving of notice or any other condition, would constitute an Event
of Default.

“Defaulting Lender” means, subject to Section 3.9(B), any Lender that (a) has
failed to (i) fund all or any portion of its Term Loans within two Business Days
of the date such Term Loans were required to be funded hereunder unless such
Lender notifies the Administrative Agent and the Borrower in writing that such
failure is the result of such Lender’s determination that one or more conditions
precedent to funding (each of which conditions precedent, together with any
applicable default, shall be specifically identified in such writing) has not
been satisfied or (ii) pay to the Administrative Agent or any Lender (upon
notice by such Lender to the Administrative Agent that it has not been paid) any
other amount required to be paid by it hereunder within two Business Days of the
date when due, (b) has notified the Borrower (and the Borrower has so notified
the Administrative Agent) or the Administrative Agent in writing that it does
not intend to comply with its funding obligations hereunder, or has made a
public statement to that effect (unless such writing or public statement relates
to such Lender’s obligation to fund a Term Loan hereunder and states that such
position is based on such Lender’s determination that a condition precedent to
funding (which condition precedent, together with any applicable default, is
specifically identified in such writing or public statement) cannot be
satisfied), (c) has failed, within three Business Days after written request by
the Administrative Agent or the Borrower, to confirm in writing to the
Administrative Agent and the Borrower that it will comply with its prospective
funding obligations hereunder (provided that such Lender will cease to be a
Defaulting Lender pursuant to this clause (c) upon receipt of such written
confirmation by the Administrative Agent and the Borrower) or (d) has, or has a
direct or indirect parent company that has, (i) become the subject of a
proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver,
custodian, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its
business or assets, including the Federal Deposit Insurance Corporation or any
other state or federal regulatory authority acting in such a capacity or
(iii) become subject to a Bail-in Action and the Administrative Agent has
received written notice thereof; provided that a Lender is not a Defaulting
Lender solely by virtue of the ownership or acquisition of any equity interest
in that Lender or any direct or indirect parent company thereof by a
Governmental Authority so long as such ownership interest does not result in or
provide such Lender with immunity from the jurisdiction of courts within the
United States or from the enforcement of judgments or writs of attachment on its
assets or permit such Lender (or such Governmental Authority) to reject,

 

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repudiate, disavow or disaffirm any contracts or agreements made with such
Lender. Any Lender who is determined to be a Defaulting Lender under any one or
more of clauses (a) through (d) above is deemed to be a Defaulting Lender
(subject to Section 3.9(B)) upon delivery of written notice of such
determination to the Borrower and each Lender. Any determination by the
Administrative Agent that a Lender is a Defaulting Lender under any one or more
of clauses (a) through (d) above is conclusive and binding absent manifest
error.

“Deposit Account” means any operating, administrative, cash management,
collection activity, demand, time, savings, passbook or other deposit account
maintained with a bank or other financial institution.

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, requires the payment of
dividends (other than dividends payable solely in Equity Interests which do not
otherwise constitute Disqualified Capital Stock) or 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 Term Loans or
other Obligations hereunder outstanding and all of the Term Loan Commitments are
terminated.

“Dollars” or “$” means, unless otherwise qualified, dollars in lawful currency
of the United States.

“Domestic Subsidiary” means any Subsidiary organized under the laws of any
political subdivision of the United States.

“EEA Financial Institution” means (a) any credit institution or investment firm
established in any EEA Member Country which is subject to the supervision of an
EEA Resolution Authority, (b) any entity established in an EEA Member Country
which is a parent of an institution described in clause (a) above or (c) any
financial institution established in an EEA Member Country which is a subsidiary
of an institution described in clauses (a) or (b) above and is subject to
consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union,
Iceland, Liechtenstein and Norway.

“EEA Resolution Authority” means any public administrative authority or any
person entrusted with public administrative authority of any EEA Member Country
(including any delegee) having responsibility for the resolution of any EEA
Financial Institution.

“Eligible Assignee” means any Person that meets the requirements to be an
assignee under Section 10.4(B)(iii), 10.4(B)(v) and 10.4(B)(vi) (subject to such
consents, if any, as may be required under Section 10.4(B)(iii)).

 

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“Environmental Laws” means any and all Applicable Laws pertaining in any way to
health, safety, the environment, the preservation or reclamation of natural
resources, or the management, Release or threatened Release of any Hazardous
Materials, in effect in any and all jurisdictions in which the Borrower or any
of the Borrower’s Subsidiaries is conducting, or at any time has conducted,
business, or where any Property of the Borrower or any Subsidiaries of Borrower
is located, including the Oil Pollution Act of 1990 (“OPA”), the Clean Air Act,
the Comprehensive Environmental, Response, Compensation, and Liability Act of
1980 (“CERCLA”), the Federal Water Pollution Control Act, the Occupational
Safety and Health Act of 1970, the Resource Conservation and Recovery Act of
1976 (“RCRA”), the Safe Drinking Water Act, the Toxic Substances Control Act,
the Superfund Amendments and Reauthorization Act of 1986, the Hazardous
Materials Transportation Law and other environmental conservation or protection
Applicable Laws.

“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 (a) in the case of a corporation, capital stock, (b) in
the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of capital
stock, (c) in the case of a partnership, partnership interests (whether general
or limited), (d) in the case of a limited liability company, membership
interests, (e) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person and (f) any and all warrants, rights or options to
purchase any of the foregoing.

“Equity Issuance” means (a) any issuance by any Loan Party or any Subsidiary
thereof of shares of its Equity Interests to any Person that is not a Loan Party
(including in connection with the exercise of options or warrants or the
conversion of any debt securities to equity) and (b) any capital contribution
from any Person that is not a Loan Party into any Loan Party or any Subsidiary
thereof. The term “Equity Issuance” does not include (i) any Asset Disposition
or (ii) any Debt Issuance.

“ERISA” means the Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder.

“ERISA Affiliate” means any Person who together with any Loan Party or any of
its Subsidiaries is treated as a single employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule
published by the Loan Market Association (or any successor person), as in effect
from time to time.

“Event of Default” has the meaning set forth for such term in Section 8.1.

 

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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 in connection with workers’ compensation, unemployment insurance or
other social security, old age pension or public liability obligations which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP;

 

  (C) statutory landlord’s liens, operators’, vendors’, carriers’,
warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s,
construction or other like Liens arising by operation of law in the ordinary
course of business or incident to the exploration, development, operation and
maintenance of Oil and Gas Properties each of which is in respect of obligations
that are not delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP;

 

  (D) contractual Liens which arise in the ordinary course of business under
operating agreements, joint venture agreements, oil and gas partnership
agreements, oil and gas leases, farm-out agreements, division orders, contracts
for the sale, transportation or exchange of oil and natural gas, unitization and
pooling declarations and agreements, area of mutual interest agreements,
overriding royalty agreements, marketing agreements, processing agreements, net
profits agreements, development agreements, gas balancing or deferred production
agreements, injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or other geophysical permits or agreements,
and other agreements which are usual and customary in the oil and gas business
and are for claims which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; provided that any such Lien referred to in this clause
(D) does not materially impair the use of the Property covered by such Lien for
the purposes for which such Property is held by the Borrower or any of the
Borrower’s Subsidiaries 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 the Borrower’s
Subsidiaries to provide collateral to the depository institution;

 

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  (F) easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any Property of the Borrower or any of the
Borrower’s Subsidiaries for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, that do not secure
any monetary obligations and which in the aggregate do not materially impair the
use of such Property for the purposes of which such Property is held by the
Borrower or any of the Borrower’s Subsidiaries or materially impair the value of
such Property subject thereto;

 

  (G) Liens on cash or securities pledged to secure performance of tenders,
surety and appeal bonds, government contracts, performance and return of money
bonds, bids, trade contracts, leases, statutory obligations, regulatory
obligations and other obligations of a like nature incurred in the ordinary
course of business; and

 

  (H) judgment and attachment Liens not giving rise to an Event of Default;
provided that any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally terminated
or the period within which such proceeding may be initiated shall not have
expired and no action to enforce such Lien has been commenced;

provided Liens described in clauses (A) through (E) above remain “Excepted
Liens” only for so long as no action to enforce such Lien has been commenced,
and no intention to subordinate the first priority Lien granted in favor of the
Administrative Agent and the Secured Parties is to be implied or expressed by
the permitted existence of such Excepted Liens.

“Exchange Act” means the Securities Exchange Act of 1934.

“Exchange Notes Indenture” means the Indenture dated as of September 27, 2016,
among the Loan Parties and Wilmington Trust, National Association, as trustee
and collateral trustee.

“Exchange Notes due 2021” means the Parent’s 10% Second Lien Senior Secured PIK
Notes due 2021 issued pursuant to the Exchange Notes Indenture and as guaranteed
by the Borrower and the Subsidiary Guarantors.

“Exchange Notes Supplemental Indenture” means a supplemental indenture to the
Exchange Notes Indenture.

“Excluded Deposit Account” means any Deposit Account, existing as of the Closing
Date, which is solely used for purposes of funding payroll, payroll taxes or
employee benefit payments or which solely contains cash of any Person, other
than the Parent or any Subsidiary, and which cash is held in such Deposit
Account solely on behalf of, and for the benefit of, such third party.

“Excluded Property” means the Property described on Annex E and known as
Galveston 186-L.

 

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“Excluded Subsidiary” means, individually and collectively, PetroQuest Oil &
Gas, L.L.C., a Louisiana limited liability company, Pittrans, Inc., an Oklahoma
corporation, Sea Harvester Energy Development Co., L.L.C., a Louisiana limited
liability company, and PQ Holdings LLC, a Louisiana limited liability company.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient: (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes; (b) in the case of a Lender, U.S. federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in a Term Loan or Term Loan
Commitment pursuant to a law in effect on the date on which (i) such Lender
acquires such interest in the Term Loan or Term Loan Commitment (other than
pursuant to an assignment request by the Borrower under Section 3.8(B)) or
(ii) such Lender changes its lending office, except in each case to the extent
that, pursuant to Section 3.7, amounts with respect to such Taxes were payable
either to such Lender’s assignor immediately before such Lender became a Party
or to such Lender immediately before it changed its lending office, (c) Taxes
attributable to such Recipient’s failure to comply with Section 3.7(G) and
(d) any U.S. federal withholding Taxes imposed under FATCA.

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

“Fee Letters” means any agreement pursuant to which the Parent, the Borrower or
any other Loan Party agrees to pay fees described in Section 3.2(B).

“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is
not a U.S. Person and (b) if the Borrower is not a U.S. Person, a Lender that is
resident or organized under the laws of a jurisdiction other than that in which
the Borrower is resident for tax purposes.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

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

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

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“Governmental Approvals” means all authorizations, consents, approvals, permits,
licenses and exemptions of, and all registrations and filings with or issued by,
any Governmental Authorities.

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

“Guarantor” means Parent and any Subsidiary Guarantor.

“Guaranty Agreement” means the unconditional guaranty agreement of even date
herewith executed by the Parent and the Subsidiary Guarantors in favor of the
Administrative Agent, for the benefit of the Secured Parties.

“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law including (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, explosives, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon, infectious or medical wastes.

“Hydrocarbon Interests” means all rights, titles, interests and estates now
owned 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.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of any Loan
Party under any Loan Document and (b) to the extent not otherwise described in
clause (a) above, Other Taxes.

“Insurance and Condemnation Event” means the receipt by any Loan Party or any of
its Subsidiaries of any cash insurance proceeds or condemnation award payable by
reason of theft, loss, physical destruction or damage, taking or similar event
with respect to any of their respective Property.

“IRS” means the United States Internal Revenue Service.

 

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“Intercreditor Agreement” means (a) the Intercreditor Agreement dated as of
February 17, 2016, between the Administrative Agent (as replacement for JPMorgan
Chase Bank, N.A.), as priority lien agent, and Wilmington Trust, National
Association, as second lien collateral agent, as supplemented and amended by
joinder or otherwise from time to time, and (b) any intercreditor or
subordination agreement entered into among the Administrative Agent (at the
written direction of the Required Lenders) and the applicable lender,
administrative agent, collateral trustee, indenture trustee or similar Person
with respect to Permitted Second Lien Debt.

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

“Lenders” means the Persons listed on Annex B and any other Person that becomes
party to this Agreement pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party to this Agreement pursuant to an
Assignment and Assumption.

“Lien” means, with respect to any asset, any mortgage, leasehold mortgage, lien,
pledge, charge, security interest, hypothecation or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, a Person shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
Capital Lease Obligation or other title retention agreement relating to such
asset.

“Loan Documents” means, collectively, this Agreement, each Term Loan Note,
Security Documents, the Guaranty Agreement, each Fee Letter, the Intercreditor
Agreement (including the Priority Confirmation Joinder executed by the
Administrative Agent in connection therewith) and each other document,
instrument, certificate and agreement executed and delivered by the Loan Parties
or any of their respective Subsidiaries in favor of or provided to the
Administrative Agent or any Lender in connection with this Agreement or
otherwise referred to herein or contemplated hereby.

“Loan Parties” means, collectively, the Parent, the Borrower and the Subsidiary
Guarantors.

 

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“Material Adverse Effect” means, with respect to the Parent and the other Loan
Parties, (a) a material adverse effect on the operations, business, assets,
properties, liabilities (actual or contingent) or condition (financial or
otherwise) of such Persons, taken as a whole, (b) a material impairment of the
ability of any such Person to perform its obligations under the Loan Documents
to which it is a party, (c) a material impairment of the rights and remedies of
the Administrative Agent or any Lender under any Loan Document or (d) a material
adverse effect on the legality, validity, binding effect or enforceability
against any Loan Party of any Loan Document to which it is a party.

“Material Indebtedness” means Debt (other than the Term Loans), or obligations
in respect of one or more Swap Agreements, of any one or more of the Parent and
its Subsidiaries in an aggregate principal amount exceeding $2,000,000. For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of the Parent or any Subsidiary in respect of any Swap Agreement at
any time is the Swap Termination Value.

“Maturity Date” means October 17, 2020.

“Moody’s” means Moody’s Investors Service, Inc.

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

“Mortgages” means each mortgage, deed of trust or other real property security
document encumbering any real property and any other Property the Required
Lenders require to be mortgaged, whether now or hereafter owned by any Loan
Party, executed by such Loan Party in favor of the Administrative Agent, for the
benefit of the Secured Parties.

“Net Cash Proceeds” means, as applicable, (a) with respect to any Asset
Disposition or Insurance and Condemnation Event, the gross proceeds received by
any Loan Party or any of its Subsidiaries therefrom (including any cash, Cash
Equivalents, deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, as and when received) less the sum of (i) in the case
of an Asset Disposition, all income taxes and other taxes assessed by, or
reasonably estimated to be payable to, a Governmental Authority as a result of
such transaction (provided that if such estimated taxes exceed the amount of
actual taxes required to be paid in cash in respect of such Asset Disposition,
the amount of such excess constitutes Net Cash Proceeds), (ii) all reasonable
and customary out-of-pocket fees and expenses incurred in connection with such
transaction or event and (iii) the principal amount of, premium, if any, and
interest on any Debt secured by a Lien on the asset (or a portion thereof)
disposed of, which Debt is required to be repaid in connection with such
transaction or event and (b) with respect to any Equity Issuance or Debt
Issuance, the gross cash proceeds received by any Loan Party or any of its
Subsidiaries therefrom less all reasonable and customary out-of-pocket legal,
underwriting and other fees and expenses incurred in connection therewith.

“Non-Consenting Lender” means any Lender that does not approve any consent,
waiver or amendment that (a) requires the approval of all or all affected
Lenders in accordance with the terms of Section 10.3 and (ii) has been approved
by the Required Lenders.

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

 

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“Non-Guarantor Subsidiary” means each Excluded Subsidiary and any other direct
or indirect Subsidiary of the Parent (other than the Borrower) that is not a
Subsidiary Guarantor.

“Notice of Borrowing” means a written notice substantially in the form of
Exhibit B.

“Notice of Prepayment” means a written notice substantially in the form of
Exhibit C.

“Obligations” means, in each case, whether now in existence or hereafter
arising, the principal of and interest on (including interest accruing after the
filing of any bankruptcy or similar petition) the Term Loans and all other fees
and commissions (including attorneys’ fees), expenses, indemnities, losses,
charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by the Loan Parties and each of their
respective Subsidiaries to the Lenders or the Administrative Agent, in each case
under any Loan Document, with respect to any Term Loan, of every kind, nature
and description, direct or indirect, absolute or contingent, due or to become
due, contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note and including interest and fees that accrue after the
commencement by or against any Loan Party or any Subsidiary thereof of any
proceeding under any Debtor Relief Laws, naming such Person as the debtor in
such proceeding, regardless of whether such interest and fees are allowed claims
in such proceeding.

“OFAC” means the United States Department of the Treasury’s Office of Foreign
Assets Control.

“Officer’s Compliance Certificate” means a certificate of a Responsible Officer
of the Parent substantially in the form of Exhibit D.

“Oil and Gas Properties” means (a) Hydrocarbon Interests, (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests, (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including all units created under orders,
regulations and rules of any Governmental Authority) which may affect all or any
portion of the Hydrocarbon Interests, (d) all operating agreements, contracts
and other agreements, including production sharing contracts and agreements,
which relate to any of the Hydrocarbon Interests or the production, sale,
purchase, exchange or processing of Hydrocarbons from or attributable to such
Hydrocarbon Interests, (e) all Hydrocarbons in and under and which may be
produced and saved or attributable to the Hydrocarbon Interests, including all
oil in tanks, and all rents, issues, profits, proceeds, products, revenues and
other incomes from or attributable to the Hydrocarbon Interests, (f) all
tenements, hereditaments, appurtenances and Properties in any manner
appertaining, belonging, affixed or incidental to the Hydrocarbon Interests and
(g) all Properties, rights, titles, interests and estates described or referred
to above, including any and all Property, real or personal, now owned or
hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such Hydrocarbon
Interests or Property (excluding drilling rigs, automotive equipment, rental
equipment or other personal Property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil wells, gas wells, injection wells or other wells, buildings,
structures, fuel separators, liquid extraction plants, plant compressors, pumps,
pumping units, field gathering systems, tanks and tank batteries, fixtures,
valves, fittings, machinery and parts,

 

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engines, boilers, meters, apparatus, equipment, appliances, tools, implements,
cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way,
easements and servitudes together with all additions, substitutions,
replacements, accessions and attachments to any and all of the foregoing.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to any Loan Document
or enforced any Loan Document, or sold or assigned an interest in any Loan or
Loan Document).

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
made pursuant to Section 3.8(B)).

“Parent” has the meaning set forth for such term in the introduction to this
Agreement.

“Parties” has the meaning set forth for such term in the introduction to this
Agreement.

“Participant” has the meaning set forth for such term in Section 10.4(D).

“Participant Register” has the meaning set forth for such term in
Section 10.4(D).

“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)).

“Permitted Refinancing Debt” means Debt (for purposes of this definition, “new
Debt”) incurred in exchange for, or proceeds of which are used to refinance, all
of any other Debt (the “Refinanced Debt”); provided (a) such new Debt is in an
aggregate principal amount not in excess of the sum of (i) the aggregate
principal amount then outstanding of the Refinanced Debt (or, if the Refinanced
Debt is exchanged or acquired for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration thereof, such
lesser amount) and (ii) an amount necessary to pay any fees and expenses
including premiums, related to such exchange or refinancing, (b) such new Debt
has a stated maturity no earlier than stated maturity of the Refinanced Debt and
an average life no shorter than the average life of the Refinanced Debt,
(c) such new Debt has a stated interest rate that is a market-based rate,
(d) such new Debt does not contain any covenants which are materially more
onerous to the Parent and its Subsidiaries than those imposed by the Refinanced
Debt, (e) such new Debt (and any guarantees thereof) is otherwise on terms and
documentation satisfactory to the Required Lenders and (f) (i) such new Debt is
secured by no more collateral (if any) than the Refinanced Debt and the property
constituting such collateral is not changed and (ii) the obligors, whether
direct or contingent, in respect of Refinanced Debt are not changed.

 

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“Permitted Second Lien Debt” means (a) the Senior Secured Notes due 2021,
(b) the Exchange Notes due 2021 (including any principal resulting from any
interest paid in kind with respect to the Exchange Notes due 2021) and (c) Debt
incurred by the Parent or the Borrower pursuant to one or more other issuances
of Debt (including pursuant to a Senior Secured Supplemental Indenture or an
Exchange Notes Supplemental Indenture); provided (i) the aggregate principal
amount of all Debt incurred pursuant to this definition does not exceed
$280,295,000 (not including any principal resulting from any interest paid in
kind with respect to the Exchange Notes due 2021), (ii) such Debt is used by the
Parent or the Borrower in connection with the Redemption of the Senior Notes due
2017 or the Senior Secured Notes due 2021 substantially concurrently with the
incurrence of such Permitted Second Lien Debt, (iii) with respect to Debt
incurred pursuant to clause (c) of this definition, such Debt (A) does not
provide for any scheduled payment of principal (subject to other payments
permitted by the Intercreditor Agreement), scheduled mandatory Redemption or
scheduled sinking fund payment before the date that is 180 days following the
Maturity Date, (B) is secured solely by junior Liens on Mortgaged Property which
Liens do not have priority over the Liens in favor of the Administrative Agent
securing the Obligations and (C) be evidenced and governed by definitive
documentation containing (1) with respect to any Senior Secured Supplemental
Indenture or Exchange Notes Supplemental Indenture, the same terms (excluding
the effect of any most favored nations clause) as, or terms less onerous to the
Parent than, the Senior Secured Indenture or Exchange Notes Indenture, as
applicable, or (2) customary market terms and conditions and otherwise
satisfactory to the Required Lenders in their sole discretion (provided that
solely with respect to any proposed Permitted Second Lien Debt transaction
pursuant to this clause (C)(2), the term sheet for such proposed Permitted
Second Lien Debt transaction is submitted to the Lenders for Required Lender
approval in their sole discretion and the definitive documentation of such
Permitted Second Lien Debt transaction is deemed acceptable to the Required
Lenders if the terms of such definitive documentation reflect the terms and
conditions set forth in the approved term sheet and contain customary market
terms and conditions and otherwise are satisfactory to the Required Lenders in
their sole discretion) and (iv) all Debt incurred pursuant to this definition is
at all times subject to the Intercreditor Agreement.

“Permitted Second Lien Debt Documents” means each credit or other loan agreement
or indenture governing Permitted Second Lien Debt, all guarantees thereof and
all other agreements, documents or instruments executed and delivered by the
Parent, any other Loan Party or any of the Borrower’s Subsidiaries in connection
with, or pursuant to, the incurrence of Permitted Second Lien Debt.

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

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

“Platform” means Debt Domain, Intralinks, Syndtrak or a substantially similar
electronic transmission system.

 

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“Property” means any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed, movable or immovable, and whether tangible or
intangible, including Equity Interests.

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

“Recipient” means the Administrative Agent or any Lender, as applicable.

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

“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents, trustees,
administrators, managers, advisors and representatives of such Person and of
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 into the environment.

“Remedial Work” has the meaning set forth for such term in Section 6.10(A).

“Required Lenders” means, at any date, any combination of Lenders holding more
than 66 2/3% of the sum of the aggregate amount of the Term Loan Commitments or,
if the Term Loan Commitments have been reduced to zero or terminated, any
combination of Lenders holding more than 66 2/3% of the aggregate outstanding
principal amount of the Term Loans; provided the Term Loan Commitment of, and
the portion of the Term Loans held or deemed held by, any Defaulting Lender are
excluded for purposes of making a determination of Required Lenders.

“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Required Lenders, setting forth, as of each January 1, April 1, July 1
and October 1 (or such other date as required hereunder) the oil and gas
reserves, using Strip Prices in effect at the end of each applicable calendar
quarter, attributable to the Oil and Gas Properties of the Borrower and the
Borrower’s Subsidiaries, including oil and gas Swap Agreements in place at the
end of each quarter, 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.

“Responsible Officer” means as to any Loan Party, the chief executive officer,
president, chief financial officer, controller, treasurer, assistant treasurer
or any executive vice president of such Person or any other officer of such
Person designated in writing by the Borrower and reasonably acceptable to the
Required Lenders; provided, to the extent requested thereby, the

 

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Administrative Agent has received a certificate of such Person certifying as to
the incumbency and genuineness of the signature of each such officer. Any
document delivered hereunder or under any other Loan Document that is signed by
a Responsible Officer of a Person is conclusively presumed to have been
authorized by all necessary corporate, partnership or other action on the part
of such Person and such Responsible Officer is conclusively presumed to have
acted on behalf of such Person.

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

“S&P” means Standard & Poor’s Financial Services LLC, a part of McGraw-Hill
Financial and any successor thereto.

“Sanctions” means economic or financial sanctions or trade embargoes imposed,
administered or enforced from time to time by the United States government
(including those administered by OFAC), the European Union, Her Majesty’s
Treasury, or other relevant sanctions authority.

“Sanctioned Country” means at any time, a country or territory which is itself
the subject or target of any Sanctions (including Cuba, Iran, North Korea, Sudan
and Syria).

“Sanctioned Person” means, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by OFAC, the United
States Department of State, the United Nations Security Council, the European
Union, Her Majesty’s Treasury, or other relevant sanctions authority, (b) any
Person operating, organized or resident in a Sanctioned Country or (c) any
Person owned or controlled by any such Person or Persons described in clauses
(a) and (b) above.

“Secured Parties” means, collectively, the Administrative Agent and the Lenders.

“Security Documents” means the collective reference to the Mortgages, the
Guaranty Agreement, any Account Control Agreements and each other agreement or
writing pursuant to which any Loan Party pledges or grants a security interest
in any Property securing the Obligations.

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

“Senior Indenture” means the Indenture dated as of August 19, 2010, between the
Parent and U.S. Bank National Association (successor to The Bank of New York
Mellon Trust Company, N.A.), as trustee, as supplemented by one or more
supplemental indentures thereto from time to time.

 

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“Senior Notes due 2017” means the Parent’s unsecured 10% senior notes due 2017
issued pursuant to the Senior Indenture and as guaranteed by the Borrower and
the Subsidiary Guarantors.

“Senior Secured Indenture” means the Indenture dated as of February 17, 2016,
among the Loan Parties and Wilmington Trust, National Association, as trustee
and collateral trustee.

“Senior Secured Notes due 2021” means the Parent’s 10% Second Lien Secured
Senior Notes due 2021 issued pursuant to the Senior Secured Indenture and as
guaranteed by the Borrower and the Subsidiary Guarantors.

“Senior Secured Supplemental Indenture” means a supplemental indenture to the
Senior Secured Indenture.

“Strip Prices” means, as of any date of determination, the average of each
twelve month’s forward monthly prices for the most comparable hydrocarbon
commodity applicable over a three year period from such date of determination,
with such prices held constant thereafter based on the third year’s average
monthly prices, as such prices are (a) quoted on the New York Mercantile
Exchange (or its successor) as of the calculation date and (b) adjusted for
energy content, quality and basis differentials; provided with respect to
estimated future production for which prices are defined, within the meaning of
SEC guidelines, by contractual arrangements excluding escalations based upon
future conditions, then such contract prices are applied to future production
subject to such arrangements.

“Subsidiary” means as to any Person, any corporation, partnership, limited
liability company or other entity of which more than 50% of the outstanding
Equity Interests having ordinary voting power to elect a majority of the board
of directors (or equivalent governing body) or other managers of such
corporation, partnership, limited liability company or other entity is at the
time owned by (directly or indirectly) or the management is otherwise controlled
by (directly or indirectly) such Person (irrespective of whether, at the time,
Equity Interests of any other class or classes of such corporation, partnership,
limited liability company or other entity have or might have voting power by
reason of the happening of any contingency). Unless otherwise qualified,
references to “Subsidiary” or “Subsidiaries” refer to a Subsidiary (including
the Borrower) of the Parent or the Subsidiaries (including the Borrower) of the
Parent but excludes PQ Holdings LLC, a Louisiana limited liability company, and
PetroQuest Oil & Gas, L.L.C., a Louisiana limited liability company.

“Subsidiary Guarantors” means, collectively, all direct and indirect
Subsidiaries of the Parent (other than the Borrower, Excluded Subsidiaries and
Foreign Subsidiaries to the extent that and for so long as the guaranty of such
Foreign Subsidiary would have adverse tax consequences for the Borrower or any
other Loan Party or result in a violation of Applicable Laws) in existence on
the Closing Date or which become a party to the Guaranty Agreement pursuant to
Section 6.14. As of the Closing Date, TDC Energy LLC, a Louisiana limited
liability company, is the only Subsidiary Guarantor.

 

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“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement, whether exchange
traded, “over-the- counter” or otherwise, involving, or settled by reference to,
one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions (including any agreement, contract or transaction that
constitutes a “swap” within the meaning of section 1a(47) of the Commodity
Exchange Act); provided that no phantom stock or similar plan providing for
payments only on account of services provided by current or former directors,
officers, employees or consultants of the Parent or the Subsidiaries is a Swap
Agreement.

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

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

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

“Term Loan Commitment” means (a) as to any Lender, the obligation of such Lender
to make a portion of the Term Loans to the account of the Borrower hereunder on
the applicable borrowing date in an aggregate principal amount not to exceed the
amount set forth opposite such Lender’s name on Annex B, as such amount may be
reduced or otherwise modified at any time or from time to time pursuant to the
terms hereof and (b) as to all Lenders, the aggregate commitment of all Lenders
to make such Term Loans. The aggregate Term Loan Commitment of all Term Loan
Lenders on the Closing Date is $50,000,000.

“Term Loan Note” means a promissory note made by the Borrower in favor of a
Lender evidencing the portion of the Term Loans made by such Lender,
substantially in the form of Exhibit A, and any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part.

“Term Loans” means the term loans made, or to be made, to the Borrower by the
Lenders pursuant to Section 2.1.

“Threshold Amount” means 90%.

 

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“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement and each other Loan Document
to which it is a party, the borrowing of Term Loans, the use of the proceeds
thereof and the grant of Liens by the Borrower on the Collateral pursuant to the
Security Documents and (b) each Guarantor, the execution, delivery and
performance by such Guarantor of each Loan Document to which it is a party, the
guaranteeing of the Obligations and the other obligations under the Guaranty
Agreement by such Guarantor and such Guarantor’s grant of Liens by such
Guarantor on the Collateral pursuant to the Security Documents.

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

“U.S. Borrower” means any Borrower that is a U.S. Person.

“U.S. Person” means any Person that is a “United States Person” as defined in
Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning set forth for such term in
Section 3.7(G).

“Wholly-Owned” means, with respect to a Subsidiary, that all of the Equity
Interests of such Subsidiary are, directly or indirectly, owned or controlled by
the Borrower or one or more of its Wholly-Owned Subsidiaries (except for
directors’ qualifying shares or other shares required by Applicable Law to be
owned by a Person other than the Borrower or one or more of its Wholly-Owned
Subsidiaries).

“Withholding Agent” means any Loan Party and the Administrative Agent.

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution
Authority, the write-down and conversion powers of such EEA Resolution Authority
from time to time under the Bail-In Legislation for the applicable EEA Member
Country, which write-down and conversion powers are described in the EU Bail-In
Legislation Schedule.

2. Accounting Terms.

(A) All accounting terms not specifically or completely defined herein are
construed in conformity with, and all financial data (including financial ratios
and other financial calculations) required to be submitted pursuant to this
Agreement shall be prepared in conformity with GAAP, applied on a consistent
basis, as in effect from time to time and in a manner consistent with that used
in preparing the audited financial statements required by Section 6.1(A) except
as otherwise specifically prescribed herein.

(B) If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in any Loan Document, and either the
Borrower or the Required Lenders so request, the Lenders and the Borrower shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the approval
of the Required Lenders); provided that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein and (ii) the Borrower shall provide to the Administrative Agent
and the Lenders financial statements and other documents required under this
Agreement or as reasonably requested hereunder setting forth a reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP.

 

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3. Use of Certain Terms. As used in this Agreement, the plural includes the
singular and the singular includes the plural. All pronouns and any variations
thereof refer to masculine, feminine, neuter, singular or plural as the identity
of the Person or Persons may require. As used in this Agreement, “include,”
“includes” and “including” have the inclusive meaning of “including without
limitation.”

4. References. Section and other headings are for reference only, and do not
affect the interpretation or meaning of any provision of this Agreement. Unless
otherwise provided, references to articles, sections, clauses, annexes,
schedules and exhibits refer to articles, sections, clauses, annexes, schedules
and exhibits of this Agreement. The words “hereof,” “herein,” “hereby,”
“hereunder” and other similar terms of this Agreement refer to this Agreement as
a whole and not exclusively to any particular provision of this Agreement.
Unless otherwise expressly indicated in this Agreement, the words “above” and
“below,” when following a reference to a clause of any Transaction Document,
refer to a clause within the same section of such Transaction Document.
References in this Agreement to this Agreement, any other Transaction Document
or any other agreement are deemed to (a) refer to this Agreement, such other
Transaction Document or such other agreements, as the case may be, as the same
may be amended, restated, supplemented or otherwise modified from time to time
under the provisions hereof or thereof, unless expressly stated otherwise or
unless such amendment, restatement, supplement or modification is not permitted
by the terms of this Agreement and (b) include all schedules, exhibits and
appendices thereto. References in this Agreement to any law, rule, statute or
regulation are deemed to refer to such law, rule, statute or regulation as it
may be amended, supplemented or otherwise modified from time to time, and any
successor law, rule, statute or regulation, in each case as in effect at the
time any such reference is operative. Any reference to a Person includes the
successors, assigns, participants and transferees of such Person, but such
reference will not increase, decrease or otherwise modify in any way the
provisions in this Agreement or any other Transaction Document governing the
assignment of rights and obligations under or the binding effect of any
provision of this Agreement or any other Transaction Document. The words “asset”
and “property” are construed to have the same meaning and effect and to refer to
any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights. The term “documents” includes any and
all instruments, documents, agreements, certificates, notices, reports,
financial statements and other writings, however evidenced, whether in physical
or electronic form. In the computation of periods of time from a specified date
to a later specified date, the word “from” means “from and including;” the words
“to” and “until” each mean “to but excluding;” and the word “through” means “to
and including”

5. Times of Day. Unless otherwise specified, all references herein to times of
day shall be references to Eastern time (daylight or standard, as applicable).

6. Rounding. Any financial ratios required to be maintained pursuant to this
Agreement shall be calculated by dividing the appropriate component by the other
component, carrying the result to one place more than the number of places by
which such ratio or percentage is expressed herein and rounding the result up or
down to the nearest number (with a rounding-up if there is no nearest number).

 

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7. Inconsistencies with Other Documents. In the event there is a conflict or
inconsistency between this Agreement and any other Loan Document, the terms of
this Agreement control; provided any provision of the Security Documents which
imposes additional burdens on a Loan Party or any of its Subsidiaries or further
restricts the rights of a Loan Party or any of its Subsidiaries or gives the
Administrative Agent or Lenders additional rights is not deemed to be in
conflict or inconsistent with this Agreement and shall be given full force and
effect.

 

 

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ANNEX B

Term Loan Commitments and Commitment Percentages

 

Lender

   Term Loan Commitment      Commitment Percentage  

Franklin Custodian Funds – Franklin Income Fund

   $ 50,000,000         100 % 

 

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ANNEX C

Addresses for Notices

If to the Borrower:

PetroQuest Energy, L.L.C.

400 E. Kaliste Saloom Road #6000

Lafayette, Louisiana 70508

Attention of: J. Bond Clement

Telephone No.: 337-232-7028

Facsimile No.: 337-232-0044

E-mail: bclement@petroquest.com

With copies to:

Porter Hedges LLP

1000 Main, 36th Floor

Houston, Texas 77002

Attention of: James Cowen

Telephone No.: 713-226-6649

Facsimile No.: 713-226-6249

E-mail: JCowen@porterhedges.com

If to the Administrative Agent:

Wells Fargo Bank, National Association

Corporate Trust Services

9062 Old Annapolis Road

Columbia, Maryland 21045

Attention of: Jason Prisco or Lance Yeagle- PetroQuest

Telephone No.: 443-367-3924 or 410-884-2271

Facsimile No.: 866-373-0261

Email: ctsbankdebtadministrationteam@wellsfargo.com

With copies to:

Kelley Drye & Warren LLP

101 Park Avenue

New York, New York 10178

Attention of: Pamela Bruzzese-Szczygiel

Telephone No.: 212-808-7750

Facsimile No.: 212-808-7897

E-mail: pbruzzese-szczygiel@kelleydrye.com

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If to the initial Lender:

Franklin Custodian Funds – Franklin Income Fund

c/o Franklin Advisors, Inc.

One Franklin Parkway

San Mateo, California 94403

Attention of: Christopher D. Chen, Associate General Counsel

Telephone No.: 650-312-3341

E-mail: chris.chen@franklintempleton.com

and

Attention of: Celia Fresquez, Portfolio Operations Director

Telephone No.: 650-312-2886

Email: celia.fresquez@franklintempleton.com

With copies to:

Jones Day

1755 Embarcadero Road

Palo Alto, CA 94303

Attention of: Stephen E. Hall

Telephone No.: 650-739-3939

Facsimile No.: 650-739-3900

E-mail: sehall@jonesday.com

 

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ANNEX D

Closing Deliverables

Executed Loan Documents. This Agreement, a Term Loan Note in favor of each
Lender requesting a Term Loan Note, the Guaranty Agreement and the Security
Documents, together with any other applicable Loan Documents.

Intercreditor Agreement. The Intercreditor Agreement (or one or more joinders to
the Intercreditor Agreement existing on the Closing Date with respect to
Permitted Second Lien Debt in effect on the Closing Date).

Officer’s Certificate. A certificate from a Responsible Officer of the Parent
and the Borrower to the effect that (a) all representations and warranties of
the Loan Parties contained in this Agreement and the other Loan Documents are
true, correct and complete, (b) none of the Loan Parties is in violation of any
of the covenants contained in this Agreement and the other Loan Documents,
(c) after giving effect to the Transactions, no Default or Event of Default has
occurred and is continuing, (d) since December 31, 2015, no event has occurred
or condition arisen, either individually or in the aggregate, that has had or
could reasonably be expected to have a Material Adverse Effect and (e) each of
the Loan Parties, as applicable, has satisfied each of the conditions set forth
in Section 4.1 and Section 4.2.

Certificate of Secretary of Each Loan Party. A certificate of a Responsible
Officer of each Loan Party certifying as to the incumbency and genuineness of
the signature of each officer of such Loan Party executing Loan Documents to
which it is a party and certifying that attached thereto is a true, correct and
complete copy of (a) the articles or certificate of incorporation or formation
(or equivalent), as applicable, of such Loan Party and all amendments thereto,
certified as of a recent date by the appropriate Governmental Authority in its
jurisdiction of incorporation, organization or formation (or equivalent), as
applicable, (b) the bylaws or other governing document of such Loan Party as in
effect on the Closing Date and (c) resolutions duly adopted by the board of
directors (or other governing body) of such Loan Party authorizing and approving
the transactions contemplated hereunder and the execution, delivery and
performance of this Agreement and the other Loan Documents to which it is a
party.

Certificates of Good Standing. Certificates as of a recent date of the good
standing of each Loan Party under the laws of its jurisdiction of incorporation,
organization or formation (or equivalent), as applicable, and, to the extent
requested by the Lenders, each other jurisdiction where such Loan Party is
qualified to do business and, to the extent available, a certificate of the
relevant taxing authorities of such jurisdictions certifying that such Loan
Party has filed required tax returns and owes no delinquent taxes.

Opinions of Counsel. Opinions of counsel to the Loan Parties addressed to the
Administrative Agent and the Lenders with respect to the Loan Parties, the Loan
Documents and such other matters as the Lenders request (which expressly permit
reliance by successors and permitted assigns of the Administrative Agent and the
Lenders).

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Lien Search. The results of a Lien search (including a search as to judgments,
bankruptcy and tax matters) made against the Loan Parties under the Uniform
Commercial Code (or applicable judicial docket) as in effect in each
jurisdiction in which filings or recordations under the Uniform Commercial Code
should be made to evidence or perfect security interests in all assets of such
Loan Party, indicating among other things that the assets of each such Loan
Party are free and clear of any Lien (except for Liens permitted under
Section 7.3).

Reserve Reports. The Reserve Reports required under Section 6.12(A) for (a) the
Oil and Gas Properties of the Borrower and the Borrower’s Subsidiaries as of
January 1, 2016, prepared by one or more Approved Petroleum Engineers and
(b) the Oil and Gas Properties of the Borrower and the Borrower’s Subsidiaries
as of July 1, 2016, prepared by or under the supervision of the chief engineer
of the Borrower in accordance with the procedures used in the January 1 Reserve
Report described above.

Mortgages; Compliance Certificate. Mortgages on Mortgaged Property representing
at least the Threshold Amount of the total value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report described above,
together with such other certificates, documents and information as is
reasonably requested by the Lenders with respect thereto, including certified
authorizing resolutions suitable for attachment to each Mortgage recorded in
Louisiana. A certificate of a Responsible Officer of the Borrower that it has
granted Mortgages to the Administrative Agent on Property representing at least
the Threshold Amount of the total value of the Oil and Gas Properties evaluated
in the most recently completed Reserve Report described above and setting forth
the percentage mortgaged.

Account Control Agreements. Account Control Agreements for each Deposit Account
maintained by a Loan Party (other than Excluded Deposit Accounts).

Pledged Collateral. If applicable, original stock certificates or other
certificates evidencing the certificated Equity Interests pledged pursuant to
the Security Documents, together with an undated stock power for each such
certificate duly executed in blank by the registered owner thereof.

Property and Liability Insurance. Evidence of property, business interruption
and liability insurance covering each Loan Party and the Collateral, evidence of
payment of all insurance premiums for the current policy year of each policy
(with appropriate endorsements naming the Administrative Agent as lender’s loss
payee (and mortgagee, as applicable) on all policies for property hazard
insurance and as additional insured on all policies for liability insurance) and
copies of such insurance policies.

Other Collateral Documentation. Any documents required by the terms of the
Security Documents to evidence or perfect the Administrative Agent’s security
interest in the Collateral, including a UCC-1 financing statement to be filed
with the clerk of court of any Louisiana parish as to any mortgaged fixtures and
as-extracted collaterals.

Financial Statements. The financial statements described in Section 5.4(A).

Other Documents. Copies of all other documents, certificates and instruments
reasonably requested by the Administrative Agent or any Lender.

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

EXHIBIT A

Term Loan Note

 

$                , 20            

FOR VALUE RECEIVED, the undersigned, PetroQuest Energy, L.L.C., a Louisiana
limited liability company (the “Borrower”), promises to pay to             (the
“Lender”), at the place and times provided in the Loan Agreement referred to
below, the principal sum of $            or, if less, the unpaid principal
amount of all Term Loans made by the Lender pursuant to the Multidraw Term Loan
Agreement dated as of October 17, 2016 (the “Loan Agreement”), among the
Borrower, PetroQuest Energy, Inc., a Delaware corporation, the Lender, the other
lenders party thereto and Wells Fargo Bank, National Association, as
administrative agent. Capitalized terms used herein and not otherwise defined
have the meanings set forth for such terms in the Loan Agreement.

The unpaid principal amount of this Term Loan Note from time to time outstanding
is payable as provided in the Loan Agreement and bears interest as provided in
Section 3.1 of the Loan Agreement. All payments of principal and interest on
this Term Loan Note is payable in Dollars in immediately available funds as
provided in the Loan Agreement.

This Term Loan Note is entitled to the benefits of, and evidences Obligations
incurred under, the Loan Agreement, to which reference is made for a description
of the security for this Term Loan Note and for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Obligations evidenced by this Term Loan Note
and on which such Obligations may be declared to be immediately due and payable.

THIS TERM LOAN NOTE IS GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

The Borrower hereby waives all requirements as to diligence, presentment, demand
of payment, protest and (except as required by the Loan Agreement) notice of any
kind with respect to this Term Loan Note.

Executed and delivered as of the date first above written.

 

PETROQUEST ENERGY, L.L.C. By:  

 

Name:   Title:  

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

EXHIBIT B

Notice of Borrowing

Dated as of:             

Wells Fargo Bank, National Association,

as Administrative Agent

Corporate Trust Services

9062 Old Annapolis Road

Columbia, Maryland 21045

Attention of: Jason Prisco or Lance Yeagle- PetroQuest

Ladies and Gentlemen:

This irrevocable Notice of Borrowing is delivered to you pursuant to Section 2.2
of the Multidraw Term Loan Agreement dated as of October 17, 2016 (the “Loan
Agreement”), among PetroQuest Energy, L.L.C., a Louisiana limited liability
company, as borrower (the “Borrower”), PetroQuest Energy, Inc., a Delaware
corporation, the lenders party thereto and Wells Fargo Bank, National
Association, as administrative agent. Capitalized terms used herein and not
otherwise defined have the meanings set forth for such terms in the Loan
Agreement.

1. The Borrower hereby requests that the Lenders make a Term Loan to the
Borrower in the aggregate principal amount of $            .

2. The Borrower hereby requests that such Loan(s) be made on the following
Business Day:             .

3. The Person(s) to whom the proceeds of such Loan(s) are to be disbursed are as
follows:

4. The Borrower has previously delivered the appropriate tax forms with respect
to each Person listed in paragraph 3 above as required by the Loan Agreement.

5. The aggregate principal amount of all Term Loans outstanding as of the date
hereof (including the Term Loan requested herein) does not exceed the maximum
amount permitted to be outstanding pursuant to the terms of the Loan Agreement.

6. All of the conditions applicable to the Term Loan requested herein as set
forth in the Loan Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Term Loan.

(Signature Page Follows)

 

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

Executed and delivered as of the date first above written.

 

PETROQUEST ENERGY, L.L.C. By:  

 

Name:   Title:  

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

EXHIBIT C

Notice of Prepayment

Dated as of:             

Wells Fargo Bank, National Association,

as Administrative Agent

Corporate Trust Services

9062 Old Annapolis Road

Columbia, Maryland 21045

Attention of: Jason Prisco or Lance Yeagle- PetroQuest

Ladies and Gentlemen:

This irrevocable Notice of Prepayment is delivered to you pursuant to
Section 2.4 of the Multidraw Term Loan Agreement dated as of October 17, 2016
(the “Loan Agreement”), among PetroQuest Energy, L.L.C., a Louisiana limited
liability company, as borrower (the “Borrower”), PetroQuest Energy, Inc., a
Delaware corporation, the lenders party thereto and Wells Fargo Bank, National
Association, as administrative agent. Capitalized terms used herein and not
otherwise defined have the meanings set forth for such terms in the Loan
Agreement.

1. The Borrower hereby provides notice to the Administrative Agent that it will
repay Term Loans in the principal amount of $            .

2. The Borrower will repay the above-referenced Term Loans on the following
Business Day:             .

Executed and delivered as of the date first above written.

 

PETROQUEST ENERGY, L.L.C. By:  

 

Name:   Title:  

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

EXHIBIT D

Officer’s Compliance Certificate

Dated as of:             

The undersigned, on behalf of PetroQuest Energy, Inc., a Delaware corporation
(the “Parent”), hereby certifies to the Administrative Agent and the Lenders,
each as defined in the Loan Agreement referred to below, as follows:

1. This certificate is delivered to you pursuant to Section 6.1(C) of the
Multidraw Term Loan Agreement dated as of October 17, 2016 (the “Loan
Agreement”), among PetroQuest Energy, L.L.C., a Louisiana limited liability
company, as borrower (the “Borrower”), the Parent, the lenders party thereto and
Wells Fargo Bank, National Association, as administrative agent. Capitalized
terms used herein and not otherwise defined have the meanings set forth for such
terms in the Loan Agreement.

2. I have reviewed the financial statements of the Parent and its subsidiaries
dated as of             and for the             period[s] then ended and such
statements fairly present in all material respects the financial condition of
the Parent and its subsidiaries as of the dates indicated and the results of
their operations and cash flows for the period[s] indicated.

3. I have reviewed the terms of the Loan Agreement, and the related Loan
Documents and have made, or caused to be made under my supervision, a review in
reasonable detail of the transactions and the condition of the Parent, the
Borrower and their respective Subsidiaries during the accounting period covered
by the financial statements referred to in Paragraph 2 above. Such review has
not disclosed the existence during or at the end of such accounting period of
any condition or event that constitutes a Default or an Event of Default, nor do
I have any knowledge of the existence of any such condition or event as at the
date of this certificate [except, if such condition or event existed or exists,
describe the nature and period of existence thereof and what action the Parent
and the Borrower have taken, are taking and propose to take with respect
thereto].

4. As of the date of this certificate, the Borrower is in compliance with the
financial covenant set forth in Section 7.1 of the Loan Agreement as shown on
Schedule 1.

5. As of the date of this certificate, the Borrower is in compliance with the
covenants set forth in Section 6.14(A) of the Loan Agreement as shown on
Schedule 2.

6. As of the date of this certificate, the Parent and the Borrower are in
compliance with the other covenants and restrictions contained in the Loan
Agreement.

(Signature Page Follows)

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

Executed and delivered as of the date first above written.

 

PETROQUEST ENERGY, INC. By:  

 

Name:   Title:  

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

Schedule 1 to Officer’s Compliance Certificate

For the Quarter/Year ended             (the “Statement Date”)

 

(a)    Present value, discounted at 10% per annum, of the estimated future net
revenues in respect of all Oil and Gas Properties of the Parent and its
Subsidiaries, before any state, federal, foreign or other income taxes,
attributable to Proved Developed Reserves, using Strip Prices in effect on the
Statement Date, including oil and gas Swap Agreements in place on the Statement
Date:    $                      (b)    Sum of the aggregate outstanding
principal amount of the Term Loans plus the then outstanding Term Loan
Commitments as of the Statement Date:    $                      (c)    Ratio of
(a) to (b):                 to 1.0 Schedule 2 to Officer’s Compliance
Certificate For the Quarter/Year ended on the Statement Date (a)    Total value
of the Oil and Gas Properties evaluated in the most recently completed Reserve
Report after giving effect to exploration and production activities,
acquisitions, dispositions and production:    $                      (b)   
Threshold Amount of (a):    $                      (c)    Total value of the Oil
and Gas Properties evaluated in the most recently completed Reserve Report that
are Mortgaged Properties:    $                     

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

EXHIBIT E

Assignment and Assumption

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [INSERT
NAME OF ASSIGNOR] (the “Assignor”) and the parties identified on the Schedules
hereto and [the] [each]1 Assignee identified on the Schedules hereto as
“Assignee” or as “Assignees” (collectively, the “Assignees” and each, an
“Assignee”). [It is understood and agreed that the rights and obligations of the
Assignees2 hereunder are several and not joint.]3 Capitalized terms used but not
defined herein shall have the meanings given to them in the Loan Agreement
identified below (the “Loan Agreement”), receipt of a copy of which is hereby
acknowledged by [the] [each] Assignee. The Standard Terms and Conditions set
forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the [Assignee] [respective Assignees], and [the] [each] Assignee hereby
irrevocably purchases and assumes from the Assignor, subject to and in
accordance with the Standard Terms and Conditions and the Loan Agreement, as of
the Effective Date inserted by the Administrative Agent as contemplated below
(i) all of the Assignor’s rights and obligations in its capacity as a Lender
under the Loan Agreement and any other documents or instruments delivered
pursuant thereto to the extent related to the amount and percentage interest
identified below of all of such outstanding rights and obligations of the
Assignor under the respective facilities identified below and (ii) to the extent
permitted to be assigned under Applicable Law, all claims, suits, causes of
action and any other right of the Assignor (in its capacity as a Lender) against
any Person, whether known or unknown, arising under or in connection with the
Loan Agreement, any other documents or instruments delivered pursuant thereto or
the loan transactions governed thereby or in any way based on or related to any
of the foregoing, including contract claims, tort claims, malpractice claims,
statutory claims and all other claims at law or in equity related to the rights
and obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned to [the] [any] Assignee pursuant to clauses
(i) and (ii) above being referred to herein collectively as, [the] [an]
“Assigned Interest”). Each such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.

 

1  For bracketed language here and elsewhere in this form relating to the
Assignee(s), if the assignment is to a single Assignee, choose the first
bracketed language. If the assignment is to multiple Assignees, choose the
second bracketed language.

2  Select as appropriate.

3  Include bracketed language if there are multiple Assignees.

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

1.    Assignor:    [INSERT NAME OF ASSIGNOR] 2.    Assignee(s):    See Schedules
attached hereto 3.    Borrower:    PetroQuest Energy, L.L.C., a Louisiana
limited liability company 4.    Administrative Agent:    Wells Fargo Bank,
National Association, as the administrative agent under the Loan Agreement 5.   
Loan Agreement:    The Multidraw Term Loan Agreement dated as of October 17,
2016 (as amended, restated, supplemented or otherwise modified), among Borrower,
PetroQuest Energy, Inc., a Delaware corporation, the lenders party thereto and
Wells Fargo Bank, National Association, as administrative agent 6.    Assigned
Interest:    See Schedules attached hereto [7.    Trade Date:   
______________]4

[Remainder of Page Intentionally Left Blank]

 

4  To be completed if the Assignor and the Assignees intend that the minimum
assignment amount is to be determined as of the Trade Date.

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

Effective Date:             , 2            [TO BE INSERTED BY THE ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR [NAME OF ASSIGNOR] By:  

 

  Name:   Title:

ASSIGNEES

 

See Schedules attached hereto

 

[Consented to and]5 Accepted: [REQUIRED LENDERS] By  

 

  Title: [Consented to:]6 PETROQUEST ENERGY, L.L.C. By  

 

  Title:

 

5  To be added only if the consent of the Required Lenders is required by the
terms of the Loan Agreement.

6  To be added only if the consent of the Borrower is required by the terms of
the Loan Agreement.

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

SCHEDULE 1

To Assignment and Assumption

By its execution of this Schedule, the Assignee identified on the signature
block below agrees to the terms set forth in the attached Assignment and
Assumption.

Assigned Interests:

 

Facility Assigned

   Aggregate
Amount of
Commitment/
Loans for all
Lenders1      Amount of
Commitment/
Loans Assigned2      Percentage
Assigned of
Commitment/
Loans3      CUSIP Number  

Term Loans

   $         $           %          $         $           %          $         $
          %      

 

[NAME OF ASSIGNEE]4 [and is an Affiliate/Approved Fund of [identify Lender]5]
By:  

 

Title:  

 

1  Amount to be adjusted by the counterparties to take into account any payments
or prepayments made between the Trade Date and the Effective Date.

2  Amount to be adjusted by the counterparties to take into account any payments
or prepayments made between the Trade Date and the Effective Date.

3  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

4  Add additional signature blocks, as needed.

5  Select as appropriate.

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

ANNEX 1

to Assignment and Assumption

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of [the] [the relevant] Assigned Interest, (ii) [the]
[such] Assigned Interest is free and clear of any lien, encumbrance or other
adverse claim, (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and (iv) it is [not] a
Defaulting Lender; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the Loan
Agreement or any other Loan Document, (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Documents or any
collateral thereunder, (iii) the financial condition of the Parent, the
Borrower, any of their respective Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document or (iv) the performance or observance
by the Parent, the Borrower, any of their respective Subsidiaries or Affiliates
or any other Person of any of their respective obligations under any Loan
Document.

1.2. Assignee[s]. [The] [Each] Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Loan Agreement, (ii) it
meets the requirements of an Eligible Assignee under the Loan Agreement (subject
to such consents, if any, as may be required under Section 10.4(B)(iii) of the
Loan Agreement), (iii) from and after the Effective Date, it shall be bound by
the provisions of the Loan Agreement as a Lender thereunder and, to the extent
of [the] [the relevant] Assigned Interest, shall have the obligations of a
Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire
assets of the type represented by the Assigned Interest and either it, or the
Person exercising discretion in making its decision to acquire [the] [such]
Assigned Interest, is experienced in acquiring assets of such type, (v) it has
received a copy of the Loan Agreement, and has received or has been accorded the
opportunity to receive copies of the most recent financial statements delivered
pursuant to Section 6.1 thereof, as applicable, and such other documents and
information as it deems appropriate to make its own credit analysis and decision
to enter into this Assignment and Assumption and to purchase [the] [such]
Assigned Interest, (vi) 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 Assignment and Assumption and to purchase [the]
[such] Assigned Interest, and (vii) attached to the Assignment and Assumption is
any documentation required to be delivered by it pursuant to the terms of the
Loan Agreement, duly completed and executed by [the] [such] Assignee; and
(b) agrees that (i) it will, independently and without reliance upon the
Administrative Agent, [the] [any] Assignor or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, and (ii) it will perform in accordance with their terms all
of the obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.

 

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

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of [the] [each] Assigned Interest (including
payments of principal, interest, fees and other amounts) to [the] [the relevant]
Assignee for all amounts which have accrued both prior to and from and after the
Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.

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

EXHIBIT F-1

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 Multidraw Term Loan Agreement dated as of
October 17, 2016 (the “Loan Agreement”), among PetroQuest Energy, L.L.C., a
Louisiana limited liability company, as borrower (the “Borrower”), PetroQuest
Energy, Inc., a Delaware corporation, the lenders party thereto and Wells Fargo
Bank, National Association, as administrative agent. Capitalized terms used
herein and not otherwise defined have the meanings set forth for such terms in
the Loan Agreement.

Pursuant to the provisions of Section 3.7 of the Loan Agreement, the undersigned
hereby certifies that (a) it is the sole record and beneficial owner of the Term
Loan(s) (as well as any Term Loan Note(s) evidencing such Term Loan(s)) in
respect of which it is providing this certificate, (b) it is not a bank within
the meaning of Section 881(c)(3)(A) of the Code, (c) it is not a 10% shareholder
of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and
(d) it is not a controlled foreign corporation related to the 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. By executing this
certificate, the undersigned agrees that (a) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent and (b) 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.

 

[NAME OF LENDER] By:  

 

  Name:   Title:

Date:             , 20

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

EXHIBIT F-2

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 Multidraw Term Loan Agreement dated as of
October 17, 2016 (the “Loan Agreement”), among PetroQuest Energy, L.L.C., a
Louisiana limited liability company, as borrower (the “Borrower”), PetroQuest
Energy, Inc., a Delaware corporation, the lenders party thereto and Wells Fargo
Bank, National Association, as administrative agent. Capitalized terms used
herein and not otherwise defined have the meanings set forth for such terms in
the Loan Agreement.

Pursuant to the provisions of Section 3.7 of the Loan Agreement, the undersigned
hereby certifies that (a) it is the sole record and beneficial owner of the
participation in respect of which it is providing this certificate, (b) it is
not a bank within the meaning of Section 881(c)(3)(A) of the Code, (c) it is not
a 10% shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of
the Code and (d) it is not a controlled foreign corporation related to the
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. By executing this certificate, the
undersigned agrees that (a) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing and
(b) 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.

 

[NAME OF PARTICIPANT] By:  

 

  Name:   Title:

Date:             , 20

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

EXHIBIT F-3

U.S. Tax Compliance Certificate

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Multidraw Term Loan Agreement dated as of
October 17, 2016 (the “Loan Agreement”), among PetroQuest Energy, L.L.C., a
Louisiana limited liability company, as borrower (the “Borrower”), PetroQuest
Energy, Inc., a Delaware corporation, the lenders party thereto and Wells Fargo
Bank, National Association, as administrative agent. Capitalized terms used
herein and not otherwise defined have the meanings set forth for such terms in
the Loan Agreement.

Pursuant to the provisions of Section 3.7 of the Loan Agreement, the undersigned
hereby certifies that (a) it is the sole record owner of the participation in
respect of which it is providing this certificate, (b) its direct or indirect
partners/members are the sole beneficial owners of such participation, (c) 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, (d) none of its direct or
indirect partners/members is a 10% shareholder of the Borrower within the
meaning of Section 881(c)(3)(B) of the Code and (e) none of its direct or
indirect partners/members is a controlled foreign corporation related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (a) an IRS Form W-8BEN or (b) an
IRS Form W-8IMY accompanied by an IRS Form W-8BEN 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 (i) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender and (ii) 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.

 

[NAME OF PARTICIPANT] By:  

 

  Name:   Title:

Date:             , 20

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

EXHIBIT F-4

U.S. Tax Compliance Certificate

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Multidraw Term Loan Agreement dated as of
October 17, 2016 (the “Loan Agreement”), among PetroQuest Energy, L.L.C., a
Louisiana limited liability company, as borrower (the “Borrower”), PetroQuest
Energy, Inc., a Delaware corporation, the lenders party thereto and Wells Fargo
Bank, National Association, as administrative agent. Capitalized terms used
herein and not otherwise defined have the meanings set forth for such terms in
the Loan Agreement.

Pursuant to the provisions of Section 3.7 of the Loan Agreement, the undersigned
hereby certifies that (a) it is the sole record owner of the Term Loan(s) (as
well as any Term Loan Note(s) evidencing such Term Loan(s)) in respect of which
it is providing this certificate, (b) its direct or indirect partners/members
are the sole beneficial owners of such Term Loan(s) (as well as any Term Loan
Note(s) evidencing such Term Loan(s)), (c) with respect to the extension of
credit pursuant to this Loan 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, (d) none of its direct or indirect partners/members is a 10%
shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the
Code and (e) none of its direct or indirect partners/members is a controlled
foreign corporation related to the Borrower as described in Section 881(c)(3)(C)
of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-8IMY accompanied by one of the following forms from each of its
partners/members that is claiming the portfolio interest exemption: (a) an IRS
Form W-8BEN or (b) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN 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
(i) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent and (ii) 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.

 

[NAME OF LENDER] By:  

 

  Name:   Title:

Date:             , 20