Execution Version

 

CREDIT AGREEMENT

 

DATED AS OF

NOVEMBER 20, 2012

 

AMONG

 

EMERALD OIL, INC.,

AS BORROWER,

 

WELLS FARGO BANK, N.A.,

AS ADMINISTRATIVE AGENT,

 

AND

 

THE LENDERS PARTY HERETO

 

SOLE LEAD ARRANGER AND SOLE BOOK RUNNER

WELLS FARGO SECURITIES LLC

 

 

 

 

Execution Version

 

Table of Contents

 

    Page       ARTICLE I Definitions and Accounting Matters       Section 1.01.
Terms Defined Above 1       Section 1.02. Certain Defined Terms 1       Section
1.03. Types of Loans and Borrowings 21       Section 1.04. Terms Generally;
Rules of Construction 21       Section 1.05. Accounting Terms and
Determinations; GAAP 21       ARTICLE II The Credits       Section 2.01.
Commitments 21       Section 2.02. Loans and Borrowings 22       Section 2.03.
Requests for Borrowings 22       Section 2.04. Interest Elections 23      
Section 2.05. Funding of Borrowings 24       Section 2.06. Termination and
Reduction of Aggregate Maximum Credit Amounts 25       Section 2.07. Borrowing
Base 26       Section 2.08. Letters of Credit 28       Section 2.09. Cash
Collateral 32       Section 2.10. Defaulting Lenders 33       ARTICLE III
Payments of Principal and Interest; Prepayments; Fees       Section 3.01.
Repayment of Loans 35       Section 3.02. Interest 35       Section 3.03.
Alternate Rate of Interest 36       Section 3.04. Prepayments 37       Section
3.05. Fees 38       ARTICLE IV Payments; Pro Rata Treatment; Sharing of Set-offs
      Section 4.01. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
39

 

 

 

 

Section 4.02. Presumption of Payment by the Borrower 40       Section 4.03.
Certain Deductions by the Administrative Agent 41       Section 4.04.
Disposition of Proceeds 41       ARTICLE V Increased Costs; Break Funding
Payments; Taxes       Section 5.01. Increased Costs 41       Section 5.02. Break
Funding Payments 42       Section 5.03. Taxes 43       Section 5.04. Designation
of Different Lending Office 46       Section 5.05. Replacement of Lenders 47    
  Section 5.06. Illegality 47       ARTICLE VI Conditions Precedent      
Section 6.01. Effective Date 47       Section 6.02. Each Credit Event 50      
ARTICLE VII Representations and Warranties       Section 7.01. Organization;
Powers 50       Section 7.02. Authority; Enforceability 50       Section 7.03.
Approvals; No Conflicts 51       Section 7.04. Financial Condition; No Material
Adverse Change 51       Section 7.05. Litigation 51       Section 7.06.
Environmental Matters 52       Section 7.07. Compliance with the Laws and
Agreements; No Defaults 53       Section 7.08. Investment Company Act 53      
Section 7.09. Taxes 53       Section 7.10. ERISA 53       Section 7.11.
Disclosure; No Material Misstatements 54       Section 7.12. Insurance 54      
Section 7.13. Restriction on Liens 54       Section 7.14. Subsidiaries 55      
Section 7.15. Foreign Operations 55

 

ii

 

 

Section 7.16. Location of Business and Offices 55       Section 7.17.
Properties; Titles, Etc. 55       Section 7.18. Maintenance of Properties 56    
  Section 7.19. Gas Imbalances 56       Section 7.20. Marketing of Production 56
      Section 7.21. Security Documents 57       Section 7.22. Swap Agreements 57
      Section 7.23. Use of Loans and Letters of Credit 57       Section 7.24.
Solvency 57       Section 7.25. OFAC 57       Section 7.26. Anti-Terrorism Laws
57       ARTICLE VIII Affirmative Covenants       Section 8.01. Financial
Statements; Other Information 58       Section 8.02. Notices of Material Events
61       Section 8.03. Existence; Conduct of Business 61       Section 8.04.
Payment of Obligations 61       Section 8.05. Performance of Obligations under
Loan Documents 61       Section 8.06. Operation and Maintenance of Properties 61
      Section 8.07. Insurance 62       Section 8.08. Books and Records;
Inspection Rights 62       Section 8.09. Compliance with Laws 63       Section
8.10. Environmental Matters 63       Section 8.11. Further Assurances 63      
Section 8.12. Reserve Reports 64       Section 8.13. Title Information 65      
Section 8.14. Additional Collateral; Additional Guarantors 65       Section
8.15. ERISA Compliance 66       Section 8.16. Marketing Activities 67      
Section 8.17. Preferred Stock 67       ARTICLE IX Negative Covenants      
Section 9.01. Financial Covenants 67

 

iii

 

 

Section 9.02. Debt 68       Section 9.03. Liens 68       Section 9.04.
Dividends, Distributions and Redemptions 68       Section 9.05. Investments,
Loans and Advances 69       Section 9.06. Nature of Business; No International
Operations 70       Section 9.07. Limitation on Leases 70       Section 9.08.
Proceeds of Notes 70       Section 9.09. ERISA Compliance 70       Section 9.10.
Sale or Discount of Receivables 71       Section 9.11. Mergers, Etc 71      
Section 9.12. Sale of Properties and Termination of Hedging Transactions 71    
  Section 9.13. Sales and Leasebacks 72       Section 9.14. Environmental
Matters 72       Section 9.15. Transactions with Affiliates 72       Section
9.16. Subsidiaries 72       Section 9.17. Negative Pledge Agreements; Dividend
Restrictions 73       Section 9.18. Take-or-Pay or Other Prepayments 73      
Section 9.19. Swap Agreements 73       Section 9.20. Anti-Terrorism Laws 74    
  ARTICLE X Events of Default; Remedies       Section 10.01. Events of Default
74       Section 10.02. Remedies 76       ARTICLE XI The AgentS       Section
11.01. Appointment; Powers 77       Section 11.02. Duties and Obligations of
Administrative Agent 77       Section 11.03. Action by Administrative Agent 78  
    Section 11.04. Reliance by Administrative Agent 78       Section 11.05.
Subagents 79       Section 11.06. Resignation of Administrative Agent 79      
Section 11.07. Agents as Lenders 79       Section 11.08. No Reliance 79

 

iv

 

 

Section 11.09. Administrative Agent May File Proofs of Claim 80       Section
11.10. Authority of Administrative Agent to Release Collateral and Liens 80    
  Section 11.11. Duties of any Arranger or Agent 80       ARTICLE XII
Miscellaneous       Section 12.01. Notices 81       Section 12.02. Waivers;
Amendments 81       Section 12.03. Expenses, Indemnity; Damage Waiver 83      
Section 12.04. Successors and Assigns 85       Section 12.05. Survival; Revival;
Reinstatement 88       Section 12.06. Counterparts; Integration; Effectiveness
89       Section 12.07. Severability 89       Section 12.08. Right of Setoff 89
      Section 12.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
90       Section 12.10. Headings 91       Section 12.11. Confidentiality 91    
  Section 12.12. Interest Rate Limitation 92       Section 12.13. Collateral
Matters; Swap Agreements 92       Section 12.14. No Third Party Beneficiaries 92
      Section 12.15. EXCULPATION PROVISIONS 93       Section 12.16. USA Patriot
Act Notice 93       Section 12.17. Flood Insurance Provisions 93

 

v

 

 

ANNEXES, EXHIBITS AND SCHEDULES

 

Annex I List of Maximum Credit Amounts       Exhibit A   Form of Note Exhibit B
  Form of Borrowing Request Exhibit C   Form of Interest Election Request
Exhibit D   Form of Compliance Certificate Exhibit E   Security Instruments
Exhibit F   Form of Assignment and Assumption Exhibit G-1   Form of U.S. Tax
Compliance Certificate     (Non-U.S. Lenders; non-partnerships) Exhibit G-2  
Form of U.S. Tax Compliance Certificate     (Foreign Participants;
non-partnerships) Exhibit G-3   Form of U.S. Tax Compliance Certificate    
(Foreign Participants; partnerships) Exhibit G-4   Form of U.S. Tax Compliance
Certificate     (Non-U.S. Lenders; partnerships)       Schedule 7.05  
Litigation Schedule 7.06   Environmental Matters Schedule 7.12   Insurance
Schedule 7.14   Subsidiaries Schedule 7.19   Gas Imbalances Schedule 7.20  
Marketing Contracts Schedule 7.22   Swap Agreements Schedule 9.02   Existing
Debt Schedule 9.03   Existing Liens Schedule 9.05   Investments

 

vi

 

 

THIS CREDIT AGREEMENT dated as of November 20, 2012, is among Emerald Oil, Inc.,
a Montana corporation (the “Borrower”), each of the Lenders from time to time
party hereto, Wells Fargo Bank, N.A. (in its individual capacity, “WF”), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”).

 

RECITALS

 

A.           The Borrower has requested that the Lenders provide certain loans
to and extensions of credit on behalf of the Borrower.

 

B.           The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.

 

C.           In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:

 

ARTICLE I

Definitions and Accounting Matters

 

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

 

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

 

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

 

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

 

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

 

“Affected Loans” has the meaning assigned to such term in Section 5.06.

 

“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.

 

“Agents” means, collectively, the Administrative Agent, and any Syndication
Agent or Documentation Agent; and “Agent” shall mean any of the Administrative
Agent, the Syndication Agent or any Documentation Agent, as the context
requires.

 

“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06. As of the Effective Date, the Aggregate Maximum Credit Amounts are
$400,000,000.

 

“Agreement” means this Credit Agreement, including the Schedules and Exhibits
hereto, as the same may be amended, modified, supplemented or restated from time
to time.

 

1

 

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1.0% and (c) the Adjusted LIBO Rate for an
Interest Period of three months on such day (or if such day is not a Business
Day, the immediately preceding Business Day) plus 1.0%. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate shall be effective from and including
the effective date of such change in the Prime Rate, the Federal Funds Effective
Rate or the Adjusted LIBO Rate, respectively.

 

“Anti-Terrorism Laws” has the meaning assigned to such term in Section 7.26.

 

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

 

Borrowing Base Utilization Grid

 

Borrowing Base Utilization Percentage  ABR Loans   Eurodollar Loans  
Commitment Fee Rate  < 25%   0.75%   1.75%   0.375% >25% and <50%   1.00% 
 2.00%   0.375% >50% and <75%   1.25%   2.25%   0.50% >75% and <90%   1.50% 
 2.50%   0.50% >90%   1.75%   2.75%   0.50%

 

With respect to the Loans, each change in the Applicable Margin and Commitment
Fee Rate shall apply during the period commencing on the effective date of such
change in the Borrowing Base Utilization Percentage and ending on the date
immediately preceding the effective date of the next such change, provided,
however, that if at any time the Borrower fails to deliver a Reserve Report
pursuant to Section 8.12(a), then the “Applicable Margin” and “Commitment Fee
Rate” shall mean the rate per annum set forth on the grid when the Borrowing
Base Utilization Percentage is at its highest level for the period beginning on
the date such Reserve Report should have been delivered until the date it is
actually delivered to the Administrative Agent.

 

“Applicable Percentage” means, with respect to any Lender at any time, the
percentage of the Aggregate Maximum Credit Amounts represented by such Lender’s
Maximum Credit Amount as such percentage is set forth on Annex I; provided that,
in the case of Section 2.10, when a Defaulting Lender shall exist, “Applicable
Percentage” shall mean the percentage of the Aggregate Maximum Credit Amounts
disregarding any Defaulting Lender’s Maximum Credit Amount represented by such
Lender’s Maximum Credit Amount.

 

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender or (b)
any other Person whose long term senior unsecured debt rating at the time a
particular Swap Agreement transaction is entered into is A or A2 by S&P or
Moody’s (or their equivalent), respectively, or higher.

 

2

 

 

“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.
and (b) any other independent petroleum engineers reasonably acceptable to the
Administrative Agent.

 

“Arranger” means Wells Fargo Securities, LLC, in its capacity as the sole lead
arranger and sole bookrunner hereunder.

 

“Assignee” has the meaning assigned to such term in Section 12.04(b).

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(b)), and accepted by the Administrative Agent, in the form of
Exhibit F or any other form approved by the Administrative Agent.

 

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

 

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

 

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

 

“Borrowing Base” means, at any time, an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 2.07(b), Section 2.07(c), Section 8.13(c) or Section
9.12(d). The Borrowing Base on the Effective Date shall be the amount set forth
in Section 2.07(a).

 

“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit
Exposures exceeds the Borrowing Base then in effect; provided, that, for
purposes of determining the existence and amount of any Borrowing Base
Deficiency, obligations under any Letter of Credit will not be deemed to be
outstanding to the extent such obligations are Cash Collateralized.

 

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

 

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

 

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

 

“Cash Collateralize” means, to pledge and deposit with or deliver to the
Administrative Agent (in a manner reasonably satisfactory to the Administrative
Agent, which may require such deposit to be made into a controlled account), for
the benefit of any Issuing Bank or the Lenders, as collateral for LC Exposure or
obligations of the Lenders to fund participations in respect of LC Exposure,
cash or deposit account balances or, if the Administrative Agent and each
Issuing Bank shall agree, in their sole discretion, other credit support, in
each case pursuant to documentation in form and substance satisfactory to the
Administrative Agent and each Issuing Bank. “Cash Collateral” shall have a
meaning correlative to the foregoing and shall include the proceeds of such Cash
Collateral and other credit support.

 

3

 

 

“Cash Management Agreement” means any agreement to provide cash management
services, including treasury, depository, overdraft, credit or debit card,
electronic funds transfer and other cash management services.

 

“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of any Loan Party having a fair market value
in excess of $1,000,000.

 

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof), of Equity Interests representing
more than 35% of the ordinary voting power represented by the issued and
outstanding Equity Interests of the Borrower (determined on a fully diluted
basis), or (b) the board of directors of the Borrower shall cease to consist of
a majority of Continuing Directors.

 

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

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

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

 

“Commitment Fee Rate” means the rate per annum set forth in the definition of
“Applicable Margin”.

 

“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.

 

4

 

 

“Consolidated Net Income” means with respect to the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and the Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in cash during such period by such other Person to
the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the net
income (but not loss) during such period of any Consolidated Subsidiary to the
extent that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary or is
otherwise restricted or prohibited, in each case determined in accordance with
GAAP; (c) the net income (or loss) of any Person acquired in a pooling of
interests transaction for any period prior to the date of such transaction; (d)
any extraordinary non-cash gains or losses during such period; (e) non-cash
gains or losses under FASB ASC Topic 815 resulting from the net change in mark
to market portfolio of commodity price risk management activities during that
period; and (f) any gains or losses attributable to writeups or writedowns of
assets, including ceiling test writedowns, provided that if such non-cash
expense subsequently becomes a cash expense, it will be included in the period
during which it became a cash expense; provided that for the purposes of
calculating Consolidated Net Income for any period of four consecutive fiscal
quarters (or less in the case of any period during which the calculation of
EBITDAX is being annualized for purposes of the financial covenant calculations
in Section 9.01) (each, a “Reference Period”), if during such Reference Period
(or, in the case of pro forma calculations, during the period from the last day
of such Reference Period to and including the date as of which such calculation
is made) the Borrower or any Consolidated Subsidiary shall have made a
disposition or acquisition, Consolidated Net Income for such Reference Period
shall be calculated after giving pro forma effect thereto as if such disposition
or acquisition by the Borrower or its Consolidated Subsidiaries occurred on the
first day of such Reference Period (with the Reference Period for the purposes
of pro forma calculations being the most recent period of four consecutive
fiscal quarters for which the relevant financial information is available).

 

“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now
existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.

 

“Continuing Director” means the directors of the Borrower on the Effective Date
and each other director if such other director’s election to the Borrower’s
board of directors was approved by, or whose nomination for election by the
Borrower’s shareholders was recommended by, a vote of at least a majority of the
directors then still in office who either were directors on the Effective Date
or whose election or nomination for election was so previously approved or
recommended.

 

“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
purposes of this definition, a Person shall be deemed to be “Controlled by” a
Person if such Person possesses, directly or indirectly, power to vote 10% or
more of the Equity Interests having ordinary voting power for the election of
directors, managers or the similar governing body of such Person. “Controlling”
and “Controlled” have meanings correlative thereto.

 

“Credit Party” means the Administrative Agent, any Issuing Bank or any other
Lender.

 

5

 

 

“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services
(excluding accounts payable 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 ninety (90) days past the date of invoice or delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP); (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 law or by a
Governmental Requirement but only to the extent of such liability; (l)
Disqualified Capital Stock; (m) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment; and (n) that portion of the Preferred Stock
required by GAAP (as in effect on the Effective Date) to be classified as debt
on the balance sheet of the Borrower. The Debt of any Person shall include all
obligations of such Person of the character described above to the extent such
Person remains legally liable in respect thereof notwithstanding that any such
obligation is not included as a liability of such Person under GAAP.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America,
and all other liquidation, conservatorship, bankruptcy, assignment for the
benefit of creditors, moratorium, fraudulent conveyance, fraudulent transfer,
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 event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Defaulting Lender” means, subject to Section 2.10, any Lender that (a) has
failed to (i) fund all or any portion of the Loans or participations in Letters
of Credit required to be funded by it hereunder within two Business Days of the
date such Loans or participations 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, any Issuing
Bank or any other Lender any other amount required to be paid by it hereunder
(including in respect of its participation in Letters of Credit) within two
Business Days of the date when due, (b) has notified the Borrower, the
Administrative Agent or any Issuing Bank 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 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, shall be 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 shall cease to be a Defaulting Lender pursuant to
this clause (c) upon receipt of such written confirmation from an authorized
officer of such Lender 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, or (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; provided that a Lender shall not be 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, repudiate, disavow or
disaffirm any contracts or agreements made with such Lender. Any determination
by the Administrative Agent that a Lender is a Defaulting Lender under clauses
(a) through (d) above shall be conclusive and binding absent manifest error, and
such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.10)
upon delivery of written notice of such determination to the Borrower, any
Issuing Bank and each Lender.

 

6

 

 

“Deficiency Notification Date” has the meaning assigned to such term in Section
3.04(c)(ii).

 

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

 

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

 

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

 

“EBITDAX” means, for any period (without duplication), the sum of Consolidated
Net Income for such period plus the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: interest (including
amortization of original issue discount and the interest component of any
deferred payment obligations and Capital Leases), income taxes, depreciation,
depletion, amortization (including amortization of goodwill and debt issuance
costs), exploration expenses and other similar noncash charges (including
noncash ASC 360, ASC 410 and ASC 815 charges), minus all noncash income
(including noncash ASC 815 income) added to Consolidated Net Income.

 

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

 

“Engineering Reports” has the meaning assigned to such term in Section
2.07(c)(i).

 

“Environmental Laws” means any and all Governmental Requirements 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 jurisdiction in which the Borrower or any
Loan Party is conducting, or at any time, has conducted business, or where any
Property of the Borrower or any Loan Party is located, including the Oil
Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980
(“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous
Materials Transportation Act, as amended, and other environmental conservation
or protection Governmental Requirements.

 

7

 

 

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

 

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

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.

 

“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with any Loan Party would be deemed to be a “single employer”
within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m)
or (o) of section 414 of the Code.

 

“ERISA Event” means (a) a Reportable Event, (b) the withdrawal of the Borrower,
any Loan Party or any ERISA Affiliate from a Plan during a plan year in which it
was a “substantial employer” as defined in section 4001(a)(2) of ERISA, (c) the
filing (or the receipt by any Loan Party or any ERISA Affiliate) of a notice of
intent to terminate a Plan or the treatment of a Plan amendment as a termination
under section 4041 of ERISA, (d) the institution of proceedings to terminate a
Plan by the PBGC, (e) receipt of a notice of withdrawal liability pursuant to
Section 4202 of ERISA, (f) any other event or condition which might constitute
grounds under section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or the incurrence by any Loan Party or any
of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan, including by not limited to the imposition of any
Lien in favor of the PBGC or any Plan, (g) on and after the effectiveness of the
Pension Act, a determination that a Plan is, or is expected to be, in “at risk”
status (as defined in 303(i)(4) of ERISA or 430(i)(4) of the Code) or (h) the
failure of any Loan Party or any ERISA Affiliate to make by its due date a
required installment under Section 430(j) of the Code with respect to any Plan
or any failure by any Plan to satisfy the minimum funding standards (within the
meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such
Plan, whether or not waived.

 

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

 

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

 

8

 

 

“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Loan Party 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
Borrower or any Loan Party to provide collateral to the depository institution;
(f) easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any Property of the Borrower or any Loan Party 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
Loan Party or materially impair the value of such Property subject thereto; (g)
Liens on cash or securities pledged to secure performance of tenders, surety and
appeal bonds, government contracts, performance and return of money bonds, bids,
trade contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business; (h)
judgment and attachment Liens not giving rise to an Event of Default, provided
that any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall not have expired and no
action to enforce such Lien has been commenced; and (i) minor defects and
irregularities in title to any Oil and Gas Property that in the aggregate do not
materially impair the use of such Property by the Borrower or any Loan Party or
materially impair the value of such Property; provided, further that Liens
described in clauses (a) through (e) and (i) shall remain “Excepted Liens” only
for so long as no action to enforce such Lien has been commenced, and no
intention to subordinate the first priority Lien granted in favor of the
Administrative Agent and the Lenders is to be hereby implied or expressed by the
permitted existence of such Excepted Liens.

 

9

 

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Credit Party or required to be withheld or deducted from a payment to a Credit
Party, (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 Credit Party 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 Loan or Commitment pursuant
to a law in effect on the date on which (i) such Lender acquires such interest
in the Loan or Commitment (other than pursuant to an assignment request by the
Borrower under Section 5.05) or (ii) such Lender changes its lending office,
except in each case to the extent that, pursuant to Section 5.03, amounts with
respect to such Taxes were payable either to such Lender’s assignor immediately
before such Lender acquired the applicable interest in a Loan or Commitment or
to such Lender immediately before it changed its lending office, (c) Taxes
attributable to such Credit Party’s failure to comply with Section 5.03(g), (d)
any U.S. federal withholding Taxes imposed under FATCA and (e) any U.S. federal
backup withholding Taxes.

 

“Executive Order” has the meaning assigned to such term in Section 7.26.

 

“Existing Credit Agreements” means that certain Credit Agreement among the
Borrower, Macquarie Bank Limited and the other lenders party thereto dated as of
February 10, 2012, as amended.

 

“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 agreements entered into
pursuant to Section 1471(b)(1) of the Code.

 

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

 

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

 

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

 

“Financial Statements” means the financial statement or statements referred to
in Section 7.04, including all footnotes attached thereto.

 

“Fixed Charge Coverage Ratio” means, for any period, the ratio of (a)
consolidated EBITDAX of the Borrower and its Subsidiaries for such period to (b)
Fixed Charges for such period.

 

Fixed Charges” means, for any period, the sum (without duplication) of (a)
Interest Expense for such period and (b) Capital Lease expense of the Borrower
and its Subsidiaries for such period.

 

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

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, with
respect to any Issuing Bank, such Defaulting Lender’s Applicable Percentage of
the outstanding LC Exposure other than LC Exposure as to which such Defaulting
Lender’s participation obligation has been reallocated to other Lenders or Cash
Collateralized in accordance with the terms hereof.

 

10

 

 

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.

 

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

 

“Governmental Requirement” means any law (including common law), statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement, whether now or hereinafter in effect, including Environmental Laws,
energy regulations and occupational, safety and health standards or controls, of
any Governmental Authority.

 

“Guarantors” means:

 

(a)          Emerald Oil, Inc., a Delaware corporation;

 

(b)          Emerald WB LLC, a Colorado limited liability company;

 

(c)          Emerald GRB LLC, a Colorado limited liability company;

 

(d)          Emerald TR LLC, a Colorado limited liability company;

 

(e)          Emerald Heath LLC, a Colorado limited liability company; and

 

(f)          each other Guarantor that guarantees the Secured Obligations
pursuant to Section 8.14(b).

 

“Guaranty Agreement” means an agreement executed by the Guarantors in form and
substance reasonably acceptable to the Administrative Agent unconditionally
guarantying on a joint and several basis, payment of the Secured Obligations, as
the same may be amended, modified or supplemented from time to time.

 

“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law 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.

 

“Highest Lawful Rate” means, as to any Lender, at the particular time in
question, the maximum non-usurious rate of interest which, under applicable law,
such Lender is then permitted to contract for, charge or collect from the
Borrower on the Loans or the other obligations of the Borrower hereunder, and as
to any other Person, at the particular time in question, the maximum
non-usurious rate of interest which, under applicable law, such Person is then
permitted to contract for, charge or collect with respect to the obligation in
question. If the maximum rate of interest which, under applicable law, the
Lenders are permitted to contract for, charge or collect from the Borrower on
the Loans or the other obligations of the Borrower hereunder shall change after
the date hereof, the Highest Lawful Rate shall be automatically increased or
decreased, as the case may be, as of the effective time of such change without
notice to the Borrower or any other Person.

 

11

 

 

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

 

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.

 

“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.

 

“Initial Reserve Report” means the report of the Borrower audited by Netherland,
Sewell & Associates, Inc. as of September 10, 2012, with respect to the value of
the Oil and Gas Properties of the Borrower and its Subsidiaries as of June 30,
2012.

 

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

 

“Interest Expense” means, for any period, total cash interest expense (including
that attributable to Capital Leases and cash dividends paid pursuant to the
Preferred Stock Agreement) of the Borrower and its Subsidiaries for such period
with respect to all outstanding Debt of the Borrower and its Subsidiaries
(including all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing and net costs
under Swap Agreements in respect of interest rates to the extent such net costs
are allocable to such period in accordance with GAAP).

 

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

 

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
(or, if available to each Lender, periods of nine or twelve months) thereafter,
as the Borrower may elect; provided, that (a) if any Interest Period would end
on a day other than a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless such next succeeding Business Day would
fall in the next calendar month, in which case such Interest Period shall end on
the next preceding Business Day, (b) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period, (c) no Interest Period may have
a term which would extend beyond the Maturity Date and (d) the Borrower shall
select Interest Periods so as not to require a payment or prepayment of any
Eurodollar Loan during an Interest Period for such Loan. For purposes hereof,
the date of a Borrowing initially shall be the date on which such Borrowing is
made and thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.

 

12

 

 

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

 

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

 

“Investment” means, for any Person: (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, assumption of Debt of, 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 ninety
(90) days representing the purchase price of inventory or supplies sold by such
Person in the ordinary course of business); or (c) the purchase or acquisition
(in one or a series of transactions) of Property of another Person that
constitutes a business unit.

 

“IRS” means the U.S. Internal Revenue Service.

 

“Issuing Bank” means WF and each Lender approved by the Administrative Agent and
reasonably satisfactory to, or requested by, the Borrower that agrees to act as
an issuer of Letters of Credit hereunder, in each case, in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.08(i). Any Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by its Affiliates, in which case
the term “Issuing Bank” shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.

 

“January 1 Reserve Report” has the meaning assigned to such term in Section
8.12(a).

 

“LC Commitment” at any time means Five Million Dollars ($5,000,000.00).

 

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

 

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

 

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

 

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

 

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

 

13

 

 

“LIBO Rate” means, with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum (rounder upwards, if
necessary, to the next 1/100 of 1%) determined on the basis of the rate for
deposits in dollars for a period equal to such Interest Period commencing on the
first day of such Interest Period appearing on the Reuters Screen LIBOR01 Page
as of 11:00 A.M., London time, two Business Days prior to the beginning of such
Interest Period. In the event that such rate does not appear on such page (or
otherwise on such screen), the “LIBO Rate” shall be determined by reference to
such other comparable publicly available service for displaying the Eurodollar
rates as may be selected by the Administrative Agent or, in the absence of such
availability, by reference to the rate at which dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 A.M., London time,
two Business Days prior to the commencement of such Interest Period.

 

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties. The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, each of the Borrower and the other Loan Parties
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, or leases under a financing lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person in a transaction intended to create a financing.

 

“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Agreements, the Letters of Credit and the Security Instruments.

 

“Loan Party” means the Borrower and each Guarantor.

 

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

 

“Majority Lenders” means, at any time while no Loans or LC Exposure are
outstanding, at least two (2) Lenders having greater than fifty percent (50%) of
the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC
Exposure is outstanding, at least two (2) Lenders holding greater than fifty
percent (50%) of the outstanding aggregate principal amount of the Loans or
participation interests in Letters of Credit (without regard to any sale by a
Lender of a participation in any Loan under Section 12.04(c)); provided that the
Maximum Credit Amounts of the Loans and participation interests in Letters of
Credit of the Defaulting Lenders (if any) shall be excluded from the
determination of Majority Lenders.

 

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

 

“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
any Loan Party in an aggregate principal amount exceeding $1,000,000. For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of any Loan Party in respect of any Swap Agreement at any time shall
be the Swap Termination Value.

 

“Maturity Date” means November 20, 2017.

 

14

 

 

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

 

“Minimum Collateral Amount” means, at any time, (i) with respect to Cash
Collateral consisting of cash or deposit account balances, an amount equal to
105% of the Fronting Exposure of all Issuing Banks with respect to Letters of
Credit issued and outstanding at such time and (ii) if the Borrower agrees to
deliver Cash Collateral consisting of property other than cash or deposit
account balances, an amount determined by the Administrative Agent and the
Issuing Bank(s) in their sole discretion.

 

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

 

“Mortgaged Property” means any Property owned by any Loan Party which is subject
to the Liens existing and to exist under the terms of the Security Instruments.

 

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in
section 3(37) or 4001 (a)(3) of ERISA.

 

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

 

“Non-U.S. Lender” means a Lender that is not a U.S. Person.

 

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

 

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
structures, fuel separators, liquid extraction plants, plant compressors, pumps,
pumping units, field gathering systems, tanks and tank batteries, fixtures,
valves, fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers, casing, tubing
and rods, surface leases, rights-of-way, easements and servitudes together with
all additions, substitutions, replacements, accessions and attachments to any
and all of the foregoing.

 

15

 

 

“Organizational Documents” means (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to such corporation’s
jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement;
and (c) with respect to any partnership, joint venture, trust or other form of
business entity, the partnership, joint venture or other applicable agreement of
formation or organization and any agreement, instrument, filing or notice with
respect thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

“Other Connection Taxes” means with respect to any Credit Party, Taxes imposed
as a result of a present or former connection between such Credit Party and the
jurisdiction imposing such Tax (other than connections arising from such Credit
Party 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, 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 5.05).

 

“Participant” has the meaning assigned to such term in Section 12.04(c).

 

“Participant Register” has the meaning assigned to such term in Section
12.04(c).

 

“Patriot Act” has the meaning assigned to such term in Section 12.16.

 

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

 

“Pension Act” means the Pension Protection Act of 2006, as it presently exists
or as it may be amended from time to time, or any successor thereto.

 

“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 a Loan Party 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 a Loan Party or an ERISA Affiliate or to which a Loan Party or an ERISA
Affiliate had any liability.

 

“Preferred Stock” means the shares issued under the Preferred Stock Agreement.

 

“Preferred Stock Agreement” means that certain convertible preferred stock
agreement to be entered into among the Borrower and Arclight Capital Partners,
LLC pursuant to that letter of intent dated as of October 30, 2012 between the
Borrower and Arclight Capital Partners, LLC.

 

16

 

 

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

 

“Prohibited Transaction” has the meaning assigned such term in Section 406 of
ERISA and Section 4975(c) of the Code.

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including cash, securities,
accounts and contract rights.

 

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

 

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

 

“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.

 

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

 

“Register” has the meaning assigned such term in Section 12.04(b)(iv).

 

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

 

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

 

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

 

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

 

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA
or the regulations issued thereunder, with respect to a Pension Plan, other than
those events as to which notice is waived pursuant to DOL Reg. Section 4043 as
in effect on the date hereof (no matter how such notice requirement may be
changed in the future).

 

“Required Lenders” means, at any time while no Loans or LC Exposure is
outstanding, at least two (2) Lenders having at least sixty-six and two thirds
percent (66-2/3%) of the Aggregate Maximum Credit Amounts; and at any time while
any Loans or LC Exposure is outstanding, at least two (2) Lenders holding at
least sixty-six and two thirds percent (66-2/3%) of the outstanding aggregate
principal amount of the Loans or participation interests in Letters of Credit
(without regard to any sale by a Lender of a participation in any Loan under
Section 12.04(c)); provided that the Maximum Credit Amounts of the Loans and
participations interests in Letters of Credit of the Defaulting Lenders (if any)
shall be excluded from the determination of Required Lenders.

 

17

 

 

“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each January 1st or July 1st,
the oil and gas reserves attributable to the Oil and Gas Properties of the
Borrower and the Loan Parties, together with a projection of the rate of
production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date based upon the economic
assumptions consistent with SEC reporting requirements at the time.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Secured Cash Management Agreement” means a Cash Management Agreement between
(a) any Loan Party and (b) a Secured Cash Management Provider.

 

“Secured Cash Management Provider” means, with respect to any Cash Management
Agreement, a Lender, an Affiliate of a Lender, the Administrative Agent or an
Affiliate of the Administrative Agent who is the counterparty to any such Cash
Management Agreement.

 

“Secured Obligations” means any and all amounts owing or to be owing by any Loan
Party to (a) to the Administrative Agent, any Issuing Bank or any Lender under
any Loan Document or (b) to any Secured Swap Provider or Secured Cash Management
Provider and all renewals, extensions and/or rearrangements of any of the
foregoing, in each case, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising) (including interest accruing after the maturity of the Loans
and LC Disbursements and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding).

 

“Secured Swap Agreement” means a Swap Agreement between (a) any Loan Party and
(b) a Secured Swap Provider.

 

18

 

 

“Secured Swap Provider” means, with respect to any Swap Agreement, (a) a Lender
or an Affiliate of a Lender who is the counterparty to any such Swap Agreement
with a Loan Party or (b) any Person who was a Lender or an Affiliate of a Lender
at time when such Person entered into any such Swap Agreement who is a
counterparty to any such Swap Agreement with a Loan Party.

 

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

 

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.

 

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

 

“Subsidiary” means as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer
to a direct or indirect Subsidiary or Subsidiaries of the Borrower.

 

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement, whether exchange
traded, “over-the-counter” or otherwise, involving, or settled by reference to,
one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions; provided that no phantom stock or similar plan providing
for payments only on account of services provided by current or former
directors, officers, employees or consultants of any Loan Party shall be 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), the amount(s) determined as the
mark-to-market value(s) for such Swap Agreements, as determined by the
counterparties to such Swap Agreements.

 

19

 

 

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

 

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

 

“Termination Date” means the earlier of the Maturity Date and the date of
termination of the Commitments.

 

“Total Debt” means, at any date, all Debt (excluding Debt described in clauses
(i), (j) and (m) of such definition) of the Borrower and its Consolidated
Subsidiaries on a consolidated basis (excluding non-cash obligations under ASC
815).

 

“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 Loans, the use of the proceeds thereof
and the issuance of Letters of Credit hereunder, the Borrower’s grant of the
security interests and provision of collateral under the Security Instruments
and Borrower’s grant of Liens on Mortgaged Properties and other Properties
pursuant to the Security Instruments and (b) each other Loan Party, the
execution, delivery and performance by such Loan Party of each Loan Document to
which it is a party, the guaranteeing of the Secured Obligations and the other
obligations under the Guaranty Agreement by such Loan Party and such Loan
Party’s grant of the security interests and provision of collateral under the
Security Instruments, and the grant of Liens by such Guarantor on Mortgaged
Properties and other Properties pursuant to the Security Instruments.

 

“Transferee” means any Assignee or Participant.

 

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

 

“U.S. Person” means a certificate substantially in the form of Exhibit G-1, G-2,
G-3 or G-4.

 

“U.S. Tax Compliance Certificate” has the meaning assigned such term in Section
5.03(g)(ii)(B)(3).

 

“WF” has the meaning assigned to such term in the preamble hereto.

 

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

 

20

 

 

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

 

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

 

Section 1.05.         Accounting Terms and Determinations; GAAP. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Administrative Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the Financial Statements except for changes in which Borrower’s
independent certified public accountants concur and which are disclosed to
Administrative Agent on the next date on which financial statements are required
to be delivered to the Lenders pursuant to Section 8.01(a); provided that,
unless the Borrower and the Majority Lenders shall otherwise agree in writing,
no such change shall modify or affect the manner in which compliance with the
covenants contained herein is computed such that all such computations shall be
conducted utilizing financial information presented consistently with prior
periods. Notwithstanding anything in this Agreement or any other Loan Document
to the contrary, for the purposes of calculating compliance with any covenant in
this Agreement or any other Loan Document, no effect shall be given to any
change in GAAP arising out of a change described in the Proposed Accounting
Standards Update to Leases (Topic 840) dated August 17, 2010 or a substantially
similar pronouncement.

 

ARTICLE II

The Credits

 

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

 

21

 

 

 

Section 2.02.         Loans and Borrowings.

 

(a)  Borrowings; Several Obligations.  Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.

 

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

 

(c)  Minimum Amounts; Limitation on Number of Borrowings.  At the commencement
of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in
an aggregate amount that is an integral multiple of $1,000,000 and not less than
$5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be
in an aggregate amount that is an integral multiple of $1,000,000 and not less
than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.08(e). Borrowings of more than one Type may be outstanding at the same
time, provided that there shall not at any time be more than a total of five (5)
Eurodollar Borrowings outstanding. Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.

 

(d)  Notes.  If a Lender shall make a written request to the Administrative
Agent and the Borrower to have its Loans evidenced by a promissory note, then
the Borrower shall execute and deliver a single promissory note of the Borrower
in substantially the form of Exhibit A, payable to such Lender in a principal
amount equal to its Maximum Credit Amount as then in effect, and otherwise duly
completed. The date, amount, Type, interest rate and, if applicable, Interest
Period of each Loan made by each Lender, and all payments made on account of the
principal thereof, may be recorded by such Lender on its books for its Note,
and, prior to any transfer, may be endorsed by such Lender on a schedule
attached to such Note or any continuation thereof or on any separate record
maintained by such Lender; provided that the failure to make any such notation
or to attach a schedule shall not affect any Lender’s or the Borrower’s rights
or obligations in respect of such Loans or affect the validity of such transfer
by any Lender of its Note.

 

Section 2.03.         Requests for Borrowings. To request a Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone or
electronic communication approved by the Administrative Agent (a) in the case of
a Eurodollar Borrowing, not later than 12:00 noon, Denver, Colorado time, three
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 10:00 a.m., Denver, Colorado time, on the date of
the proposed Borrowing; provided that no such notice shall be required for any
deemed request of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as provided in Section 2.08(e). Each such telephonic (or electronic
communication approved by the Administrative Agent) Borrowing Request shall be
irrevocable and must be confirmed promptly by hand delivery, facsimile or e-mail
to the Administrative Agent of a written Borrowing Request in substantially the
form of Exhibit B and signed by the Borrower. Each such telephonic and written
Borrowing Request shall specify the following information in compliance with
Section 2.02:

 

22

 

 

(i)          the aggregate amount of the requested Borrowing;

 

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

 

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

 

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

 

(v)         the amount of the then effective Borrowing Base, the current total
Revolving Credit Exposures (without regard to the requested Borrowing), and the
pro forma total Revolving Credit Exposures (giving effect to the requested
Borrowing); and

 

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

 

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

 

Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

 

Section 2.04.         Interest Elections.

 

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

 

(b)  Interest Election Requests.  To make an election pursuant to this Section
2.04, the Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if the Borrower were requesting a Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed promptly
by hand delivery, facsimile or e-mail to the Administrative Agent of a written
Interest Election Request in substantially the form of Exhibit C and signed by
the Borrower.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)  Effect of Failure to Deliver Timely Interest Election Request and Events of
Default and Borrowing Base Deficiencies on Interest Election. If the Borrower
fails to deliver a timely Interest Election Request with respect to a Eurodollar
Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest
Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding
any contrary provision hereof, if an Event of Default or a Borrowing Base
Deficiency has occurred and is continuing: (i) no outstanding Borrowing may be
converted to or continued as a Eurodollar Borrowing (and any Interest Election
Request that requests the conversion of any Borrowing to, or continuation of any
Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless
repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the
end of the Interest Period applicable thereto.

 

Section 2.05.         Funding of Borrowings.

 

(a)  Funding by Lenders. Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 10:00 a.m., Denver, Colorado time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower designated by the Borrower in the applicable Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.08(e) shall be remitted by the Administrative Agent to
the applicable Issuing Bank. Nothing herein shall be deemed to obligate any
Lender to obtain the funds for its Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for its Loan in any particular place or manner.

 

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

 

Section 2.06.         Termination and Reduction of Aggregate Maximum Credit
Amounts.

 

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

 

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

 

(i)          The Borrower may at any time terminate, or from time to time
reduce, the Aggregate Maximum Credit Amounts; provided that (A) each reduction
of the Aggregate Maximum Credit Amounts shall be in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000 and (B) the
Borrower shall not terminate or reduce the Aggregate Maximum Credit Amounts if,
after giving effect to any concurrent prepayment of the Loans in accordance with
Section 3.04, the total Revolving Credit Exposures would exceed the total
Commitments.

 

(ii)         The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Aggregate Maximum Credit Amounts under Section
2.06(b)(i) at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided
that a notice of termination of the Aggregate Maximum Credit Amounts delivered
by the Borrower may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied. Any termination or reduction
of the Aggregate Maximum Credit Amounts shall be permanent and may not be
reinstated. Each reduction of the Aggregate Maximum Credit Amounts pursuant to
this Section 2.06(b)(ii) shall be made ratably among the Lenders in accordance
with each Lender’s Applicable Percentage.

 

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Section 2.07.         Borrowing Base.

 

(a)  Initial Borrowing Base. For the period from and including the Effective
Date to but excluding the first Redetermination Date, the amount of the
Borrowing Base shall be $27,500,000. Following the first Redetermination Date,
the Borrowing Base shall be determined pursuant to this Section 2.07.
Notwithstanding the foregoing, the Borrowing Base may be subject to further
adjustments from time to time pursuant to Section 2.07(b), Section 2.07(c),
Section 8.13(c) or Section 9.12(d).

 

(b)  Scheduled and Interim Redeterminations. The Borrowing Base shall be
redetermined semi-annually in accordance with this Section 2.07 (such
redeterminations, a “Scheduled Redetermination”), and, subject to Section
2.07(d), such redetermined Borrowing Base shall become effective and applicable
to the Borrower, the Agents, the Issuing Bank(s) and the Lenders on April 1st
and October 1st of each year commencing April 1, 2013. In addition, the Borrower
may, by notifying the Administrative Agent thereof, and the Administrative Agent
may, at the direction of the Required Lenders, by notifying the Borrower
thereof, each elect to cause the Borrowing Base to be redetermined (an “Interim
Redetermination”) (i) one time during each 6 month period occurring between any
Scheduled Redeterminations and (ii) one additional time during any 12 month
period, each in accordance with this Section 2.07.

 

(c)  Scheduled and Interim Redetermination Procedure.

 

(i)          Each Scheduled Redetermination and each Interim Redetermination
shall be effectuated as follows: upon receipt by the Administrative Agent of (A)
the Reserve Report and the certificate required to be delivered by the Borrower
to the Administrative Agent, in the case of a Scheduled Redetermination,
pursuant to Section 8.12(a) and (c), and, in the case of an Interim
Redetermination, pursuant to Sections 8.12(b) and (c), and (B) such other
reports, data and supplemental information, including the information provided
pursuant to Section 8.12(c), as may, from time to time, be reasonably requested
by the Administrative Agent or the Majority Lenders (the Reserve Report, such
certificate and such other reports, data and supplemental information being the
“Engineering Reports”), the Administrative Agent shall evaluate the information
contained in the Engineering Reports and shall, in good faith and in its sole
discretion, propose a new Borrowing Base (the “Proposed Borrowing Base”) based
upon such information and such other information (including the status of title
information with respect to the Oil and Gas Properties as described in the
Engineering Reports and the existence of any other Debt) as the Administrative
Agent deems appropriate in its sole discretion and consistent with its customary
oil and gas lending criteria as it exists at the particular time. In no event
shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amounts.

 

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

 

(A)         in the case of a Scheduled Redetermination (1) if the Administrative
Agent shall have received the Engineering Reports required to be delivered by
the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete
manner, then on or about March 15th or September 15th, as the case may be, of
such year following the date of delivery or (2) if the Administrative Agent
shall not have received the Engineering Reports required to be delivered by the
Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then promptly after the Administrative Agent has received complete Engineering
Reports from the Borrower and has had a reasonable opportunity to determine the
Proposed Borrowing Base in accordance with Section 2.07(c)(i); and

 

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(B)         in the case of an Interim Redetermination, promptly, and in any
event, before or on or about the fifteenth (15th) day after the Administrative
Agent has received the required Engineering Reports.

 

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

 

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

 

(i)          in the case of a Scheduled Redetermination, (A) if the
Administrative Agent shall have received the Engineering Reports required to be
delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and
complete manner, then on the April 1st or October 1st, as applicable, following
such notice, or (B) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then on the Business Day next
succeeding delivery of such notice; and

 

(ii)         in the case of an Interim Redetermination, on the Business Day next
succeeding delivery of such notice.

 

(e)  Potential Adjustment of Borrowing Base Upon Termination of Swap Agreements.
If the Borrower or any of its Subsidiaries shall terminate or create any
off-setting positions which have the economic effect of terminating any Swap
Agreements (regardless of how evidenced) upon which the Lenders relied in
determining the Borrowing Base, and which would affect the Borrowing Base in an
amount greater than 5% of the then current Borrowing Base (after giving effect
to any replacement Swap Agreements), then, within 10 Business Days of such
termination, the Borrowing Base shall be adjusted in an amount determined by the
Administrative Agent equal to the economic value of such Swap Agreements.

 

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Such amount shall then become the Borrowing Base, until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 2.07(c), Section 8.13(c) or
Section 9.12(d), whichever occurs first. Notwithstanding the foregoing, no
Scheduled Redetermination or Interim Redetermination shall become effective
until the New Borrowing Base Notice related thereto is received by the Borrower.

 

Section 2.08.         Letters of Credit.

 

(a)  General. Subject to the terms and conditions set forth herein, the Borrower
may request the issuance of dollar denominated Letters of Credit for its own
account or for the account of any Loan Party, in a form reasonably acceptable to
the Administrative Agent and the applicable Issuing Bank, at any time and from
time to time during the period from the Effective Date until the day which is
ten (10) Business Days prior to the end of the Availability Period; provided
that the Borrower may not request the issuance, amendment, renewal or extension
of Letters of Credit hereunder if a Borrowing Base Deficiency exists at such
time or would exist as a result thereof. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the applicable Issuing Bank
relating to any Letter of Credit, the terms and conditions of this Agreement
shall control.

 

(b)  Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or deliver by facsimile (or transmit by electronic communication, if
arrangements for doing so have been approved by the applicable Issuing Bank) to
the applicable Issuing Bank and the Administrative Agent (not less than five (5)
Business Days in advance of the requested date of issuance, amendment, renewal
or extension) a notice:

 

(i)          requesting the issuance of a Letter of Credit or identifying the
Letter of Credit to be amended, renewed or extended;

 

(ii)         specifying the date of issuance, amendment, renewal or extension
(which shall be a Business Day);

 

(iii)        specifying the date on which such Letter of Credit is to expire
(which shall comply with Section 2.08(c));

 

(iv)        specifying the amount of such Letter of Credit;

 

(v)         specifying the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit; and

 

(vi)        specifying the amount of the then effective Borrowing Base and
whether a Borrowing Base Deficiency exists at such time, the current total
Revolving Credit Exposures (without regard to the requested Letter of Credit or
the requested amendment, renewal or extension of an outstanding Letter of
Credit) and the pro forma total Revolving Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of
an outstanding Letter of Credit).

 

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

 

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

 

(c)  Expiration Date. Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date that is eighteen months after
the date of issuance of such Letter of Credit (or, in the case of any renewal or
extension of a Letter of Credit, eighteen months after such renewal or
extension), in each case unless consented to by the relevant Issuing Lender and
the Administrative Agent, and (ii) the date that is ten (10) Business Days prior
to the Maturity Date.

 

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

 

29

 

 

(e)  Reimbursement. If an Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by
paying to the Administrative Agent an amount equal to such LC Disbursement not
later than 12:00 noon, Denver, Colorado time, on the next Business Day after the
date that such LC Disbursement is made, if the Borrower shall have received
notice of such LC Disbursement prior to 10:00 a.m., Denver, Colorado time, on
the date of such LC Disbursement, or, if such notice has not been received by
the Borrower prior to such time on such date, then not later than 12:00 noon,
Denver, Colorado time, two (2) Business Days after the Borrower receives such
notice; provided that, unless the Borrower has notified the relevant Issuing
Bank and Administrative Agent that it will reimburse such LC Disbursement on the
date when the LC Disbursement is made and makes such reimbursement on the next
Business Day, the Borrower shall, subject to the conditions to Borrowing set
forth herein, be deemed to have requested, and the Borrower does hereby request
under such circumstances, that such payment be financed with an ABR Borrowing in
an equivalent amount and, to the extent so financed, the Borrower’s obligation
to make such payment shall be discharged and replaced by the resulting ABR
Borrowing. If the Borrower fails to make such payment when due, the
Administrative Agent shall notify each Lender of the applicable LC Disbursement,
the payment then due from the Borrower in respect thereof and such Lender’s
Applicable Percentage thereof. Promptly following receipt of such notice, each
Lender shall pay to the Administrative Agent its Applicable Percentage of the
payment then due from the Borrower, in the same manner as provided in Section
2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply,
mutatis mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the applicable Issuing Bank the
amounts so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this Section
2.08(e), the Administrative Agent shall distribute such payment to the
applicable Issuing Bank or, to the extent that Lenders have made payments
pursuant to this Section 2.08(e) to reimburse the applicable Issuing Bank, then
to such Lenders and the Issuing Bank as their interests may appear. Any payment
made by a Lender pursuant to this Section 2.08(e) to reimburse the applicable
Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as
contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.

 

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

 

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(g)  Disbursement Procedures. An Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. An Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by facsimile or
e-mail) of such demand for payment and whether the Issuing Bank has made or will
make an LC Disbursement thereunder; provided that any failure to give or delay
in giving such notice shall not relieve the Borrower of its obligation to
reimburse the applicable Issuing Bank and the Lenders with respect to any such
LC Disbursement.

 

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

 

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

 

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

 

Section 2.09.         Cash Collateral.

 

(a)           At any time that there shall exist a Defaulting Lender, within one
Business Day following the written request of the Administrative Agent or an
Issuing Bank (with a copy to the Administrative Agent), the Borrower shall Cash
Collateralize the Fronting Exposure of the applicable Issuing Bank with respect
to such Defaulting Lender (determined after giving effect to Section 2.10(a)(iv)
and any Cash Collateral provided by such Defaulting Lender) in an amount not
less than the Minimum Collateral Amount. The Borrower may use proceeds of
Borrowings for the provision of Cash Collateral (so long as no Borrowing Base
Deficiency, Default or Event of Default exists or would result therefrom).

 

(i)          Grant of Security Interest. The Borrower, and to the extent
provided by any Defaulting Lender, such Defaulting Lender, hereby grants to the
Administrative Agent, for the benefit of the Issuing Bank(s), and agrees to
maintain, a first priority security interest in all such Cash Collateral as
security for the Defaulting Lender’s obligation to fund participations in
respect of LC Exposure, to be applied pursuant to subsection (ii) below. If at
any time the Administrative Agent determines that Cash Collateral is subject to
any right or claim of any Person other than the Administrative Agent and the
Issuing Bank(s) as herein provided, or that the total amount of such Cash
Collateral is less than the Minimum Collateral Amount, the Borrower will, within
2 Business Days upon demand by the Administrative Agent, pay or provide to the
Administrative Agent additional Cash Collateral in an amount sufficient to
eliminate such deficiency (after giving effect to any Cash Collateral provided
by the Defaulting Lender).

 

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(ii)         Application. Notwithstanding anything to the contrary contained in
this Agreement, Cash Collateral provided under this Section 2.09 or Section 2.10
in respect of Letters of Credit shall be applied to the satisfaction of the
Defaulting Lender’s obligation to fund participations in respect of LC Exposure
(including, as to Cash Collateral provided by a Defaulting Lender, any interest
accrued on such obligation) for which the Cash Collateral was so provided, prior
to any other application of such property as may otherwise be provided for
herein.

 

(iii)        Termination of Requirement. Cash Collateral (or the appropriate
portion thereof) provided to reduce the Fronting Exposure of the Issuing Bank(s)
shall no longer be required to be held as Cash Collateral pursuant to this
Section 2.09 following (i) the elimination of the applicable Fronting Exposure
(including by the termination of Defaulting Lender status of the applicable
Lender), or (ii) the determination by the Administrative Agent and the Issuing
Bank(s) that there exists excess Cash Collateral; provided that, subject to
Section 2.10, the Person providing Cash Collateral and the Issuing Bank(s) may
agree that Cash Collateral shall be held to support future anticipated Fronting
Exposure or other obligations; and provided further that to the extent that such
Cash Collateral was provided by the Borrower, such Cash Collateral shall remain
subject to the security interest granted pursuant to the Loan Documents.

 

Section 2.10.         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 Governmental Requirement:

 

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

 

(ii)         Defaulting Lender Waterfall. 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
Article X or otherwise) or received by the Administrative Agent from a
Defaulting Lender pursuant to Section 12.08 shall be applied at such time or
times as may be determined by the Administrative Agent as follows: first, to the
payment of any amounts owing by such Defaulting Lender to the Administrative
Agent hereunder; second, to the payment on a pro rata basis of any amounts owing
by such Defaulting Lender to the Issuing Bank(s) hereunder; third, to Cash
Collateralize the Fronting Exposure of the Issuing Bank(s) with respect to such
Defaulting Lender in accordance with Section 2.09; fourth, as the Borrower may
request (so long as no Default or Event of Default exists), to the funding of
any Loan or funded participation in respect of which such Defaulting Lender has
failed to fund its portion thereof as required by this Agreement, as determined
by the Administrative Agent; fifth, if so determined by the Administrative Agent
and the Borrower, to be held in a deposit account and released pro rata in order
to (A) satisfy such Defaulting Lender’s potential future funding obligations
with respect to Loans and funded participations under this Agreement and (B)
Cash Collateralize the Issuing Banks’ future Fronting Exposure with respect to
such Defaulting Lender with respect to future Letters of Credit issued under
this Agreement, in accordance with Section 2.09; sixth, to the payment of any
amounts owing to the Lenders or the Issuing Bank(s) as a result of any judgment
of a court of competent jurisdiction obtained by any Lender or the Issuing
Bank(s) against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement; seventh, 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 eighth, to such Defaulting
Lender or as otherwise directed by a court of competent jurisdiction; provided
that if (1) such payment is a payment of the principal amount of any Loans or
funded participations in Letters of Credit in respect of which such Defaulting
Lender has not fully funded its appropriate share, and (2) such Loans were made
or the related Letters of Credit were issued at a time when the conditions set
forth in Section 6.02 were satisfied or waived, such payment shall be applied
solely to pay the Loans of, and funded participations in Letters of Credit owed
to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the
payment of any Loans of, or funded participations in Letters of Credit owed to,
such Defaulting Lender until such time as all Loans and funded and unfunded
participations in LC Exposure are held by the Lenders pro rata in accordance
with the Commitment under the Agreement without giving effect to Section
2.10(a)(iv). 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 or to post Cash Collateral pursuant to this Section 2.10(a)(ii) shall be
deemed paid to and redirected by such Defaulting Lender, and each Lender
irrevocably consents hereto.

 

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(iii)        Certain Fees.

 

(A)         No Defaulting Lender shall be entitled to receive any commitment fee
for any period during which that Lender is a Defaulting Lender (and the Borrower
shall not be required to pay any such fee that otherwise would have been
required to have been paid to that Defaulting Lender). Commitment fees shall
cease to accrue on the unfunded portion of the Commitment of such Defaulting
Lender pursuant to Section 3.05(a).

 

(B)         Each Defaulting Lender shall be entitled to receive Letter of Credit
fees pursuant to Section 3.05(b) for any period during which that Lender is a
Defaulting Lender only to the extent allocable to its Applicable Percentage of
the stated amount of Letters of Credit for which it has provided Cash Collateral
pursuant to Section 2.09.

 

(C)         With respect to any commitment fee or letter of credit fee not
required to be paid to any Defaulting Lender pursuant to clause (A) or (B)
above, the Borrower shall (1) pay to each Non-Defaulting Lender that portion of
any such fee otherwise payable to such Defaulting Lender with respect to such
Defaulting Lender’s participation in LC Exposure that has been reallocated to
such Non-Defaulting Lender pursuant to clause (iv) below, (2) pay to each
Issuing Bank, as applicable, the amount of any such fee otherwise payable to
such Defaulting Lender to the extent allocable to such Issuing Bank’s Fronting
Exposure to such Defaulting Lender, and (3) not be required to pay the remaining
amount of any such fee.

 

(iv)        Reallocation of Participations to Reduce Fronting Exposure. All or
any part of such Defaulting Lender’s participation in LC Exposure shall be
reallocated among the Non-Defaulting Lenders in accordance with their respective
Applicable Percentages (calculated without regard to such Defaulting Lender’s
Commitment) but only to the extent that (x) the conditions set forth in Section
6.02 are satisfied at the time of such reallocation (and, unless the Borrower
shall have otherwise notified the Administrative Agent at such time, the
Borrower shall be deemed to have represented and warranted that such conditions
are satisfied at such time), and (y) such reallocation does not cause the
aggregate Revolving Credit Exposure of any Non-Defaulting Lender to exceed such
Non-Defaulting Lender’s Applicable Percentage of the Commitment. No reallocation
hereunder shall constitute a waiver or release of any claim of any party
hereunder against a Defaulting Lender arising from that Lender having become a
Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of
such Non-Defaulting Lender’s increased exposure following such reallocation.

 

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(v)         Cash Collateral. If the reallocation described in clause (iv) above
cannot, or can only partially, be effected, the Borrower shall, without
prejudice to any right or remedy available to it hereunder or under law, Cash
Collateralize the Issuing Banks’ Fronting Exposure in accordance with the
procedures set forth in Section 2.09.

 

(b)           Defaulting Lender Cure. If the Borrower, the Administrative Agent
and the Issuing Bank(s) agree in writing that a Lender is no longer a Defaulting
Lender, the Administrative Agent will so notify the parties hereto, whereupon as
of the effective date specified in such notice and subject to any conditions set
forth therein (which may include arrangements with respect to any Cash
Collateral), such Lender will, to the extent applicable, purchase at par that
portion of outstanding Loans of the other Lenders or take such other actions as
the Administrative Agent may determine to be necessary to cause the Loans and
funded and unfunded participations in Letters of Credit to be held pro rata by
the Lenders in accordance with the Commitments under this Agreement (without
giving effect to Section 2.10(a)(iv), whereupon such Lender will cease to be a
Defaulting Lender; provided that no adjustments will be made retroactively with
respect to fees accrued or payments made by or on behalf of the Borrower while
that Lender was a Defaulting Lender; and provided, further, that except to the
extent otherwise expressly agreed by the affected parties, no change hereunder
from Defaulting Lender to Lender will constitute a waiver or release of any
claim of any party hereunder arising from that Lender having been a Defaulting
Lender.

 

(c)            New Letters of Credit. So long as any Lender is a Defaulting
Lender, no Issuing Bank shall be required to issue, extend, renew or increase
any Letter of Credit unless it is satisfied that it will have no Fronting
Exposure after giving effect thereto.

 

ARTICLE III
Payments of Principal and Interest; Prepayments; Fees

 

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

 

Section 3.02.         Interest.

 

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

 

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

 

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(c)  Post-Default Rate. Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower or any
Guarantor hereunder or under any other Loan Document is not paid when due,
whether at stated maturity, upon acceleration or otherwise, and including any
payments in respect of a Borrowing Base Deficiency under Section 3.04, then all
Loans and other amounts outstanding, shall, upon the request of the Required
Lenders, as of the date of such failure to pay the relevant amount when due or
such later date determined by the Required Lenders, bear interest, after as well
as before judgment, at a rate per annum equal to two percent (2%) plus the rate
applicable to ABR Loans as provided in Section 3.02(a), but in no event to
exceed the Highest Lawful Rate, until such time as such overdue Loans or other
payments have been paid.

 

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

 

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

 

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

 

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

 

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

 

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

 

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Section 3.04.         Prepayments.

 

(a)  Optional Prepayments. Subject to break funding costs payable pursuant to
Section 5.02 and prior notice in accordance with Section 3.04(b), the Borrower
shall have the right at any time and from time to time to prepay any Borrowing
in whole or in part, in a minimum aggregate amount of $100,000 or any integral
multiple of $100,000 in excess thereof or if less than $100,000, the remaining
balance of the Borrowing.

 

(b)  Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by facsimile or e-mail) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing,
not later than 10:00 a.m., Denver, Colorado time, three Business Days before the
date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not
later than 10:00 a.m., Denver, Colorado time, one Business Day before the date
of prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; provided that, if a notice of prepayment is given in connection with
a conditional notice of termination of the Commitments as contemplated by
Section 2.06(b), then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.06(b). Promptly following
receipt of any such notice relating to a Borrowing, the Administrative Agent
shall advise the Lenders of the contents thereof. Each partial prepayment of any
Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 3.02 and any amounts due under Section 5.02.

 

(c)  Mandatory Prepayments.

 

(i)          If, after giving effect to any termination or reduction of the
Aggregate Maximum Credit Amounts pursuant to Section 2.06(b), the total
Revolving Credit Exposures minus any Cash Collateral previously pledged and
still held by the Administrative Agent in respect of any LC Exposure exceeds the
lesser of (A) the total Commitments and (B) the Borrowing Base, then the
Borrower shall prepay the Borrowings on the date of such termination or
reduction in an aggregate principal amount equal to such excess, and if any
excess remains after prepaying all of the Borrowings as a result of an LC
Exposure, pay to the Administrative Agent on behalf of the Lenders an amount
equal to such excess to be held as Cash Collateral as provided in Section
2.08(j).

 

(ii)         Upon any redetermination of or adjustment to the amount of the
Borrowing Base in accordance with Section 2.07 or Section 8.13(c), if the total
Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing Base,
then, after receiving notice from the Administrative Agent by means of a New
Borrowing Base Notice or notice of adjustment pursuant to Section 8.13(c), in
each case, of such Borrowing Base Deficiency (such date of receipt of notice,
the “Deficiency Notification Date”), the Borrower shall at its option:

 

(A) within thirty (30) days of the Deficiency Notification Date (1) prepay the
Borrowings in an aggregate principal amount equal to such excess, and (2) if any
excess remains after prepaying all of the Borrowings as a result of any LC
Exposure, pay to the Administrative Agent on behalf of the Lenders an amount
equal to such excess to be held as Cash Collateral as provided in Section
2.08(j),

 

37

 

 

(B) promptly notify the Administrative Agent that it shall pay off such
Borrowing Base Deficiency in installments and then, commencing on the 30th day
after the Deficiency Notification Date and same day of each month for the two
months thereafter (or if any such day is not a Business Day, the immediately
preceding Business Day), prepay the Borrowings in an amount equal to one-third
(1/3rd) of such Borrowing Base Deficiency so that the Borrowing Base Deficiency
is reduced to zero within 90 days of the Deficiency Notification Date, or

 

(C) within fifteen (15) days following the Deficiency Notification Date, submit
(and pledge as Collateral) additional Oil and Gas Properties owned by the
Borrower or any of the other Loan Parties for consideration in connection with
the determination of the Borrowing Base which the Administrative Agent and the
Required Lenders deem satisfactory, in their sole discretion, to eliminate such
Borrowing Base Deficiency;

 

provided that, notwithstanding the options set forth above, in all cases, the
Borrowing Base Deficiency must be eliminated on or prior to the Termination
Date.

 

(iii)        Upon any adjustments to the Borrowing Base pursuant to Section
9.12, if the total Revolving Credit Exposures exceeds the Borrowing Base as
adjusted, then the Borrower shall (A) prepay the Borrowings in an aggregate
principal amount equal to such excess, and (B) if any excess remains after
prepaying all of the Borrowings as a result of an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as Cash Collateral as provided in Section 2.08(j). The Borrower shall be
obligated to make such prepayment and/or deposit of Cash Collateral on the date
it or any Loan Party receives cash proceeds as a result of such disposition or
termination; provided that in all cases, the Borrowing Base Deficiency must be
eliminated on or prior to the Termination Date.

 

(iv)        Each prepayment of Borrowings pursuant to this Section 3.04(c) shall
be applied, first, ratably to any ABR Borrowings then outstanding, and, second,
to Eurodollar Borrowings then outstanding beginning with the Eurodollar
Borrowing with the least number of days remaining in the Interest Period
applicable thereto and ending with the Eurodollar Borrowing with the most number
of days remaining in the Interest Period applicable thereto.

 

(v)         Prepayments pursuant to this Section 3.04(c) shall be accompanied by
accrued interest to the extent required by Section 3.02.

 

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

 

Section 3.05.         Fees.

 

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

 

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(b)  Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative
Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Margin used to determine the interest rate applicable to Eurodollar Loans on the
average daily amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the date of this Agreement to but excluding the later of the date on
which such Lender’s Commitment terminates and the date on which such Lender
ceases to have any LC Exposure, (ii) to each applicable Issuing Bank a fronting
fee at the time of issuance of each Letter of Credit, which shall equal the
greater of (A) $500 or (B) 0.125% of the face amount of such Letter of Credit
and (iii) to each Issuing Bank, for its own account, its standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of Credit
or processing of drawings thereunder. Participation fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on such last day, commencing on the first such date to occur after
the date of this Agreement; provided that all such fees shall be payable on the
Termination Date and any such fees accruing after the Termination Date shall be
payable on demand. Any other fees payable to any Issuing Bank pursuant to this
Section 3.05(b) shall be payable within 10 days after demand. All participation
fees shall be computed on the basis of a year of 360 days unless such
computation would exceed the Highest Lawful Rate, in which case interest shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).

 

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

 

(d)  Other Fees. The Borrower agrees to pay to the Administrative Agent other
fees payable in the amount and at the times to be agreed by the Administrative
Agent and the Borrower.

 

ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs

 

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

 

(a)  Payments by the Borrower. The Borrower shall make each payment required to
be made by it hereunder (whether of principal, interest, fees or reimbursement
of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02,
Section 5.03 or otherwise) prior to 10:00 a.m., Denver, Colorado time, on the
date when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and
shall not be refundable under any circumstances. Any amounts received after such
time on any date may, in the discretion of the Administrative Agent, be deemed
to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, except payments
to be made directly to the applicable Issuing Bank as expressly provided herein
and except that payments pursuant to Section 5.01, Section 5.02, Section 5.03
and Section 12.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.

 

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(b)  Application of Insufficient Payments. If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, unreimbursed LC Disbursements, interest, fees and other amounts
then due hereunder, such funds shall be applied: first, ratably to reimbursement
of expenses and indemnities provided for in this Agreement and the Security
Instruments; second, to accrued interest on the Loans; third, to fees; fourth,
pro rata to outstanding principal of the Loans and unreimbursed LC
Disbursements; and fifth, if applicable, to serve as Cash Collateral to be held
by the Administrative Agent to secure the LC Exposure, in each case, ratably
among the parties entitled thereto in accordance with the amounts then due to
such parties.

 

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

 

Section 4.02.         Presumption of Payment by the Borrower. Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders or the applicable Issuing Bank that the Borrower will not make such
payment, the Administrative Agent may assume that the Borrower has made such
payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders or the applicable Issuing Bank, as the
case may be, the amount due. In such event, if the Borrower has not in fact made
such payment, then each of the Lenders or the applicable Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.

 

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Section 4.03.         Certain Deductions by the Administrative Agent. If any
Lender shall fail to make any payment required to be made by it pursuant to
Section 2.05(a), Section 2.08(d), Section 2.08(e) or Section 4.02 then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid.

 

Section 4.04.         Disposition of Proceeds. The Security Instruments contain
an assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower’s or
each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property. The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Secured Obligations and other obligations
described therein and secured thereby. Notwithstanding the assignment contained
in such Security Instruments, until the occurrence of an Event of Default, (a)
the Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and any
Loan Party and (b) the Lenders hereby authorize the Administrative Agent to take
such actions as may be necessary to cause such proceeds to be paid to the
Borrower and/or such Loan Parties.

 

ARTICLE V
Increased Costs; Break Funding Payments; Taxes

 

Section 5.01.         Increased Costs.

 

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

 

(i)          subject any Credit Party to any Taxes (other than (A) Indemnified
Taxes and (B) Taxes described in clauses (b) through (e) of the definition of
Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal,
letters of credit, commitments, or other obligations, or its deposits, reserves,
other liabilities or capital attributable thereto;

 

(ii)         impose, modify or deem 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 (except any reserve requirement reflected in the Adjusted LIBO Rate)
or any Issuing Bank; or

 

(iii)        impose on any Lender or any Issuing Bank or the London interbank
market any other condition, cost or expense (other than Taxes) affecting this
Agreement or Loans made by such Lender or any Letter of Credit or participation
therein;

 

and the result of any of the foregoing shall be to increase the cost to such
Lender or such other Credit Party of making, converting to, continuing or
maintaining any Loan or of maintaining its obligation to make any such Loan, or
to increase the cost to such Lender, such Issuing Bank or other Credit Party of
participating in, issuing or maintaining any Letter of Credit (or of maintaining
its obligation to participate in or to issue any Letter of Credit) or to reduce
the amount of any sum received or receivable by such Lender or such other Credit
Party (whether of principal, interest or otherwise), then the Borrower will pay
to such Lender or such other Credit Party such additional amount or amounts as
will compensate such Lender or such other Credit Party for such additional costs
incurred or reduction suffered.

 

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

 

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

 

(d)  Effect of Failure or Delay in Requesting Compensation. Failure or delay on
the part of any Lender or Issuing Bank to demand compensation pursuant to this
Section 5.01 shall not constitute a waiver of such Lender’s or Issuing Bank’s
right to demand such compensation; provided that the Borrower shall not be
required to compensate a Lender or Issuing Bank pursuant to this Section 5.01
for any increased costs or reductions incurred more than 365 days prior to the
date that such Lender or Issuing Bank, as the case may be, notifies the Borrower
of the Change in Law giving rise to such increased costs or reductions and of
such Lender’s or Issuing Bank’s intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 365-day period referred to above shall be
extended to include the period of retroactive effect thereof.

 

(e)  Dodd-Frank Act. Notwithstanding anything herein to the contrary, the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives thereunder or issued in connection therewith,
and all requests, rules, guidelines or directives promulgated by the Bank for
International Settlements, the Basel Committee on Bank Supervision (or any
successor or similar authority) or the United States or foreign regulatory
authorities, in each case pursuant to Basel III, shall in each case be deemed to
be a Change in Law, regardless of the date enacted, adopted or issued.

 

Section 5.02.         Break Funding Payments. In the event of (a) the payment of
any principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan into an ABR Loan other than on the last
day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any
notice delivered pursuant hereto, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such event
or (d) the assignment of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 5.04(a). In the case of a Eurodollar Loan, such loss, cost
or expense to any Lender shall be deemed to include an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market.

 

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

 

Section 5.03.         Taxes.

 

(a)  Defined Terms. For purposes of this Section 5.03, the term “Lender”
includes any Issuing Bank and 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 shall
be 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 shall be 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 5.03), the
amounts received with respect to this agreement equal the sum which would have
been received had no such deduction or withholding been made.

 

(c)  Payment of Other Taxes by the Loan Parties. The Loan Parties shall (without
duplication of amounts otherwise payable under this Section 5.03) timely pay to
the relevant Governmental Authority in accordance with applicable law, or at the
option of the Administrative Agent timely reimburse it for, Other Taxes.

 

(d)  Indemnification by the Loan Parties. The Loan Parties shall (without
duplication of amounts otherwise payable under this Section 5.03) jointly and
severally indemnify each Credit Party, within 10 days after written 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 5.03) payable or paid by such Credit Party or required to be withheld or
deducted from a payment to such Credit Party 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.
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, shall be
conclusive absent manifest error.

 

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(e)  Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within 10 days after demand therefor, for (i) any Taxes
attributable to such Lender (but only to the extent that any Loan Party has not
already indemnified the Administrative Agent for such Taxes and without limiting
the obligation of the Loan Parties to do so) and (ii) any Taxes attributable to
such Lender's failure to comply with the provisions of Section 12.04(c) relating
to the maintenance of a Participant Register, in either 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 shall be
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 paragraph (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 5.03, 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 Administrative Agent.

 

(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 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 5.03(g)(ii)(A), (ii)(B) and (ii)(D) below)
shall not be 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,

 

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

 

(B)         any Non-U.S. 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 Non-U.S. 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:

 

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

 

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

 

(3)         in the case of a Non-U.S. Lender claiming the benefits of the
exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate substantially in the form of Exhibit G-1 to the effect that such
Non-U.S. 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 and (y) executed originals of IRS
Form W-8BEN; or

 

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

 

(C)         any Non-U.S. 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 Non-U.S. Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), executed originals of any other form prescribed by
applicable law as a basis for claiming exemption from or a reduction in U.S.
federal withholding Tax, duly completed, together with such supplementary
documentation as may be prescribed by applicable law to permit the Borrower or
the Administrative Agent to determine the withholding or deduction required to
be made; and

 

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(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
clause (D), “FATCA” shall include 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.

 

(h)  Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of , or a
credit which such party specifically elected to receive in lieu of a refund and
which such party actually was able to utilize for, any Taxes as to which it has
been indemnified pursuant to this Section 5.03 (including by the payment of
additional amounts pursuant to this Section 5.03), it shall pay to the
indemnifying party an amount equal to such refund or credit (but only to the
extent of indemnity payments made under this Section with respect to the Taxes
giving rise to such refund or credit), 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
or credit). Such indemnifying party, upon the request of such indemnified party,
shall repay to such indemnified party the amount paid over pursuant to this
paragraph (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 or credit to such Governmental Authority.
Notwithstanding anything to the contrary in this paragraph (h), in no event will
the indemnified party be required to pay any amount to an indemnifying party
pursuant to this paragraph (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 or credit 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 paragraph shall 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 5.03 shall survive
the resignation or replacement of the Administrative Agent or any assignment of
rights by, or the replacement of, a Lender, the termination of the Commitments
and the repayment, satisfaction or discharge of all obligations under the Loan
Documents.

 

Section 5.04.         Designation of Different Lending Office. If any Lender
requests compensation under Section 5.01, or if the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 5.03, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

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Section 5.05.         Replacement of Lenders. If (a) any Lender requests
compensation under Section 5.01, (b) the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 5.03, (c) any Lender is a Defaulting Lender, (d)
any Lender has asserted that any adoption or change of the type described in
Section 5.06 has occurred or (e) any Lender has not approved a proposed waiver
or amendment that requires the consent of all Lenders, all non-Defaulting
Lenders or all Lenders affected thereby, but which has been approved by Required
Lenders (with, in the case of such determination, the percentage threshold set
forth in the definition of Required Lenders being deemed to be raised to 85%),
then the Borrower may, at its sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 12.04(b)), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans and participations in LC Disbursements, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts) and (iii) in the case of any such
assignment resulting from a claim for compensation under Section 5.01 or
payments required to be made pursuant to Section 5.03, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.

 

Section 5.06.         Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to honor its obligation to make or maintain Eurodollar
Loans either generally or having a particular Interest Period hereunder, then
(a) such Lender shall promptly notify the Borrower and the Administrative Agent
thereof and such Lender’s obligation to make such Eurodollar Loans shall be
suspended (the “Affected Loans”) until such time as such Lender may again make
and maintain such Eurodollar Loans and (b) all Affected Loans which would
otherwise be made by such Lender shall be made instead as ABR Loans (and, if
such Lender so requests by notice to the Borrower and the Administrative Agent,
all Affected Loans of such Lender then outstanding shall be automatically
converted into ABR Loans on the date specified by such Lender in such notice)
and, to the extent that Affected Loans are so made as (or converted into) ABR
Loans, all payments of principal which would otherwise be applied to such
Lender’s Affected Loans shall be applied instead to its ABR Loans.

 

ARTICLE VI

 

Conditions Precedent

 

Section 6.01.         Effective Date. The obligations of the Lenders to make
Loans and of the Issuing Bank(s) to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 12.02):

 

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

 

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

 

(i)          be reasonably satisfied that the Security Instruments create first
priority, perfected Liens (except that Excepted Liens identified in clauses (a)
to (d) and (f) of the definition thereof, but subject to the provisos at the end
of such definition may exist) on at least 85% of the total value of the Oil and
Gas Properties evaluated in the Initial Reserve Report; and

 

(ii)         have received certificates, if appropriate, together with undated,
blank stock powers for each such certificate, representing all of the issued and
outstanding Equity Interests of each Domestic Subsidiary and not less than 66%
of all of the issued and outstanding Equity Interests of each Foreign
Subsidiary, which is directly owned by either the Borrower or a Domestic
Subsidiary.

 

(c)  The Administrative Agent shall have received a certificate of the Secretary
or an Assistant Secretary of the Borrower and each Guarantor setting forth (i)
resolutions of its board of directors or other appropriate governing body with
respect to the authorization of the Borrower or such Guarantor to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the Borrower
or such Guarantor (A) who are authorized to sign the Loan Documents to which the
Borrower or such Guarantor is a party and (B) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of such authorized officers, and
(iv) the Organizational Documents of the Borrower and such Guarantor, certified
as being true and complete. The Administrative Agent and the Lenders may
conclusively rely on such certificate until the Administrative Agent receives
notice in writing from the Borrower to the contrary.

 

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

 

(e)  The Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower in form and substance reasonably satisfactory to the
Administrative Agent certifying that (i) all government and third party
approvals necessary in connection with the Transactions have been obtained on
satisfactory terms and (ii) no action or proceeding is pending or threatened in
any court or before any Governmental Authority seeking to enjoin or prevent the
consummation of the Transactions contemplated hereby.

 

(f)  The Administrative Agent shall have received certificates of insurance
coverage of the Loan Parties in form and substance reasonably satisfactory to
the Administrative Agent evidencing that the Loan Parties are carrying insurance
in accordance with Section 7.12.

 

(g)  The Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower in form and substance reasonably satisfactory to the
Administrative Agent certifying that the Borrower and the Loan Parties will have
no outstanding Debt for borrowed money or outstanding payment obligations with
respect to Disqualified Capital Stock other than the Secured Obligations under
this Agreement.

 

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(h)  The Administrative Agent shall have received satisfactory evidence
(including a customary pay off letter) that (i) all commitments under the
Existing Credit Agreements shall have been terminated in full and all amounts
outstanding under the Existing Credit Agreements shall have been paid in full,
(ii) satisfactory arrangements shall have been made for the termination of all
Liens granted in connection therewith and (iii) the existing hedges of the Loan
Parties have been terminated or novated to WF.

 

(i)  The Administrative Agent shall have received (i) the financial statements
referred to in Section 7.04(a), (ii) projections for the next twelve (12) months
for the Borrower and its Subsidiaries in form and substance reasonably
acceptable to the Administrative Agent and (iii) the Initial Reserve Report
accompanied by a certificate covering the matters described in Section
8.12(c)(i)-(iii).

 

(j)  The Administrative Agent shall have received all documentation and other
information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including the USA
Patriot Act.

 

(k)  The Administrative Agent shall have received an opinion of Davis Graham &
Stubbs LLP, counsel to the Loan Parties, substantially in a form and of
substance reasonably acceptable to the Administrative Agent and an opinion of
local counsel in each state where Oil and Gas Properties included in the
Borrowing Base are located, substantially in a form and of substance reasonably
satisfactory to the Administrative Agent.

 

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

 

(m)  The Administrative Agent shall have received appropriate UCC search
certificates reflecting no prior Liens encumbering the Properties of the
Borrower and the Loan Parties for each of the following jurisdictions: Montana,
Colorado, Delaware and any other jurisdiction requested by the Administrative
Agent; other than those being released on or prior to the Effective Date or
Liens permitted by Section 9.03.

 

(n)  The Administrative Agent shall have received title information as the
Administrative Agent may reasonably require satisfactory to the Administrative
Agent setting forth the status of title to at least 85% of the total value of
the Oil and Gas Properties evaluated in the Initial Reserve Report.

 

(o)  The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and the
Loan Parties.

 

(p)  The Administrative Agent shall have received such other certificates,
documents, instruments and agreements as the Administrative Agent shall
reasonably request in connection with the transactions contemplated by this
Agreement and the other Loan Documents.

 

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The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank(s) to issue Letters of Credit hereunder shall not become effective unless
each of the foregoing conditions is satisfied (or waived pursuant to Section
12.02) at or prior to 4:00 p.m., Denver, Colorado time, on November 30, 2012
(and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).

 

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

 

(a)  At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.

 

(b)  The representations and warranties of the Borrower and the Guarantors set
forth in this Agreement and in the other Loan Documents shall be true and
correct in all material respects (unless already qualified by materiality in
which case such applicable representation and warranty shall be true and
correct) on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, except
to the extent any such representations and warranties are expressly limited to
an earlier date, in which case, on and as of the date of such Borrowing or the
date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, such representations and warranties shall continue to be true and
correct in all material respects (unless already qualified by materiality in
which case such applicable representation and warranty shall be true and
correct) as of such specified earlier date.

 

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

 

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

 

ARTICLE VII

Representations and Warranties

 

The Borrower represents and warrants to the Lenders that:

 

Section 7.01.         Organization; Powers. Each of the Loan Parties 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 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 licenses,
authorizations, consents, approvals and foreign qualifications could not
reasonably be expected to have a Material Adverse Effect.

 

Section 7.02.         Authority; Enforceability. The Transactions are within
each Loan Party’s entity powers and have been duly authorized by all necessary
entity and, if required, equity holder action. Each Loan Document to which a
Loan Party is a party has been duly executed and delivered by it and constitutes
its legal, valid and binding obligation, as applicable, enforceable in
accordance with its terms, subject to applicable Debtor Relief Laws and subject
to general principles of equity, regardless of whether considered in a
proceeding in equity or at law.

 

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Section 7.03.         Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority or any other third Person, 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 the recording and filing of the Security
Instruments as required by this Agreement, (b) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of
any Loan Party or any order of any Governmental Authority, (c) will not violate
or result in a default under any indenture, agreement or other instrument
binding upon the Borrower, any of its Subsidiaries or their Properties, or give
rise to a right thereunder to require any payment to be made by the Borrower or
any of its Subsidiaries and (d) will not result in the creation or imposition of
any Lien on any Property of the Borrower or any of its Subsidiaries (other than
the Liens created by the Loan Documents).

 

Section 7.04.         Financial Condition; No Material Adverse Change.

 

(a)  The Borrower has furnished to the Lenders (i) the audited consolidated
balance sheet for the Borrower and its Consolidated Subsidiaries and related
statements of operations, stockholders’ equity, as applicable, and cash flows as
of the end of and for the fiscal year ended December 31, 2011, and (ii) the
unaudited consolidated balance sheet for the Borrower and its Consolidated
Subsidiaries and related statements of operations, stockholders’ equity, as
applicable, and cash flows as of the end of and for the fiscal quarter ended
June 30, 2012, which financial statements shall be prepared in accordance with
GAAP. The financial statements in clauses (i) and (ii) present fairly, in all
material respects, the financial condition of Borrower and its Consolidated
Subsidiaries on a consolidated basis, as of the dates and for the periods set
forth above in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes in the case of the unaudited quarterly financial
statements.

 

(b)  Since December 31, 2011, there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect.

 

(c)  Neither the Borrower nor any of the Guarantors 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 as referred to or reflected or
provided for in the Financial Statements.

 

Section 7.05.         Litigation.

 

(a)  Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Guarantor that (i) are not fully
covered by insurance (except for normal deductibles) as to which there is a
reasonable possibility of an adverse determination that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (ii) involve any Loan Document or the
Transactions.

 

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

 

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Section 7.06.         Environmental Matters. Except for such matters as set
forth on Schedule 7.06 or that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect:

 

(a)  the Borrower, the Guarantors 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 Guarantors 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 neither
the Borrower nor any Guarantor 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 the Borrower’s knowledge, threatened against the Borrower, any Guarantor or
any of their respective Properties or as a result of any operations at the
Properties;

 

(d)  none of the Properties of the Borrower or any Guarantor 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 attributable to the operations of the Borrower
or any Guarantor or at, on, under or from any of their Properties, there are no
investigations, remediations, abatements, removals, or monitorings of Hazardous
Materials required under Environmental Laws relating to such Releases or
threatened Releases or at such Properties, and none of such Properties are
adversely affected by any Release or threatened Release of a Hazardous Material
originating or emanating from any other real property;

 

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

 

(g)  there has been no exposure of any Person or property to any Hazardous
Materials as a result of or in connection with the operations and businesses of
the Borrower or any Guarantor or relating to any of their Properties that would
reasonably be expected to form the basis for a claim for damages or compensation
and, to the Borrower’s knowledge, there are no conditions or circumstances that
would reasonably be expected to result in the receipt of notice regarding such
exposure; and

 

(h)  the Borrower has provided or made available to 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 the Borrower’s or any Guarantor’s possession or control and
relating to their respective Properties or operations thereon.

 

52

 

 

Section 7.07.         Compliance with the Laws and Agreements; No Defaults.

 

(a)  The Borrower and each Guarantor is in compliance with all Governmental
Requirements applicable to it or its Property and all agreements and other
instruments binding upon it or its Property, and possesses all licenses,
permits, franchises, exemptions, approvals and other governmental authorizations
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.

 

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

 

(c)  No Default has occurred and is continuing.

 

Section 7.08.         Investment Company Act. No Loan Party is an “investment
company” or a company “controlled” by an “investment company,” within the
meaning of, or subject to regulation under, the Investment Company Act of 1940,
as amended.

 

Section 7.09.         Taxes. The Borrower and each Guarantor 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 the Borrower or applicable Guarantor 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. To the knowledge of the Borrower, no material proposed tax assessment is
being asserted with respect to the Borrower or any Guarantor.

 

Section 7.10.         ERISA.

 

(a)  Each Plan is, and has been, operated, administered and maintained in
substantial compliance with, and the Borrower and each ERISA Affiliate have
complied in all material respects with, ERISA, the terms of the applicable Plan
and, where applicable, the Code.

 

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

 

(c)  No Plan (other than a defined contribution plan) or any trust created under
any such Plan has been terminated since September 2, 1974. No liability to the
PBGC (other than for the payment of current premiums which are not past due) by
the Borrower or any ERISA Affiliate has been or is expected by any Loan Party or
any ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event with
respect to any Plan has occurred.

 

53

 

 

 

(d)  The actuarial present value of the benefit liabilities under each Plan
which is subject to Title IV of ERISA does not, as of the end of the Borrower’s
most recently ended fiscal year, exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities by an amount that could
reasonably be expected to have a Material Adverse Effect. The term “actuarial
present value of the benefit liabilities” shall have the meaning specified in
section 4041 of ERISA.

 

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

 

Section 7.11.         Disclosure; No Material Misstatements. The Borrower have
disclosed to the Administrative Agent and the Lenders all agreements,
instruments and corporate or other restrictions to which it or any Loan Party 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 written reports, financial statements, certificates or other
information furnished by or on behalf of the Borrower and the Guarantors 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) contain any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Loan Parties represent only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time. There is no fact peculiar to the Loan Parties
which could reasonably be expected to have a Material Adverse Effect which has
not been set forth in this Agreement or the Loan Documents or the other
documents, certificates and statements furnished to the Administrative Agent or
the Lenders by or on behalf of the Loan Parties prior to, or on, the date hereof
in connection with the transactions contemplated hereby. There are no statements
or conclusions in any Reserve Report which are based upon or include misleading
information or fail to take into account material information regarding the
matters reported therein, it being understood that projections concerning
volumes attributable to the Oil and Gas Properties and production and cost
estimates contained in each Reserve Report are necessarily based upon
professional opinions, estimates and projections and the Loan Parties do not
warrant that such opinions, estimates and projections will ultimately prove to
have been accurate.

 

Section 7.12.         Insurance. The Borrower has, and has caused all of its
Loan Parties to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage, or self-insurance, 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 Loan Parties.
Schedule 7.12, as of the date hereof, sets forth a list of all insurance
maintained by the Borrower and all the Loan Parties. The Administrative Agent
and the Lenders have been named as additional insureds in respect of such
liability insurance policies and the Administrative Agent has been named as loss
payee with respect to Property loss insurance.

 

Section 7.13.         Restriction on Liens. Neither the Borrower nor any Loan
Parties is a party to any material agreement or arrangement (other than Capital
Leases creating Liens permitted by Section 9.03(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 and the Lenders on or in respect of their
Properties to secure the Secured Obligations and the Loan Documents.

 

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Section 7.14.         Subsidiaries. Except as set forth on Schedule 7.14 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.14, there are no
other Subsidiaries of the Borrower.

 

Section 7.15.         Foreign Operations. The Borrower and the Loan Parties do
not own any Oil and Gas Properties not located within the geographical
boundaries of the United States.

 

Section 7.16.         Location of Business and Offices. The Borrower’s
jurisdiction of organization is Montana; the name of the Borrower as listed in
the public records of its jurisdiction of organization is Emerald Oil, Inc.; and
the organizational identification number of the Borrower in its jurisdiction of
organization is D-215504 (or, in each case, as set forth in a notice delivered
to the Administrative Agent pursuant to Section 8.01(l) in accordance with
Section 12.01). The Borrower’s principal place of business and chief executive
offices are located at the address specified in Section 12.01 (or as set forth
in a notice delivered pursuant to Section 8.01(l) and Section 12.01(c)). Each
Loan Party’s jurisdiction of organization, name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(l)).

 

Section 7.17.         Properties; Titles, Etc.

 

(a)  Each Loan Party has good and defensible title to, or valid leasehold
interests in, the Oil and Gas Properties evaluated in the most recently
delivered Reserve Report and good title to, or valid leasehold interests in, all
its personal Properties, in each case, free and clear of all Liens except Liens
permitted by Section 9.03. After giving full effect to the Excepted Liens, the
Loan Party specified as the owner owns the net interests in production
attributable to the Hydrocarbon Interests as reflected in the most recently
delivered Reserve Report, and the ownership of such Properties shall not in any
material respect obligate such Loan Party to bear the costs and expenses
relating to the maintenance, development and operations of each such Property in
an amount in excess of the working interest of each Property set forth in the
most recently delivered Reserve Report that is not offset by a corresponding
proportionate increase in such Loan Party’s net revenue interest in such
Property.

 

(b)  All material leases and agreements necessary for the conduct of the
business of the Loan Parties 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 Loan
Parties including all easements and rights of way, include all rights and
Properties necessary to permit the Loan Parties to conduct their business in all
material respects in the same manner as its business has been conducted prior to
the date hereof.

 

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

 

55

 

 

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

 

Section 7.18.         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
Loan Parties have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all Governmental Requirements and in
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Loan Parties.
Specifically in connection with the foregoing, except for those as could not be
reasonably expected to have a Material Adverse Effect, (i) no Oil and Gas
Property of the Loan Parties 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 (ii) none of the wells comprising a part of the Oil
and Gas Properties (or Properties unitized therewith) of the Loan Parties is
deviated from the vertical more than the maximum permitted by Governmental
Requirements, and such wells are, in fact, bottomed under and are producing
from, and the well bores are wholly within, the Oil and Gas Properties (or in
the case of wells located on Properties unitized therewith, such unitized
Properties) of the Loan Parties. All pipelines, wells, gas processing plants,
platforms and other material improvements, fixtures and equipment owned in whole
or in part by the Loan Parties 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 Loan Parties in a
manner consistent with the Loan Parties’ past practices (other than those the
failure of which to maintain in accordance with this Section 7.17 could not
reasonably be expected to have a Material Adverse Effect).

 

Section 7.19.         Gas Imbalances. Except as set forth on Schedule 7.19 or on
the most recent certificate delivered pursuant to Section 8.12(c), on a net
basis there are no gas imbalances which would require the Borrower or any of its
Restricted Subsidiaries to deliver Hydrocarbons produced from their Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor exceeding two percent (2.0%) of the aggregate volumes of Hydrocarbons
(on an Mcf equivalent basis) listed in the most recent Reserve Report.

 

Section 7.20.         Marketing of Production. Except for contracts listed and
in effect on the date hereof on Schedule 7.20, and thereafter either disclosed
in writing to the Administrative Agent or included in the most recently
delivered Reserve Report (with respect to all of which contracts (a) the Loan
Parties 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) and (b) 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 Loan Parties’ Hydrocarbons (including calls on or other
rights to purchase, production, whether or not the same are currently being
exercised) that (i) pertain to the sale of production at a fixed price and (ii)
have a maturity or expiry date of longer than six (6) months from the date
hereof.

 

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Section 7.21.         Security Documents. The Security Instruments are effective
to create in favor of the Administrative Agent, for the benefit of the Lenders,
a legal, valid and enforceable security interest in the Mortgaged Property and
proceeds thereof. The Secured Obligations are and shall be at all times secured
by a legal, valid and enforceability perfected first priority Liens in favor of
the Administrative Agent, covering and encumbering the Mortgaged Properties and
other Properties pledged pursuant to the Security Instruments, to the extent
such Liens may be perfected by the recording of a mortgage, the filing of a UCC
financing statement or by possession (in each case, to the extent available in
the applicable jurisdiction); provided that, except in the case of pledged
Equity Interests or as otherwise provided herein, Liens permitted by Section
9.03 may exist).

 

Section 7.22.         Swap Agreements. Schedule 7.22, as of the date hereof, and
after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 8.01(d), sets forth, a true and complete list of all Swap
Agreements of the Loan Parties, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
mark to market value thereof, all credit support agreements relating thereto
(including any margin required or supplied) and the counterparty to each such
agreement.

 

Section 7.23.         Use of Loans and Letters of Credit. The proceeds of the
Loans and the Letters of Credit shall be used to acquire oil and gas assets,
refinance existing debt, provide working capital for exploration and production
operations, for general corporate purposes of the Borrower and its Subsidiaries
and to pay fees and expenses associated with the Transactions. No Loan Party is
engaged principally, or as one of its or their important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of Regulation
T, U or X of the Board). No part of the proceeds of any Loan or Letter of Credit
will be used for any purpose which violates the provisions of Regulations T, U
or X of the Board.

 

Section 7.24.         Solvency. After giving effect to the transactions
contemplated hereby, (a) the aggregate assets (after giving effect to amounts
that could reasonably be received by reason of indemnity, offset, insurance or
any similar arrangement), at a fair valuation, of the Loan Parties, taken as a
whole, will exceed the aggregate Debt of the Loan Parties on a consolidated
basis, as the Debt becomes absolute and matures, (b) each Loan Party 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 it 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 Loan Party
will not have (and will have no reason to believe that it will have thereafter)
unreasonably small capital for the conduct of its business.

 

Section 7.25.         OFAC. Neither the Loan Parties, nor any director, officer,
agent, employee or Affiliate of the Loan Parties is currently subject to any
material U.S. sanctions administered by U.S. Department of Treasury’s Office of
Foreign Assets Control (“OFAC”), and the Borrower will not directly or
indirectly use the proceeds from the Borrowings or lend, contribute or otherwise
make available such proceeds to any Loan Party, joint venture partner or other
Person, for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC.

 

Section 7.26.         Anti-Terrorism Laws. (a) None of the Loan Parties or, to
the knowledge of any of the Borrower, any of their Affiliates is in violation of
any laws relating to terrorism or money laundering (“Anti-Terrorism Laws”),
including Executive Order No. 13224 on Terrorist Financing, effective September
24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Public Law 107 56.

 

(b)          No Loan Party or, to the knowledge of the Borrower, their
respective brokers or other agents acting or benefiting in any capacity in
connection with the Loans is any of the following:

 

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(i)          a Person or entity that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order;

 

(ii)         a Person or entity owned or controlled by, or acting for or on
behalf of, any Person or entity that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order;

 

(iii)        a Person or entity with which any Lender is prohibited from dealing
or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

(iv)         a Person or entity that commits, threatens or conspires to commit
or supports “terrorism” as defined in the Executive Order; or

 

(v)          a Person or entity that is named as a “specially designated
national and blocked person” on the most current list published by the U.S.
Treasury Department Office of Foreign Assets Control at its official website or
any replacement website or other replacement official publication or such list.

 

(c)          No Loan Party or, to the knowledge of the Borrower, any of its
brokers or other agents acting in any capacity in connection with the Loans (i)
conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any Person described in clause
(b) above, (ii) deals in, or otherwise engages in any transaction relating to,
any property or interests in property blocked pursuant to the Executive Order,
or (iii) engages in or conspires to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in any Anti-Terrorism Law.

 

ARTICLE VIII

Affirmative Covenants

 

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

 

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

 

(a)  Annual Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 90 days after the end of
each fiscal year of the Borrower, the audited consolidated balance sheet for the
Borrower and its Consolidated Subsidiaries and related statements of operations,
stockholders’ equity, as applicable, and cash flows as of the end of and for
such year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by BDO USA, LLP or 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 financial statements present
fairly in all material respects the financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries on a consolidated
basis, in accordance with GAAP consistently applied.

 

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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 Borrower, the
unaudited consolidated balance sheet for the Borrower and its Consolidated
Subsidiaries and related statements of operations, stockholders’ equity, as
applicable, and cash flows as of the end of and for such fiscal quarter and the
then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of Borrower and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes.

 

(c)  Certificate of Financial Officer — Compliance. Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b),
commencing with the delivery of financial statements for the fiscal year ending
December 31, 2012, a certificate of a Financial Officer of the Borrower in
substantially the form of Exhibit D hereto (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating compliance with
Section 9.01 and (iii) stating whether any change in GAAP or in the application
thereof has occurred since the date of the most recently delivered financial
statements referred to in Section 7.04(a) and (b) and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate.

 

(d)  Certificate of Financial Officer – Swap Agreements. Concurrently with the
delivery of each Reserve Report hereunder, a certificate of a Financial Officer,
in form and substance satisfactory to the Administrative Agent, setting forth as
of the last Business Day of such fiscal quarter or fiscal year, a true and
complete list of all Swap Agreements of each Loan Party, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net mark-to-market value therefor, any new credit
support agreements relating thereto not listed on Schedule 7.22, any margin
required or supplied under any credit support document, and the counterparty to
each such agreement.

 

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

 

(f)  Other Accounting Reports. Promptly upon receipt thereof, a copy of each
other formal report or letter submitted to any Loan Party by independent
accountants in connection with any annual, interim or special audit made by them
of the books of any such Person, and a copy of any response by such Person, or
the board of directors or other appropriate governing body of such Person, 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 any Loan Party with the SEC, or with any
national securities exchange, or distributed by a Loan Party to its shareholders
generally, as the case may be. Documents required to be delivered pursuant to
Section 8.01 may be delivered electronically and if so delivered, shall be
deemed to have been delivered on the date on which a Loan Party posts such
documents to EDGAR (or such other free, publicly-accessible internet database
that may be established and maintained by the SEC as a substitute for or
successor to EDGAR).

 

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(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 evidencing Material Indebtedness, other
than this Agreement and not otherwise required to be furnished to the Lenders
pursuant to any other provision of this Section 8.01.

 

(i)  Lists of Purchasers. Concurrently with the delivery of any Reserve Report
to the Administrative Agent pursuant to Section 8.12, a list of all Persons
purchasing Hydrocarbons from any Loan Party.

 

(j)  Notice of Sales of Oil and Gas Properties and Unwinds of Swap Agreements.
In the event the Borrower or any other Loan Party intends to sell, transfer,
assign or otherwise dispose of any Oil or Gas Properties with a fair market
value in excess of $1,000,000 (in a single transaction or in multiple
transactions over any three month period) or terminate, unwind, cancel or
otherwise dispose of Swap Agreements, in each case, in accordance with Section
9.12, prior written notice of the foregoing, the price thereof, in the case of
Oil and Gas Properties, and the anticipated decline in the mark-to-market value
thereof or net cash proceeds therefrom, in the case of Swap Agreements, and the
anticipated date of closing and any other details thereof reasonably requested
by the Administrative Agent or any Lender.

 

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

 

(l)  Information Regarding Borrower and Guarantors. Prompt written notice of
(and in any event within thirty (30) days prior thereto or such other time as
the Administrative Agent may agree) any change (i) in a Loan Party’s corporate
name or in any trade name used to identify such Person in the conduct of its
business or in the ownership of its Properties, (ii) in the location of the Loan
Party’s chief executive office or principal place of business, (iii) in the Loan
Party’s identity or corporate structure, (iv) in the Loan Party’s jurisdiction
of organization or such Person’s organizational identification number in such
jurisdiction of organization, and (v) in the Loan Party’s federal taxpayer
identification number.

 

(m)  Production Report and Lease Operating Statements. In connection with each
Reserve Report delivered pursuant to Section 8.12(a), a report setting forth,
for each calendar month during the then current fiscal year to date, the volume
of production and sales attributable to production (and the prices at which such
sales were made and the revenues derived from such sales) for each such calendar
month from the Oil and Gas Properties, and setting forth the related ad valorem,
severance and production taxes and lease operating expenses attributable thereto
and incurred for each such calendar month.

 

(n)  Patriot Act. Promptly upon request, all documentation and other information
required by regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including the USA Patriot Act.

 

(o)  Other Requested Information. Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Borrower or any Subsidiary (including any Plan or Multiemployer
Plan and any reports or other information required to be filed under ERISA), or
compliance with the terms of this Agreement or any other Loan Document, as the
Administrative Agent or any Lender may reasonably request.

 

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Section 8.02.         Notices of Material Events. The Borrower will furnish to
the Administrative Agent and 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 Loan Parties 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 a Material
Adverse Effect;

 

(c)  the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower or any Loan Party in an aggregate amount exceeding
$500,000; and

 

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

 

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

 

Section 8.03.         Existence; Conduct of Business. The Borrower will, and
will cause each Loan Party 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 that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.11.

 

Section 8.04.         Payment of Obligations. The Borrower will, and will cause
each other Loan Party to, pay its obligations, including tax liabilities of the
Borrower and all of the other Loan Parties before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Borrower or
such other Loan Party 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.

 

Section 8.05.         Performance of Obligations under Loan Documents. The
Borrower will pay the Loans according to the reading, tenor and effect thereof,
and cause each other Loan Party to, do and perform every act and discharge all
of the obligations to be performed and discharged by them under the Loan
Documents, including this Agreement, at the time or times and in the manner
specified.

 

Section 8.06.         Operation and Maintenance of Properties. The Borrower, at
its own expense, will, and will cause each other Loan Party to:

 

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

 

(b)  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 Properties material to the conduct of its business, including all
equipment, machinery and facilities.

 

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

 

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

 

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

 

(f)  to the extent the Borrower is not the operator of any Property, the
Borrower shall use commercially reasonable efforts to cause the operator to
comply with this Section 8.06.

 

Section 8.07.         Insurance. The Borrower will, and will cause each other
Loan Party to, maintain, with financially sound and reputable insurance
companies, insurance, in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations. The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as “sole
loss payees” or other formulation acceptable to the Administrative Agent and
such liability policies shall name the Administrative Agent and the Lenders as
“additional insureds” and provide that the insurer will endeavor to give at
least 30 days prior notice of any cancellation to the Administrative Agent.

 

Section 8.08.         Books and Records; Inspection Rights. The Borrower will,
and will cause each other Loan Party to, keep proper books of record and account
in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each other Loan Party 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.

 

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Section 8.09.         Compliance with Laws. The Borrower will, and will cause
each Loan Party 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.

 

Section 8.10.         Environmental Matters.

 

(a)  The Borrower shall at its sole expense: (i) comply, and shall cause its
Properties and operations and each other Loan Party and each other Loan Party’s
Properties and operations to comply, with all applicable Environmental Laws, the
breach of which Environmental Laws could be reasonably expected to have a
Material Adverse Effect; (ii) not Release, and shall cause each other Loan Party
not to Release, any Hazardous Material, on, under, about or from any of the
Borrower’s or the other Loan Parties’ Properties or any other Property to the
extent caused by the Borrower’s or any of the other Loan Parties’ operations
except in compliance with applicable Environmental Laws, the Release of which
could reasonably be expected to have a Material Adverse Effect; (iii) timely
obtain or file, and shall cause each other Loan Party to timely obtain or file,
all notices, and Environmental Permits, if any, required under applicable
Environmental Laws to be obtained or filed in connection with the operation or
use of the Borrower’s or the other Loan Parties’ 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 of other Loan Party to promptly commence and diligently prosecute to
completion, any assessment, evaluation, investigation, monitoring, containment,
cleanup, removal, repair, restoration, remediation or other remedial obligations
(collectively, the “Remedial Work”) in the event any Remedial Work is required
or reasonably necessary under applicable Environmental Laws because of or in
connection with the actual or suspected past, present or future disposal or
other Release of any Hazardous Materials on, under, about or from any of the
Borrower’s or the other Loan Parties’ Properties, which failure to commence and
diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect; and (v) establish and implement, and shall cause each
the other Loan Party to establish and implement, such policies of environmental
audit and compliance as may be necessary to continuously determine and assure
that the Borrower’s and the other Loan Parties’ obligations under this Section
8.10(a) are timely and fully satisfied, which failure to establish and implement
could reasonably be expected to have a Material Adverse Effect.

 

(b)  The Borrower will promptly, but in 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 landowner or
other third party against the Borrower or the other Loan Parties or their
Properties of which the Borrower has knowledge in connection with any
Environmental Laws (excluding routine testing and corrective action) if the
Borrower reasonably anticipates that such action will result in liability
(whether individually or in the aggregate) in excess of $500,000, not fully
covered by insurance, subject to normal deductibles.

 

Section 8.11.         Further Assurances.

 

(a)  The Borrower at its sole expense will, and will cause each other Loan Party
to, promptly execute and deliver to the Administrative Agent all such other
documents, agreements and instruments reasonably requested by the Administrative
Agent to comply with, cure any defects or accomplish the conditions precedent,
covenants and agreements of any Loan Party, as the case may be, in the Loan
Documents or to further evidence and more fully describe the collateral intended
as security for the Secured Obligations, or to correct any omissions in this
Agreement or the Security Instruments, or to state more fully the obligations
secured therein, or to perfect, protect or preserve any Liens created pursuant
to this Agreement or any of the Security Instruments or the priority thereof, or
to make any recordings, file any notices or obtain any consents, all as may be
reasonably necessary or appropriate, in the sole discretion of the
Administrative Agent, in connection therewith.

 

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(b)  The Borrower hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Mortgaged Property without the signature of the Borrower or any
other Loan Party where permitted by law. A carbon, photographic or other
reproduction of the Security Instruments or any financing statement covering the
Mortgaged Property or any part thereof shall be sufficient as a financing
statement where permitted by law.

 

Section 8.12.         Reserve Reports.

 

(a)  On or before March 1st and September 1st of each year, the Borrower shall
furnish to the Administrative Agent and the Lenders a Reserve Report evaluating
the Oil and Gas Properties of the Borrower and the other Loan Parties as of the
immediately preceding January 1st and July 1st. The Reserve Report as of January
1st delivered on or before March 1st of each year (the “January 1 Reserve
Report”) shall be prepared by one or more Approved Petroleum Engineers, and each
other Reserve Report of each year may be prepared by one or more Approved
Petroleum Engineers or internally 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 1 Reserve Report.

 

(b)  In the event of an Interim Redetermination, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared by or under
the supervision of the chief engineer of the Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the immediately preceding January 1 Reserve Report.
For any Interim Redetermination requested by the Administrative Agent or the
Borrower pursuant to Section 2.07(b), the Borrower shall provide such Reserve
Report with an “as of” date as required by the Administrative Agent as soon as
possible, but in any event no later than thirty (30) days following the receipt
of such request.

 

(c)  With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects: (i) the information contained in the
Reserve Report and any other information delivered in connection therewith is
true and correct, (ii) the Borrower or the other Loan Parties own good and
defensible title to the Oil and Gas Properties evaluated in such Reserve Report
and such Properties are free of all Liens except for Liens permitted by Section
9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis
there are no gas imbalances in excess of the volume specified in Section 7.19
with respect to its Oil and Gas Properties evaluated in such Reserve Report
which would require the Borrower or any other Loan Party to deliver Hydrocarbons
either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv) none of
their Oil and Gas Properties have been sold since the date of the last Borrowing
Base determination except as set forth on an exhibit to the certificate, which
exhibit shall list all of its Oil and Gas Properties sold and in such detail as
reasonably required by the Administrative Agent, (v) attached to the certificate
is a list of all marketing agreements entered into subsequent to the later of
the date hereof or the most recently delivered Reserve Report which the Borrower
could reasonably be expected to have been obligated to list on Schedule 7.20 had
such agreement been in effect on the date hereof and (vi) attached thereto is a
schedule of the Oil and Gas Properties evaluated by such Reserve Report that are
Mortgaged Properties and demonstrating the percentage of the total value of the
Oil and Gas Properties that the value of such Mortgaged Properties represent and
that such percentage is in compliance with Section 8.14(a).

 

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Section 8.13.         Title Information.

 

(a)  On or before the delivery to the Administrative Agent and the Lenders of
each Reserve Report required by Section 8.12(a), the Borrower will deliver title
information in form and substance acceptable to the Administrative Agent
covering enough of the Oil and Gas Properties evaluated by such Reserve Report
that were not included in the immediately preceding Reserve Report, so that the
Administrative Agent shall have received together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 85% of the total value of the Oil and Gas Properties evaluated by
such Reserve Report.

 

(b)  If the Borrower has provided title information for additional Properties
under Section 8.13(a), the Borrower shall, within 60 days of notice from the
Administrative Agent that title defects or exceptions exist with respect to such
additional Properties, either (i) cure any such title defects or exceptions
(including defects or exceptions as to priority) which are not permitted by
Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged
Properties with no title defects or exceptions except for Excepted Liens (other
than Excepted Liens described in clauses (e), (g) and (h) of such definition)
having an equivalent value or (iii) deliver title information in form and
substance acceptable to the Administrative Agent so that the Administrative
Agent shall have received, together with title information previously delivered
to the Administrative Agent, satisfactory title information on at least 85% of
the value of the Oil and Gas Properties evaluated by such Reserve Report.

 

(c)  If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 60-day period or the
Borrower does not comply with the requirements to provide acceptable title
information covering 85% of the value of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default, but instead
the Administrative Agent and/or the Majority Lenders shall have the right to
exercise the following remedy in their sole discretion from time to time, and
any failure to so exercise this remedy at any time shall not be a waiver as to
future exercise of the remedy by the Administrative Agent or the Lenders. To the
extent that the Administrative Agent or the Majority Lenders are not satisfied
with title to any Mortgaged Property after the 60-day period has elapsed, such
unacceptable Mortgaged Property shall not count towards the 85% requirement, and
the Administrative Agent may send a notice to the Borrower and the Lenders that
the then outstanding Borrowing Base shall be reduced by an amount as determined
by the Required Lenders to cause the Borrower to be in compliance with the
requirement to provide acceptable title information on 85% of the value of the
Oil and Gas Properties. This new Borrowing Base shall become effective
immediately after receipt of such notice.

 

Section 8.14.         Additional Collateral; Additional Guarantors.

 

(a)  In connection with each redetermination of the Borrowing Base, the Borrower
shall review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 85% 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
85% of such total value, then the Borrower shall, and shall cause the other Loan
Parties to, grant, within thirty (30) days of delivery of the certificate
required under Section 8.12(c), to the Administrative Agent as security for the
Secured 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
Instruments such that after giving effect thereto, the Mortgaged Properties will
represent at least 85% of such total value. All such Liens will be created and
perfected by and in accordance with the provisions of deeds of trust, security
agreements and financing statements or other Security Instruments, all in form
and substance reasonably satisfactory to the Administrative Agent and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.

 

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(b)  The Borrower shall promptly cause each (i) newly created or acquired
Domestic Subsidiary that is a Wholly-Owned Subsidiary or (ii) Loan Party that
guarantees other Debt of any Loan Party to guarantee the Secured Obligations
pursuant to the Guaranty Agreement. In connection with any such guaranty, the
Borrower shall, or shall cause: (A) such Domestic Subsidiary that is a
Wholly-Owned Subsidiary that guarantees other Debt of any Loan Party to execute
and deliver a supplement to the Guaranty Agreement, (B) the parent(s) of such
Domestic Subsidiary to pledge all of the Equity Interests of such Domestic
Subsidiary (including delivery (if applicable) of original certificates
evidencing the Equity Interests of such Domestic Subsidiary, together with an
appropriate undated stock powers for each certificate duly executed in blank by
the registered owner thereof) and (C) such parent(s) or Domestic Subsidiary, as
applicable, to execute and deliver such other additional closing documents,
certificates and legal opinions as shall reasonably be requested by the
Administrative Agent.

 

(c)  In the event that any Loan Party becomes the owner of a first tier Foreign
Subsidiary, then such Loan Party shall (i) pledge 66% of all the Equity
Interests of such Foreign Subsidiary (including delivery of original stock
certificates evidencing such Equity Interests of such Foreign Subsidiary,
together with appropriate stock powers for each certificate duly executed in
blank by the registered owner thereof) and (ii) (along with such Foreign
Subsidiary) execute and deliver such other additional closing documents,
certificates and legal opinions as shall reasonably be requested by the
Administrative Agent.

 

Section 8.15.         ERISA Compliance. The Borrower will promptly furnish and
will cause each Subsidiary and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) immediately upon becoming aware of the occurrence of
any ERISA Event or of any Prohibited Transaction, which could reasonably be
expected to result in liability of the Borrower or any other Loan Party in an
aggregate amount exceeding $500,000, in connection with any Plan or any trust
created thereunder, a written notice of the Borrower or such other Loan Party or
ERISA Affiliate, as the case may be, specifying the nature thereof, what action
such Person is taking or proposes to take with respect thereto, and, when known,
any action taken or proposed by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto, and (ii) immediately upon receipt
thereof, copies of any notice of the PBGC’s intention to terminate or to have a
trustee appointed to administer any Plan. With respect to each Plan (other than
a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and
ERISA Affiliate to, (i) satisfy in full and in a timely manner, without
incurring any late payment or underpayment charge or penalty and without giving
rise to any lien, all of the contribution and funding requirements of section
412 of the Code and of section 302 of ERISA, and (ii) pay, or cause to be paid,
to the PBGC in a timely manner, without incurring any late payment or
underpayment charge or penalty, all premiums required pursuant to sections 4006
and 4007 of ERISA. Promptly following receipt thereof, the Borrower will
promptly furnish and will cause each Subsidiary and any ERISA Affiliate to
promptly furnish to the Administrative Agent copies of any documents described
in Sections 101(k) or 101(l) of ERISA that any Loan Party or any ERISA Affiliate
may request with respect to any Multiemployer Plan; provided, that if the Loan
Parties or any of their ERISA Affiliates have not requested such documents or
notices from the administrator or sponsor of the applicable Multiemployer Plan,
then, upon reasonable request of the Administrative Agent, the Loan Parties
and/or their ERISA Affiliates shall promptly make a request for such documents
or notices from such administrator or sponsor and the Borrower shall provide
copies of such documents and notices to the Administrative Agent promptly after
receipt thereof.

 

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Section 8.16.         Marketing Activities. The Borrower will not, and will not
permit any of the other Loan Party to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than (i)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be
produced from their proved Oil and Gas Properties during the period of such
contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrower and the other Loan Parties that the Borrower or one of the other
Loan Parties 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 (iii) other contracts for the purchase and/or
sale of Hydrocarbons of third parties (A) which have generally offsetting
provisions (i.e. corresponding pricing mechanics, delivery dates and points and
volumes) such that no “position” is taken and (B) for which appropriate credit
support has been taken to alleviate the material credit risks of the
counterparty thereto.

 

Section 8.17.         Preferred Stock. Prior to the issuance of the Preferred
Stock, the Administrative Agent shall be reasonably satisfied with the terms and
conditions of the Preferred Stock Agreement in its final form.

 

ARTICLE IX

Negative Covenants

 

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

 

Section 9.01.         Financial Covenants.

 

(a)  Ratio of Total Debt to EBITDAX. The Borrower will not, as of the last day
of any fiscal quarter, commencing with the quarter ending December 31, 2012,
permit its ratio of Total Debt as of such date to EBITDAX for the four fiscal
quarters ending on such date to be greater than 3.5 to 1.0; provided that, for
purposes of this Section 9.01(a), EBITDAX for the four fiscal quarters ending
(i) December 31, 2012, shall equal EBITDAX for the fiscal quarter ending on such
date multiplied by four (4), (ii) March 31, 2013, shall equal EBITDAX for the
two fiscal quarters ending on such date multiplied by two (2) and (iii) June 30,
2013, shall equal EBITDAX for the three fiscal quarters ending on such date
multiplied by four (4) and divided by three (3).

 

(b)  Current Ratio. The Borrower will not, as of the last day of any fiscal
quarter, commencing with the quarter ending December 31, 2012, permit its ratio
of (i) consolidated current assets (including the unused amount of the total
Commitments, but excluding non-cash current assets under ASC 815) to (ii)
consolidated current liabilities (excluding non-cash current obligations under
ASC 815, reclamation obligations to the extent classified as current liabilities
under GAAP, and current maturities under this Agreement) to be less than 1.0 to
1.0.

 

(c)  Fixed Charge Coverage Ratio. The Borrower will not, as of the last day of
any fiscal quarter, commencing with the quarter ending December 31, 2012, permit
its Fixed Charge Coverage Ratio for any four consecutive quarters to be less
than 3:1.

 

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

 

(a)  the Loans or other Secured Obligations arising under the Loan Documents or
any guaranty of or suretyship arrangement for the Loans or other Secured
Obligations arising under the Loan Documents.

 

(b)  Debt of any Loan Party under Capital Leases not exceed $1,000,000.

 

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

 

(d)  Debt between (i) the Borrower and its Subsidiaries which are Loan Parties
and (ii) the Subsidiaries of the Borrower which are Loan Parties.

 

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

 

(f)  the Preferred Stock.

 

(g)  other Debt not to exceed $1,000,000 in the aggregate at any one time
outstanding.

 

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

 

(a)  Liens securing the payment of any Secured Obligations.

 

(b)  Liens existing on the Effective Date and disclosed on Schedule 9.03 and
Excepted Liens.

 

(c)  Liens securing Capital Leases permitted by Section 9.02(d) but only on the
Property that is the subject of any such lease.

 

(d)  other Liens on Property not constituting collateral for the Secured
Obligations not to exceed $1,000,000 in the aggregate at any one time
outstanding.

 

Section 9.04.         Dividends, Distributions and Redemptions. The Borrower
will not, and will not permit any of the other Loan Parties to, declare or make,
or agree to pay or make, directly or indirectly, any Restricted Payment, return
any capital or make any distribution of its Property to its Equity Interest
holders, except (i) the Borrower may make Restricted Payments with respect to
its Equity Interests with or by issuing additional shares of its Equity
Interests (other than Disqualified Capital Stock), (ii) Subsidiaries of the
Borrower may declare and pay dividends ratably with respect to their holders’
Equity Interests, (iii) so long as no Default, Event of Default or Borrowing
Base Deficiency is occurring or would result therefrom, the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for it and its Subsidiaries’ respective management or
employees, and (iv) so long as no Default, Event of Default or Borrowing Base
Deficiency is occurring or would result therefrom, the Borrower may make
dividends with respect to the Preferred Stock at a rate no more than 8% per
annum as follows: (A) for any period from the Effective Date through December
31, 2013 by issuing additional Preferred Stock, (B) for the period beginning
January 1, 2014 through December 31, 2014 by issuing additional Preferred Stock
for 50% of any such dividend and in cash for the other 50% and (C) thereafter in
cash.

 

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

 

(a)  Investments reflected in the Financial Statements delivered on or prior to
the Effective Date and which are disclosed to the Lenders in Schedule 9.05.

 

(b)  accounts receivable arising in the ordinary course of business or under
Section 9.10.

 

(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 $500,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively.

 

(f)  Investments in money market or similar funds with assets of at least
$1,000,000,000 and rated Aaa by Moody’s and AAA by S&P.

 

(g)  Investments (i) made by the Borrower in or to its Subsidiaries which are
Loan Parties or (ii) made by the Subsidiaries of the Borrower which are Loan
Parties to each other and the Borrower.

 

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

 

(i)  loans or advances to employees, officers or directors in the ordinary
course of business of the Borrower or any of the other Loan Parties, 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 $200,000 in the aggregate at
any time.

 

(j)  Investments in stock, obligations or securities received in settlement of
debts arising from Investments permitted under this Section 9.05 owing to the
Borrower or any other Loan Party 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 other Loan Parties; provided
that the Borrower shall give the Administrative Agent prompt written notice in
the event that the aggregate amount of all Investments held at any one time
under this Section 9.05(j) exceeds $250,000.

 

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(k)  other Investments not to exceed $1,000,000 in the aggregate at any time.

 

Section 9.06.         Nature of Business; No International Operations. The
Borrower will not, and will not permit any other Loan Party to, allow any
material change to be made in the character of its business as an independent
oil and gas exploration and production company. The Loan Parties will not
acquire or make any other expenditures (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.

 

Section 9.07.         Limitation on Leases. The Borrower will not, and will not
permit any other Loan Party 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 Loan Parties pursuant to all such leases or
lease agreements, including any residual payments at the end of any lease, to
exceed $1,000,000 in any period of twelve consecutive calendar months during the
life of such leases.

 

Section 9.08.         Proceeds of Notes. The Borrower will not permit the
proceeds of the Borrowings to be used for any purpose other than those permitted
by Section 7.23. No Loan Party nor any Person acting on behalf of the Borrower
has taken or will take any action which might cause any of the Loan Documents to
violate Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect. If requested by the Administrative Agent, the Borrower will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

 

Section 9.09.         ERISA Compliance. The Borrower will not, and will not
permit any ERISA Affiliate to, at any time:

 

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

 

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

 

(c)  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, any Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto.

 

(d)  fail to satisfy, or allow any ERISA Affiliate to fail to satisfy, the
minimum funding standards (within the meaning of Section 412 of the Code or
Section 302 of ERISA), in any case whether or not waived, with respect to any
Plan.

 

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

 

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(f)  acquire, or permit any ERISA Affiliate to acquire, an interest in any
Person that causes such Person to become an ERISA Affiliate with respect to any
Subsidiary or with respect to any ERISA Affiliate if such Person sponsors,
maintains or contributes to, or at any time in the six-year period preceding
such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA
under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities.

 

Section 9.10.         Sale or Discount of Receivables. Except for receivables
obtained by the Loan Parties out of the ordinary course of business or the
settlement of joint interest billing accounts in the ordinary course of business
or discounts granted to settle collection of accounts receivable or the sale of
defaulted accounts arising in the ordinary course of business in connection with
the compromise or collection thereof and not in connection with any financing
transaction, the Borrower will not, and will not permit any other Loan Party to,
discount or sell (with or without recourse) any of its notes receivable or
accounts receivable.

 

Section 9.11.         Mergers, Etc. Neither the Borrower nor any other Loan
Party will merge into or with or consolidate with any other Person, or permit
any other Person to merge into or consolidate with it, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property to any other Person, (whether now owned
or hereafter acquired) (any such transaction, a “consolidation”), or liquidate
or dissolve; except that (i) any Loan Party may consolidate with or into the
Borrower (provided the Borrower shall be the continuing or surviving
corporation) and (ii) any Loan Party (other than the Borrower) may consolidate
with any Subsidiary of the Borrower which is a Loan Party (provided such
Subsidiary shall be the continuing or surviving corporation), in each case, so
long as no Default is continuing or would occur as a result and notice of such
consolidation is provided to the Administrative Agent five Business Days prior
to such consolidation.

 

Section 9.12.         Sale of Properties and Termination of Hedging
Transactions. The Borrower will not, and will not permit any other Loan Party
to, sell, assign, farm-out, convey or otherwise transfer any Property (subject
to Section 9.11) except for:

 

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

 

(b)  farmouts in the ordinary course of business of undeveloped acreage or
undrilled depths and assignments in connection with such farmouts;

 

(c)  the sale or transfer of equipment that is no longer necessary for the
business of the Borrower or such other Loan Party or are replaced by equipment
of at least comparable value and use; and

 

(d)  the sale or other disposition (including Casualty Events) of any Oil and
Gas Property or any interest therein or the termination, unwinding, cancellation
or other disposition of Swap Agreements; provided that:

 

(i)  100% of the consideration received in respect of such sale or other
disposition of any such Oil and Gas Property shall be cash,

 

(ii) (other than in respect of Casualty Events) the consideration received in
respect of a sale or other disposition of any Oil and Gas Property shall be
equal to or greater than the fair market value of the Oil and Gas Property or
interest therein subject of such sale or other disposition (as reasonably
determined by a Responsible Officer of the Borrower and if requested by the
Administrative Agent, the Borrower shall deliver a certificate of a Responsible
Officer of the Borrower certifying to the foregoing),

 

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(iii)  no Default or Event of Default is occurring or would result and no
Borrowing Base Deficiency would result from any such sale or disposition of Oil
and Gas Properties or any such termination, unwinding, cancellation or other
disposition of Swap Agreements; and

 

(iv)  if the the fair market value attributable to the Oil and Gas Property
(including farm-outs under Section 9.12(b)) included in the most recently
delivered Reserve Report in connection with such sale or other disposition,
during any period between two successive Scheduled Redetermination Dates is in
excess of five percent (5%) of the Borrowing Base as then in effect (as
determined by the Administrative Agent), individually or in the aggregate, the
Borrowing Base shall be reduced, effective immediately upon such sale,
disposition termination, unwind or cancellation, by an amount equal to the
value, if any, attributed to such Property in the Borrowing Base based on the
most recently delivered Reserve Report;

 

(e)  sales and other dispositions of Properties (not otherwise regulated by
Section 9.12(a) through (d)) having a fair market value not to exceed $1,000,000
during any 12-month period;

 

(f)  transfers of Properties from any Loan Party to the Borrower or any
Subsidiary of the Borrower that is a Loan Party; and

 

(g)  Casualty Events of Properties which are not Oil and Gas Properties.

 

Section 9.13.         Sales and Leasebacks. The Borrower will not, and will not
permit any other Loan Party to enter into any arrangement with any Person
providing for the leasing by any Loan Party of real or personal property that
has been or is to be sold or transferred by such Loan Party to such Person or to
any other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of such Loan Party.

 

Section 9.14.         Environmental Matters. The Borrower will not, and will not
permit any other Loan Party to, (i) cause or knowingly permit any of its
Property to be in violation of, or (ii) do anything or knowingly permit anything
to be done which will subject any such Property to any Remedial Work (other than
Remedial Work done in the ordinary course of business) under, any Environmental
Laws that could reasonably be expected to have a Material Adverse Effect; it
being understood that clause (ii) above will not be deemed as limiting or
otherwise restricting any obligation to disclose any relevant facts, conditions
and circumstances pertaining to such Property to the appropriate Governmental
Authority.

 

Section 9.15.         Transactions with Affiliates. The Borrower will not, and
will not permit any other Loan Party 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 between Borrower and Subsidiaries of the
Borrower who are Loan Parties) unless such transactions are otherwise permitted
under this Agreement and are upon fair and reasonable terms no less favorable to
it than it would obtain in a comparable arm’s length transaction with a Person
not an Affiliate.

 

Section 9.16.         Subsidiaries. The Borrower will not, and will not permit
any other Loan Party to, create or acquire any additional Subsidiaries unless
the Borrower gives written notice to the Administrative Agent of such creation
or acquisition and complies with Section 8.14(b) and Section 8.14(c).

 

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Section 9.17.         Negative Pledge Agreements; Dividend Restrictions. The
Borrower will not, and will not permit any other Loan Party to, create, incur,
assume or suffer to exist any contract, agreement or understanding which in any
way prohibits or restricts (a) the granting, conveying, creation or imposition
of any Lien on any of its Property to secure the Secured Obligations or which
requires the consent of or notice to other Persons in connection therewith or
(b) the Borrower or any other Loan Party from paying dividends or making
distributions to any Loan Party or receiving any money in respect of Debt or
other obligations owed to it, or which requires the consent of or notice to
other Persons in connection therewith; provided that (i) the foregoing shall not
apply to restrictions and conditions under the Loan Documents, (ii) the
foregoing shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of any asset or a Loan Party pending such sale;
provided such restrictions and conditions apply only to the asset or Loan Party
that is to be sold and such sale is permitted hereunder, and (iv) clause (a) of
the foregoing shall not apply to (A) restrictions or conditions imposed by any
agreement relating to Capital Leases permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Secured Obligations and (B) customary provisions in leases restricting the
assignment thereof.

 

Section 9.18.         Take-or-Pay or Other Prepayments. The Borrower will not,
and will not permit any other Loan Party to, allow take-or-pay or other
prepayments with respect to the Oil and Gas Properties of the Borrower or any
other Loan Party that would require the Borrower or such other Loan Party to
deliver Hydrocarbons at some future time without then or thereafter receiving
full payment therefor.

 

Section 9.19.         Swap Agreements.

 

(a)  The Borrower will not, and will not permit any other Loan Party to, enter
into any Swap Agreements with any Person other than (i) Swap Agreements in
respect of commodities (A) with an Approved Counterparty and (B) the notional
volumes for which (when aggregated and netted with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such
Swap Agreement is executed, 80% of production from the proved, developed
producing Oil and Gas Properties, as listed on the most recently delivered
Reserve Report pursuant to Section 2.07, of the Loan Parties for each of crude
oil, liquids and natural gas, calculated separately, for each month during the
period commencing on the month when such Swap Agreement is in executed and
ending no later than 60 months later; and (ii) Swap Agreements in respect of
interest rates with an Approved Counterparty as follows: (A) Swap Agreements
effectively converting interest rates from fixed to floating, the notional
amounts of which (when aggregated with all other Swap Agreements of the Borrower
and its Subsidiaries then in effect effectively converting interest rates from
fixed to floating) do not exceed 75% of the then outstanding principal amount of
the Borrower’s Debt for borrowed money which bears interest at a fixed rate and
(B) Swap Agreements effectively converting interest rates from floating to
fixed, the notional amounts of which (when aggregated with all other Swap
Agreements of the Borrower and its Subsidiaries then in effect effectively
converting interest rates from floating to fixed) do not exceed 75% of the then
outstanding principal amount of the Borrower’s Debt for borrowed money which
bears interest at a floating rate.

 

(b)  Notwithstanding Section 9.19(a): (i) in no event shall any Swap Agreement
contain any requirement, agreement or covenant for any Loan Party to post
collateral or margin to secure their obligations under such Swap Agreement or to
cover market exposures, (ii) Swap Agreements shall only be entered into in the
ordinary course of business (and not for speculative purposes), (iii) no Swap
Agreement shall be terminated, unwound, cancelled or otherwise disposed of
except to the extent permitted by Section 9.12 and (iv) in no event shall any
Loan Party permit its production from proved, developed producing Oil and Gas
Properties during the then current month to be less than the aggregate amount of
production from the proved, developed producing Oil and Gas Properties which is
subject to Swap Agreements during such month.

 

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Section 9.20.         Anti-Terrorism Laws. The Borrower shall not permit, and
shall not permit the other Loan Parties to (a) conduct any business or engage in
making or receiving any contribution of funds, goods or services to or for the
benefit of any Person described in Section 7.26 above, (b) deal in, or otherwise
engage in any transaction relating to, any property of interests in property
blocked pursuant to the Executive Order of any other Anti-Terrorism Law or (c)
engage in or conspire to engage in any transaction that evades or avoids, or has
the purpose of evading or avoiding, or attempts to violate, (i) any of the
prohibitions set forth in any Anti-Terrorism Law or (ii) any prohibitions set
forth in the rules or regulations issued by OFAC (and, in each case, the
Borrower shall cause each of the other Loan Parties to promptly deliver or cause
to be delivered to the Lenders any certification or other evidence requested
from time to time by any Lender in its reasonable discretion, confirming the
Loan Parties’ compliance with this Section 9.20).

 

ARTICLE X

Events of Default; Remedies

 

Section 10.01.         Events of Default. One or more of the following events
shall constitute an “Event of Default”:

 

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

 

(b)  the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in Section 10.01(a)) payable
under any Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of three (3) Business Days.

 

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

 

(d)  the Borrower or any other Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in Section 8.01(l), Section 8.02 or
in ARTICLE IX.

 

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

 

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(f)  the Borrower or any other Loan Party shall (i) fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable.

 

(g)  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 Borrower or any other Loan Party to make an
offer in respect thereof.

 

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

 

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

 

(j)  (i) one or more judgments for the payment of money in an aggregate amount
in excess of $1,000,000 (to the extent not covered by independent third party
insurance provided by financially sound and reputable insurers as to which the
insurer does not dispute coverage and is not subject to an insolvency
proceeding) or (ii) any one or more non-monetary judgments that have, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, shall be rendered against any Loan Party or any combination
thereof and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to attach or levy upon any assets of any
Loan Party to enforce any such judgment.

 

(k)  the Loan Documents after delivery thereof shall for any reason, except to
the extent permitted by the terms thereof, cease to be in full force and effect
and valid, binding and enforceable in accordance with their terms against the
Borrower or a Loan Party party thereto or shall be 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 Borrower or any other Loan
Party or any of their Affiliates shall so state in writing.

 

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(l)  the Borrower or any other Loan Party shall (i) fail to make any payment in
an amount of $250,000 or more (whether in the form of an exchange or redemption
or a dividend) in respect of any Preferred Stock, when and as the same shall
become due and payable or (ii) default in the observance or performance of any
material covenant or agreement in the Preferred Stock Agreement or any other
agreement or condition relating to any such Preferred Stock or contained in any
instrument or agreement relating thereto and such failure shall continued
unremedied for any applicable grace period contained in the Preferred Stock
Agreement or such other instrument or agreement relating thereto.

 

(m)  a Change in Control shall occur.

 

Section 10.02.         Remedies.

 

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

 

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

 

(c)  All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Loans, whether by
acceleration or otherwise, shall be applied:

 

(i)          first, to payment or reimbursement of that portion of the Secured
Obligations constituting fees, expenses and indemnities payable to the
Administrative Agent in its capacity as such;

 

(ii)         second, pro rata to payment or reimbursement of that portion of the
Secured Obligations constituting fees, expenses and indemnities payable to the
Lenders;

 

(iii)        third, pro rata to payment of accrued interest on the Loans;

 

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(iv)         fourth, pro rata to payment of principal outstanding on the Loans
and Secured Obligations referred to in Clause (b) of the definition of Secured
Obligations owing to a Lender or an Affiliate of a Lender and of Secured
Obligations in respect of Secured Cash Management Agreements and Secured Swap
Agreements;

 

(v)          fifth, pro rata to any other Secured Obligations;

 

(vi)         sixth, to serve as cash collateral to be held by the Administrative
Agent to secure the LC Exposure; and

 

(vii)        seventh, any excess, after all of the Secured Obligations shall
have been indefeasibly paid in full in cash, shall be paid to the Borrower or as
otherwise required by any Governmental Requirement.

 

ARTICLE XI
The AgentS

 

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

 

Section 11.02.         Duties and Obligations of Administrative Agent. The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing (the use of the term “agent” herein and in the other Loan
Documents with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
Agent shall have no duty to take any discretionary action or exercise any
discretionary powers, except as provided in Section 11.03, and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any Loan Party that is communicated to or obtained
by the bank serving as Administrative Agent or any of its Affiliates in any
capacity. The Administrative Agent shall be deemed not to have knowledge of any
Default unless and until written notice thereof is given to the Administrative
Agent by the Borrower or a Lender, and shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with this Agreement or any other Loan Document, (ii)
the contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in ARTICLE VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent
or as to those conditions precedent expressly required to be to the
Administrative Agent’s satisfaction, (vi) the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
Borrower and the other Loan Parties or any other obligor or guarantor, or (vii)
any failure by the Borrower or any other Person (other than itself) to perform
any of its obligations hereunder or under any other Loan Document or the
performance or observance of any covenants, agreements or other terms or
conditions set forth herein or therein. For purposes of determining compliance
with the conditions specified in ARTICLE VI, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed closing date specifying
its objection thereto.

 

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

 

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

 

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Section 11.05.         Subagents. The Administrative Agent may perform any and
all its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

 

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

 

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

 

Section 11.08.         No Reliance. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent, any other
Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement and each other Loan Document to which it is a party. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent, any other Agent or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document, any related agreement or any
document furnished hereunder or thereunder. The Agents shall not be required to
keep themselves informed as to the performance or observance by, the Borrower or
any of the other Loan Parties of this Agreement, the Loan Documents or any other
document referred to or provided for herein or to inspect the Properties or
books of any such Person. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, no Agent or Arranger shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower or any
Loan Party (or any of their Affiliates) which may come into the possession of
such Agent or any of its Affiliates. In this regard, each Lender acknowledges
that Simpson Thacher & Bartlett LLP is acting in this transaction as special
counsel to the Administrative Agent only, except to the extent otherwise
expressly stated in any legal opinion or any Loan Document. Each other party
hereto will consult with its own legal counsel to the extent that it deems
necessary in connection with the Loan Documents and the matters contemplated
therein.

 

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Section 11.09.         Administrative Agent May File Proofs of Claim.

 

In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Borrower or any of the other Loan Parties,
the Administrative Agent (irrespective of whether the principal of any Loan
shall then be due and payable as herein expressed or by declaration or otherwise
and irrespective of whether the Administrative Agent shall have made any demand
on the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

 

(a)  to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans and all other Secured
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,
expenses, disbursements and advances of the Lenders and the Administrative Agent
and their respective agents and counsel and all other amounts due the Lenders
and the Administrative Agent under Section 12.03) allowed in such judicial
proceeding; and

 

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

 

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

 

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

 

Section 11.10.         Authority of Administrative Agent to Release Collateral
and Liens. Each Lender and the Issuing Bank(s) hereby authorizes the
Administrative Agent to release any collateral that is permitted to be sold or
released pursuant to the terms of the Loan Documents. Each Lender and the
Issuing Bank(s) hereby authorizes the Administrative Agent to execute and
deliver to the Borrower, at the Borrower’s sole cost and expense, any and all
releases of Liens, termination statements, assignments or other documents
reasonably requested by the Borrower in connection with any sale or other
disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.12 or is otherwise authorized by the terms
of the Loan Documents. Upon request by the Administrative Agent at any time, the
Majority 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 Guarantor from its obligations under any Guaranty Agreement
pursuant to this Section 11.10.

 

Section 11.11.         Duties of any Arranger or Agent. Any Arranger or Agent
shall have no duties, responsibilities or liabilities under this Agreement and
the other Loan Documents other than their duties, responsibilities and
liabilities in their capacity as Lenders hereunder.

 

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ARTICLE XII

Miscellaneous

 

Section 12.01.         Notices.

 

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

 

(i)            if to the Borrower, to it at:

Emerald Oil, Inc.

1600 Broadway, Suite 1040

Denver, Colorado 80202

Attention: Paul Wiesner

Fax: 303-323-0008

Email: paulw@emeraldoil.com

 

(ii)           if to the Administrative Agent or WF as Issuing Bank, to it at:

1700 Lincoln Street, Suite 64

Denver, Colorado 80203

Attention: Tim Green

Fax: 303-863-5196

Email: Tim.Green@wellsfargo.com

 

(iii)          if to any other Lender or Issuing Bank, to it at its address (or
facsimile number or e-mail address) set forth in its Administrative
Questionnaire.

 

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

 

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

 

Section 12.02.         Waivers; Amendments.

 

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

 

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Neither this Agreement nor any provision hereof nor any Security Instrument nor
any provision thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Borrower and/or the other
applicable Loan Parties and the Majority Lenders or by the Borrower and/or the
other applicable Loan Parties and the Administrative Agent with the consent of
the Majority Lenders; provided that no such agreement shall (i) increase the
Maximum Credit Amount of any Lender without the written consent of such Lender,
(ii) increase the Borrowing Base without the written consent of each
non-Defaulting Lender, decrease or maintain the Borrowing Base without the
consent of the Required Lenders, (iii) reduce the principal amount of any Loan
or LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, or reduce any other Secured Obligations hereunder or under
any other Loan Document, without the written consent of each Lender affected
thereby, (iv) postpone the scheduled date of payment or prepayment of the
principal amount of any Loan or LC Disbursement, or any interest thereon, or any
fees payable hereunder, or any other Secured Obligations hereunder or under any
other Loan Document, or reduce the amount of, waive or excuse any such payment,
or postpone the Termination Date without the written consent of each Lender
affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that
would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (vi) waive or amend Section 10.02(c) without the
written consent of each Lender, Secured Swap Provider or Cash Management
Provider, (vii) release any Guarantor (except as set forth in the Guaranty
Agreement), release all or substantially all of the collateral (other than as
provided in Section 11.10), or reduce the percentages set forth in Section
8.14(a), without the written consent of each Lender, (viii) modify any Security
Instrument in a manner that results in the Secured Swap Obligations secured by
such Security Instrument no longer being secured thereby on an equal and ratable
basis with the principal of the Loans, or amend or otherwise change the
definition of “Secured Swap Agreement” or “Secured Swap Provider”, without the
written consent of each Secured Swap Provider adversely affected thereby or (ix)
change any of the provisions of this Section 12.02(b) or the definitions of
“Majority Lenders” or “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or under any other Loan Documents or make any
determination or grant any consent hereunder or any other Loan Documents,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, any Agent or Issuing Bank hereunder or under any other
Loan Document without the prior written consent of the Administrative Agent,
such Agent or Issuing Bank, as the case may be. Notwithstanding the foregoing,
any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by
delivering to the Administrative Agent a supplemental schedule clearly marked as
such and, upon receipt, the Administrative Agent will promptly deliver a copy
thereof to the Lenders. Notwithstanding the foregoing, the Borrower and the
Administrative Agent may amend this Agreement or any other Loan Document without
the consent of the Lenders to add covenants or other provisions in order to
permit the Loan Parties to comply with Section 9.04(b)(ii) or in order to
correct, amend or cure any ambiguity, inconsistency or defect or correct any
typographical error or other manifest error in any Loan Document.

 

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Section 12.03.         Expenses, Indemnity; Damage Waiver.

 

(a)  The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred
by the Administrative Agent and its Affiliates, including the reasonable fees,
charges and disbursements of counsel and other outside consultants for the
Administrative Agent, the reasonable travel, photocopy, mailing, courier,
telephone and other similar expenses, and the cost of environmental invasive and
non-invasive assessments and audits and surveys and appraisals, in connection
with the syndication of the credit facilities provided for herein, the
preparation, negotiation, execution, delivery and administration (both before
and after the execution hereof and including advice of counsel to the
Administrative Agent as to the rights and duties of the Administrative Agent and
the Lenders with respect thereto) of this Agreement and the other Loan Documents
and any amendments, modifications or waivers of or consents related to the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all costs, expenses, taxes,
assessments and other charges incurred by any Agent or any Lender in connection
with any filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any Security Instrument or any other document
referred to therein, (iii) all reasonable out-of-pocket expenses incurred by the
Issuing Bank in connection with the issuance, amendment, renewal or extension of
any Letter of Credit or any demand for payment thereunder, (iv) all reasonable
out-of-pocket expenses incurred by any Agent, the Issuing Bank or any Lender,
including the reasonable fees, charges and disbursements of any counsel for any
Agent, the Issuing Bank or any Lender, in connection with the enforcement or
protection of its rights in connection with this Agreement or any other Loan
Document, including its rights under this Section 12.03, or in connection with
the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

 

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(b)  THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, THE ISSUING BANK AND
EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH
PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND DEFEND AND HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES,
LIABILITIES AND RELATED EXPENSES, INCLUDING THE REASONABLE FEES, CHARGES AND
DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST
ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE
EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, (ii) THE PERFORMANCE BY
THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (iii) THE FAILURE OF THE
BORROWER OR ANY OTHER LOAN PARTY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT,
INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iv) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF
THE BORROWER OR ANY OTHER LOAN PARTY SET FORTH IN ANY OF THE LOAN DOCUMENTS OR
ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH,
(v) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM,
INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY AN ISSUING BANK TO HONOR A
DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN
CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER
OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT
NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION
OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (vi) ANY OTHER ASPECT OF THE
LOAN DOCUMENTS, (vii) THE OPERATIONS OF THE BUSINESS OF THE BORROWER OR ANY
OTHER LOAN PARTY BY SUCH PERSONS, (viii) ANY ASSERTION THAT THE LENDERS WERE NOT
ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS,
(ix) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OTHER LOAN PARTY OR
ANY OF THEIR PROPERTIES OR OPERATIONS, INCLUDING WITHOUT LIMITATION, THE
PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT,
DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID
WASTES OR HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES, (x) THE BREACH
OR NON-COMPLIANCE BY THE BORROWER OR ANY OTHER LOAN PARTY WITH ANY ENVIRONMENTAL
LAW APPLICABLE TO THE BORROWER OR ANY OTHER LOAN PARTY, (xi) THE PAST OWNERSHIP
BY THE BORROWER OR ANY OTHER LOAN PARTY OF ANY OF THEIR PROPERTIES OR PAST
ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE
AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xii) THE PRESENCE, USE,
RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE,
TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND
GAS WASTES, SOLID WASTES OR HAZARDOUS MATERIALS ON OR AT ANY OF THE PROPERTIES
OWNED OR OPERATED BY THE BORROWER OR ANY OTHER LOAN PARTY OR ANY ACTUAL OR
ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED
OR OPERATED BY THE BORROWER OR ANY OTHER LOAN PARTY, (xiii) ANY ENVIRONMENTAL
LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OTHER LOAN PARTY, (xiv) ANY
OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS, OR (xv) 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 ANY LOAN PARTY, AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNITEES INCLUDING ORDINARY NEGLIGENCE;
PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO
THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES
ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNITEE. THIS SECTION 12.03(b) SHALL NOT APPLY WITH RESPECT TO TAXES
OTHER THAN ANY TAXES THAT REPRESENT LOSSES, CLAIMS, DAMAGES, ETC. ARISING FROM
ANY NON-TAX CLAIM.

 

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(c)  To the extent that the Borrower fails to pay any amount required to be paid
by it to any Agent, Arranger or Issuing Bank under Section 12.03(a) or (b), each
Lender severally agrees to pay to such Agent, Arranger or Issuing Bank, as the
case may be, such Lender’s Applicable Percentage (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against such Agent, Arranger or Issuing Bank in its capacity as
such.

 

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

 

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

 

Section 12.04.    Successors and Assigns.

 

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

 

(b)  (i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender
may assign to one or more assignees (each, an “Assignee”) all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it) with the prior written
consent) of:

 

(A)         the Borrower (such consent not to be unreasonably withheld),
provided that no consent of the Borrower shall be required for an assignment to
a Lender, an Affiliate of a Lender, or, if an Event of Default has occurred and
is continuing, to any Assignee; provided further, that the Borrower shall be
deemed to have consented to any such assignment unless the Borrower shall object
thereto by written notice to the Administrative Agent with five Business days
after having received notice thereof; and

 

(B)         the Administrative Agent and each Issuing Bank.

 

(ii)         Assignments shall be subject to the following additional
conditions:

 

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

 

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

 

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

 

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

 

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

 

(iv)        The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitments of, and principal amount of the
Loans and LC Exposure owing to, each Lender pursuant to the terms hereof from
time to time (the “Register”). The entries in the Register shall be conclusive,
and the Borrower, the Administrative Agent, the Issuing Bank(s) 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,
notwithstanding notice to the contrary. Any Assignment and Assumption, whether
or not evidenced by a Note or other Loan Document, shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by the Borrower, the Issuing Bank and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice. In connection with any changes to the Register, if necessary, the
Administrative Agent will reflect the revisions on Annex I and forward a copy of
such revised Annex I to the Borrower, the Issuing Bank and each Lender.

 

(v)         Upon its receipt of a duly completed Assignment and Assumption
executed by an assigning Lender and an assignee, the Assignee’s completed
Administrative Questionnaire and, if required hereunder, applicable tax forms
(unless the Assignee shall already be a Lender hereunder), the processing and
recordation fee referred to in Section 12.04(b) and any written consent to such
assignment required by Section 12.04(b), the Administrative Agent shall accept
such Assignment and Assumption and record the information contained therein in
the Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this Section
12.04(b).

 

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(vi)        Notwithstanding the foregoing, no assignment or participation shall
be made to any Loan Party or any Affiliate of a Loan Party.

 

(c)  Any Lender may, without the consent of the Borrower, the Administrative
Agent or the Issuing Bank, sell participations to one or more banks or other
entities (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided that (A) such Lender’s obligations under
this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(C) the Borrower, the Administrative Agent, the Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement and
(D) such Lender shall continue to give prompt attention to and process
(including, if required, through discussions with Participants) requests for
waivers or amendments hereunder. Any agreement or instrument pursuant to which a
Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such Participant. In
addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03. The Borrower agrees that each Participant shall be
entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 (subject
to the requirements and limitations therein, including the requirements under
Section 5.03(g) (it being understood that the documentation required under
Section 5.03(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 paragraph (b) of this Section; provided that such Participant (i)
agrees to be subject to the provisions of Section 5.02 and Section 5.03 as if it
were an assignee under paragraph (b) of this Section and (ii) shall not be
entitled to receive any greater payment under Section 5.02 or Section 5.03, 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 an adoption of or any change in any law or in the
interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof that
occurs after the Participant acquired the applicable participation. To the
extent permitted by law, each Participant also shall be entitled to the benefits
of Section 12.08 as though it were a Lender, provided such Participant agrees to
be subject to Section 4.01(c) as though it were a Lender. Each Lender that sells
a participation shall, acting solely for this purpose as an agent of the
Borrower, shall 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 that no Lender shall have any
obligation to disclose all or any portion of the Participant Register to any
Person (including the identity of any Participant or any information relating to
a Participant’s interest in any Commitments, Loans, Letters of Credit or its
other obligations under any Loan Document) except to the extent that such
disclosure is necessary to establish that such Commitment, Loan, Letter of
Credit 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
shall be 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. Any sale or transfer of a participation, however evidenced, shall
be effective only upon appropriate entries with respect thereto being made in
the Participant Register. For the avoidance of doubt, the Administrative Agent
(in its capacity as Administrative Agent) shall have no responsibility for
maintaining a Participant Register.

 

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

 

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

 

Section 12.05.    Survival; Revival; Reinstatement.

 

(a)  All covenants, agreements, representations and warranties made by the Loan
Parties herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent or any other Agent, Issuing Bank or Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit or other Secured Obligations are outstanding. The
provisions of Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and
ARTICLE XI shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement, any other Loan Document or any
provision hereof or thereof.

 

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

 

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Section 12.06.    Counterparts; Integration; Effectiveness.

 

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

 

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

 

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

 

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

 

Section 12.08.   Right of Setoff. If an Event of Default shall have occurred and
be continuing, each Lender and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including, without limitations obligations under Swap Agreements) at any
time owing by such Lender or Affiliate to or for the credit or the account of
the Borrower or any other Loan Party against any of and all the obligations of
the Borrower or any other Loan Party owed to such Lender now or hereafter
existing under this Agreement or any other Loan Document, irrespective of
whether or not such Lender shall have made any demand under this Agreement or
any other Loan Document and although such obligations may be unmatured. The
rights of each Lender under this Section 12.08 are in addition to other rights
and remedies (including other rights of setoff) which such Lender or its
Affiliates may have; provided that in the event that any Defaulting Lender shall
exercise any such right of setoff, (x) all amounts so set off shall be paid over
immediately to the Administrative Agent for further application in accordance
with the provisions of Section 10.02(c) and, pending such payment, shall be
segregated by such Defaulting Lender from its other funds and deemed held in
trust for the benefit of the Administrative Agent, Issuing Bank(s) and the
Lenders, and (y) the Defaulting Lender shall provide promptly to the
Administrative Agent a statement describing in reasonable detail the Secured
Obligations owing to such Defaulting Lender as to which it exercised such right
of setoff. The rights of each Lender, Issuing Bank(s) and their respective
Affiliates under this Section 12.08 are in addition to other rights and remedies
(including other rights of setoff) that such Lender, Issuing Bank(s) or their
respective Affiliates may have. Each Lender and Issuing Bank agrees to notify
the Borrower and the Administrative Agent promptly after any such setoff and
application; provided further that the failure to give such notice shall not
affect the validity of such setoff and application.

 

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Section 12.09.    GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

 

(a)  THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT
UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE,
RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH
LENDER IS LOCATED.

 

(b)  EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY: SUBMITS (AND THE
BORROWER SHALL CAUSE EACH LOAN PARTY TO SUBMIT) FOR ITSELF AND ITS PROPERTY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK AND APPELLATE COURTS FROM ANY THEREOF; PROVIDED, THAT NOTHING CONTAINED
HEREIN OR IN ANY OTHER LOAN DOCUMENT WILL PREVENT ANY LENDER OR THE
ADMINISTRATIVE AGENT FROM BRINGING ANY ACTION TO ENFORCE ANY AWARD OR JUDGMENT
OR EXERCISE ANY RIGHT UNDER THE SECURITY INSTRUMENTS OR AGAINST ANY COLLATERAL
OR ANY OTHER PROPERTY OF ANY LOAN PARTY IN ANY OTHER FORUM IN WHICH JURISDICTION
CAN BE ESTABLISHED. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.

 

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

 

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(d)  EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

 

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

 

Section 12.11.    Confidentiality. Each of the Administrative Agent and each
Lender agrees to keep confidential all non-public information provided to it by
any Loan Party, the Administrative Agent or any Lender pursuant to or in
connection with this Agreement that is designated by the provider thereof as
confidential; provided that nothing herein shall prevent the Administrative
Agent or any Lender from disclosing any such information (a) to the
Administrative Agent, any other Lender or any affiliate thereof, (b) subject to
an agreement to comply with the provisions of this Section, to any actual or
prospective Transferee or any direct or indirect counterparty to any Swap
Agreement (or any professional advisor to such counterparty) relating to the
Borrower and its obligations, (c) to its employees, directors, agents,
attorneys, accountants and other professional advisors or those of any of its
affiliates, (d) upon the request or demand of any Governmental Authority, (e) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Governmental Requirement, (f) if requested
or required to do so in connection with any litigation or similar proceeding,
(g) that has been publicly disclosed, (h) to the National Association of
Insurance Commissioners or any similar organization or any nationally recognized
rating agency that requires access to information about a Lender’s investment
portfolio in connection with ratings issued with respect to such Lender, (i) in
connection with the exercise of any remedy hereunder or under any other Loan
Document or (j) if agreed by the Borrower in its sole discretion by any other
Person.

 

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

 

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

 

91

 

 

Section 12.12.    Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America or any other jurisdiction whose laws may be mandatorily applicable to
such Lender notwithstanding the other provisions of this Agreement), then, in
that event, notwithstanding anything to the contrary in any of the Loan
Documents or any agreement entered into in connection with or as security for
the Notes, it is agreed as follows: (a) the aggregate of all consideration which
constitutes interest under law applicable to any Lender that is contracted for,
taken, reserved, charged or received by such Lender under any of the Loan
Documents or agreements or otherwise in connection with the Loans or Notes shall
under no circumstances exceed the maximum amount allowed by such applicable law,
and any excess shall be canceled automatically and if theretofore paid shall be
credited by such Lender on the principal amount of the Secured Obligations (or,
to the extent that the principal amount of the Secured Obligations shall have
been or would thereby be paid in full, refunded by such Lender to the Borrower);
and (b) in the event that the maturity of the Loans or Notes is accelerated by
reason of an election of the holder thereof resulting from any Event of Default
under this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to any Lender may never include more than the maximum amount allowed
by such applicable law, and excess interest, if any, provided for in this
Agreement or otherwise shall be canceled automatically by such Lender as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Debt (or, to the extent
that the principal amount of the Debt shall have been or would thereby be paid
in full, refunded by such Lender to the Borrower). All sums paid or agreed to be
paid to any Lender for the use, forbearance or detention of sums due hereunder
shall, to the extent permitted by law applicable to such Lender, be amortized,
prorated, allocated and spread throughout the stated term of the Loans until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.12.

 

Section 12.13.    Collateral Matters; Swap Agreements. The benefit of the
Security Instruments and of the provisions of this Agreement relating to any
collateral securing the Secured Obligations shall also extend to and be
available to the Secured Swap Providers in respect of the Secured Swap
Agreements as set forth herein. Except as set forth in Section 12.02(b)(v), no
Lender or any Affiliate of a Lender shall have any voting rights under any Loan
Document as a result of the existence of obligations owed to it under any such
Swap Agreements.

 

Section 12.14.    No Third Party Beneficiaries. This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans and any Issuing Bank
to issue, amend, renew or extend Letters of Credit hereunder are solely for the
benefit of the Borrower, and no other Person (including any other Loan Party of
the Borrower, any obligor, contractor, subcontractor, supplier or materialsman)
shall have any rights, claims, remedies or privileges hereunder or under any
other Loan Document against the Administrative Agent or any other Agent, Issuing
Bank or Lender for any reason whatsoever. There are no third party
beneficiaries.

 

92

 

 

Section 12.15.    EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”

 

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

 

Section 12.17.    Flood Insurance Provisions. Notwithstanding any provision in
this Agreement or any other Loan Document to the contrary, in no event is any
Building (as defined in the applicable Flood Insurance Regulation) or
Manufactured (Mobile) Home (as defined in the applicable Flood Insurance
Regulation) included in the definition of “Mortgaged Property” and no such
Building or Manufactured (Mobile) Home is hereby encumbered by this Agreement or
any other Loan Document. As used herein, “Flood Insurance Regulations” means (a)
the National Flood Insurance Act of 1968 as now or hereafter in effect or any
successor statute thereto, (b) the Flood Disaster Protection Act of 1973 as now
or hereafter in effect or any successor statue thereto, (c) the National Flood
Insurance Reform Act of 1994 (amending 42 USC 4001, et seq.), as the same may be
amended or recodified from time to time and (d) the Flood Insurance Reform Act
of 2004 and any regulations promulgated thereunder.

 

[SIGNATURES BEGIN NEXT PAGE]

 

93

 

 

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

 

BORROWER:     EMERALD OIL, INC.         By: /s/ Paul Wiesner   Name:  Paul
Wiesner   Title:  Chief Financial Officer

 

Signature Page

Credit Agreement

 

 

 

 

ADMINISTRATIVE AGENT: WELLS FARGO BANK, N.A.,   as Administrative Agent and
Lender         By: /s/  Suzanne Ridenhour   Name:  Suzanne Ridenhour   Title:
 Director

 

Signature Page

Credit Agreement

 

 

 

 

ANNEX I

 

LIST OF MAXIMUM CREDIT AMOUNTS

 

Aggregate Maximum Credit Amounts

 

Name of Lender  Applicable Percentage   Maximum Credit Amount  Wells Fargo Bank,
N.A.   100%  $400,000,000.00                                                    
                                 TOTAL:   100.0%  $400,000,000.00 

 

Annex i

 

 

 

 

EXHIBIT A

 

FORM OF NOTE

 

$[          ] [          ], 201[  ]

 

FOR VALUE RECEIVED, EMERALD OIL, INC., a Montana corporation, (the “Borrower”),
hereby promises to pay to [          ] (the “Lender”), at the principal office
of WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Administrative Agent”), the
principal sum of [          ] Dollars ($[          ]) (or such lesser amount as
shall equal the aggregate unpaid principal amount of the Loans made by the
Lender to the Borrower under the Credit Agreement, as hereinafter defined), in
lawful money of the United States of America and in immediately available funds,
on the dates and in the principal amounts provided in the Credit Agreement, and
to pay interest on the unpaid principal amount of each such Loan, at such
office, in like money and funds, for the period commencing on the date of such
Loan until such Loan shall be paid in full, at the rates per annum and on the
dates provided in the Credit Agreement.

 

The date, amount, Type, interest rate, Interest Period and maturity of each Loan
made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender’s or the Borrower’s rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.

 

This Note is one of the Notes referred to in the Credit Agreement dated as of
November 20, 2012 among the Borrower, the Guarantors, the Administrative Agent,
and the other agents and lenders signatory thereto (including the Lender), and
evidences Loans made by the Lender thereunder (such Credit Agreement as the same
may be amended, supplemented or restated from time to time, the “Credit
Agreement”). Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.

 

This Note is issued pursuant to, and is subject to the terms and conditions set
forth in, the Credit Agreement and is entitled to the benefits provided for in
the Credit Agreement and the other Loan Documents. The Credit Agreement provides
for the acceleration of the maturity of this Note upon the occurrence of certain
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Note.

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.

 

  EMERALD OIL, INC.         By:     Name:     Title:  

 

Exhibit A

 

 

 

 

EXHIBIT B

 

FORM OF BORROWING REQUEST

 

[          ], 201[  ]

 

Emerald Oil, Inc., a Montana corporation (the “Borrower”), pursuant to Section
2.03 of the Credit Agreement dated as of November 20, 2012 (together with all
amendments, restatements, supplements or other modifications thereto, the
“Credit Agreement”) among the Borrower, Wells Fargo Bank, National Association,
as Administrative Agent and the other agents and lenders (the “Lenders”) which
are or become parties thereto (unless otherwise defined herein, each capitalized
term used herein is defined in the Credit Agreement), hereby requests a
Borrowing as follows:

 

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

 

(2)         Date of such Borrowing is [          ], 201[ ];

 

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

 

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

 

(5)         Amount of Borrowing Base in effect on the date hereof is
$[          ];

 

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

 

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

 

(8)         Location and number of the Borrower’s account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.05 of the
Credit Agreement, is as follows:

 

[                                              ]

 

[                                              ]

 

[                                              ]

 

[                                              ]

 

[                                              ]

 

[Signature Page Follows]

 

Exhibit B

 

 

 

 

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

 

  EMERALD OIL, INC.         By:     Name:     Title:  

 

Exhibit B

 

 

 

 

EXHIBIT C

 

FORM OF INTEREST ELECTION REQUEST

 

[          ], 201[  ]

 

Emerald Oil, Inc., a Montana corporation, (the “Borrower”), pursuant to Section
2.04 of the Credit Agreement dated as of November 20, 2012 (together with all
amendments, restatements, supplements or other modifications thereto, the
“Credit Agreement”) among the Borrower, Wells Fargo Bank, National Association,
as Administrative Agent and the other agents and lenders (the “Lenders”) which
are or become parties thereto (unless otherwise defined herein, each capitalized
term used herein is defined in the Credit Agreement), hereby makes an Interest
Election Request as follows:

 

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

 

(9)         The effective date of the election made pursuant to this Interest
Election Request is [          ], 201[ ];[and]

 

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

 

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

 

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

 

  EMERALD OIL, INC.         By:     Name:     Title:  

 

Exhibit C

 

 

 

 

EXHIBIT D

 

FORM OF
COMPLIANCE CERTIFICATE

 

[_____________], 20[__]

 

The undersigned hereby certifies that he/she is the [          ] of Emerald Oil,
Inc., a Montana corporation (the “Borrower”), and that as such he/she is
authorized to execute this certificate on behalf of the Borrower. With reference
to the Credit Agreement dated as of November 20, 2012 (together with all
amendments, restatements, supplements or other modifications thereto being the
“Agreement”) among the Borrower, Wells Fargo Bank, National Association, as
Administrative Agent, and the other agents and lenders (the “Lenders”) which are
or become a party thereto, the undersigned represents and warrants as follows
(each capitalized term used herein having the same meaning given to it in the
Agreement unless otherwise specified):

 

1             The representations and warranties of the Borrower contained in
Article VII of the Agreement and in the Loan Documents and otherwise made in
writing by or on behalf of the Guarantor and the Borrower pursuant to the
Agreement and the Loan Documents were true and correct when made, and are
repeated at and as of the time of delivery hereof and are true and correct in
all material respects at and as of the time of delivery hereof, except to the
extent such representations and warranties are expressly limited to an earlier
date or the Majority Lenders have expressly consented in writing to the
contrary.

 

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

 

3             Since [Date], no change has occurred in the condition, financial
or otherwise, of the Guarantor, the Borrower or any Subsidiary which could
reasonably be expected to have a Material Adverse Effect [or specify event].

 

4             There exists no Default or Event of Default [or specify Default
and describe].

 

5              [Omit from the Compliance Certificate delivered on the Effective
Date:] Attached hereto are the detailed computations necessary to determine
whether the Borrower is in compliance with Section 9.01 as of the end of the
[fiscal quarter][fiscal year] ending [          ].

 

EXECUTED AND DELIVERED as of the date first written above.

 

  EMERALD OIL, INC.         By:     Name:     Title:  

 

Exhibit D

 

 

 

 

EXHIBIT E

 

SECURITY INSTRUMENTS

 

1.Guaranty and Collateral Agreement dates as of November 20, 2012 by the
Borrower and the Loan Parties in favor of the Administrative Agent and the
Lenders.

 

2.Financing Statements in respect of item 1, by

 

(a) the Borrower

 

(b) the Guarantors

 

3.Mortgage, Assignment of As-Extracted Collateral, Security Agreement, Line of
Credit Mortgage, Fixture Filing and Financing Statement from Emerald Oil, Inc.,
as Mortgagor to Wells Fargo Bank, National Association, as Administrative Agent.
(Montana)

 

4.Mortgage, Assignment of As-Extracted Collateral, Security Agreement, Line of
Credit Mortgage, Fixture Filing and Financing Statement from Emerald Oil, Inc.,
as Mortgagor to Wells Fargo Bank, National Association, as Administrative Agent.
(North Dakota)

 

5.Financing Statement in respect of item 3 and 4.

 

Exhibit E

 

 

 

 

EXHIBIT F

 

FORM OF 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 [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
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, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit 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 Credit 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 (including any letters of credit and guarantees included in
such facilities) 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 Credit 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 pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). 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 Assignor: ______________________________       2 Assignee:
______________________________           [and is an Affiliate of [identify
Lender]1 ]       3 Borrower: Emerald Oil, Inc.       4 Administrative Agent:
Wells Fargo Bank, National Association as the administrative agent under the
Credit Agreement

 

 

1 Select as applicable.

 

Exhibit F

 

 

 

 

5 Credit Agreement: The Credit Agreement dated as of November 20, 2012 among
Emerald Oil, Inc., the Lenders parties thereto, Wells Fargo Bank, National
Association, as Administrative Agent, and the other agents parties thereto      
6 Assigned Interest:  

 

Commitment

Assigned

 

Aggregate Amount of

Commitment/Loans

for all Lenders

 

Amount of

Commitment/Loans

Assigned

 

Percentage Assigned of

Commitment/Loans2

    $   $   %     $   $   %     $   $   %

 

Effective Date: [_____________ ___], 201[__] [TO BE INSERTED BY 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:       ASSIGNEE  
    [NAME OF ASSIGNEE]       By     Name:   Title:

 

 

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

 

Exhibit F

 

 

 

 

[Consented to and]3 Accepted:       Wells Fargo Bank, National Association, as  
  Administrative Agent       By       Name:     Title:       [Consented to:]4  
    Emerald Oil, Inc.       By       Name:     Title:  

 

 

3 To be added only if the consent of the Administrative Agent is required by the
terms of the Credit Agreement.

 

4 To be added only if the consent of the Borrower is required by the terms of
the Credit Agreement.

 

Exhibit F

 

 

 

 

ANNEX 1

 

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 Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (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 (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit 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
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.

 

1.2. Assignee. The 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 Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 8.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the 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 Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

 

Exhibit F

 

 

 

 

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

 

 

 

 

EXHIBIT G-1

Form of U.S. Tax Compliance Certificate

 

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Credit Agreement dated as of November 20, 2012
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Emerald Oil, Inc., as Borrower, Wells Fargo Bank, National
Association, as Administrative Agent, and each lender from time to time party
thereto.

 

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv)
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 Foreign Person status on IRS Form W-8BEN. By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent, and (2) the undersigned shall have at all times
furnished the Borrower and the Administrative Agent with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER]         By:       Name:      Title:   

Date: [________ __], 20[  ]

 

Exhibit G-1

 

 

 

 

EXHIBIT G-2

Form of U.S. Tax Compliance Certificate

 

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Credit Agreement dated as of November 20, 2012
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Emerald Oil, Inc., as Borrower, Wells Fargo Bank, National
Association, as Administrative Agent, and each lender from time to time party
thereto.

 

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate, (ii)
it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii)
it is not a ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, and (iv) 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
Foreign Person status on IRS Form W-8BEN. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing, and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT]         By:       Name:      Title:   

Date: [________ __], 20[  ]

 

Exhibit G-2

 

 

 

 

EXHIBIT G-3

Form of U.S. Tax Compliance Certificate

 

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

 

Reference is hereby made to the Credit Agreement dated as of November 20, 2012
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Emerald Oil, Inc., as Borrower, Wells Fargo Bank, National
Association, as Administrative Agent, and each lender from time to time party
thereto.

 

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of the
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to 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: (i) an IRS Form W-8BEN or (ii) 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 (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender and (2) the undersigned shall have at all times furnished
such Lender with a properly completed and currently effective certificate in
either the calendar year in which each payment is to be made to the undersigned,
or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT]         By:       Name:      Title:   

Date: [________ __], 20[ ]

 

Exhibit G-3

 

 

 

 

EXHIBIT G-4

Form of U.S. Tax Compliance Certificate

 

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

 

Reference is hereby made to the Credit Agreement dated as of November 20, 2012
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Emerald Oil, Inc., as Borrower, Wells Fargo Bank, National
Association, as Administrative Agent, and each lender from time to time party
thereto.

 

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
(as well as any Note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) its direct or indirect partners/members are the
sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such
Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit
Agreement or any other Loan Document, neither the undersigned nor any of its
direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of the Borrower within
the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to 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: (i) an IRS
Form W-8BEN or (ii) 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
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent, and (2) the
undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER]         By:       Name:      Title:   

Date: [________ __], 20

 

Exhibit G-4