Exhibit 10.3

 

AMENDMENT NO. 4 TO

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDMENT NO. 4 TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(“Amendment”) entered into on March 8, 2016 is by and among Clayton Williams
Energy, Inc., a Delaware corporation (the “Borrower”), the subsidiaries of the
Borrower party hereto (together with the Borrower, the “Guarantors”), the
Lenders party hereto (as defined below), and JPMorgan Chase Bank, N.A., as
administrative agent (in such capacity, the “Administrative Agent”) and as
issuing bank (in such capacity, the “Issuing Bank”).

 

RECITALS

 

A.            The Borrower is party to that certain Third Amended and Restated
Credit Agreement dated as of April 23, 2014 among the Borrower, the financial
institutions party thereto from time to time, as lenders (the “Lenders”), the
Administrative Agent and the Issuing Bank (as amended by that certain Amendment
No. 1 to Third Amended and Restated Credit Agreement entered into on
November 12, 2014, as amended by that certain Amendment No. 2 to Third Amended
and Restated Credit Agreement entered into on February 25, 2015 (“Amendment
No. 2”), as amended by that certain Amendment No. 3 to Third Amended and
Restated Credit Agreement entered into on November 9, 2015 and as the same may
be further amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”).

 

B.            Subject to the terms and conditions set forth herein, the parties
hereto wish to amend the Credit Agreement as provided herein.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants,
representations and warranties contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

 

Section 1.              Defined Terms.  As used in this Amendment, each of the
terms defined in the opening paragraph and the Recitals above shall have the
meanings assigned to such terms therein.  Each term defined in the Credit
Agreement and used herein without definition shall have the meaning assigned to
such term in the Credit Agreement, unless expressly provided to the contrary.

 

Section 2.              Other Definitional Provisions.  Article, Section,
Schedule, and Exhibit references are to Articles and Sections of and Schedules
and Exhibits to this Amendment, unless otherwise specified.  The words “hereof”,
“herein”, and “hereunder” and words of similar import when used in this
Amendment shall refer to this Amendment as a whole and not to any particular
provision of this Amendment.  The term “including” means “including, without
limitation,”.  Paragraph headings have been inserted in this Amendment as a
matter of convenience for reference only and it is agreed that such paragraph
headings are not a part of this Amendment and shall not be used in the
interpretation of any provision of this Amendment.

 

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Section 3.              Decrease of Borrowing Base.  Effective as of the
Amendment Effective Date, the Borrowing Base is hereby decreased from
$450,000,000 to $100,000,000.  Once effective, the new Borrowing Base amount
shall remain in effect at that level until the Borrowing Base is redetermined or
reduced in accordance with the Credit Agreement.  For the avoidance of doubt,
the decrease in the Borrowing Base pursuant to this Section 3 is the Scheduled
Redetermination scheduled to be made on or about May 1, 2016.

 

Section 4.              Amendments to Credit Agreement.  The Credit Agreement is
amended as reflected in Annex A attached hereto.

 

Section 5.              Temporary Amendments to Credit Agreement.  The temporary
amendments to the Credit Agreement made pursuant to Section 4 of Amendment No. 2
are hereby made permanent, except as modified by Annex A attached hereto.

 

Section 6.              Representations and Warranties.  The Borrower and each
Guarantor hereby represents and warrants that: (a) after giving effect to this
Amendment, the representations and warranties contained in the Credit Agreement,
as amended hereby, and the representations and warranties contained in the other
Loan Documents are true and correct in all material respects (except that such
materiality qualifier shall not be applicable to any representation or warranty
that already is qualified or modified by materiality in the text thereof) on and
as of the date hereof as if made on as and as of such date except to the extent
that any such representation or warranty expressly relates solely to an earlier
date, in which case such representation or warranty is true and correct in all
material respects (except that such materiality qualifier shall not be
applicable to any representation or warranty that already is qualified or
modified by materiality in the text thereof) as of such earlier date; (b) after
giving effect to this Amendment, no Default has occurred and is continuing;
(c) the execution, delivery and performance of this Amendment are within the
limited liability company, limited partnership, or corporate power and authority
of the Borrower and each Guarantor and have been duly authorized by appropriate
limited liability company, limited partnership or corporate action and
proceedings; (d) this Amendment constitutes the legal, valid, and binding
obligation of the Borrower and each Guarantor enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the rights of creditors generally and
general principles of equity; (e) there are no governmental or other third party
consents, licenses and approvals required in connection with the execution,
delivery, performance, validity and enforceability of this Amendment; and
(f) the Liens under the Security Instruments are valid and subsisting and secure
the Obligations, as amended hereby.

 

Section 7.              Conditions to Effectiveness.  Other than
Section 8(a) and (b) and Sections 9 through 16 hereof, all of which shall become
effective as of the date hereof, this Amendment shall become effective and
enforceable against the parties hereto upon the occurrence of the following
conditions precedent (the “Amendment Effective Date”):

 

(a)           The Administrative Agent shall have received multiple original
counterparts, as requested by the Administrative Agent, of this Amendment, duly
and validly executed and delivered by duly authorized officers of the Borrower,
the Guarantors, the Administrative Agent, and the Required Lenders.

 

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(b)           The Administrative Agent, for the ratable benefit of the Lenders,
shall have received, to the extent invoiced, reimbursement or payment of all out
of pocket expenses required to be reimbursed or paid by the Borrower under the
Loan Documents, including all reasonable fees, expenses and disbursements of
counsel for the Administrative Agent.

 

(c)           The Administrative Agent shall have received such other
instruments and documents incidental and appropriate to the transactions
provided for herein as the Administrative Agent or its special counsel may
reasonably request prior to the Amendment Effective Date, and all such documents
shall be in form and substance satisfactory to the Administrative Agent.

 

(d)           The representations and warranties in this Amendment shall be true
and correct in all material respects (except that such materiality qualifier
shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) as of such date except
to the extent that any such representation or warranty expressly relates solely
to an earlier date, in which case it shall have been true and correct in all
material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) as of such earlier date, and no
Default shall have occurred and be continuing.

 

(e)           The Administrative Agent shall have received multiple original
counterparts, as requested by the Administrative Agent, of the Intercreditor
Agreement, duly and validly executed and delivered by duly authorized officers
of the Borrower, the Guarantors party thereto, the Administrative Agent, and
Wilmington Trust, National Association (the “Intercreditor Agreement”).

 

(f)            The Administrative Agent shall have received (i) a certificate of
each Credit Party, dated the Amendment Effective Date and executed by its
Secretary or Assistant Secretary or a Responsible Officer of such Credit Party,
which shall (A) certify the resolutions of its board of directors, members or
other body authorizing the execution, delivery and performance of the Amendment
and the other Loan Documents to which it is a party, (B) identify by name and
title and bear the signatures of the officers of such Credit Party authorized to
sign the Loan Documents to which it is a party, and (C) contain appropriate
attachments, including the certificate of formation or articles of incorporation
or organization of such Credit Party certified by the relevant authority of the
jurisdiction of organization of such Credit Party and a true and correct copy of
its by-laws or operating, management or partnership agreement, and (ii) a good
standing certificate for each Credit Party from its jurisdiction of
organization.

 

(g)           The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated the
Amendment Effective Date) of Vinson & Elkins LLP, counsel for the Credit
Parties, in form and substance reasonably satisfactory to the Administrative
Agent, covering such matters relating to the Credit Parties, this Amendment or
the Transactions as the Administrative Agent shall reasonably request.  The
Credit Parties hereby request such counsel to deliver such opinion.

 

(h)           The Administrative Agent shall have received duly executed copies
of the Second Lien Loan Documents (as defined in the Credit Agreement, as
amended by this Amendment),

 

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which shall be in full force and effect on such date and in form and substance
reasonably satisfactory to the Administrative Agent. The Borrower shall have
received the proceeds of the loans contemplated by the Second Lien Loan
Documents, and such proceeds shall have been applied, to the extent necessary,
to reduce the Aggregate Credit Exposure (as defined in the Credit Agreement, as
amended by this Amendment) to no more than $100,000,000.

 

(i)            The Administrative Agent shall have received the Security
Agreement (as defined in the Credit Agreement, as amended by this Amendment),
together with such other assignments, conveyances, amendments, agreements and
other writings, including, without limitation, UCC-1 financing statements,
necessary to create first priority Liens, subject to the Liens permitted under
Section 7.02 of the Credit Agreement (as amended by this Amendment) and the
Intercreditor Agreement, in all of the Collateral in which a security interest
is required to be granted in favor of the Administrative Agent pursuant to the
Security Instruments, including all of the Equity Interests of each Restricted
Subsidiary now or hereafter owned by the Borrower or any Restricted Subsidiary.

 

(j)            The Administrative Agent shall have received duly executed
Mortgages in form and substance reasonably satisfactory to the Administrative
Agent necessary or appropriate to grant, evidence and perfect Liens on Oil and
Gas Interests of the Borrower and its Restricted Subsidiaries in favor of the
Administrative Agent as required by Section 6.09 of the Credit Agreement.  In
connection with such Mortgages, the Administrative Agent shall have received
such additional documents, certificates and legal opinions as shall reasonably
be requested by the Administrative Agent, in each case in form and substance
reasonably satisfactory to the Administrative Agent.

 

(k)           The Administrative Agent shall have received a control agreement
with respect to each of the Credit Parties’ deposit and other accounts, and each
such agreement shall provide for a first priority perfected Lien (subject to
Permitted Encumbrances and Liens permitted by Section 7.02(i) of the Credit
Agreement, as amended by this Amendment) in such deposit or other account in
favor of the Administrative Agent for the benefit of the Secured Parties.

 

(l)            The Administrative Agent shall have received from the Borrower an
executed counterpart to the fee letter among JPMorgan Chase Bank, N.A., J.P.
Morgan Securities LLC and the Borrower relating to the transactions contemplated
hereby.

 

Section 8.              Acknowledgments and Agreements.

 

(a)           The Borrower acknowledges that on the date hereof all outstanding
Obligations are payable in accordance with their terms and the Borrower waives
any defense, offset, counterclaim or recoupment with respect thereto.

 

(b)           The Administrative Agent, the Issuing Bank, and the Lenders hereby
expressly reserve all of their rights, remedies, and claims under the Loan
Documents, as amended hereby.  Except as expressly set forth herein, this
Amendment shall not constitute a waiver or relinquishment of (i) any Default or
Event of Default under any of the Loan Documents, as amended hereby, (ii) any of
the agreements, terms or conditions contained in any of the Loan Documents, as
amended hereby, (iii) any rights or remedies of the Administrative Agent, the

 

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Issuing Bank, or any Lender with respect to the Loan Documents, as amended
hereby, or (iv) the rights of the Administrative Agent, the Issuing Bank, or any
Lender to collect the full amounts owing to them under the Loan Documents, as
amended hereby.

 

(c)           The Borrower, each Guarantor, the Administrative Agent, the
Issuing Bank and each Lender do hereby adopt, ratify, and confirm the Credit
Agreement, as amended hereby, and acknowledge and agree that the Credit
Agreement, as amended hereby, is and remains in full force and effect, and the
Borrower and each Guarantor acknowledge and agree that their respective
liabilities and obligations under the Credit Agreement, as amended hereby, and
the other Loan Documents, are not impaired in any respect by this Amendment.

 

(d)           From and after the Amendment Effective Date, all references to the
Credit Agreement and the Loan Documents shall mean such Credit Agreement and
such Loan Documents as amended by this Amendment and the other documents
executed pursuant hereto.  This Amendment is a Loan Document for the purposes of
the provisions of the other Loan Documents.  Without limiting the foregoing, any
breach of representations, warranties, and covenants under this Amendment shall
be a Default or Event of Default, as applicable, under the Credit Agreement.

 

(e)           From and after the Amendment Effective Date, the Borrower shall
indemnify the Administrative Agent, and hold it harmless from, any and all
losses, claims, damages, liabilities and related expenses, including Taxes and
the fees, charges and disbursements of any counsel for any of the foregoing,
arising in connection with the Administrative Agent’s treating, for purposes of
determining withholding Taxes imposed under FATCA, the Credit Agreement as
qualifying as a “grandfathered obligation” within the meaning of Treasury
Regulation Section 1.1471-2(b)(2)(i).

 

(f)            The Administrative Agent and the Required Lenders acknowledge and
agree that SWR VPP, LLC has heretofore been dissolved in accordance with
Section 7.03 of the Credit Agreement and is no longer a Credit Party or
Guarantor under the Loan Documents.

 

Section 9.              Reaffirmation of the Guaranty.  Each Guarantor hereby
ratifies, confirms, acknowledges and agrees that its obligations under
Article VIII of the Credit Agreement are in full force and effect and that such
Guarantor continues to unconditionally and irrevocably guarantee the full and
punctual payment, when due, whether at stated maturity or earlier by
acceleration or otherwise, all of the Guaranteed Liabilities, as such Guaranteed
Liabilities may have been amended by this Amendment, and its execution and
delivery of this Amendment do not indicate or establish an approval or consent
requirement by such Guarantor under the Credit Agreement in connection with the
execution and delivery of amendments, consents or waivers to the Credit
Agreement or any of the other Loan Documents.

 

Section 10.            Waiver.  Effective on the date hereof until the Amendment
Effective Date, the Administrative Agent, the Issuing Bank, and the Lenders
hereby expressly waive any Event of Default under Sections 7.02 or 7.10 of the
Credit Agreement solely to the extent arising from the execution and delivery of
the Second Lien Loan Documents executed by any Credit Party on the date hereof.

 

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Section 11.            Counterparts.  This Amendment may be signed in any number
of counterparts, each of which shall be an original and all of which, taken
together, constitute a single instrument.  This Amendment may be executed by
facsimile or other electronic signature and all such signatures shall be
effective as originals.

 

Section 12.            Successors and Assigns.  This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted pursuant to the Credit Agreement.

 

Section 13.            Invalidity.  In the event that any one or more of the
provisions contained in this Amendment shall for any reason be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Amendment.

 

Section 14.            Governing Law.  This Amendment shall be construed in
accordance with and governed by the law of the State of New York.

 

Section 15.            Release.  AS A MATERIAL PART OF THE CONSIDERATION FOR THE
ADMINISTRATIVE AGENT AND EACH LENDER ENTERING INTO THIS AMENDMENT, THE BORROWER
AND EACH OTHER CREDIT PARTY, ON BEHALF OF ITSELF AND EACH OF ITS RESPECTIVE
SUBSIDIARIES (EACH A “RELEASOR”) AGREES AS FOLLOWS (THE “RELEASE PROVISION”):

 

(a)           RELEASOR HEREBY RELEASES AND FOREVER DISCHARGES THE ADMINISTRATIVE
AGENT AND EACH LENDER, AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS, OFFICERS,
MANAGERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, ATTORNEYS (INCLUDING
WITHOUT LIMITATION BRACEWELL LLP), REPRESENTATIVES, PARENT CORPORATIONS,
SUBSIDIARIES, AND AFFILIATES (HEREINAFTER ALL OF THE ABOVE COLLECTIVELY REFERRED
TO AS THE “LENDER GROUP”) JOINTLY AND SEVERALLY FROM ANY AND ALL CLAIMS,
COUNTERCLAIMS, DEMANDS, DAMAGES, DEBTS, AGREEMENTS, COVENANTS, SUITS, CONTRACTS,
OBLIGATIONS, LIABILITIES, ACCOUNTS, OFFSETS, RIGHTS, ACTIONS, AND CAUSES OF
ACTION OF ANY NATURE WHATSOEVER, INCLUDING, WITHOUT LIMITATION, ALL CLAIMS,
DEMANDS, AND CAUSES OF ACTION FOR CONTRIBUTION AND INDEMNITY, WHETHER ARISING AT
LAW OR IN EQUITY, WHETHER PRESENTLY POSSESSED OR POSSESSED IN THE FUTURE,
WHETHER KNOWN OR UNKNOWN, WHETHER LIABILITY BE DIRECT OR INDIRECT, LIQUIDATED OR
UNLIQUIDATED, WHETHER PRESENTLY ACCRUED OR TO ACCRUE HEREAFTER, WHETHER ABSOLUTE
OR CONTINGENT, FORESEEN OR UNFORESEEN, AND WHETHER OR NOT HERETOFORE ASSERTED,
WHICH RELEASOR MAY HAVE OR CLAIM TO HAVE AGAINST ANY OF THE LENDER GROUP IN
CONNECTION WITH THE CREDIT AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS;
PROVIDED, HOWEVER, THAT NO LENDER SHALL BE RELEASED HEREBY FROM ANY OBLIGATION
TO PAY TO RELEASOR ANY AMOUNTS THAT RELEASOR MAY HAVE ON DEPOSIT WITH SUCH
LENDER, IN ACCORDANCE WITH APPLICABLE LAW AND THE TERMS OF THE LOAN

 

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DOCUMENTS AND THE DOCUMENTS ESTABLISHING ANY SUCH DEPOSIT RELATIONSHIP.

 

(b)           RELEASOR AGREES NOT TO SUE ANY OF THE LENDER GROUP OR IN ANY WAY
ASSIST ANY OTHER PERSON OR ENTITY IN SUING THE LENDER GROUP WITH RESPECT TO ANY
CLAIM RELEASED HEREIN.  THE RELEASE PROVISION MAY BE PLEADED AS A FULL AND
COMPLETE DEFENSE TO, AND MAY BE USED AS THE BASIS FOR AN INJUNCTION AGAINST, ANY
ACTION, SUIT, OR OTHER PROCEEDING WHICH MAY BE INSTITUTED, PROSECUTED, OR
ATTEMPTED IN BREACH OF THE RELEASE CONTAINED HEREIN.

 

(c)           RELEASOR ACKNOWLEDGES, WARRANTS, AND REPRESENTS TO THE LENDER
GROUP THAT:

 

(i)            RELEASOR HAS READ AND UNDERSTANDS THE EFFECT OF THE RELEASE
PROVISION. RELEASOR HAS HAD THE ASSISTANCE OF INDEPENDENT COUNSEL OF ITS OWN
CHOICE, OR HAS HAD THE OPPORTUNITY TO RETAIN SUCH INDEPENDENT COUNSEL, IN
REVIEWING, DISCUSSING, AND CONSIDERING ALL THE TERMS OF THE RELEASE PROVISION;
AND IF COUNSEL WAS RETAINED, COUNSEL FOR RELEASOR HAS READ AND CONSIDERED THE
RELEASE PROVISION AND ADVISED RELEASOR TO EXECUTE THE SAME.  BEFORE EXECUTION OF
THIS AMENDMENT, RELEASOR HAS HAD ADEQUATE OPPORTUNITY TO MAKE WHATEVER
INVESTIGATION OR INQUIRY IT MAY DEEM NECESSARY OR DESIRABLE IN CONNECTION WITH
THE SUBJECT MATTER OF THE RELEASE PROVISION.

 

(ii)           RELEASOR IS NOT ACTING IN RELIANCE ON ANY REPRESENTATION,
UNDERSTANDING, OR AGREEMENT NOT EXPRESSLY SET FORTH HEREIN. RELEASOR
ACKNOWLEDGES THAT THE LENDER GROUP HAS NOT MADE ANY REPRESENTATION WITH RESPECT
TO THE RELEASE PROVISION EXCEPT AS EXPRESSLY SET FORTH HEREIN.

 

(iii)          RELEASOR HAS EXECUTED THIS AMENDMENT AND THE RELEASE PROVISION
THEREOF AS ITS FREE AND VOLUNTARY ACT, WITHOUT ANY DURESS, COERCION, OR UNDUE
INFLUENCE EXERTED BY OR ON BEHALF OF ANY PERSON.

 

(iv)          RELEASOR IS THE SOLE OWNER OF THE CLAIMS RELEASED BY THE RELEASE
PROVISION, AND RELEASOR HAS NOT HERETOFORE CONVEYED, ASSIGNED  OR ENCUMBERED ALL
OR ANY PART OF SUCH CLAIMS OR ANY INTEREST IN ANY SUCH CLAIMS TO ANY OTHER
PERSON OR ENTITY.

 

(d)           RELEASOR UNDERSTANDS THAT THE RELEASE PROVISION IS A MATERIAL
CONSIDERATION IN THE AGREEMENT OF THE ADMINISTRATIVE AGENT AND EACH LENDER TO
ENTER INTO THIS AMENDMENT.

 

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(e)           IT IS THE EXPRESS INTENT OF RELEASOR THAT THE RELEASE AND
DISCHARGE SET FORTH IN THE RELEASE PROVISION BE CONSTRUED AS BROADLY AS POSSIBLE
IN FAVOR OF THE LENDER GROUP SO AS TO FORECLOSE FOREVER THE ASSERTION BY
RELEASOR OF ANY CLAIMS RELEASED HEREBY AGAINST THE LENDER GROUP.

 

(f)            IF ANY TERM, PROVISION, COVENANT, OR CONDITION OF THE RELEASE
PROVISION IS HELD BY A COURT OF COMPETENT JURISDICTION TO BE INVALID, ILLEGAL,
OR UNENFORCEABLE, THE REMAINDER OF THE PROVISIONS SHALL REMAIN IN FULL FORCE AND
EFFECT.

 

Section 16.            Entire Agreement. THIS AMENDMENT, THE CREDIT AGREEMENT,
AS AMENDED HEREBY, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

[SIGNATURES BEGIN ON NEXT PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.

 

BORROWER:

CLAYTON WILLIAMS ENERGY, INC.

 

 

 

 

 

 

 

By:

/s/ Michael L. Pollard

 

 

Michael L. Pollard, Senior Vice President

 

 

 

 

 

 

GUARANTORS:

SOUTHWEST ROYALTIES, INC.

 

WARRIOR GAS CO.

 

CWEI ACQUISITIONS, INC.

 

ROMERE PASS ACQUISITION L.L.C.

 

CWEI ROMERE PASS ACQUISITION CORP.

 

BLUE HEEL COMPANY

 

TEX-HAL PARTNERS, INC.

 

DESTA DRILLING GP, LLC

 

WEST COAST ENERGY PROPERTIES GP, LLC

 

CLAJON INDUSTRIAL GAS, INC.

 

CLAYTON WILLIAMS PIPELINE CORPORATION

 

 

 

 

 

 

 

By:

/s/ Michael L. Pollard

 

 

Michael L. Pollard, Senior Vice President

 

 

of each of the Guarantors listed above

 

 

 

 

 

 

 

DESTA DRILLING, L.P.

 

 

 

 

By:

Desta Drilling GP, LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Michael L. Pollard

 

 

Michael L. Pollard, Senior Vice President

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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ADMINISTRATIVE AGENT/

 

 

ISSUING BANK/LENDER:

JPMORGAN CHASE BANK, N.A.,

 

as Administrative Agent, Issuing Bank and a Lender

 

 

 

 

 

 

 

By:

/s/ David M. Morris

 

 

David M. Morris

 

 

Executive Director

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

WELLS FARGO BANK, N.A.

 

 

 

 

 

 

 

By:

/s/ Courtney Kubesch

 

Name:

Courtney Kubesch

 

Title:

Vice President

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

MUFG UNION BANK, N.A.

 

 

 

 

 

 

 

By:

/s/ Joshua Patterson

 

Name:

Joshua Patterson

 

Title:

Managing Director

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

COMPASS BANK

 

 

 

 

 

 

 

By:

/s/ Kathleen J. Bowen

 

Name:

Kathleen J. Bowen

 

Title:

Managing Director

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

FROST BANK

 

 

 

 

 

 

 

By:

/s/ Alex Zemkoski

 

Name:

Alex Zemkoski

 

Title:

Senior Vice President

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

TORONTO DOMINION (TEXAS) LLC

 

 

 

 

 

 

 

By:

/s/ Ryan Karim

 

Name:

Ryan Karim

 

Title:

Authorized Signatory

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

 

KEYBANK NATIONAL ASSOCIATION

 

 

 

 

 

 

 

 

By:

/s/ John Dravenstott

 

 

Name:

John Dravenstott

 

 

Title:

Vice President

 

 

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

 

NATIXIS, NEW YORK BRANCH

 

 

 

 

 

 

 

 

By:

/s/ Stuart Murray

 

 

Name:

Stuart Murray

 

 

Title:

Managing Director

 

 

 

 

 

 

 

 

 

 

By:

/s/ Vikram Nath

 

 

Name:

Vikram Nath

 

 

Title:

Vice President

 

 

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

 

UBS AG, STAMFORD BRANCH

 

 

 

 

 

 

 

 

By:

/s/ Darlene Arias

 

 

Name:

Darlene Arias

 

 

Title:

Director

 

 

 

 

 

 

 

 

 

By:

/s/ Craig Pearson

 

 

Name:

Craig Pearson

 

 

Title:

Associate Director

 

 

 

Banking Product Services, US

 

 

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

 

FIFTH THIRD BANK

 

 

 

 

 

 

 

 

By:

/s/ Justin Bellamy

 

 

Name:

Justin Bellamy

 

 

Title:

Director

 

 

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

 

WHITNEY BANK

 

 

 

 

 

 

 

 

By:

/s/ Parker U. Mears

 

 

Name:

Parker U. Mears

 

 

Title:

Vice President

 

 

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

BANK OF AMERICA, N.A.,

 

 

 

 

 

 

 

By:

/s/ Raza Jafferi

 

Name:

Raza Jafferi

 

Title:

Vice President

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

 

BRANCH BANKING AND TRUST COMPANY

 

 

 

 

 

 

 

 

By:

/s/ James Giordano

 

 

Name:

James Giordano

 

 

Title:

Senior Vice-President

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

 

CAPITAL ONE, NATIONAL ASSOCIATION

 

 

 

 

By:

/s/ Victor Ponce de Leon

 

 

Name:

Victor Ponce de Leon

 

 

Title:

Senior Vice-President

 

 

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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LENDER:

 

PNC BANK, NATIONAL ASSOCIATION

 

 

 

 

 

 

 

 

By:

/s/ Sandra Aultman

 

 

Name:

Sandra Aultman

 

 

Title:

Managing Director

 

 

 

Signature Page to

Amendment No. 4 to Third Amended and Restated Credit Agreement

(Clayton Williams Energy, Inc.)

 

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Annex A

 

Amended Credit Agreement

 

[See attached.]

 

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EXECUTION VERSION

 

 

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

dated as of

 

April 23, 2014

 

among

 

CLAYTON WILLIAMS ENERGY, INC.,

as Borrower

 

CERTAIN SUBSIDIARIES OF BORROWER,

as Guarantors

 

The Lenders Party Hereto

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

WELLS FARGO BANK, N.A.,

as Syndication Agent

 

UNION BANK, N.A.,

as Documentation Agent

 

and

 

J.P. MORGAN SECURITIES LLC,

as Sole Bookrunner and Lead Arranger

 

 

$150,000,000 Senior Secured Credit Facility

 

 

[g60161km07i001.jpg]

 

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TABLE OF CONTENTS

 

 

 

Page

Article I  Definitions

1

Section 1.01.

Defined Terms

1

Section 1.02.

Types of Loans and Borrowings

34

Section 1.03.

Terms Generally

34

Section 1.04.

Accounting Terms; GAAP

35

Section 1.05.

[Reserved.]

35

Section 1.06.

Time of Day

35

 

 

 

Article II  The Credits

35

Section 2.01.

Commitments

35

Section 2.02.

Termination and Reduction of the Aggregate Commitment

36

Section 2.03.

Additional Lenders; Increases in the Aggregate Commitment

36

Section 2.04.

Loans and Borrowings

37

Section 2.05.

Requests for Borrowings

38

Section 2.06.

Letters of Credit

38

Section 2.07.

Funding of Borrowings

43

Section 2.08.

Interest Elections

43

Section 2.09.

Repayment of Loans; Evidence of Debt

44

Section 2.10.

Optional Prepayment of Loans

45

Section 2.11.

Mandatory Prepayment of Loans

46

Section 2.12.

Fees

47

Section 2.13.

Interest

48

Section 2.14.

Alternate Rate of Interest

49

Section 2.15.

Increased Costs

49

Section 2.16.

Break Funding Payments

50

Section 2.17.

Taxes

51

Section 2.18.

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

55

Section 2.19.

Mitigation Obligations; Replacement of Lenders

57

Section 2.20.

Defaulting Lenders

58

 

 

 

Article III  Borrowing Base

60

 

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Section 3.01.

Reserve Report; Proposed Borrowing Base

60

Section 3.02.

Scheduled Redeterminations of the Borrowing Base; Procedures and Standards

60

Section 3.03.

Special Redeterminations

61

Section 3.04.

Notice of Redetermination

62

 

 

 

Article IV  Representations and Warranties

62

Section 4.01.

Organization; Powers

62

Section 4.02.

Authorization; Enforceability

62

Section 4.03.

Governmental Approvals; No Conflicts

62

Section 4.04.

Financial Condition; No Material Adverse Change

62

Section 4.05.

Properties

63

Section 4.06.

Litigation and Environmental Matters

63

Section 4.07.

Compliance with Laws and Agreements

64

Section 4.08.

Investment Company Status

64

Section 4.09.

Taxes

64

Section 4.10.

ERISA

64

Section 4.11.

Disclosure

64

Section 4.12.

Labor Matters

65

Section 4.13.

Capitalization

65

Section 4.14.

Margin Stock

65

Section 4.15.

Oil and Gas Interests

65

Section 4.16.

Insurance

66

Section 4.17.

Solvency

66

Section 4.18.

Material Sales Contracts

66

Section 4.19.

Common Enterprise

66

Section 4.20.

Anti-Corruption Laws and Sanctions

67

Section 4.21.

EEA Financial Institutions

67

 

 

 

Article V  Conditions

67

Section 5.01.

Effective Date

67

Section 5.02.

Each Credit Event

70

 

 

 

Article VI  Affirmative Covenants

70

Section 6.01.

Financial Statements; Other Information

70

Section 6.02.

Notices of Material Events

72

Section 6.03.

Existence; Conduct of Business

73

 

ii

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Section 6.04.

Payment of Obligations

74

Section 6.05.

Maintenance of Properties; Insurance

74

Section 6.06.

Books and Records; Inspection Rights

74

Section 6.07.

Compliance with Laws

74

Section 6.08.

Use of Proceeds and Letters of Credit

74

Section 6.09.

Mortgages and Other Security

75

Section 6.10.

Title Data

75

Section 6.11.

Swap Agreements

76

Section 6.12.

Operation of Oil and Gas Interests

76

Section 6.13.

Material Restricted Subsidiaries

76

Section 6.14.

Pledged Equity Interests

77

Section 6.15.

Designation and Conversion of Restricted and Unrestricted Subsidiaries

77

Section 6.16.

Accounts

78

Section 6.17.

Environmental Matters

79

 

 

 

Article VII  Negative Covenants

79

Section 7.01.

Indebtedness

79

Section 7.02.

Liens

81

Section 7.03.

Fundamental Changes

82

Section 7.04.

Dispositions

82

Section 7.05.

Nature of Business

84

Section 7.06.

Investments, Loans, Advances, Guarantees and Acquisitions

84

Section 7.07.

Swap Agreements

86

Section 7.08.

Restricted Payments

87

Section 7.09.

Transactions with Affiliates

87

Section 7.10.

Restrictive Agreements

87

Section 7.11.

Disqualified Stock

88

Section 7.12.

Amendments to Organizational Documents

88

Section 7.13.

Financial Covenants

88

Section 7.14.

Sale and Leaseback Transactions and other Off-Balance Sheet Liabilities

88

Section 7.15.

Senior Notes Restrictions

88

Section 7.16.

Second Lien Debt Restrictions

89

Section 7.17.

Anti-Hoarding

91

Section 7.18.

Lease Restrictions

91

 

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Article VIII  Guarantee of Obligations

92

Section 8.01.

Guarantee of Payment

92

Section 8.02.

Guarantee Absolute

92

Section 8.03.

Guarantee Irrevocable

92

Section 8.04.

Reinstatement

93

Section 8.05.

Subrogation

93

Section 8.06.

Subordination

93

Section 8.07.

Payments Generally

93

Section 8.08.

Setoff

94

Section 8.09.

Formalities

94

Section 8.10.

Limitations on Guarantee

94

Section 8.11.

Keepwell

94

 

 

 

Article IX  Events of Default

95

 

 

Article X  The Administrative Agent

97

 

 

Article XI  Miscellaneous

101

Section 11.01.

Notices

101

Section 11.02.

Waivers; Amendments

102

Section 11.03.

Expenses; Indemnity; Damage Waiver

103

Section 11.04.

Successors and Assigns

105

Section 11.05.

Survival

109

Section 11.06.

Counterparts; Integration; Effectiveness; Electronic Execution

109

Section 11.07.

Severability

110

Section 11.08.

Right of Setoff

110

Section 11.09.

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

111

Section 11.10.

WAIVER OF JURY TRIAL

111

Section 11.11.

Headings

112

Section 11.12.

Confidentiality

112

Section 11.13.

Material Non-Public Information

112

Section 11.14.

Authorization to Distribute Certain Materials to Public-Siders

113

Section 11.15.

Interest Rate Limitation

113

Section 11.16.

USA PATRIOT Act

114

Section 11.17.

Original Credit Agreement

114

Section 11.18.

Reaffirmation and Grant of Security Interest

114

 

iv

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Section 11.19.

Reallocation of Commitments and Loans

114

Section 11.20.

Release of Guarantees and Liens

115

Section 11.21.

Flood Insurance Regulation

116

Section 11.22.

Acknowledgment and Consent to Bail-In of EEA Financial Institutions

116

 

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EXHIBITS:

 

Exhibit A — Form of Assignment and Assumption

Exhibit B — Form of Counterpart Agreement

Exhibit C — Form of Interest Election Request

Exhibit D — Form of Note

Exhibit E — Form of Lender Certificate

Exhibit F — Form of Tax Certificates

 

SCHEDULES:

 

Schedule 1.01 — Existing Letters of Credit

Schedule 2.01 — Applicable Percentages and Commitments

Schedule 4.04 — Material Liabilities

Schedule 4.06 — Disclosed Matters

Schedule 4.13 — Capitalization

Schedule 7.01 — Existing Indebtedness

Schedule 7.02 — Existing Liens

Schedule 7.04 — Incentive Oil and Gas Interests

Schedule 7.06(c) — Investment Commitments

Schedule 7.06(g) — Existing Investments

Schedule 7.06(l) — Costs Relating to Incentive Oil and Gas Interests

Schedule 7.09 — Transactions with Affiliates

 

vi

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THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

This THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 23, 2014, is
among CLAYTON WILLIAMS ENERGY, INC., a Delaware corporation, as Borrower,
CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party hereto and
JPMORGAN CHASE BANK, N.A., as Administrative Agent.

 

RECITALS

 

WHEREAS, the Borrower, certain Subsidiaries of the Borrower, certain of the
Lenders and JPMorgan Chase Bank, N.A., as administrative agent, have entered
into that certain Second Amended and Restated Credit Agreement, dated as of
November 29, 2010 (as amended, supplemented or otherwise modified from time to
time prior to the Effective Date, the “Original Credit Agreement”), pursuant to
which the lenders party thereto agreed to provide the Borrower with a revolving
credit facility in the form and upon the terms and conditions set forth therein;

 

WHEREAS, the Borrower has requested that the Administrative Agent and the
Lenders amend and restate the Original Credit Agreement in its entirety, and the
Administrative Agent and the Lenders have agreed to do so upon the terms and
conditions set forth herein; and

 

WHEREAS, it is the intent of the parties hereto that this Agreement shall not
constitute a novation of the obligations and liabilities existing under the
Original Credit Agreement or constitute repayment of any such obligations and
liabilities and that this Agreement shall amend and restate the Original Credit
Agreement in its entirety.

 

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

 

Definitions

 

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

 

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

 

“Acquisition” means, the acquisition by the Borrower or any Restricted
Subsidiary, whether by purchase, merger (and, in the case of a merger with any
such Person, with such Person being the surviving corporation) or otherwise, of
all or substantially all of the Equity Interest of, or all or substantially all
of the business, property or fixed assets of or business line or unit or a
division of, any other Person primarily engaged in the business of producing oil
or

 

1

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natural gas or the acquisition by the Borrower or any Restricted Subsidiary of
property or assets consisting of Oil and Gas Interests.

 

“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 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

 

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as
contractual representative of the Lenders hereunder pursuant to Article X and
not in its individual capacity as a Lender, and any successor agent appointed
pursuant to Article X.

 

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

 

“Advance Payment Contract” means any contract whereby any Credit Party either
(a) receives or becomes entitled to receive (either directly or indirectly) any
payment (an “Advance Payment”) to be applied toward payment of the purchase
price of Hydrocarbons produced or to be produced from Oil and Gas Interests
owned by any Credit Party and which Advance Payment is, or is to be, paid in
advance of actual delivery of such production to or for the account of the
purchaser regardless of such production, or (b) grants an option or right of
refusal to the purchaser to take delivery of such production in lieu of payment,
and, in either of the foregoing instances, the Advance Payment is, or is to be,
applied as payment in full for such production when sold and delivered or is, or
is to be, applied as payment for a portion only of the purchase price thereof or
of a percentage or share of such production; provided that inclusion of the
standard “take or pay” provision in any gas sales or purchase contract or any
other similar contract shall not, in and of itself, constitute such contract as
an Advance Payment Contract for the purposes hereof.

 

“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, except with
respect to an “Affiliate” of Ares, such term shall not include any portfolio
company owned or controlled by Ares.

 

“Aggregate Commitment” means, at any time, the sum of the Commitments of all the
Lenders at such time, as such amount may be reduced or increased from time to
time pursuant to Section 2.02 and Section 2.03; provided that such amount shall
not at any time exceed the lesser of (a) the Borrowing Base then in effect and
(b) the Maximum Facility Amount. As of the Fourth Amendment Effective Date, the
Aggregate Commitment is $100,000,000.

 

“Aggregate Commitment Usage” means, as of any date and for all purposes, the
quotient, expressed as a percentage, of (a) the Aggregate Credit Exposure as of
such date, divided by (b) the Aggregate Commitment as of such date.

 

“Aggregate Credit Exposure” means, as of any date of determination, the sum of
the Credit Exposure of all of the Lenders as of such date.

 

2

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“Agreement” means this Third Amended and Restated Credit Agreement, dated as of
April 23, 2014, as it may be amended, amended and restated, supplemented or
otherwise modified from time to time.

 

“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 NYFRB Rate in effect on
such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month Interest
Period on such day (or if such day is not a Business Day, the immediately
preceding Business Day) plus 1%, provided that, for the avoidance of doubt, the
Adjusted LIBO Rate for any day shall be based on the LIBO Screen Rate at
approximately 11:00 a.m. London time on such day.  Any change in the Alternate
Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate, respectively.

 

“Applicable Percentage” means, with respect to any Lender at any time, the
percentage of the Aggregate Commitment represented by such Lender’s Commitment
at such time; provided that in the case of Section 2.20 only, when a Defaulting
Lender exists, “Applicable Percentage” shall mean the percentage of the
Aggregate Commitment (disregarding any Defaulting Lender’s Commitment)
represented by such Lender’s Commitment.  The initial amount of each Lender’s
Applicable Percentage is as set forth on Schedule 2.01.  If the Aggregate
Commitment has terminated or expired, the Applicable Percentage of any Lender
shall be determined based upon the Aggregate Commitment most recently in effect,
giving effect to any assignments and to any Lender’s status as a Defaulting
Lender at the time of determination.

 

“Applicable Rate” means, with respect to any ABR Loan or Eurodollar Loan, or
with respect to the Unused Commitment Fees payable hereunder, as the case may
be, the applicable rate per annum set forth below under the caption “ABR
Spread”, “Eurodollar Spread” or “Unused Commitment Fee Rate”, as the case may
be, based upon the Borrowing Base Usage applicable on such date:

 

Borrowing Base Usage:

 

ABR
Spread

 

Eurodollar
Spread

 

Unused
Commitment Fee
Rate

 

Equal to or greater than 90%

 

2.500

%

3.500

%

0.500

%

Equal to or greater than 75% and less than 90%

 

2.250

%

3.250

%

0.500

%

Equal to or greater than 50% and less than 75%

 

2.000

%

3.000

%

0.500

%

Equal to or greater than 25% and less than 50%

 

1.750

%

2.750

%

0.500

%

Less than 25%

 

1.500

%

2.500

%

0.500

%

 

Each change in the Applicable Rate shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next change.

 

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“Approved Counterparty” means, at any time and from time to time, (a) any Person
that is approved by the Administrative Agent (such approval not to be
unreasonably withheld) and has (or the credit support provider of such Person
has), at the time the Borrower or any Restricted Subsidiary enters into a Swap
Agreement with such Person, a long term senior unsecured debt credit rating of
BBB+ or better from S&P or Baal or better from Moody’s and (b) any Lender
Counterparty.

 

“Approved Fund” has the meaning assigned to such term in Section 11.04.

 

“Approved Petroleum Engineer” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company Petroleum Consultants, L.P., (c) Williamson Petroleum
Consultants, Inc., or (d) any reputable firm of independent petroleum engineers
selected by the Borrower and reasonably acceptable to the Administrative Agent.

 

“Ares” means (a) Ares Management LLC, its Affiliated investment managers and
funds or accounts managed by any of them (but excluding any portfolio companies
that are owned in whole or in part by any of the foregoing) and (b) any other
Affiliates of Ares Management LLC or any “person” or “group” of related persons
(as such terms are used in sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) sharing voting power with Ares Management LLC.

 

“Asset Coverage Reserve Report” has the meaning assigned to such term in the
Second Lien Credit Agreement.

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee, and accepted by the Administrative Agent, in
the form of Exhibit A or any other form approved by the Administrative Agent.

 

“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Maturity Date and the date of termination of
the Aggregate Commitment.

 

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

 

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

 

“Bankruptcy Code” means chapter 11 of the United States Bankruptcy Code.

 

“Bankruptcy Event” means, with respect to any Person, such Person becomes the
subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee, administrator, custodian, assignee for the benefit of
creditors or similar Person charged with the reorganization or liquidation of
its business appointed for it, or, in the good faith determination

 

4

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of the Administrative Agent, has taken any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any such proceeding
or appointment, provided that a Bankruptcy Event shall not result solely by
virtue of any ownership interest, or the acquisition of any ownership interest,
in such Person by a Governmental Authority or instrumentality thereof, unless
such ownership interest results in or provides such Person 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 permits such Person (or such
Governmental Authority or instrumentality) to reject, repudiate, disavow or
disaffirm any contracts or agreements made by such Person.

 

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

 

“Borrower” means Clayton Williams Energy, Inc., a Delaware corporation, and its
successors and permitted assigns.

 

“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 3.01, as the same may be redetermined, adjusted or
reduced from time to time pursuant to Article III.

 

“Borrowing Base Deficiency” means, as of any date, the amount, if any, by which
the Aggregate Credit Exposure on such date exceeds the Borrowing Base in effect
on such date; 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 secured
by cash in the manner contemplated by Section 2.06(j).

 

“Borrowing Base Properties” means all Oil and Gas Interests of the Borrower and
the Restricted Subsidiaries evaluated by the Lenders for purposes of
establishing the Borrowing Base.

 

“Borrowing Base Usage” means, as of any date and for all purposes, the quotient,
expressed as a percentage, of (i) the Aggregate Credit Exposure as of such date,
divided by (ii) the Borrowing Base as of such date.

 

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.05.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.

 

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or

 

5

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personal property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases or lease obligations on a
balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.

 

“Cash Collateral Account” means a deposit account with, and in the name of, the
Administrative Agent, for the benefit of the Lenders, established and maintained
for the deposit of cash collateral required under or in connection with this
Agreement and the other Loan Documents.

 

“Cash Management Agreements” means the agreements, documents, certificates and
instruments evidencing any Cash Management Obligations of any Credit Party.

 

“Cash Management Obligations” means, with respect to any Credit Party, any
obligations of such Credit Party owed to any Lender (or any Affiliate of any
Lender) in respect of treasury management arrangements (including controlled
disbursement, automated clearinghouse transactions, return items, overdrafts and
interstate depository network services), depositary or other cash management
services, including commercial credit card and merchant card services.

 

“Change in Law” means the occurrence after the date of this Agreement or, with
respect to the Administrative Agent or any Lender, such later date on which the
Administrative Agent or such Lender becomes a party to this Agreement of (a) the
adoption of any law, rule, regulation or treaty, (b) any change in any law,
rule, regulation or treaty or in the interpretation or application thereof by
any Governmental Authority or (c) compliance by any Lender or the Issuing Bank
(or, for purposes of Section 2.15(b), by any lending office of such Lender or by
such Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement; provided
that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, shall be deemed to be a “Change in Law”
regardless of the date enacted, adopted or issued.

 

“Change of Control” means

 

(a) any “person” or “group” of related persons (as such terms are used in
sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), other than Ares, Clayton Williams, Jr., The Williams
Children’s Partnership, Ltd. or any Related Party thereof (each, a “Permitted
Holder”), is or becomes the beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that such person or group shall be deemed
to have “beneficial ownership” of all shares that such person or group has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the total
voting power of the outstanding capital stock (excluding any debt securities
convertible into equity) normally entitled to vote in the election of

 

6

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directors (“Voting Stock”) of the Borrower (or its successor by merger,
consolidation or purchase of all or substantially all of its assets) (for
purposes of this clause, such person or group shall be deemed to beneficially
own any Voting Stock held by a parent entity, if such person or group
“beneficially owns” (as defined above), directly or indirectly, more than 35% of
the voting power of the Voting Stock of such parent entity);

 

(b) the first day on which a majority of the members of the board of directors
of the Borrower are not, as of any date of determination, either (i) a member of
the board of directors of the Borrower on March 8, 2016, or (ii) individuals who
were nominated for election or elected to the Borrower’s board of directors with
the approval of the majority of the directors described in clause (i) (or
approved for nomination or election by the majority of directors described in
clause (i) or (ii) hereof) who were members of the Borrower’s board of directors
at the time of such nomination or election;

 

(c) the occurrence of a “Change of Control” as such term is defined in the
Indenture; or

 

(d) the occurrence of a “Change of Control” as such term is defined in the
Second Lien Credit Agreement.

 

“Charges” has the meaning assigned to such term in Section 11.13.

 

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

 

“Collateral” means all assets, whether now owned or hereafter acquired by any
Borrower or any other Credit Party, in which a Lien is granted or purported to
be granted to any Secured Party as security for any Obligation.

 

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Credit Exposure hereunder, as such commitment may be (a) reduced from
time to time pursuant to Section 2.02, (b) increased from time to time as a
result of such Lender delivering a Lender Certificate pursuant to Section 2.03,
and (c) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 11.04.  The amount of each Lender’s Commitment
as of the Fourth Amendment Effective Date is set forth on Schedule 2.01.

 

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

 

“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.

 

“Consolidated Current Assets” means, as of any date of determination, the total
of (a) the consolidated current assets of the Borrower and the Restricted
Subsidiaries determined in accordance with GAAP as of such date, plus, all
Unused Commitments as of such date, less (b) any non-cash assets required to be
included in consolidated current assets of the Borrower and

 

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the Restricted Subsidiaries as a result of the application of FASB Accounting
Standards Codification (“ASC”) 815 as of such date.

 

“Consolidated Current Liabilities” means, as of any date of determination, the
total of (a) consolidated current liabilities of the Borrower and the Restricted
Subsidiaries, as determined in accordance with GAAP as of such date, less
(b) current maturities of the Loans, less (c) any non-cash obligations required
to be included in consolidated current liabilities of the Borrower and the
Restricted Subsidiaries as a result of the application of FASB ASC 815 as of
such date, less (d) the current portion of any operating lease obligations to
the extent included in the calculation of consolidated current liabilities of
the Borrower and the Restricted Subsidiaries.

 

“Consolidated Current Ratio” means, as of any date of determination, the ratio
of Consolidated Current Assets to Consolidated Current Liabilities as of such
date.

 

“Consolidated EBITDAX” means, with respect to the Borrower and its Restricted
Subsidiaries for any period, Consolidated Net Income for such period plus,
without duplication and to the extent deducted in the calculation of
Consolidated Net Income for such period, the sum of (a) income or franchise
Taxes paid or accrued; (b) Consolidated Net Interest Expense; (c) amortization,
depletion and depreciation expense; (d) any non-cash losses or charges on any
Swap Agreement resulting from the application of FASB ASC 815 for that period;
(e) oil and gas exploration expenses (including all drilling, completion,
geological and geophysical costs) for such period; (f) losses from Dispositions
of assets outside of the ordinary course of business and other extraordinary or
non-recurring losses; (g)  restructuring costs that have been incurred or
expensed in an amount not to exceed $10,000,000 in the aggregate over the
Availability Period, which costs shall be itemized on the most recently
delivered compliance certificate delivered pursuant to Section 6.01 and are
otherwise reasonably acceptable to the Administrative Agent, and (h) all other
non-cash charges, expenses or losses (excluding non-cash charges that constitute
accruals for future cash charges); minus, to the extent included in the
calculation of Consolidated Net Income, the sum of (i) any non-cash gains on any
Swap Agreements resulting from the application of FASB ASC 815 for that period;
(ii) extraordinary or non-recurring gains; (iii) gains from Dispositions of
assets outside of the ordinary course of business; and (iv) all other non-cash
gains; provided that, with respect to the determination of the Borrower’s
compliance with the Consolidated Senior Debt Leverage Ratio set forth in
Section 7.13(b) for any period, Consolidated EBITDAX shall be adjusted to give
effect, on a pro forma basis and consistent with GAAP, to any Acquisitions or
Dispositions made during such period as if such Acquisition or Disposition, as
the case may be, was made at the beginning of such period.

 

“Consolidated Funded Indebtedness” means, as of any date, without
duplication, Indebtedness of the Borrower and its Restricted Subsidiaries of the
type described in clauses (a), (b), (c), (d), (e), (f), (g) or (h) of the
definition of Indebtedness.

 

“Consolidated Net Income” means for any period, the consolidated net income (or
loss) of the Borrower and its Restricted Subsidiaries, as applicable, determined
on a consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary of the Borrower, or is merged into or
consolidated with the Borrower or any of its Restricted Subsidiaries, as
applicable, (b) the undistributed earnings of any Restricted Subsidiary of the
Borrower, to the extent that the

 

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declaration or payment of dividends or similar distributions by such Restricted
Subsidiary is not at the time permitted by the terms of any contractual
obligation (other than under any Loan Document) or by any law applicable to such
Restricted Subsidiary and (c) the income (or loss) of any Person in which any
other Person (other than the Borrower or any of its Restricted Subsidiaries) has
an Equity Interest, except to the extent of the amount of dividends or other
distributions actually paid in cash to the Borrower or any of its Restricted
Subsidiaries during such period.

 

“Consolidated Net Interest Expense” means, for the Borrower and the Restricted
Subsidiaries on a consolidated basis for any period, the sum of (a) aggregate
interest expense, amortization or writeoff of debt discount and debt issuance
costs and commissions, discounts and other fees, expenses and charges associated
with Indebtedness plus (b) capitalized interest, minus (c) interest income, in
each case determined in accordance with GAAP.

 

“Consolidated Senior Debt” means, as of any date, without
duplication, Indebtedness of the Borrower and its Restricted Subsidiaries owed
to the Administrative Agent, the Issuing Bank, the Lenders or any of them under
any Loan Document, whether for principal, interest (including post-petition
interest), reimbursement of amounts drawn under any Letter of Credit, funding
indemnification amounts, fees, expenses, indemnification or otherwise.

 

“Consolidated Senior Debt Leverage Ratio” means, with respect to any fiscal
quarter, the ratio of (a) Consolidated Senior Debt as of the end of such fiscal
quarter, to (b) Consolidated EBITDAX for the trailing four fiscal quarter period
ending on the last day of such fiscal quarter.

 

“Consolidated Subsidiaries” means, for any Person, any Subsidiary or other
entity the accounts of which would be consolidated with those of such Person in
its consolidated financial statements in accordance with GAAP.

 

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

 

“Core Assets” means the Oil and Gas Interests of the Borrower and its Restricted
Subsidiaries located in Reeves County, Texas (including, the pipeline assets of
Clayton Williams Pipeline Corporation located in Reeves County, Texas).

 

“Counterpart Agreement” means a Counterpart Agreement substantially in the form
of Exhibit B delivered by a Guarantor pursuant to Section 6.13.

 

“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.

 

“Credit Parties” means collectively, Borrower and each Guarantor, and each
individually, a “Credit Party”.

 

“Crude Oil” means all crude oil and condensate.

 

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

 

“Defaulting Lender” means any Lender that (a) has failed, within two Business
Days of the date required to be funded or paid, to (i) fund any portion of its
Loans, (ii) fund any portion of its participations in Letters of Credit or
(iii) pay over to the Administrative Agent, the Issuing Bank or any Lender any
other amount required to be paid by it hereunder, unless, in the case of clause
(i) above, such Lender notifies the Administrative Agent in writing that such
failure is the result of such Lender’s good faith determination that a condition
precedent to funding (specifically identified and including the particular
default, if any) has not been satisfied, (b) has notified the Borrower, the
Administrative Agent or the Issuing Bank in writing, or has made a public
statement to the effect, that it does not intend or expect to comply with any of
its funding obligations under this Agreement (unless such writing or public
statement indicates that such position is based on such Lender’s good faith
determination that a condition precedent (specifically identified and including
the particular default, if any) to funding a loan under this Agreement cannot be
satisfied) or generally under other agreements in which it commits to extend
credit, (c) has failed, within three Business Days after written request by the
Administrative Agent or the Issuing Bank, acting in good faith, to provide a
certification in writing from an authorized officer of such Lender that it will
comply with its obligations to fund prospective Loans and participations in then
outstanding Letters of Credit under this Agreement, provided that such Lender
shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt
by the Administrative Agent or the Issuing Bank of such certification in form
and substance reasonably satisfactory to it and the Administrative Agent, or
(d) has become the subject of (1) a Bankruptcy Event or (2) a Bail-In Action.

 

“Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 4.06.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease, exchange or
other disposition (including any sale and leaseback transaction) of any property
by any Person, including any sale, assignment, transfer or other disposal, with
or without recourse, of any notes or accounts receivable or any rights and
claims associated therewith.

 

“Disqualified Stock” means any Equity Interest which, 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 Stock), pursuant to a sinking fund obligation or
otherwise, or is redeemable for any consideration other than other Equity
Interests (which would not constitute Disqualified Stock) at the sole option of
the holder thereof, in whole or in part, on or prior to the date that is 91 days
after the Maturity Date.

 

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

 

“Domestic Subsidiary” means, with respect to any Person, a Subsidiary of such
Person that is incorporated or formed under the laws of the United States of
America, any state thereof or the District of Columbia.

 

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

 

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

 

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

 

“Effective Date” means the date on which the conditions specified in
Section 5.01 are satisfied (or waived in accordance with Section 11.02).

 

“Electronic Signature” means an electronic sound, symbol, or process attached
to, or associated with, a contract or other record and adopted by a person with
the intent to sign, authenticate or accept such contract or record.

 

“Eligible Assignee” means any Person that qualifies as an assignee pursuant to
Section 11.04(b)(i); provided that, notwithstanding the foregoing, “Eligible
Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or
Subsidiaries.

 

“Engineered Value” means, the value attributed to the Borrowing Base Properties
for purposes of the most recent Redetermination of the Borrowing Base pursuant
to Article III (or for purposes of determining the Initial Borrowing Base in the
event no such Redetermination has occurred), based upon the discounted present
value of the estimated net cash flow to be realized from the production of
Hydrocarbons from the Oil and Gas Interests as set forth in the Reserve Report.

 

“Environmental Laws” means all laws (including common law), rules, regulations,
codes, ordinances, orders, determinations, decrees, judgments, injunctions,
notices or binding agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the environment, preservation or
reclamation of natural resources, pollution, the management, release or
threatened release of any Hazardous Material or to health and safety matters.

 

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of any Credit Party directly or indirectly resulting
from or based upon (a) violation of or liability under any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal (or arrangement for the disposal) of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the release or threatened release
of any Hazardous Materials into the environment or (e) any contract, agreement
or other consensual arrangement pursuant to which liability is assumed or
imposed with respect to any of the foregoing.

 

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“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
from time to time.

 

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

 

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the failure of any Plan
to satisfy the minimum funding standard applicable to that Plan for a plan year
under Section 412 of the Code or Section 302 of ERISA; (c) the filing pursuant
to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (d) the
incurrence by any Credit Party or any of its ERISA Affiliates of any liability
under Title IV of ERISA with respect to the termination of any Plan; (e) the
receipt by any Credit Party or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any
Credit Party or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by any Credit Party or any ERISA Affiliate of any notice, or the receipt
by any Multiemployer Plan from any Credit Party or any ERISA Affiliate of any
notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.

 

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

 

“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 Article IX.

 

“Excluded Hedges” means, collectively, Swap Agreements that (a) are basis
differential only swaps for volumes of Natural Gas included under other Swap
Agreements permitted by Section 7.07(a) or (b) are a hedge of volumes of Crude
Oil or Natural Gas by means of a price “floor” for which there exists no
deferred obligation to pay the related premium or other purchase price or the
only deferred obligation is to either pay the premium or other purchase price on
each settlement date so long as such settlement date occurs at least monthly, or
pay the financing for such premium or other purchase price.

 

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“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap
Obligation if, and to the extent that, all or a portion of the Guarantee of such
Guarantor of, or the grant by such Guarantor of a security interest to secure,
such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the
Commodity Exchange Act or any rule, regulation or order of the Commodity Futures
Trading Commission (or the application or official interpretation of any
thereof) by virtue of such Guarantor’s failure for any reason to constitute an
“eligible contract participant” as defined in the Commodity Exchange Act and the
regulations thereunder at the time the Guarantee of such Guarantor or the grant
of such security interest becomes effective with respect to such Swap
Obligation. If a Swap Obligation arises under a master agreement governing more
than one swap, such exclusion shall apply only to the portion of such Swap
Obligation that is attributable to swaps for which such Guarantee or security
interest is or becomes illegal.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient, (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes, (b) in the case of a Lender (including any
Issuing Bank), 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,
Letter of Credit or Commitment pursuant to a law in effect on the date on which
(i) such Lender acquires such interest in the Loan, Letter of Credit or
Commitment (other than pursuant to an assignment request by the Borrower under
Section 2.19(b)) or (ii) such Lender changes its lending office, except in each
case to the extent that, pursuant to Section 2.17, 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, Letter of Credit or
Commitment or to such Lender immediately before it changed its lending office,
(c) Taxes attributable to such Recipient’s failure to comply with
Section 2.17(f) and (d) any U.S. Federal withholding Taxes imposed under FATCA.

 

“Existing Letters of Credit” means the letters of credit issued under the
Original Credit Agreement and set forth on the attached Schedule 1.01.

 

“Existing Senior Notes” means the 7¾% Senior Notes due April 1, 2019 issued by
the Borrower pursuant to and in accordance with the terms of the Indenture.

 

“Existing Senior Notes Indenture” means that certain Indenture dated as of
March 16, 2011, by and between the Borrower, as issuer, and Wells Fargo Bank,
National Association, as trustee, as amended, restated, supplemented, renewed or
extended or otherwise modified from time to time to the extent permitted by
Section 7.15.

 

“Existing Swap Agreements” means any Swap Agreements entered into between any
Credit Party and any Lender Counterparty (including any Lender Counterparty
under and as defined in the Original Credit Agreement) prior to the Effective
Date and in effect on the Effective Date.

 

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“FASB” means Financial Accounting Standards Board.

 

“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), and any current or future
regulations or official interpretations thereof and any agreement entered into
pursuant to Section 1471(b)(1) of the Code.

 

“Federal Funds Effective Rate” means, for any day, the rate calculated by the
NYFRB based on such day’s federal funds transactions by depositary institutions,
as determined in such manner as the NYFRB shall set forth on its public website
from time to time, and published on the next succeeding Business Day by the
NYFRB as the federal funds effective rate.

 

“Fee Letter” means that certain fee letter, dated April 23, 2014, among the
Borrower, the Administrative Agent and the Lead Arranger.

 

“Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of any Credit Party.  Any document delivered
hereunder that is signed by a Financial Officer of a Credit Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Credit Party and such
Financial Officer shall be conclusively presumed to have acted on behalf of such
Credit Party.

 

“First Amendment Effective Date” means November 12, 2014.

 

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

 

“Fourth Amendment Effective Date” means March [  ], 2016.

 

“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 1.04.

 

“Gas Balancing Agreement” means any agreement or arrangement whereby the
Borrower or any Restricted Subsidiary, or any other party having an interest in
any Hydrocarbons to be produced from Oil and Gas Interests in which the Borrower
or any Restricted Subsidiary owns an interest, has a right to take more than its
proportionate share of production therefrom.

 

“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 properly exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.

 

“Guarantee” of or by any Person (in this definition, the “guarantor”) means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment

 

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of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.

 

“Guaranteed Liabilities” has the meaning assigned to such term in Section 8.01.

 

“Guarantor” means the Borrower (with respect to the Obligations of the other
Credit Parties) and each Material Restricted Subsidiary that is a party hereto
or hereafter executes and delivers to the Administrative Agent and the Lenders,
a Counterpart Agreement pursuant to Section 6.13 or otherwise.

 

“Hazardous Materials”  means all explosive or radioactive materials, substances
or wastes and all hazardous or toxic materials, substances or wastes or other
chemicals or pollutants, including petroleum or petroleum distillates, asbestos
or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other materials, substances or wastes of
any nature regulated pursuant to, or for which liability or standards of conduct
may be imposed under, any Environmental Law.

 

“Hedge Modification” means the amendment, modification, cancellation,
monetization, sale, transfer, assignment, early termination or other disposition
of any Swap Agreement (including any Existing Swap Agreement) by any Credit
Party for Crude Oil or Natural Gas.

 

“Hydrocarbons” means all Crude Oil and Natural Gas produced from or attributable
to the Oil and Gas Interests of the Credit Parties.

 

“Impacted Interest Period” has the meaning assigned to it in the definition of
“LIBO Rate.”

 

“Incentive Partnership” means any trust or limited partnership to which a Credit
Party, as general partner, contributes a portion of its after-payout working
interest in wells drilled within certain areas, and key employees and
consultants who promote the drilling and acquisition programs, as limited
partners contribute cash.

 

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (d) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding those incurred
in the ordinary course of business which are not greater than sixty (60) days
past the date of invoice or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP), (e) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to

 

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be secured by) any Lien on property owned or acquired by such Person, whether or
not the Indebtedness secured thereby has been assumed by such Person, but
limited to the lesser of (i) the amount of such Indebtedness and (ii) the fair
market value of the property securing such Indebtedness, (f) all Guarantees by
such Person of Indebtedness of others to the extent of the lesser of the amount
of such Indebtedness and the maximum stated amount of such Guarantee, (g) all
Capital Lease Obligations of such Person, (h) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty, (i) all obligations, contingent or otherwise, of such
Person in respect of bankers’ acceptances, (j) all net obligations (after giving
effect to any netting requirements) under any Swap Agreement that such Person
would be required to pay if the Swap Agreement were terminated at such time,
(k) attributable Indebtedness in respect of Sale and Leaseback Transactions and
(l) with respect to any Production Payment and Reserve Sale, any warranties or
guaranties of production or payment by such Person with respect to such
Production Payment and Reserve Sale but excluding other contractual obligations
of such Person with respect to such Production Payment and Reserve Sale.  The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person’s ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor. 
Notwithstanding anything to the contrary contained herein, after giving effect
to the netting contemplated by clause (j) above, (a) in no event shall any
Warrants be deemed to constitute Indebtedness for purposes of this Agreement and
the other Loan Documents and (b) in no event shall any amounts owing to any
Credit Party under any Swap Agreement be deemed to reduce Indebtedness.

 

“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
Credit Party under any Loan Document and (b) to the extent not otherwise
described in (a) hereof, Other Taxes.

 

“Indemnitee” has the meaning assigned to such term in Section 11.03.

 

“Indenture” means with respect to (a) the Existing Senior Notes, the Existing
Senior Notes Indenture and (b) any other Senior Notes, any indenture by and
among any Credit Party, as issuer, and a trustee, pursuant to which such Senior
Notes are issued, in each case, as the same may be amended, restated,
supplemented, renewed or extended or otherwise modified from time to time to the
extent permitted by Section 7.15.

 

“Ineligible Institution” has the meaning assigned to it in Section 11.04(b).

 

“Information” has the meaning assigned to such term in Section 11.12.

 

“Initial Borrowing Base” has the meaning assigned to such term in Section 3.01.

 

“Intercreditor Agreement” means that certain Intercreditor Agreement, dated as
of March 8, 2016, among the Administrative Agent, the Second Lien Administrative
Agent, the Borrower and the other Credit Parties party thereto, as the same may
be amended, supplemented or otherwise modified from time to time.

 

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“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.08.

 

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

 

“Interpolated Rate” means, at any time, for any Interest Period, the rate per
annum (rounded to the same number of decimal places as the LIBO Screen Rate) 
determined by the Administrative Agent (which determination shall be conclusive
and binding absent manifest error) to be equal to the rate that results from
interpolating on a linear basis between: (a) the LIBO Screen Rate for the
longest period for which the LIBO Screen Rate is available) that is shorter than
the Impacted Interest Period; and (b) the LIBO Screen Rate for the shortest
period (for which that Screen Rate is available) that exceeds the Impacted
Interest Period, in each case, at such time.

 

“IRS” means the United States Internal Revenue Service.

 

“Issuing Bank” means JPMorgan Chase Bank, N.A., in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.06(i).  The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term “Issuing Bank” shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.

 

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

 

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

 

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Exposure of any Lender at any time shall be its Applicable Percentage of the
total LC Exposure at such time.

 

“Lead Arranger” means J.P. Morgan Securities LLC in its capacity as the lead
arranger.

 

“Lender Certificate” has the meaning assigned to such term in Section 2.03.

 

“Lender Counterparty” means any Lender or any Affiliate of a Lender counterparty
to a Swap Agreement with any Credit Party.

 

“Lender Hedging Obligations” means all obligations arising from time to time
under Swap Agreements permitted hereunder and entered into from time to time
between any Credit Party and a Lender Counterparty (including any such
obligations under any Existing Swap Agreements); provided that if such Lender
Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender
hereunder, Lender Hedging Obligations shall only include such obligations to the
extent arising from transactions entered into at the time such Lender
Counterparty was a Lender hereunder or an Affiliate of a Lender hereunder
pursuant to any Swap Agreement or any Existing Swap Agreement.

 

“Lender Parent” means, with respect to any Lender, any Person as to which such
Lender is, directly or indirectly, a Subsidiary.

 

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption or a
Lender Certificate, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Assumption. Unless the context otherwise requires,
the term “Lenders” includes the Issuing Bank.

 

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

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the London interbank offered rate as administered by ICE Benchmark
Administration (or any other Person that takes over the administration of such
rate for U.S. Dollars for a period equal in length to such Interest Period as
displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such
rate (or, in the event such rate does not appear on a Reuters page or screen, on
any successor or substitute page on such screen that displays such rate, or on
the appropriate page of such other information service that publishes such rate
from time to time as selected by the Administrative Agent in its reasonable
discretion; in each case the “LIBO Screen Rate”) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period; provided that, if the LIBO Screen Rate shall be less than zero, such
rate shall be deemed to be zero for the purposes of this Agreement and provided,
further, if the LIBO Screen Rate shall not be available at such time for such
Interest Period (an “Impacted Interest Period”) then the LIBO Rate shall be the
Interpolated Rate, provided, that, if any Interpolated Rate shall be less than
zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

“LIBO Screen Rate” has the meaning assigned to it in the definition of “LIBO
Rate.”

 

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“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

“Loan Documents” means this Agreement, any promissory notes executed in
connection herewith, the Security Instruments, the Intercreditor Agreement, the
Letters of Credit (and any applications therefore and reimbursement agreements
related thereto), the Fee Letter and any other agreements executed by any Credit
Party in connection with this Agreement and designated as a Loan Document
therein.

 

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

 

“Majority Lenders” means, at any time, Lenders having Credit Exposures and
Unused Commitments representing more than fifty percent (50%) of the sum of the
Aggregate Credit Exposure and all Unused Commitments at such time or, if the
Aggregate Commitment has been terminated, Lenders having Credit Exposures
representing more than fifty percent (50%) of the Aggregate Credit Exposure at
such time.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, financial condition or results of operations of the Borrower
and its Restricted Subsidiaries taken as a whole, (b) the ability of any Credit
Party to perform any of its obligations under this Agreement and the other Loan
Documents or (c) the validity or enforceability of any Loan Document against any
Credit Party which is a party thereto or the rights of or benefits available to
the Lenders under this Agreement and the other Loan Documents.

 

“Material Gas Imbalance” means, with respect to all Gas Balancing Agreements to
which Borrower or any Restricted Subsidiary is a party or by which any Oil and
Gas Interests owned by Borrower or a Restricted Subsidiary is bound, a net
overproduced gas imbalance to Borrower and the Restricted Subsidiaries, taken as
a whole, in excess of $750,000.

 

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of the
Borrower or any one or more of the Restricted Subsidiaries in an aggregate
principal amount exceeding $10,000,000.  For purposes of determining Material
Indebtedness, the “principal amount” of the obligations of the Borrower or any
Restricted Subsidiary in respect of any Swap Agreement at any time shall be the
Swap Termination Value.

 

“Material Restricted Subsidiary” means any Restricted Subsidiary that is a
Domestic Subsidiary and that is not a Non-Material Restricted Subsidiary.

 

“Material Sales Contract” means, as of any date of determination, any agreement
for the sale of Hydrocarbons from the Oil and Gas Interests to which the
Borrower or any Restricted Subsidiary is a party if the aggregate volume of
Hydrocarbons sold pursuant to such agreement during the twelve months
immediately preceding such date equals or exceeds 15% of the

 

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aggregate volume of Hydrocarbons sold by the Borrower and the Restricted
Subsidiaries, on a consolidated basis, from the Oil and Gas Interests during the
twelve months immediately preceding such date.

 

“Maturity Date” means April 23, 2019; provided that if on or prior to October 1,
2018 the Existing Senior Notes are not either (a) amended to extend the
scheduled repayment thereof until no earlier than October 23, 2019 or
(b) retired, redeemed, defeased, repurchased, prepaid or refinanced with the
proceeds of any Permitted Refinancing, the Loans or the issuance of Equity
Interests of the Borrower (or any combination thereof) in accordance with
Section 7.15, then “Maturity Date” shall mean October 1, 2018.

 

“Maximum Facility Amount” means $150,000,000.

 

“Maximum Liability” has the meaning assigned to such term in Section 8.10.

 

“Maximum Rate” has the meaning assigned to such term in Section 11.13.

 

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

 

“Mortgaged Properties” means the Oil and Gas Interests described in one or more
duly executed, delivered and filed Mortgages evidencing a first and prior Lien
in favor of the Administrative Agent for the benefit of the Secured Parties and
subject only to the Liens permitted pursuant to Section 7.02.

 

“Mortgages” means all mortgages, deeds of trust, amendments to mortgages,
security agreements, assignments of production, pledge agreements, collateral
mortgages, collateral chattel mortgages, collateral assignments, financing
statements and other documents, instruments and agreements evidencing, creating,
perfecting or otherwise establishing the Liens on the Mortgaged Properties as
required by Section 6.09, which shall be in form and substance reasonably
satisfactory to the Administrative Agent.

 

“Multiemployer Plan” means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which any Credit Party or any ERISA Affiliate
contributed or has any obligations (current or contingent).

 

“Natural Gas” means all natural gas, distillate or sulphur, natural gas liquids
and all products recovered in the processing of natural gas (other than
condensate) including, without limitation, natural gasoline, coalbed methane
gas, casinghead gas, iso-butane, normal butane, propane and ethane (including
such methane allowable in commercial ethane).

 

“Net Cash Proceeds” means, (A) with respect to any Disposition of any Borrowing
Base Properties (including any Equity Interests of any Restricted Subsidiary
owning Borrowing Base Properties) by the Borrower or any Restricted Subsidiary,
the excess, if any, of (a) the sum of cash and cash equivalents received in
connection with such sale, but only as and when so received, over (b) the sum of
(i) the principal amount of any Indebtedness that is secured by such asset and
that is required to be repaid in connection with the sale thereof (other than
the Loans) and (ii) the out-of-pocket expenses incurred by the Borrower or such
Restricted Subsidiary in connection with such sale, (B) with respect to any
Permitted Refinancing or issuance of Senior

 

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Notes, the cash proceeds received from such Permitted Refinancing or issuance of
Senior Notes, as the case may be, net of underwriting discounts and commissions
and other reasonable costs and expenses associated therewith, including
reasonable legal fees and expenses, and (C) with respect to any Hedge
Modification by the Borrower or any Restricted Subsidiary, the excess, if any,
of (a) the sum of cash and cash equivalents received in connection with such
Hedge Modification (after giving effect to any netting arrangements), over
(b) the out-of-pocket expenses incurred by the Borrower or such Restricted
Subsidiary in connection with such Hedge Modification.

 

“New Lender” shall have the meaning assigned to such term in Section 11.17.

 

“Non-Consenting Lender” has the meaning assigned to such term in
Section 2.19(c).

 

“Non-Material Restricted Subsidiary” means any Restricted Subsidiary that
(a) does not own or operate, by contract or otherwise, any Oil and Gas Interests
included in the Borrowing Base Properties, (b) does not own assets, properties
and interests having an aggregate fair market value in excess of $1,000,000 and
(c) is not a party to any Guarantee of the Senior Notes or Second Lien Debt.

 

“NYFRB” means the Federal Reserve Bank of New York.

 

“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective
Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on
such day (or for any day that is not a Business Day, for the immediately
preceding Business Day); provided that if none of such rates are published for
any day that is a Business Day, the term “NYFRB Rate” means the rate for a
federal funds transaction quoted at 11:00 a.m. on such day received by the
Administrative Agent from a Federal funds broker of recognized standing selected
by it; provided, further, that if any of the aforesaid rates shall be less than
zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

“Obligations” means (a) all obligations of every nature, contingent or
otherwise, whether now existing or hereafter arising, of any Credit Party from
time to time owed to the Administrative Agent, the Issuing Bank, the Lenders or
any of them under any Loan Document, whether for principal, interest (including
post-petition interest), reimbursement of amounts drawn under any Letter of
Credit, funding indemnification amounts, fees, expenses, indemnification or
otherwise, (b) Lender Hedging Obligations and (c) Cash Management Obligations;
provided that the “Obligations” shall exclude any Excluded Swap Obligations.

 

“Off-Balance Sheet Liability” of a Person means (i) any repurchase obligation or
liability of such Person with respect to accounts or notes receivable sold by
such Person, (ii) any liability under any Sale and Leaseback Transaction which
is not a Capital Lease Obligation, (iii) any liability under any so-called
“synthetic lease” transaction entered into by such Person, (iv) any Material Gas
Imbalance, (v) any Advance Payment Contract, or (vi) any obligation arising with
respect to any other transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a liability on the balance
sheets of such Person, but excluding from the foregoing clauses (iii) through
(vi) operating leases and usual and customary oil, gas and mineral leases.

 

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“Oil and Gas Interest(s)” means: (a) direct and indirect interests in and rights
with respect to oil, gas, mineral and related properties and assets of any kind
and nature, direct or indirect, including, without limitation, working, royalty
and overriding royalty interests, mineral interests, leasehold interests,
production payments, operating rights, net profits interests, other non-working
interests, contractual interests, non-operating interests and rights in any
pooled, unitized or communitized acreage by virtue of such interest being a part
thereof; (b) interests in and rights with respect to Hydrocarbons and other
minerals or revenues therefrom and contracts and agreements in connection
therewith and claims and rights thereto (including oil and gas leases, operating
agreements, unitization, communitization and pooling agreements and orders,
division orders, transfer orders, mineral deeds, royalty deeds, oil and gas
sales, exchange and processing contracts and agreements and, in each case,
interests thereunder), and surface interests, fee interests, reversionary
interests, reservations and concessions related to any of the foregoing;
(c) easements, rights-of-way, licenses, permits, leases, and other interests
associated with, appurtenant to, or necessary for the operation of any of the
foregoing; (d) interests in oil, gas, water, disposal and injection wells,
equipment and machinery (including well equipment and machinery), oil and gas
production, gathering, transmission, compression, treating, processing and
storage facilities (including tanks, tank batteries, pipelines and gathering
systems), pumps, water plants, electric plants, gasoline and gas processing
plants, refineries and other tangible or intangible, movable or immovable, real
or personal property and fixtures located on, associated with, appurtenant to,
or necessary for the operation of any of the foregoing; and (e) all seismic,
geological, geophysical and engineering records, data, information, maps,
licenses and interpretations.

 

“Organizational Documents” means (a) with respect to any corporation, its
certificate or articles of incorporation, organization or formation, as amended,
and its by-laws, as amended, (b) with respect to any limited partnership, its
certificate of limited partnership or formation, as amended, and its partnership
agreement, as amended, (c) with respect to any general partnership, its
partnership agreement, as amended, and (d) with respect to any limited liability
company, its certificate of formation or articles of organization, as amended,
and its limited liability company agreement or operating agreement, as amended.

 

“Original Credit Agreement” has the meaning provided for such term in the first
Recital to this Agreement.

 

“Original Loans” means the loans and other extensions of credit outstanding
under the Original Credit Agreement as of the Effective Date.

 

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

 

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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 2.19).

 

“Overnight Bank Funding Rate” means, for any day, the rate comprised of both
overnight federal funds and overnight Eurodollar borrowings by U.S.-managed
banking offices of depository institutions (as such composite rate shall be
determined by the NYFRB as set forth on its public website from time to time)
and published on the next succeeding Business Day by the NYFRB as an overnight
bank funding rate (from and after such date as the NYFRB shall commence to
publish such composite rate).

 

“Participant” has the meaning assigned to such term in Section 11.04.

 

“Participant Register” has the meaning assigned to such term in Section 11.04.

 

“Payment Currency” has the meaning assigned to such term in Section 8.07.

 

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

 

“PDP Coverage Ratio” means, as of any date of determination, the ratio of
(a) PV10 of Proved Developed Producing Reserves to (b) the sum of (i) the
Obligations and (ii) without duplication of clause (a) above, all obligations
(after giving effect to any netting requirements) under any Swap Agreement that
such Person would be required to pay if the Swap Agreement were terminated at
such time, in each case, as of such date.  Notwithstanding anything to the
contrary contained herein, after giving effect to the netting contemplated by
clause (ii) above, in no event shall amounts owing to any Credit Party under any
Swap Agreement result in a reduction of the obligations referred to in clause
(b).

 

“Permitted Encumbrances” means:

 

(a)                               Liens imposed by law for Taxes, assessments or
other governmental charges or levies which are not yet delinquent or which
(i) are being contested in good faith by appropriate proceedings diligently
conducted, (ii) the Borrower or such Restricted Subsidiary, as applicable, has
set aside on its books adequate reserves with respect thereto in accordance with
GAAP and (iii) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect;

 

(b)                               carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s and other like Liens imposed by law, and contractual
Liens granted to operators and non-operators under oil and gas operating
agreements, in each case, arising in the ordinary course of business or incident
to the exploration, development, operation and maintenance of Oil and Gas
Interests and securing obligations that are not overdue by more than 60 days or
which (i) are being contested in good faith by appropriate proceedings, (ii) the
Borrower or such Restricted Subsidiary, as applicable, has set aside on its
books adequate reserves with respect thereto in accordance with GAAP and
(iii) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect;

 

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(c)                                  contractual Liens which arise in the
ordinary course of business under operating 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, that are taken into account in computing the net
revenue interests and working interests of the Borrower or any of its
Subsidiaries warranted in the Security Instruments or this Agreement, which
Liens are limited to the Oil and Gas Interests and related property that is the
subject of such agreement, arising out of or pertaining to the operation or the
production or sale of Hydrocarbons produced from the Oil and Gas Interests,
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 Restricted Subsidiary or materially
impair the value of such property subject thereto;

 

(d)                                 pledges and deposits in connection with
workers’ compensation, unemployment insurance and other social security laws or
regulations;

 

(e)                                  Liens on cash and securities and deposits
to secure the performance of bids, trade contracts, leases, statutory
obligations (excluding Liens arising under ERISA), surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case which are
in the ordinary course of business and which are 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;

 

(f)                                   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, or under general depositary agreements, 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 of its Restricted
Subsidiaries to provide collateral to the depository institution;

 

(g)                                  judgment liens in respect of judgments that
do not constitute an Event of Default under clause (k) of Article IX;

 

(h)                                 easements, zoning restrictions,
rights-of-way, servitudes, permits, surface leases, and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and that, in the aggregate, do not
materially detract from the value of the affected property or materially impair
the use of the affected property or interfere with the ordinary conduct of
business of the Borrower or any Restricted Subsidiary;

 

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(i)                                     royalties, overriding royalties,
reversionary interests and similar burdens granted by the Borrower or any
Restricted Subsidiary with respect to the Oil and Gas Interests owned by the
Borrower or such Restricted Subsidiary, as the case may be, if the net
cumulative effect of such burdens does not operate to deprive the Borrower or
any Restricted Subsidiary of any material right in respect of its assets or
properties (except for rights customarily granted with respect to such
interests) and the net cumulative effect is deducted in the calculation of
Engineered Value;

 

(j)                                    Liens arising from Uniform Commercial
Code financing statement filings regarding operating leases entered into by the
Borrower or any Restricted Subsidiary in the ordinary course of business
covering the property under the lease;

 

(k)                                 unperfected Liens reserved in leases (other
than oil and gas leases) or arising by operation of law for rent or compliance
with the lease in the case of leasehold estates; and

 

(l)                                     defects in or irregularities of title
(other than defects or irregularities of title to Oil and Gas Interests), if
such defects or irregularities do not deprive the Borrower or any Restricted
Subsidiary of any material right in respect of its assets or properties;

 

provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness.

 

“Permitted Investments” means:

 

(a) U.S. Government Securities;

 

(b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or from Moody’s;

 

(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;

 

(d) fully collateralized repurchase agreements with a term of not more than 30
days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (c) above; and

 

(e) money market funds that (i) comply with the criteria set forth in Securities
and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940,
(ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of
at least $5,000,000,000.

 

“Permitted Junior Liens” means a Lien, junior to the Liens securing the
Obligations and the obligations under the Second Lien Loan Documents, granted by
the Borrower and any Guarantor in favor of the holders of Permitted Junior Lien
Debt (or any collateral agent, trustee

 

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or representative in connection therewith), at any time, upon any property of
the Borrower or any Guarantor to secure the Permitted Junior Lien Obligations.

 

“Permitted Junior Lien Debt” means any Indebtedness of the Borrower and the
Guarantors constituting a Permitted Refinancing of the Senior Notes to the
extent permitted by Section 7.01(g) and Section 7.15 that is secured by a
Permitted Junior Lien and that is subject to the Intercreditor Agreement.

 

“Permitted Junior Lien Obligations” means Permitted Junior Lien Debt and all
other obligations in respect thereof.

 

“Permitted Refinancing” means any Indebtedness of the Borrower or any Restricted
Subsidiary, and Indebtedness constituting Guarantees thereof by the Borrower or
any Restricted Subsidiary, incurred or issued in exchange for, or renewing or
extending, or the Net Cash Proceeds of which are used to extend, refinance,
renew, replace, defease or refund, Existing Senior Notes, in whole or in part,
from time to time; provided that (a) the principal amount of such Permitted
Refinancing does not exceed the principal amount of the Indebtedness being so
refinanced (it being understood and agreed that (i) if the principal amount of
the Indebtedness being so refinanced is reduced in connection with a debt
exchange or similar transaction, then the principal amount of such Permitted
Refinancing shall not exceed the principal amount of the Indebtedness being so
refinanced after taking into account any discount or reduction that may have
resulted from such exchange or similar transaction and (ii) such Permitted
Refinancing shall not consist of additional borrowings or issuances of
Indebtedness above what is required to refinance the Indebtedness being so
refinanced), (b) such Permitted Refinancing does not provide for any scheduled
repayment, mandatory redemption or payment of a sinking fund obligation prior to
the date that is 180 days after the fifth anniversary of the Effective Date
(except for any customary offer to redeem such Indebtedness required as a result
of asset sales or the occurrence of a “Change of Control” under and as defined
in the Indenture), (c) the covenant, default and remedy provisions of such
Permitted Refinancing, taken as a whole, are not materially more restrictive to
the Borrower and its Subsidiaries than those imposed by the Existing Senior
Notes being refinanced, (d) the mandatory prepayment, repurchase and redemption
provisions of such Permitted Refinancing, taken as a whole, are not materially
more restrictive to the Borrower and its Subsidiaries than those imposed by the
Existing Senior Notes being refinanced, (e) the cash interest rate, the overall
effective interest cost and the weighted average yield (with the comparative
determinations to be made by the Administrative Agent in a manner consistent
with generally accepted finance practices) applicable to such Permitted
Refinancing does not exceed the greater of (i) the cash interest rate, the
overall effective interest cost and the weighted average yield (as calculated
above) of the Existing Senior Notes being refinanced and (ii) the prevailing
market cash interest rate, overall effective interest cost and weighted average
yield (as calculated above) then in effect for similarly situated credits at the
time such Permitted Refinancing is incurred (provided that such cash interest
rate, the overall effective interest cost and the weighted average yield (as
calculated above) shall not in any event exceed 17.5%), (f) (i) the default
interest rate shall not exceed the applicable non-default interest rate by more
than two percent (2.0%) per annum and (ii) any make-whole premiums, non-call
protections or other premiums must be on prevailing market terms (provided that
in no event shall a make-whole premium, non-call protection or other premium
period be in excess of 60% of the overall maturity period of the Permitted
Refinancing), (g) such Permitted Refinancing is

 

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unsecured or secured solely by Permitted Junior Liens, (h) no Subsidiary of the
Borrower is required to Guarantee such Permitted Refinancing unless such
Subsidiary is (or concurrently with any such Guarantee becomes) a Guarantor
hereunder, and (i) to the extent such Permitted Refinancing is or is intended to
be expressly subordinate to the payment in full of all of the Obligations, the
subordination provisions contained therein are either (x) on substantially the
same terms or at least as favorable to the Secured Parties as the subordination
provisions contained in the Existing Senior Notes being refinanced or
(y) reasonably satisfactory to the Administrative Agent and the Majority
Lenders.

 

“Permitted Second Lien Refinancing” means any Indebtedness of the Borrower or
any Restricted Subsidiary, and Indebtedness constituting Guarantees thereof by
the Borrower or any Restricted Subsidiary, incurred or issued in exchange for,
or renewing or extending, or the Net Cash Proceeds of which are used to extend,
refinance, renew, replace, defease or refund, the Second Lien Credit Agreement,
in whole only, from time to time; provided that such Permitted Second Lien
Refinancing shall be incurred in compliance with Section 7.16.

 

“Permitted Second Lien Refinancing Charges” means, without duplication, (a) any
payment-in-kind interest in connection with the Second Lien Debt hereunder and
(b) any payment-in-kind interest, make-whole amounts, prepayment premiums and
costs, fees and expenses, in each case, in connection with a Permitted Second
Lien Refinancing.

 

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

 

“Petroleum Industry Standards” means Definitions for Oil and Gas Reserves
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question.

 

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

 

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan Chase Bank as its prime rate in effect at its office located
at 270 Park Avenue, New York, New York; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

 

“Production Payment and Reserve Sale” means the grant or transfer by the
Borrower or any of its Restricted Subsidiaries to any Person of a royalty,
overriding royalty, net profits interest, production payment, partnership or
other interest in Oil and Gas Interests, reserves or the right to receive all or
a portion of the production or the proceeds from the sale of production
attributable to such properties where the holder of such interest has recourse
solely to such production or proceeds of production, subject to the obligation
of the grantor or transferor to operate and maintain, or cause the subject
interests to be operated and maintained, in a

 

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reasonably prudent manner or other customary standard or subject to the
obligation of the grantor or transferor to indemnify for environmental, title or
other matters customary in the oil and gas business, including any such grants
or transfers pursuant to incentive programs on terms that are reasonably
customary in the oil and gas business for geologists, geophysicists or other
providers of technical services to the Borrower or any of its Restricted
Subsidiaries.

 

“Projections” means the Borrower’s forecasted (a) balance sheets, (b) profit and
loss statements, and (c) cash flow statements, all prepared on a basis
consistent with the historical financial statements described in Section 4.04
and after giving effect to the Transactions, together with appropriate
supporting details and a statement of underlying assumptions, in each case in
form and substance satisfactory to the Lenders and for the period from the
Effective Date through December 31, 2015.

 

“Proved Developed Producing Reserves” means oil and gas reserves that, in
accordance with Petroleum Industry Standards, are classified as both “Proved
Reserves” and “Developed Producing Reserves.”

 

“Proved Reserves” means oil and gas reserves that, in accordance with Petroleum
Industry Standards, are classified as both “Proved Reserves” and one of the
following: (a) “Developed Producing Reserves”, (b) “Developed Non-Producing
Reserves” or (c) “Undeveloped Reserves”.

 

“Public-Sider” means a Lender or any representative of such Lender that does not
want to receive material non-public information within the meaning of the
federal and state securities laws.

 

“PV10” means, in respect of the Proved Developed Producing Reserves of any
Credit Parties’ Oil and Gas Interests set forth in the most recently delivered
Reserve Report, the present value of future cash flows (discounted at ten
percent (10%) per annum) (a) calculated in accordance with SEC guidelines but
using Strip Price for crude oil and natural gas liquids (WTI Cushing) and
natural gas (Henry Hub), (b) calculated by (i) in the case of a Reserve Report
due on April 1 of any year, an Approved Petroleum Engineer and (ii) in the case
of a Reserve Report due on October 1 of any year or as otherwise required under
this Agreement, at the Borrower’s option, a petroleum engineer employed by the
Borrower or an Approved Petroleum Engineer, in each case, in such person’s
reasonable judgment after having reviewed the information from the most recently
delivered Reserve Report, (c) as set forth in the Reserve Report most recently
delivered under this Agreement, (d) as adjusted to give effect to Swap
Agreements permitted by this Agreement as in effect on the date of such
determination and (e) as adjusted to give pro forma effect to all Dispositions
or Acquisitions completed since the date of the Reserve Report.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Credit
Party that has total assets exceeding $10,000,000 at the time the relevant
Guarantee or grant of the relevant security interest becomes effective with
respect to such Swap Obligation or such other person as constitutes an “eligible
contract participant” under the Commodity Exchange Act or any regulations
promulgated thereunder and can cause another person to qualify as an “eligible
contract participant” at such time by entering into a keepwell under
Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any
Issuing Bank, as applicable.

 

“Redetermination” means any Scheduled Redetermination or Special
Redetermination.

 

“Redetermination Date” means each date on which the Borrowing Base is
redetermined pursuant to the terms hereof, which shall be (a) with respect to
any Scheduled Redetermination, on or about May 1 and November 1 of each year,
commencing November 1, 2014, (b) with respect to any Special Redetermination
requested by the Borrower pursuant to Section 3.03, the first day of the first
month which is not less than twenty (20) days following the date of a request by
the Borrower for a Special Redetermination and (c) with respect to any Special
Redetermination requested by the Required Lenders, the date notice of such
Redetermination is delivered to the Borrower pursuant to Section 3.04.

 

“Register” has the meaning assigned to such term in Section 11.04.

 

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

 

“Required Lenders” means, at any time, Lenders having Credit Exposures and
Unused Commitments representing at least sixty-six and two-thirds percent
(66-2/3%) of the sum of the Aggregate Credit Exposure and all Unused Commitments
of all Lenders at such time or, if the Aggregate Commitment has been terminated,
Lenders having Credit Exposures representing at least sixty-six and two-thirds
percent (66-2/3%) of the Aggregate Credit Exposure of all Lenders at such time.

 

“Requirements of Law” means, as to any Person, any order, law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

 

“Reserve Report” means an unsuperseded engineering analysis of the Borrowing
Base Properties, in form and substance reasonably acceptable to the
Administrative Agent, prepared in accordance with customary and prudent
practices in the petroleum engineering industry.

 

“Reserve Report Certificate” means, with respect to any Reserve Report or Asset
Coverage Reserve Report, a certificate from a Responsible Officer certifying
that in all material respects: (a) such report is based on information
reasonably available to the Borrower; (b) the Borrower or its Subsidiaries owns
good and defensible title to the Oil and Gas Interests evaluated in such report
(except any such Oil and Gas Interests that have been Disposed of since the date
of such report as permitted by this Agreement) and such properties are free and
clear of all Liens except for Liens permitted by Section 7.02; (c) except as set
forth on an exhibit to the Reserve Report Certificate, on a net basis there are
no gas imbalances, take-or-pay or other prepayments with respect to its Oil and
Gas Interests evaluated in such report which would require the Borrower or any
Subsidiary to deliver Hydrocarbons either generally or produced from Oil and Gas
Interests at some future time without then or thereafter receiving full payment
therefor; (d) except as set forth on an exhibit to the Reserve Report
Certificate, none of the Borrower’s or its

 

29

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Subsidiaries’ Oil and Gas Interests have been Disposed of since the last
delivery of the corresponding report, which exhibit shall describe in reasonable
detail such Dispositions; (e) attached to the Reserve Report Certificate is a
list of all Material Sales Contracts and all material marketing agreements;
(f) the Borrower is in compliance with Section 6.09; and (g) except as set forth
on an exhibit to the Reserve Report Certificate, all such properties are owned
by the Borrower or a Guarantor.

 

“Responsible Officer” means the chief executive officer, president, vice
president, chief financial officer, principal accounting officer, treasurer or
assistant treasurer of a Credit Party.  Any document delivered hereunder that is
signed by a Responsible Officer of a Credit Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Credit Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Credit Party.

 

“Restricted Contribution” means (a) any gift, payment or other contribution to a
charity or other charitable organization in excess of $100,000 per fiscal year
unless consented to by the Administrative Agent or (b) any gift, payment or
other contribution to a political party, political group or other political
organization.

 

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

 

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

 

“S&P” means Standard & Poor’s.

 

“Sale and Leaseback Transaction” means any sale or other transfer of any
property by any Person with the intent to lease such property as lessee.

 

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

 

“Sanctioned Person” means, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by the Office of Foreign
Assets Control of the U.S. Department of the Treasury, the U.S. Department of
State, (b) any Person operating, organized or resident in a Sanctioned Country
or (c) any Person controlled by any such Person.

 

“Sanctions” means economic or financial sanctions or trade embargoes imposed,
administered or enforced from time to time by the U.S. government, including
those administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury or the U.S. Department of State, the United Nations
Security Council and the European Union, each as amended, supplemented or
substituted from time to time.

 

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“SEC” means the Securities and Exchange Commission of the United States of
America.

 

“Scheduled Redetermination” means any redetermination of the Borrowing Base
pursuant to Section 3.02.

 

“Second Lien Administrative Agent” means Wilmington Trust, National Association
in its capacity as administrative agent for the secured creditors under the
Second Lien Credit Agreement, and its successor or successors in such capacity.

 

“Second Lien Credit Agreement” means that certain Credit Agreement, dated as of
March 8, 2016, among the Borrower, the Guarantors, the lenders from time to time
party thereto and the Second Lien Administrative Agent, as the same may be
amended, restated, supplemented, renewed, extended or otherwise modified from
time to time.

 

“Second Lien Debt” means the loans and other Indebtedness incurred pursuant to
the Second Lien Loan Documents and any Permitted Second Lien Refinancing
thereof.

 

“Second Lien Loan Documents” means the Second Lien Credit Agreement and any
other agreements executed by any Credit Party in connection therewith.

 

“Secured Party” means each of the Administrative Agent, any Lender, any Lender
Counterparty and any Affiliate of any Lender to which Obligations are owed,
including any Cash Management Obligations and Lender Hedging Obligations.

 

“Security Agreement” means that certain Third Amended and Restated Pledge and
Security Agreement dated as of the Fourth Amendment Effective Date, in favor of
the Administrative Agent for the benefit of the Secured Parties.

 

“Security Instruments” means collectively, the Security Agreement and all
Mortgages, deeds of trust, security agreements, pledge agreements, guaranty
agreements (other than this Agreement), collateral assignments and all other
collateral documents, now or hereafter executed and delivered by the Borrower or
any other Person (other than Swap Agreements with the Lenders or any Affiliate
of a Lender or participation or similar agreements between any Lender and any
other lender or creditor with respect to any Indebtedness pursuant to this
Agreement) as security for the payment or performance of the Obligations, all
such documents to be in form and substance reasonably satisfactory to the
Administrative Agent.

 

“Senior Notes” means (a) the Existing Senior Notes, (b) any senior, senior
subordinated or senior convertible notes issued by the Borrower pursuant to a
Permitted Refinancing of the Existing Senior Notes (including any Permitted
Junior Lien Debt) and (c) any senior, senior subordinated or senior convertible
notes issued by the Borrower pursuant to a Permitted Refinancing of the Senior
Notes (including any Permitted Junior Lien Debt), as the same may be amended,
restated, supplemented, renewed or extended or otherwise modified from time to
time to the extent permitted by Section 7.01(g) and Section 7.15.

 

“Senior Notes Documents” means the Senior Notes, the Indenture and any documents
or instruments contemplated by or executed in connection with any of them (and
designated therein

 

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as having been executed in connection with the Senior Notes), in each case, as
amended, modified, supplemented or restated from time to time to the extent
permitted by Section 7.15.

 

“Sole Bookrunner” means J.P. Morgan Securities LLC in its capacity as the sole
bookrunner.

 

“Special Redetermination” means any redetermination of the Borrowing Base made
pursuant to Section 3.03.

 

“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 percentage (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
percentage 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.

 

“Strip Price” means, at any time, the forward month prices as of the date
designated by the Borrower, which shall not be 30 days earlier than the date of
any determination for purposes of Section 2.03, for the most comparable
hydrocarbon commodity applicable to such future production month for a five-year
period (or such shorter period if forward month prices are not quoted for a
reasonably comparable hydrocarbon commodity for the full five-year period), with
such prices escalated at two percent (2%) each year thereafter based on the last
quoted forward month price of such period, as such prices are (i) quoted on the
New York Mercantile Exchange as of the determination date and (ii) adjusted by
appropriate management adjustments for additions to reserves and depletion or
sale of reserves since the date of such Reserve Report, adjusted for any basis
differential as of the date of determination.

 

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any
other Person the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other Person (a) of which Equity Interests representing more than 50% of the
equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.  Unless the context otherwise
clearly requires, references herein to a “Subsidiary” refer to a Subsidiary of
the Borrower.

 

“Super-Majority Lenders” means, at any time, Lenders having Credit Exposures and
Unused Commitments representing at least eighty percent (80%) of the sum of the
Aggregate Credit Exposure and all Unused Commitments at such time or, if the
Aggregate Commitment has

 

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been terminated, Lenders having Credit Exposures representing at least eighty
percent (80%) of the Aggregate Credit Exposure of all Lenders at such time.

 

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement 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 (other than, with respect to any Credit
Party, forward contracts for the purchase by, and physical delivery to, a Credit
Party of commodities used or consumed by such Credit Party in the ordinary
course of business); provided that no phantom stock or similar plan providing
for payments only on account of services provided by current or former
directors, officers, employees or consultants of the Credit Parties shall be a
Swap Agreement.

 

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “swap”
within the meaning of section 1a(47) of the Commodity Exchange Act.

 

“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.

 

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

 

“Third Lien Loan Documents” means, in the case of a Permitted Refinancing
secured by Permitted Junior Liens, the credit agreement, loan agreement, note
agreement, promissory note, indenture or any other agreement or instrument
evidencing or governing such Indebtedness and any other agreements executed by
any Credit Party in connection with such Indebtedness.

 

“Transactions” means (a) the execution, delivery and performance by the Credit
Parties of this Agreement and the other Loan Documents, (b) the borrowing of
Loans, (c) the use of the proceeds thereof, and (d) the issuance of Letters of
Credit hereunder.

 

“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 Adjusted LIBO Rate or the Alternate Base Rate.

 

“Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as
such on Schedule 4.13 or which the Borrower has designated in writing to the
Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 6.15.

 

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“Unused Commitment Fee” has the meaning assigned to such term in
Section 2.12(a).

 

“Unused Commitment” means, with respect to each Lender at any time, the lesser
of (a) such Lender’s Applicable Percentage of the Borrowing Base then in effect
minus such Lender’s Credit Exposure at such time and (b) such Lender’s
Commitment at such time minus such Lender’s Credit Exposure at such time.

 

“U.S. Government Securities” means direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency or instrumentality thereof to the extent
such obligations are entitled to the full faith and credit of the United States
of America), in each case maturing within one year from the date of acquisition
thereof.

 

“U.S. Person” means a “United States person” within the meaning of
Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in
Section 2.17(f)(ii)(B)(3).

 

“Warrants” means any and all warrants issued by any Credit Party to the extent
constituting Indebtedness.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

 

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

 

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

 

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

 

Terms Generally.  The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words “include”, “includes” and “including” shall be deemed
to be followed by the phrase “without limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words

 

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“herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words “asset” and “property” shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

Accounting Terms; GAAP.  Except as otherwise expressly provided herein, all
terms of an accounting or financial nature shall be construed in accordance with
GAAP, as in effect from time to time; provided that, if the Borrower notifies
the Administrative Agent that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision
(or if the Administrative Agent notifies the Borrower that the Majority Lenders
request an amendment to any provision hereof for such purpose), regardless of
whether any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision amended
in accordance herewith. Notwithstanding any other provision contained herein,
all terms of an accounting or financial nature used herein shall be construed,
and all computations of amounts and ratios referred to herein shall be made,
without giving effect to any election under Financial Accounting Standards Board
Accounting Standards Codification 825 (or any other Financial Accounting
Standard having a similar result or effect) to value any Indebtedness or other
liabilities of the Borrower or any Subsidiary at “fair value”, as defined
therein.

 

[Reserved.]

 

Time of Day.  Unless otherwise specified, all references to times of day shall
be references to Central time (daylight or standard, as applicable).

 

The Credits

 

Commitments.  Subject to the terms and conditions set forth herein, each Lender
that was a Lender under and as defined in the Original Credit Agreement agrees
to continue the Original Loans and each Lender agrees to make one or more Loans
to the Borrower from time to time on any Business Day during the Availability
Period in an aggregate principal amount that will not result in (a) such
Lender’s Credit Exposure exceeding the lesser of (i) such Lender’s Applicable
Percentage of the Borrowing Base then in effect and (ii) such Lender’s
Commitment or (b) the Aggregate Credit Exposure exceeding the lesser of (i) the
Borrowing Base then in effect and (ii) the Aggregate Commitment.  Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Loans.

 

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Termination and Reduction of the Aggregate Commitment.

 

Unless previously terminated, the Aggregate Commitment shall terminate on the
Maturity Date.

 

The Borrower may at any time terminate, or from time to time reduce, the
Aggregate Commitment; provided that (i) each reduction of the Aggregate
Commitment shall be in an amount that is an integral multiple of $1,000,000 and
not less than $1,000,000 and shall be applied among the Lenders in accordance
with each Lender’s Applicable Percentage and (ii) the Borrower shall not
terminate or reduce the Aggregate Commitment if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.10 and
Section 2.11, the Aggregate Credit Exposure would exceed the Aggregate
Commitment. If at any time the Borrowing Base is reduced to zero, then the
Aggregate Commitment shall terminate on the effective date of such reduction.

 

The Borrower shall notify the Administrative Agent of any election to terminate
or reduce the Aggregate Commitment under paragraph (b) of this Section 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 shall be irrevocable; provided that a notice of termination of
the Aggregate Commitment 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 of the Aggregate Commitment shall be permanent. 
Each reduction of the Aggregate Commitment shall be made ratably among the
Lenders in accordance with each Lender’s Applicable Percentage.

 

Additional Lenders; Increases in the Aggregate Commitment.  If (a) no Default
exists as of the date of such increase or would be caused by such increase,
(b) immediately after giving effect to such increase, the Aggregate Commitment
does not exceed the lesser of (i) the Borrowing Base then in effect and (ii) the
Maximum Facility Amount, and (c) at the time of and immediately after giving
effect to such increase, the Borrower (1) is in pro forma compliance with the
financial covenants set forth in Section 7.13 and (2) the PDP Coverage Ratio, on
a pro forma basis assuming the facility hereunder is fully drawn, is no less
than 1.20 to 1.00 as of the last day of the most recently ended fiscal quarter
for which the financial statements and compliance certificate required under
Section 6.01 have been delivered to the Administrative Agent and the Lenders,
calculated as though such increase occurred prior to the end of such fiscal
quarter, the Borrower may, at any time and from time to time, with the consent
of the Administrative Agent, increase the Aggregate Commitment in a minimum
amount of $10,000,000 and integral multiples of $1,000,000 in excess thereof by
providing written notice of such increase to the Administrative Agent.  Each
Lender shall have the right, but not the obligation, in each such Lender’s sole
discretion, to provide a portion of such increase in the Aggregate Commitment up
to the portion of such increase that such Lender’s existing Commitment bears to
the aggregate amount of the existing Commitments of all Lenders electing to
participate in such requested increase by executing and delivering to the
Borrower and the Administrative Agent a certificate substantially in the form of
Exhibit E hereto (a “Lender Certificate”). In the event that within 10 Business
Days of the Administrative Agent’s receipt of such written notice, the existing
Lenders fail to provide increases in their respective Commitments sufficient to
satisfy such requested increase in the Aggregate Commitment, the

 

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Borrower may adjust the previously requested increase to reflect the increased
Commitments of existing Lenders or one or more financial institutions reasonably
acceptable to the Administrative Agent may become a Lender under this Agreement
by executing and delivering to the Borrower and the Administrative Agent a
Lender Certificate. Upon receipt by the Administrative Agent of Lender
Certificates representing increases to existing Lender Commitments and/or
Commitments from new Lenders as provided in this Section 2.03 in an aggregate
amount equal to the requested increase (as the same may have been adjusted),
(1) the Aggregate Commitment (including the Commitment of any Person that
becomes a Lender by delivery of such a Lender Certificate) automatically without
further action by the Borrower, the Administrative Agent or any Lender shall be
increased on the effective date set forth in such Lender Certificates by the
amount indicated in such Lender Certificates, (2) the Register shall be amended
to add the Commitment of each additional Lender or to reflect the increase in
the Commitment of each existing Lender, and the Applicable Percentages of the
Lenders shall be adjusted accordingly to reflect each additional Lender or the
increase in the Commitment of each existing Lender, (3) any such additional
Lender shall be deemed to be a party in all respects to this Agreement and any
other Loan Documents to which the Lenders are a party, and (4) upon the
effective date set forth in such Lender Certificate, any such Lender party to a
Lender Certificate shall purchase and each existing Lender shall assign to such
Lender a pro rata portion of the outstanding Credit Exposure of each of the
existing Lenders such that the Lenders (including any additional Lender, if
applicable) shall have the appropriate portion of the Aggregate Credit Exposure
of the Lenders (based in each case on such Lender’s Applicable Percentage, as
revised pursuant to this Section), and the Borrower shall have paid to the
Lenders any amounts due pursuant to Section 2.16 as a result of such purchase
and assignment.

 

Loans and Borrowings.

 

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 of the
Lenders are several and no Lender shall be responsible for any other Lender’s
failure to make Loans as required.

 

Subject to Section 2.14, 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.

 

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 $1,000,000.  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 Aggregate Commitment or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.06(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 four (4) Eurodollar
Borrowings outstanding.

 

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Notwithstanding any other provision of this Agreement, the Borrower shall not be
entitled to request, or to elect to convert or continue, any Eurodollar
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.

 

Requests for Borrowings.  To request a Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., three Business Days before the
date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later
than 11:00 a.m., on the date of the proposed Borrowing (so long as such date is
a Business Day); 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 contemplated by Section 2.06(e).  Each such telephonic Borrowing Request
shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower.  Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.04:

 

the aggregate amount of the requested Borrowing;

 

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

 

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

 

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”; and

 

the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.07.

 

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.  Promptly following
receipt of a Borrowing Request in accordance with this Section, 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.

 

Letters of Credit.

 

General.  Subject to the terms and conditions set forth herein, the Borrower may
request the issuance of Letters of Credit as the applicant thereof for the
support of its or its Restricted Subsidiaries’ obligations in a form reasonably
acceptable to the Administrative Agent and the Issuing Bank, at any time and
from time to time during the Availability Period.  In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the Issuing
Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control. Notwithstanding anything herein to the contrary, the
Issuing Bank shall have no obligation hereunder to issue, and shall not issue,
any Letter of Credit the proceeds of which would be made to any Person (i) to
fund any

 

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activity or business of or with any Sanctioned Person, or in any country or
territory, that at the time of such funding is the subject of any Sanctions or
(ii) in any manner that would result in a violation of any Sanctions by any
party to this Agreement.

 

Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, 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.  If requested by the 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.  A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $15,000,000 and (ii) the
Aggregate Credit Exposure shall not exceed the lesser of (1) the Borrowing Base
then in effect and (2) the Aggregate Commitment.

 

Expiration Date.  Each Letter of Credit (other than any Existing Letter of
Credit) shall expire at or prior to the close of business on the earlier of
(i) the date one year after the date of the issuance of such Letter of Credit
(or, in the case of any renewal or extension thereof, one year after such
renewal or extension) and (ii) the date that is five Business Days prior to the
Maturity Date. Each Existing Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the expiration date of such Existing
Letter of Credit as in effect on the Effective Date (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and
(ii) the date that is five Business Days prior to the Maturity Date.

 

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 Issuing Bank or the Lenders, the Issuing Bank hereby grants
to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit.  In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Bank, such Lender’s Applicable Percentage of each
LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on
the date due as provided in paragraph (e) of this Section, 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 paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the

 

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Aggregate Commitment, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.

 

Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of
a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying
to the Administrative Agent an amount equal to such LC Disbursement not later
than 12:00 noon on 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. on such
date, 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 on the Business Day
immediately following the day that the Borrower receives such notice; provided
that the Borrower shall, subject to the conditions to borrowing set forth
herein, be deemed to have requested 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 2.07 with respect to Loans made by such Lender (and
Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank
the amounts so received by it from the Lenders.  Promptly following receipt by
the Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing
Bank as their interests may appear.  Any payment made by a Lender pursuant to
this paragraph to reimburse the 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.

 

Obligations Absolute.  The Borrower’s obligation to reimburse LC Disbursements
as provided in paragraph (e) of this Section 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 or this
Agreement, or any term or provision therein, (ii) any draft or other document
presented under a Letter of Credit proving to be forged, fraudulent or invalid
in any respect or any statement therein being untrue or inaccurate in any
respect, (iii) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the terms of
such Letter of Credit, or (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, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower’s obligations hereunder. 
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of

 

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technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to special, indirect, consequential or punitive damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by the Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof.  The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of the Issuing Bank (as finally determined by a court of
competent jurisdiction), the Issuing Bank shall be deemed to have exercised care
in each such determination.  In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
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.

 

Disbursement Procedures.  The Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment
under a Letter of Credit.  The Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy) 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
Issuing Bank and the Lenders with respect to any such LC Disbursement.

 

Interim Interest.  If the Issuing Bank shall make any LC Disbursement, then,
unless the Borrower shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made (either with its own funds or a Borrowing under
Section 2.06(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 paragraph shall
be for the account of the Issuing Bank, except that interest accrued on and
after the date of payment by any Lender pursuant to paragraph (e) of this
Section to reimburse the Issuing Bank shall be for the account of such Lender to
the extent of such payment.

 

Replacement of the Issuing Bank.  The 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 2.12(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
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require.  After the
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

 

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Credit issued by it prior to such replacement, but shall not be required to
issue additional Letters of Credit.

 

Cash Collateralization.

 

(i)                                 If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than
sixty-six and two-thirds percent (662/3%) of the total LC Exposure) demanding
the deposit of cash collateral pursuant to this paragraph, the Borrower shall
deposit in the Cash Collateral Account an amount in cash equal to the total LC
Exposure as of such date plus any accrued and unpaid interest thereon, if any;
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 described in clause (h) or (i) of
Article IX.

 

(ii)                              All cash collateral provided by the Borrower
or any other Credit Party pursuant to the request of the Administrative Agent in
accordance with Section 2.20(c) shall be deposited in the Cash Collateral
Account.

 

(iii)                           Deposits in the Cash Collateral Account made
pursuant to either the foregoing paragraph (i) of this Section 2.06(j) or
Section 2.20(c) shall be held by the Administrative Agent as collateral for the
payment and performance of the Obligations under this Agreement and Borrower
hereby grants a security interest in such cash and each deposit account
(including the Cash Collateral Account) into which such cash is deposited to
secure the Obligations under this Agreement.  The Administrative Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over the Cash Collateral 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 but in consultation with the
Borrower 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 Issuing Bank for LC Disbursements for which it has not
been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated (but
subject to the consent of Lenders with LC Exposure representing sixty-six and
two-thirds percent (662/3%) or more of the total LC Exposure), be applied to
satisfy other Obligations under this Agreement and to the extent any excess
remains after payment in full in cash of all Obligations and the termination of
all Commitments, such excess shall be released to the Borrower.

 

(v)                             If the Borrower is required to provide an amount
of cash collateral pursuant to either paragraph (i) of this Section 2.06(j) or
Section 2.20(c), the amount of such cash collateral (to the extent not applied
as aforesaid) shall be returned to the Borrower within one (1) Business Day
after (x) in the case of cash collateral provided

 

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pursuant to paragraph (i) above, all Events of Default have been cured or waived
and (y) in the case of cash collateral provided pursuant to Section 2.20(c), the
date on which such cash collateral is no longer required pursuant to
Section 2.20(c).

 

Funding of Borrowings.

 

Each Lender shall make each Loan to be made by it hereunder on the proposed date
thereof solely by wire transfer of immediately available funds by 12:00 noon to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders.  Except in respect of the provisions of this
Agreement covering the reimbursement of Letters of Credit, the Administrative
Agent will make such Loans available to the Borrower by promptly crediting the
amounts so received in the aforesaid account of the Administrative Agent to a
deposit 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 2.06(e) shall be remitted by the
Administrative Agent to the Issuing Bank.

 

Unless the Administrative Agent shall have received notice from a Lender prior
to the proposed time any Borrowing is required to be made by such Lender in
accordance with paragraph (a) of this Section 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 paragraph (a) of this Section 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
reasonably 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 the principal portion of such payment shall
constitute such Lender’s Loan included in such Borrowing.

 

Interest Elections.

 

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.  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.

 

To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing
Request would

 

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be required under Section 2.05 if the Borrower were requesting a Borrowing of
the Type resulting from such election to be made on the effective date of such
election.  Each such telephonic Interest Election Request shall be irrevocable
and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in the form attached
hereto as Exhibit C and signed by the Borrower.

 

Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.04:

 

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 clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);

 

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

 

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

 

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,” unless otherwise
agreed upon by the Borrower and the Administrative Agent.

 

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.

 

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.

 

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 has
occurred and is continuing and the Administrative Agent, at the request of the
Majority Lenders, so notifies the Borrower, then, so long as an Event of Default
is continuing (i) no outstanding Borrowing may be converted to or continued as a
Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.

 

Repayment of Loans; Evidence of Debt.

 

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 Maturity Date.

 

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Each Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.

 

The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender’s share thereof.

 

The entries made in the accounts maintained pursuant to paragraph (b) or (c) of
this Section shall be prima facie evidence of the existence and amounts of the
obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement; and provided further that to the
extent there is any conflict between the accounts maintained pursuant to
paragraph (b) or (c) of this Section and the Register maintained pursuant to
Section 11.04, the Register shall control.

 

Any Lender may request that Loans made by it be evidenced by a promissory note. 
In such event, the Borrower shall prepare, execute and deliver to such Lender a
promissory note payable to such Lender (or, if requested by such Lender, to such
Lender and its registered assigns) and in the form attached hereto as
Exhibit D.  Thereafter, the Loans evidenced by such promissory note and interest
thereon shall at all times (including after assignment pursuant to
Section 11.04) be represented by one or more promissory notes in such form.

 

Optional Prepayment of Loans.

 

The Borrower shall have the right at any time and from time to time to prepay
without premium or penalty any Borrowing in whole and or in part, subject to
prior notice in accordance with paragraph (b) of this Section and to payment of
any funding indemnification amounts required by Section 2.16.

 

The Borrower shall notify the Administrative Agent by telephone (confirmed by
telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 11:00 a.m., three Business Days before the
date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not
later than 11:00 a.m., 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 or reduction of the Aggregate Commitment as contemplated by
Section 2.02, then such notice of prepayment may be revoked if such notice of
termination or reduction is revoked in accordance with Section 2.02.  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 2.04.  Each
prepayment of a Borrowing shall be applied ratably to the Loans included in

 

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the prepaid Borrowing.  Prepayments shall be accompanied by accrued interest to
the extent required by Section 2.13.

 

Mandatory Prepayment of Loans.

 

Except as otherwise provided in clauses (b), (c), (d) and (e) of this
Section 2.11, in the event a Borrowing Base Deficiency exists, the Borrower
shall, within thirty (30) days after written notice from the Administrative
Agent to the Borrower of such Borrowing Base Deficiency, either (i) by
instruments satisfactory in form and substance to the Administrative Agent,
provide additional security satisfactory to the Required Lenders in their sole
discretion to eliminate such Borrowing Base Deficiency, (ii) prepay, without
premium or penalty, the principal amount of the Loans (and cash collateralize
any portion of such Borrowing Base Deficiency attributable to LC Exposure) in an
amount sufficient to eliminate such Borrowing Base Deficiency, (iii) notify the
Administrative Agent that it intends to prepay, without premium or penalty (but
subject to any funding indemnification amounts required by Section 2.16), the
principal amount of such Borrowing Base Deficiency in not more than five
(5) equal monthly installments plus accrued interest thereon and make the first
such monthly payment on the 30th day after the Borrower’s receipt of notice of
such Borrowing Base Deficiency or (iv) exercise any combination of options (i),
(ii) and (iii) above to eliminate such Borrowing Base Deficiency.

 

Upon any redetermination or adjustment to the Borrowing Base as a result of a
Disposition of any Borrowing Base Properties (including a Disposition of Equity
Interests of a Restricted Subsidiary) pursuant to Section 7.04(j), the Borrower
shall (i) prepay the Loans (and cash collateralize any portion of such Borrowing
Base Deficiency attributable to LC Exposure) to the extent necessary to
eliminate any Borrowing Base Deficiency that may have occurred as a result of
such Disposition within one (1) Business Day of the date it or any Restricted
Subsidiary consummates such Disposition, and (ii) in the case of any exchange of
Borrowing Base Properties for other Oil and Gas Interests, take all actions
reasonably necessary that are requested by the Administrative Agent to cause
such Oil and Gas Interests received in such exchange to become additional
security for the Obligations by instruments satisfactory in form and substance
to the Administrative Agent.

 

Upon any redetermination or adjustment to the Borrowing Base as a result of a
Hedge Modification pursuant to Section 7.04(j), the Borrower shall prepay the
Loans (and cash collateralize any portion of such Borrowing Base Deficiency
attributable to LC Exposure) to the extent necessary to eliminate any Borrowing
Base Deficiency that may have occurred as a result of such Hedge Modification
promptly, and in any event by the later of (A) the date that is one (1) Business
Day after the date it or any Restricted Subsidiary receives the Net Cash
Proceeds from such Hedge Modification or (B) the date of such redetermination or
adjustment to the Borrowing Base.

 

[Reserved.]

 

In the event that the Aggregate Credit Exposure exceeds the lesser of the
Maximum Facility Amount and the sum of the Commitments of all the Lenders at
such time, the Borrower shall immediately prepay, subject to any funding
indemnification amounts required

 

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by Section 2.16, the principal amount of the Loans (and cash collateralize any
such excess attributable to LC Exposure) to the extent necessary to eliminate
such excess.

 

Amounts applied to the prepayment of Borrowings pursuant to this Section shall
be first applied ratably to ABR Borrowings then outstanding and, upon payment in
full of all outstanding ABR Borrowings, second, to Eurodollar Borrowings then
outstanding, and if more than one Eurodollar Borrowing is then outstanding, to
each such Eurodollar Borrowing 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. Any prepayments pursuant to this
Section shall be accompanied by accrued interest to the extent required by
Section 2.13 and any funding indemnification amounts required by Section 2.16.

 

Fees.

 

The Borrower agrees to pay to the Administrative Agent, for the account of each
Lender, an unused commitment fee (the “Unused Commitment Fee”) equal to the
Applicable Rate times the daily average of the total Unused Commitments.  Such
Unused Commitment Fee shall be calculated on the basis of a year consisting of
360 days.  The Unused Commitment Fee shall be payable in arrears on the last day
of March, June, September and December of each year, commencing with the first
such date to occur after the Effective Date, and on the Maturity Date for any
period then ending for which the Unused Commitment Fee shall not have been
theretofore paid.  In the event the Aggregate Commitment terminates on any date
other than the last day of March, June, September or December of any year, the
Borrower agrees to pay to the Administrative Agent, for the account of each
Lender, on the date of such termination, the pro rata portion of the Unused
Commitment Fee due for the period from the last day of the immediately preceding
March, June, September or December, as the case may be, to the date such
termination occurs.

 

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 Rate used to determine the
interest rate applicable to Eurodollar Loans on the face amount of each Letter
of Credit during the period from and including the Effective Date 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, and (ii) to the
Issuing Bank a fronting fee for each Letter of Credit equal to 0.125% per annum
on the face amount of such Letter of Credit during the period from and including
the Effective Date to but excluding the later of the date of termination of the
Aggregate Commitment and the date on which there ceases to be any LC Exposure
(but in no event less than $500 per annum), as well as the Issuing Bank’s
standard fees with respect to the issuance, amendment, renewal or extension of
any Letter of Credit or processing of drawings thereunder.  Participation fees
and fronting fees accrued through and including the last day of March, June,
September and December of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the
Effective Date; provided that all such fees shall be payable on the date on
which the Aggregate Commitment terminates and any such fees accruing after the
date on which the Aggregate Commitment terminates shall be payable on demand. 
Any other fees payable to the Issuing Bank pursuant to this paragraph shall be
payable within 10 days after

 

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demand.  All participation fees and fronting fees shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

 

The Borrower agrees to pay to the Administrative Agent and J.P. Morgan
Securities LLC, for their respective accounts, the fees set forth in the Fee
Letter payable to the Administrative Agent and J.P. Morgan Securities LLC and
such other fees payable in the amounts and at the times separately agreed upon
between the Borrower, the Administrative Agent and J.P. Morgan Securities LLC.

 

All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent (or to the Issuing Bank, in the
case of fees payable to it) for distribution, in the case of Unused Commitment
Fees and participation fees, to the Lenders.  Fees paid shall not be refundable
under any circumstances.

 

Interest.

 

The Loans comprising each ABR Borrowing shall bear interest at the Alternate
Base Rate plus the Applicable Rate.

 

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 Rate.

 

Notwithstanding the foregoing, if any principal of or interest on any Loan or
any fee or other amount payable by the Borrower hereunder is not paid when due,
whether at stated maturity, upon acceleration or otherwise, such overdue amount
shall bear interest, after as well as before judgment, at a rate per annum equal
to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise
applicable to such Loan as provided in the preceding paragraphs of this
Section or (ii) in the case of any other amount, 2% plus the rate applicable to
ABR Loans as provided in paragraph (a) of this Section.

 

Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan and upon termination of the Aggregate Commitment and
on the Maturity Date; provided that (i) interest accrued pursuant to paragraph
(c) of this Section shall be payable on demand, (ii) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR Loan
prior to the end of the Availability Period at a time when no Borrowing Base
Deficiency exists), 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.

 

All interest hereunder shall be computed on the basis of a year of 360 days,
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.

 

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

 

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, as applicable, for such
Interest Period; or

 

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

 

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

 

Increased Costs.

 

If any Change in Law shall:

 

impose, modify or deem applicable any reserve, special deposit, liquidity or
similar requirement (including any compulsory loan requirement, insurance charge
or other assessment) against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate) or the Issuing Bank;

 

impose on any Lender or the 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; or

 

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

 

and the result of any of the foregoing shall be to increase the cost to such
Lender or such other Recipient of making, continuing, converting or maintaining
any Loan (or of maintaining its obligation to make any such Loan) or to increase
the cost to such Lender, the Issuing Bank or such other Recipient of
participating in, issuing or maintaining any Letter of Credit or to reduce the
amount of any sum received or receivable by such Lender, the Issuing Bank or
such other Recipient hereunder (whether of principal, interest or otherwise),
then the Borrower will pay to such Lender, the Issuing Bank or such other
Recipient, as the case may be, such additional amount or amounts as will

 

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compensate such Lender, the Issuing Bank or such other Recipient, as the case
may be, for such additional costs incurred or reduction suffered.

 

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

 

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

 

Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the Issuing Bank’s right to demand such compensation; provided that
the Borrower shall not be required to compensate a Lender or the Issuing Bank
pursuant to this Section for any increased costs or reductions incurred more
than 270 days prior to the date that such Lender or the 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 the 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 270-day period referred to above shall be extended to include the period of
retroactive effect thereof.

 

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 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 (regardless
of whether such notice may be revoked under Section 2.10(b) and is revoked in
accordance therewith), (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 2.03 or Section 2.19, then, in any such
event, the Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event.  In the case of a Eurodollar 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

 

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such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the Eurodollar market.  A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 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.

 

Taxes.

 

Payments Free of Taxes.  Any and all payments by or on account of any obligation
of any Credit 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 Credit 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 2.17) the
applicable Recipient receives an amount equal to the sum it would have received
had no such deduction or withholding been made.

 

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

 

Evidence of Payments.  As soon as practicable after any payment of Taxes by any
Credit Party to a Governmental Authority pursuant to this Section 2.17, such
Credit 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.

 

Indemnification by the Borrower.  The Credit Parties shall jointly and severally
indemnify each Recipient, within 10 days after demand therefor, for the full
amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted
on or attributable to amounts payable under this Section) payable or paid by
such Recipient or required to be withheld or deducted from a payment to such
Recipient and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority; provided, however, that the
Credit Parties shall not be required to make any payment pursuant to this
Section 2.17 if the Agent or Lender, as the case may be, makes demand for such
payment more than eighteen months after the earlier of (i) the date on which the
relevant Governmental Authority makes written demand upon such Person for
payment of such Indemnified Taxes, and (ii) the date on

 

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which such Person has made payment of such Indemnified Taxes.  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. 
From and after the Fourth Amendment Effective Date, the Borrower shall indemnify
the Administrative Agent, and hold it harmless from, any and all losses, claims,
damages, liabilities and related expenses, including Taxes and the fees, charges
and disbursements of any counsel for any of the foregoing, arising in connection
with the Administrative Agent’s treating, for purposes of determining
withholding Taxes imposed under FATCA, the Loans as qualifying as a
“grandfathered obligation” within the meaning of Treasury Regulation
Section 1.1471-2(b)(2)(i).

 

Indemnification by the Lenders.  Each Lender shall severally indemnify the
Administrative Agent, within 10 days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that any
Credit Party has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Credit Parties to
do so), (ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 11.04(c) relating to the maintenance of a Participant
Register and (iii) any Excluded Taxes attributable to such Lender, in each case,
that are payable or paid by the Administrative Agent in connection with any Loan
Document, and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority.  A certificate as to the amount of such payment
or liability delivered to any Lender by the Administrative Agent 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).

 

Status of Lenders.

 

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 2.17(f)(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.

 

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Without limiting the generality of the foregoing,

 

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), an executed IRS
Form W-9 certifying that such Lender is exempt from U.S. Federal backup
withholding Tax;

 

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

 

(1)                                 in the case of a Foreign Lender claiming the
benefits of an income tax treaty to which the United States is a party (x) with
respect to payments of interest under any Loan Document, an executed IRS
Form W-8BEN-E or IRS Form W-8BEN (or applicable successor form) 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-E or IRS
Form W-8BEN (or applicable successor form) 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)                                 an executed IRS Form W-8ECI;

 

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

 

(4)                                 to the extent a Foreign Lender is not the
beneficial owner, an executed IRS Form W-8IMY, accompanied by IRS
Form W-8ECI, IRS Form W-8BEN-E, IRS Form W-8BEN (or applicable successor form),
a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or
Exhibit F-3, IRS Form W-9, and/or

 

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other certification documents from each beneficial owner, as applicable;
provided that if the Foreign Lender is a partnership and one or more direct or
indirect partners of such Foreign Lender are claiming the portfolio interest
exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate
substantially in the form of Exhibit F-4 on behalf of each such direct and
indirect partner;

 

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

 

if a payment made to a Recipient under any Loan Document would be subject to
U.S. Federal withholding Tax imposed by FATCA if such Recipient 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
Recipient 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
Recipient has complied with such Recipient’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.

 

Treatment of Certain Refunds.  If any party determines, in its sole discretion
exercised in good faith, that it has received a refund of any Taxes as to which
it has been indemnified pursuant to this Section 2.17 (including by the payment
of additional amounts pursuant to this Section 2.17), it shall pay to the
indemnifying party an amount equal to such refund (but only to

 

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the extent of indemnity payments made under this Section 2.17 with respect to
the Taxes giving rise to such refund), net of all out-of-pocket expenses
(including Taxes) of such indemnified party and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund).  Such indemnifying party, upon the request of such indemnified party,
shall repay to such indemnified party the amount paid over pursuant to this
paragraph (g)  (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) in the event that such indemnified party is
required to repay such refund to such Governmental Authority.  Notwithstanding
anything to the contrary in this paragraph (g), in no event will the indemnified
party be required to pay any amount to an indemnifying party pursuant to this
paragraph (g) the payment of which would place the indemnified party in a less
favorable net after-Tax position than the indemnified party would have been in
if the Tax subject to indemnification and giving rise to such refund had not
been deducted, withheld or otherwise imposed and the indemnification payments or
additional amounts with respect to such Tax had never been paid.  This 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.

 

Survival.  Each party’s obligations under this Section 2.17 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 any Loan
Document.

 

Defined Terms.  For purposes of this Section 2.17, the term “Lender” includes
any Issuing Bank and the term “applicable law” includes FATCA.

 

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

 

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 2.15, Section 2.16 or Section 2.17, or
otherwise) prior to 12:00 noon on the date when due, in immediately available
funds, without set-off or counterclaim.  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 at Mail Code IL1-0010, 10 South Dearborn, Floor 07,
Chicago, Illinois, 60603-2003, except payments to be made directly to the
Issuing Bank as expressly provided herein and except that payments pursuant to
Section 2.15, Section 2.16, Section 2.17 and Section 11.03 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.

 

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

 

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interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties; provided that in the
event such funds are received by and available to the Administrative Agent as a
result of the exercise of any rights and remedies with respect to any collateral
under the Security Instruments, the parties entitled to a ratable share of such
funds pursuant to the foregoing clause (ii) and the determination of each
parties’ ratable share shall include, on a pari passu basis, (x) the Lender
Counterparties with respect to Lender Hedging Obligations then due and owing to
each Lender Counterparty by any Credit Party (after giving effect to any netting
agreements) and (y) any Lender or any of its Affiliates with respect to Cash
Management Obligations then due and owing to such Lender or any of its
Affiliates by any Credit Party.  Excluded Swap Obligations with respect to any
Guarantor shall not be paid with amounts received from such Guarantor or its
assets, but appropriate adjustments shall be made with respect to payments from
other Credit Parties to preserve the allocation to the Obligations otherwise set
forth above in this Section.

 

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 paragraph shall not be construed to
apply to any payment made by the Borrower pursuant to and in accordance with the
express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans or participations in LC Disbursements to any assignee or participant,
other than to the Borrower or any Subsidiary or Affiliate thereof (as to which
the provisions of this paragraph 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.

 

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 Issuing Bank hereunder 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 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 Issuing Bank, as the case may be,
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such

 

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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.

 

If any Lender shall fail to make any payment required to be made by it pursuant
to Section 2.06(d) or Section 2.06(e), Section 2.07(b), Section 2.18(d) or
Section 11.03(c), then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), (i) apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
for the benefit of the Administrative Agent or the Issuing Bank to satisfy such
Lender’s obligations to it under such Sections until all such unsatisfied
obligations are fully paid, and/or (ii) hold any such amounts in a segregated
account as cash collateral for, and application to, any future funding
obligations of such Lender under any such Section, in the case of each of
clauses (i) and (ii) above, in any order as determined by the Administrative
Agent in its discretion.

 

Mitigation Obligations; Replacement of Lenders.

 

If any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any Indemnified Taxes or additional amounts to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
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 2.15 or Section 2.17, 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.

 

If any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any Indemnified Taxes or additional amounts to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17 or
if any Lender becomes a Defaulting Lender, then the Borrower may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in Section 11.04), all its interests,
rights (other than its existing rights to payments pursuant to Sections 2.15 or
2.17) 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 (and if a Commitment is being
assigned, the Issuing Bank), 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 2.15 or payments required to be made pursuant to
Section 2.17, 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

 

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such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.

 

If (i) in connection with any proposed increase in the Borrowing Base or
proposed amendment, modification, termination, waiver or consent with respect to
any of the provisions of this Agreement or any other Loan Document that requires
approval of all of the Lenders, each Lender or each Lender affected thereby
under Section 11.02, the consent of the Super-Majority Lenders shall have been
obtained but the consent of one or more of such other Lenders (each a
“Non-Consenting Lender”) whose consent is required has not been obtained, or
(ii) any Lender becomes a Defaulting Lender; then, in each case, the Borrower
may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, elect to replace such Non-Consenting Lender or Defaulting
Lender, as the case may be, as a Lender party to this Agreement in accordance
with and subject to the restrictions contained in, and consents required by
Section 11.04; provided that (x) the Borrower shall have received the prior
written consent of the Administrative Agent (and if a Commitment is being
assigned, the Issuing Bank), which consent shall not unreasonably be withheld
and (y) 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). 
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 or, in the case of a Defaulting Lender, such Lender is no longer
a Defaulting Lender.

 

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

 

the fees shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 2.12(a);

 

the Commitment and Credit Exposure of such Defaulting Lender shall not be
included in determining whether the Super-Majority Lenders, the Required Lenders
or the Majority Lenders have taken or may take any action hereunder (including
any consent to any amendment, waiver or other modification pursuant to
Section 11.02), provided that (i) any waiver, consent, amendment or modification
otherwise requiring the consent of such Lender or each affected Lender shall
require the consent of such Defaulting Lender, (ii) any waiver, consent,
amendment or modification requiring the consent of all Lenders shall require the
consent of such Defaulting Lender (except in respect of any increases in the
Maximum Facility Amount) and (iii) the Commitment of such Defaulting Lender may
not be increased or extended, nor amounts owed to such Lender reduced (except as
expressly provided herein), or the final maturity thereof extended, without the
consent of such Defaulting Lender.

 

if any LC Exposure exists at the time such Lender becomes a Defaulting Lender
then:

 

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all or any part of the LC Exposure of such Defaulting Lender shall be
reallocated among the non-Defaulting Lenders in accordance with their respective
Applicable Percentages but only to the extent the sum of all non-Defaulting
Lenders’ Credit Exposures plus such Defaulting Lender’s LC Exposure does not
exceed the total of all non-Defaulting Lenders’ Commitments;

 

if the reallocation described in clause (i) above cannot, or can only partially,
be effected, the Borrower shall, within one (1) Business Day following notice by
the Administrative Agent, cash collateralize for the benefit of the Issuing Bank
only the Borrower’s obligations corresponding to such Defaulting Lender’s LC
Exposure (after giving effect to any partial reallocation pursuant to clause
(i) above) in accordance with the procedures set forth in Section 2.06(j) for so
long as such LC Exposure is outstanding;

 

if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC
Exposure pursuant to clause (ii) above, the Borrower shall not be required to
pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect
to such Defaulting Lender’s LC Exposure during the period such Defaulting
Lender’s LC Exposure is cash collateralized;

 

if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to
clause (i) above, then the fees payable to the Lenders pursuant to
Section 2.12(a) and Section 2.12(b) shall be adjusted in accordance with such
non-Defaulting Lenders’ Applicable Percentages; and

 

if all or any portion of such Defaulting Lender’s LC Exposure is neither cash
collateralized nor reallocated pursuant to clauses (i) or (ii) above, then,
without prejudice to any rights or remedies of the Issuing Bank or any Lender
hereunder, all letter of credit fees payable under Section 2.12(b) with respect
to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank
until and to the extent that such LC Exposure is cash collateralized and/or
reallocated; and

 

so long as such Lender is a Defaulting Lender, the Issuing Bank shall not be
required to issue, amend, or increase any Letter of Credit, unless it is
satisfied that the related exposure and the Defaulting Lender’s then outstanding
LC Exposure will be 100% covered by the Commitments of the non-Defaulting
Lenders and/or cash collateral will be provided by the Borrower in accordance
with Section 2.20(c), and any participating interests in any newly issued or
increased Letter of Credit shall be allocated among non-Defaulting Lenders in a
manner consistent with Section 2.20(c)(i) (and such Defaulting Lender shall not
participate therein).

 

If (i) a Bankruptcy Event or a Bail-In Action with respect to any Lender Parent
shall occur following the date hereof and for so long as such event shall
continue or (ii) the Issuing Bank has a good faith belief that any Lender has
defaulted in fulfilling its obligations under one or more other agreements in
which such Lender commits to extend credit, the Issuing Bank shall not be
required to issue, amend, or increase any Letter of Credit, unless the Issuing
Bank shall have entered into arrangements with the Borrower or such Lender,
satisfactory to the Issuing Bank to defease any risk to it in respect of such
Lender hereunder.

 

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

 

Borrowing Base

 

Reserve Report; Proposed Borrowing Base.  During the period from the Effective
Date until the first Redetermination after the Effective Date, the Borrowing
Base shall be $415,000,000 (the “Initial Borrowing Base”).  As soon as available
and in any event by April 1 and October 1 of each year, beginning October 1,
2014, the Borrower shall deliver to the Administrative Agent and each Lender a
Reserve Report, prepared as of the immediately preceding December 31 and
June 30, respectively, in form and substance reasonably satisfactory to the
Administrative Agent and prepared by an Approved Petroleum Engineer (or, in the
case of the Reserve Report due on October 1 of each year, by one or more
petroleum engineers employed by the Borrower), said Reserve Report to utilize
economic and pricing parameters established from time to time by the
Administrative Agent, together with such other information, reports and data
concerning the value of the Borrowing Base Properties as the Administrative
Agent shall deem reasonably necessary to determine the value of such Borrowing
Base Properties.  Simultaneously with the delivery to the Administrative Agent
and the Lenders of each Reserve Report, the Borrower shall submit to the
Administrative Agent and each Lender the Borrower’s requested amount of the
Borrowing Base as of the next Redetermination Date.  Promptly after the receipt
by the Administrative Agent of such Reserve Report and the Borrower’s requested
amount for the Borrowing Base, the Administrative Agent shall submit to the
Lenders a recommended amount of the Borrowing Base to become effective for the
period commencing on the next Redetermination Date.

 

Scheduled Redeterminations of the Borrowing Base; Procedures and Standards. 
Based in part on the Reserve Reports made available to the Administrative Agent
and the Lenders pursuant to Section 3.01, the Lenders shall redetermine the
Borrowing Base on or prior to the next Redetermination Date (or such date
promptly thereafter as reasonably possible based on the engineering and other
information available to the Lenders).  Any Borrowing Base which becomes
effective as a result of any Redetermination of the Borrowing Base shall be
subject to the following restrictions: (a) such Borrowing Base shall not exceed
the amount of the Borrowing Base requested by the Borrower, (b) such Borrowing
Base shall not exceed the Maximum Facility Amount, (c) to the extent such
Borrowing Base represents an increase in the Borrowing Base in effect prior to
such Redetermination, such Borrowing Base must be approved by all Lenders, and
(d) to the extent such Borrowing Base represents a decrease in the Borrowing
Base in effect prior to such Redetermination or a reaffirmation of such prior
Borrowing Base, such Borrowing Base must be approved by the Administrative Agent
and Required Lenders.  If a redetermined Borrowing Base is not approved by the
Administrative Agent and Required Lenders within twenty (20) days after the
submission to the Lenders by the Administrative Agent of its recommended
Borrowing Base pursuant to Section 3.01, or by all Lenders within such

 

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twenty (20) day period in the case of any increase in the Borrowing Base, the
Administrative Agent shall notify each Lender that the

recommended Borrowing Base has not been approved and request that each Lender
submit to the Administrative Agent within ten (10) days thereafter its proposed
Borrowing Base.  Promptly following the 10th day after the Administrative
Agent’s request for each Lender’s proposed Borrowing Base, the Administrative
Agent shall determine the Borrowing Base for such Redetermination by calculating
the highest Borrowing Base then acceptable to the Administrative Agent and a
number of Lenders sufficient to constitute Required Lenders (or all Lenders in
the case of an increase in the Borrowing Base).  Each Redetermination shall be
made by the Lenders in their sole discretion, but based on the Administrative
Agent’s and such Lender’s usual and customary procedures for evaluating Oil and
Gas Interest as such exist at the time of such Redetermination, and including
adjustments to reflect the effect of any Swap Agreements of the Borrower and the
Restricted Subsidiaries as such exist at the time of such Redetermination.  The
Borrower acknowledges and agrees that each Redetermination shall be based upon
the loan collateral value which each Agent and each Lender in its sole
discretion (using such methodology, assumptions and discount rates as the
Administrative Agent and such Lender customarily uses in assigning collateral
value to Oil and Gas Interests) assigns to the Borrowing Base Properties
consisting of proved reserves at the time in question and based upon such other
credit factors consistently applied (including, without limitation, the assets,
liabilities, cash flow, business, properties, prospects, management and
ownership of the Credit Parties) as the Administrative Agent and such Lender
customarily considers in evaluating similar oil and gas credits.  It is
expressly understood that the Administrative Agent and Lenders have no
obligation to designate the Borrowing Base at any particular amounts, except in
the exercise of their discretion, whether in relation to the Aggregate
Commitment or otherwise. If the Borrower does not furnish all information,
reports and data required to be delivered by any date specified in this
Article III, unless such failure is not the fault of the Borrower, the
Administrative Agent and Lenders may nonetheless designate the Borrowing Base at
any amounts which the Administrative Agent and Lenders in their reasonable
discretion determine and may redesignate the Borrowing Base from time to time
thereafter until the Administrative Agent and Lenders receive all such
information, reports and data, whereupon the Administrative Agent and Lenders
shall designate a new Borrowing Base, in accordance with the other provisions of
this Section.

 

Special Redeterminations.  In addition to Scheduled Redeterminations, the
Borrower shall be permitted to request a Special Redetermination of the
Borrowing Base once between each Scheduled Redetermination and the Required
Lenders shall be permitted to request a Special Redetermination once between
each Scheduled Redetermination.  Any request by the Borrower pursuant to this
Section 3.03 shall be submitted to the Administrative Agent and each Lender and
at the time of such request (or within twenty (20) days thereafter in the case
of the Reserve Report) the Borrower shall (1) deliver to the Administrative
Agent a Reserve Report prepared as of a date prior to the date of such request
that is reasonably acceptable to the Administrative Agent and such other
information which the Administrative Agent shall reasonably request, and
(2) notify the Administrative Agent of the Borrowing Base requested by the
Borrower in connection with such Special Redetermination.  Any request by the
Required Lenders pursuant to this Section 3.03 shall be submitted to the
Administrative Agent and the Borrower. Any Special Redetermination shall be made
by the Administrative Agent and Lenders in accordance with the procedures and
standards set forth in Section 3.02; provided that no Reserve Report is required
to be

 

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delivered to the Administrative Agent in connection with any Special
Redetermination requested by the Required Lenders pursuant to this Section 3.03.

 

Notice of Redetermination.  Promptly following any Redetermination of the
Borrowing Base, the Administrative Agent shall notify the Borrower of the amount
of the redetermined Borrowing Base, which Borrowing Base shall be effective as
of the date specified in such notice, and such Borrowing Base shall remain in
effect for all purposes of this Agreement until the next Redetermination.

 

Representations and Warranties

 

The Borrower represents and warrants to the Administrative Agent and the Lenders
that:

 

Organization; Powers.  Each Credit Party is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.

 

Authorization; Enforceability.  The Transactions are within each Credit Party’s
corporate, limited liability company or partnership powers and have been duly
authorized by all necessary corporate, limited liability company or partnership
and, if required, actions by equity holders. This Agreement has been duly
executed and delivered by each Credit Party and constitutes a legal, valid and
binding obligation of each Credit Party, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

 

Governmental 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, except such as have been obtained or made and are in
full force and effect or have been made or to be made in connection with the
filing of the Security Instruments to secure the Obligations, (b) will not
violate any Requirement of Law applicable to the Borrower or any Restricted
Subsidiary, (c) will not violate or result in a default under any indenture,
agreement or other instrument evidencing Material Indebtedness or a Material
Sales Contract binding upon the Borrower or any Restricted Subsidiary or any of
their respective assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any Restricted Subsidiary, and (d) will
not result in the creation or imposition of any Lien on any asset of the
Borrower or any Restricted Subsidiary not otherwise permitted under
Section 7.02.

 

Financial Condition; No Material Adverse Change.

 

The Borrower has heretofore furnished to the Lenders the audited consolidated
balance sheet and related statements of income, stockholders equity and cash
flows of the Borrower and its Consolidated Subsidiaries as of and for the fiscal
year ended December 31, 2013, reported on

 

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by KPMG LLP, independent public accountants. Such financial statements, together
with any notes and management discussions related thereto appearing in the
Borrower’s Form 10-K filed with the SEC on March 11, 2014, present fairly, in
all material respects, the financial position and results of operations and cash
flows of the Borrower and its Consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP and, except as set forth on Schedule 4.04,
show all material indebtedness and other liabilities, direct or contingent of
the Borrower and its Consolidated Subsidiaries as of the date thereof, including
liabilities for Taxes, material commitments and Indebtedness.

 

Since December 31, 2013, no event or circumstance which has had or could
reasonably be expected to have a Material Adverse Effect has occurred.

 

Properties.

 

Except as otherwise provided in Section 4.15 with respect to Oil and Gas
Interests, the Borrower and each Restricted Subsidiary has good title to, or
valid leasehold interests in, all such real and personal property material to
its business, except for (i) minor defects in title that do not, in the
aggregate, interfere with its ability to conduct its business as currently
conducted or to utilize such properties for their intended purposes and
(ii) Liens permitted under Section 7.02.

 

The Borrower and each Restricted Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Borrower and such
Restricted Subsidiaries, as the case may be, 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.

 

Litigation and Environmental Matters.

 

There are no actions, suits 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 Restricted Subsidiary,
(i) as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected, individually or
in the aggregate, to result in a Material Adverse Effect after taking into
account insurance proceeds or other recoveries from third parties actually
received (other than the Disclosed Matters) or (ii) that involve this Agreement
or the Transactions.

 

Except for the Disclosed Matters and except with respect to any other matters
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect after taking into account insurance proceeds
or other recoveries from third parties actually received, neither the Borrower
nor any Restricted Subsidiary, to the Borrower’s knowledge, (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
become subject to any Environmental Liability, (iii) has received written notice
of any claim with respect to any Environmental Liability or (iv) knows of any
basis for any claim with respect to any Environmental Liability.

 

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Since the date of this Agreement, there has been no change in the status of the
Disclosed Matters that, individually or in the aggregate, has resulted in, or
materially increased the likelihood of, a Material Adverse Effect.

 

Compliance with Laws and Agreements.  The Borrower and each Restricted
Subsidiary is in compliance with all Requirements of Law applicable to it or its
property, its Organizational Documents and all indentures, agreements and other
instruments binding upon 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. No Default has occurred and is continuing.

 

Investment Company Status.  Neither the Borrower nor any Restricted Subsidiary
is an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940.

 

Taxes.  The Borrower and each Restricted Subsidiary 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 such Restricted Subsidiary, as applicable, has set
aside on its books adequate reserves or (b) to the extent that the failure to do
so could not reasonably be expected to result in a Material Adverse Effect.

 

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

 

Disclosure.  The Borrower has disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which it or any Restricted
Subsidiary 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 other reports, financial statements, certificates or other
information furnished by or on behalf of the Borrower or any Restricted
Subsidiary to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) when taken as a whole contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading as of the date made or deemed made; provided
that, with respect to projected financial information, the Borrower represents
only that such information was prepared in good faith based on assumptions
believed to be reasonable at the time and, if such projected financial
information was delivered prior to the Effective Date, as of the Effective Date.

 

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Labor Matters.  There are no strikes, lockouts or slowdowns against the Borrower
or any of its Restricted Subsidiaries pending or, to the knowledge of the
Borrower, threatened that could reasonably be expected to have a Material
Adverse Effect. The hours worked by and payments made to employees of the
Borrower and, to the knowledge of the Borrower, to employees of its Restricted
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other Law dealing with such matters to the extent that such violation could
reasonably be expected to have a Material Adverse Effect.

 

Capitalization.  Schedule 4.13 lists as of the Effective Date, (a) for the
Borrower and each Restricted Subsidiary, its full legal name and its
jurisdiction of organization and (b) for each Restricted Subsidiary, the number
of shares of capital stock or other Equity Interests outstanding and the
owner(s) of such shares or Equity Interests.

 

Margin Stock.  Neither the Borrower nor any Restricted Subsidiary is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation  U issued by the Federal Reserve Board), and no part of
the proceeds of any Loan will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock.

 

Oil and Gas Interests.  Each Credit Party has good and defensible title to all
Proved Reserves included in the Oil and Gas Interests (for purposes of this
Section 4.15, “proved Oil and Gas Interests”) described in the most recent
Reserve Report provided to the Administrative Agent (other than such Proved
Reserves that have been subsequently disposed of in compliance with this
Agreement), free and clear of all Liens except Liens permitted pursuant to
Section 7.02. All such proved Oil and Gas Interests are valid, subsisting, and
in full force and effect in all material respects, and all rentals, royalties,
and other amounts due and payable in respect thereof have been duly paid except
for such rentals, royalties and other amounts that are amounts being contested
in good faith by appropriate proceedings and for which the Borrower or the
applicable Restricted Subsidiary has set aside on its books adequate reserves,
or except to the extent such rentals, royalties and other amounts due, if left
unpaid, would not result in the loss or forfeiture of Oil and Gas Interests
having an aggregate fair market value in excess of $10,000,000. Without regard
to any consent or non-consent provisions of any joint operating agreement
covering any Credit Party’s proved Oil and Gas Interests, such Credit Party’s
share of (a) the costs for each proved Oil and Gas Interest described in the
Reserve Report (other than for such proved Oil and Gas Interests that have been
subsequently disposed of in compliance with this Agreement) is not materially
greater than the decimal fraction set forth in the Reserve Report, before and
after payout, as the case may be, and described therein by the respective
designations “working interests,” “WI,” “gross working interest,” “GWI,” or
similar terms (except in such cases where there is a corresponding increase in
the net revenue interest), and (b) production from, allocated to, or attributed
to each such proved Oil and Gas Interest is not materially less than the decimal
fraction set forth in the Reserve Report, before and after payout, as the case
may be, and described therein by the designations “net revenue interest,” “NRI,”
or similar terms. The wells drilled in respect of proved producing Oil and Gas
Interests described in the Reserve Report (other than wells drilled in respect
of such proved producing Oil and Gas Interests that have been subsequently
disposed of in compliance with this Agreement) (1) are capable of, and are
presently, either producing Hydrocarbons in commercially profitable

 

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quantities or in the process of being worked over or enhanced, and the Credit
Party that owns such proved producing Oil and Gas Interests is currently
receiving payments for its share of production, with no funds in respect of any
thereof being presently held in suspense, other than any such funds being held
in suspense pending delivery of appropriate division orders, and (2) have been
drilled, bottomed, completed, and operated in compliance with all applicable
laws, in the case of clauses (1) and (2), except where any failure to satisfy
clause (1) or to comply with clause (2) would not have a Material Adverse
Effect, and no such well which is currently producing Hydrocarbons is subject to
any material penalty in production by reason of such well having produced in
excess of its allowable production.

 

Insurance.  The certificate signed by a Responsible Officer that attests to the
existence of, and summarizes, the property and casualty insurance program
maintained by the Credit Parties that has been furnished by the Borrower to the
Administrative Agent and the Lenders as of the Effective Date, is complete and
accurate in all material respects as of the Effective Date and demonstrates the
Borrower’s and the Restricted Subsidiaries’ compliance with Section 6.05.

 

Solvency.

 

Immediately after the consummation of the Transactions and immediately following
the making of the initial Borrowing, if any, made on the Effective Date and
after giving effect to the application of the proceeds thereof, (1) the fair
value of the assets of the Credit Parties on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities, subordinated, contingent or
otherwise, of the Credit Parties on a consolidated basis; (2) the present fair
saleable value of the real and personal property of the Credit Parties on a
consolidated basis will be greater than the amount that will be required to pay
the probable liability of the Credit Parties on a consolidated basis on their
debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (3) the Credit Parties
on a consolidated basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (4) the Credit Parties on a consolidated basis will
not have unreasonably small capital with which to conduct the businesses in
which they are engaged as such businesses are now conducted and are proposed to
be conducted after the date hereof.

 

The Credit Parties do not intend to, and do not believe that they will, incur
debts beyond their ability to pay such debts as they mature, taking into account
the timing of and amounts of cash to be received by it and the timing of the
amounts of cash to be payable on or in respect of its Indebtedness.

 

Material Sales Contracts.  No Credit Party is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Material Sales Contract to which it is a party, except where
such default could not reasonably be expected to result in a Material Adverse
Effect.

 

Common Enterprise.  The successful operation and condition of each of the Credit
Parties is dependent on the continued successful performance of the functions of
the group of the Credit Parties as a whole and the successful operation of each
of the Credit Parties is dependent on the successful performance and operation
of each other Credit Party. Each Credit Party expects to

 

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derive benefit (and its board of directors or other governing body has
determined that it may reasonably be expected to derive benefit), directly and
indirectly, from (i) successful operations of each of the other Credit Parties
and (ii) the credit extended by the Lenders to the Borrower hereunder, both in
their separate capacities and as members of the group of companies. Each Credit
Party has determined that execution, delivery, and performance of this Agreement
and any other Loan Documents to be executed by such Credit Party is within its
purpose, will be of direct and indirect benefit to such Credit Party, and is in
its best interest.

 

Anti-Corruption Laws and Sanctions.  The Borrower has implemented and maintains
in effect policies and procedures designed to ensure compliance by the Borrower,
its Subsidiaries and their respective directors, officers, employees and agents
with Anti-Corruption Laws and applicable Sanctions, and the Borrower, its
Subsidiaries and their respective officers and employees and to the knowledge of
the Borrower its directors and agents insofar as the same are acting on behalf
of the Borrower or its Subsidiaries, (x) are in compliance with Anti-Corruption
Laws and applicable Sanctions in all material respects and (y) have not and will
not do business, enter into transactions or store with, purchase or receive
money from, transport from, to or with, sell goods or give money to, a
Sanctioned Person. None of (a) the Borrower, any Subsidiary or any of their
respective directors, officers or employees, or (b) to the knowledge of the
Borrower, any agent of the Borrower or any Subsidiary that will act in any
capacity in connection with or benefit from the credit facility established
hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of
proceeds or other transaction contemplated by the Credit Agreement will violate
Anti-Corruption Laws or applicable Sanctions.

 

EEA Financial Institutions.  No Credit Party is an EEA Financial Institution.

 

Conditions

 

Effective Date.  The obligations (i) of the Lenders to continue the Original
Loans and the obligation of the Lenders to make Loans and (ii) of the Issuing
Bank to permit the Existing Letters of Credit to remain outstanding and 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 11.02):

 

The Administrative Agent (or its counsel) shall have received from each party
hereto either (i) a counterpart of this Agreement signed on behalf of such party
or (ii) written evidence satisfactory to the Administrative Agent (which may
include telecopy or electronic transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement.

 

The Administrative Agent shall have received (i) a certificate of each Credit
Party, dated the Effective Date and executed by its Secretary or Assistant
Secretary, which shall (A) certify the resolutions of its board of directors,
members or other body authorizing the execution, delivery and performance of the
Loan Documents to which it is a party, (B) identify by name and title and bear
the signatures of the officers of such Credit Party authorized to sign the Loan
Documents to which it is a party, and (C) contain appropriate attachments,
including the

 

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certificate of formation or articles of incorporation or organization of each
Credit Party certified by the relevant authority of the jurisdiction of
organization of such Credit Party and a true and correct copy of its by-laws or
operating, management or partnership agreement, and (ii) a good standing
certificate for each Credit Party from its jurisdiction of organization.

 

The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the Effective
Date) of Vinson & Elkins LLP, counsel for the Credit Parties, covering such
matters relating to the Credit Parties, this Agreement or the Transactions as
the Administrative Agent shall reasonably request. The Credit Parties hereby
request such counsel to deliver such opinion.

 

The Administrative Agent shall have received a certificate, dated the Effective
Date and signed by a Responsible Officer of the Borrower, confirming that the
Credit Parties have (i) complied with the conditions set forth in paragraphs
(k) and (l) of this Section 5.01 and paragraphs (a), (b) and (c) of
Section 5.02, (ii) complied with the covenants set forth in Section 6.05 (and
demonstrating such compliance by the attachment of an insurance summary and
insurance certificates evidencing the coverage described in such summary) and
(iii) complied with the requirements of Section 6.09 and Section 6.10.

 

The Administrative Agent, the Lenders and J.P. Morgan Securities LLC shall have
received all fees and other amounts due and payable on or prior to the Effective
Date under this Agreement and the Fee Letter, and, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrower hereunder, including all reasonable fees, expenses and
disbursements of counsel for the Administrative Agent to the extent invoiced on
or prior to the Effective Date, together with such additional amounts as shall
constitute such counsel’s reasonable estimate of expenses and disbursements to
be incurred by such counsel in connection with the recording and filing of
Mortgages (and/or Mortgage amendments) and financing statements; provided, that,
such estimate shall not thereafter preclude further settling of accounts between
the Borrower and the Administrative Agent.

 

The Administrative Agent shall have received the Security Agreement, duly
executed and delivered by the appropriate Credit Parties, together with such
other assignments, conveyances, amendments, agreements and other writings,
including, without limitation, UCC-1 financing statements creating Liens prior
and superior in right to any other Person, subject to the Liens permitted under
Section 7.02, in all of the Collateral in which a security interest is required
to be granted pursuant to the Security Instruments, including all of the Equity
Interests of each Restricted Subsidiary now or hereafter owned by Borrower or
any Restricted Subsidiary.

 

The Administrative Agent shall have received promissory notes duly executed by
the Borrower for each Lender that has requested the delivery of a promissory
note pursuant to and in accordance with Section 2.09(e).

 

In the event any Loans are made on the Effective Date, the Administrative Agent
shall have received a Borrowing Request acceptable to the Administrative Agent
and in accordance with Section 2.05 setting forth the Loans requested by the
Borrower on the Effective Date, the Type and amount of each Loan and the
accounts to which such Loans are to be funded.

 

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If the initial Borrowing includes the issuance of one or more Letters of Credit,
the Administrative Agent shall have received a written request in accordance
with Section 2.06 of this Agreement.

 

The Administrative Agent shall have received such financing statements
(including, without limitation, the financing statements referenced in
subclause (f) above) as Administrative Agent shall specify to fully evidence and
perfect all Liens contemplated by the Loan Documents, all of which shall be
filed of record in such jurisdictions as the Administrative Agent shall require
in its sole discretion.

 

Each Credit Party shall have obtained all approvals required from any
Governmental Authority and all consents of other Persons, in each case that are
necessary or advisable in connection with the Transactions and each of the
foregoing shall be in full force and effect and in form and substance reasonably
satisfactory to the Administrative Agent. All applicable waiting periods shall
have expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose adverse conditions
on the transactions contemplated by the Loan Documents or the financing thereof
and no action, request for stay, petition for review or rehearing,
reconsideration, or appeal with respect to any of the foregoing shall be
pending, and the time for any applicable agency to take action to set aside its
consent on its own motion shall have expired.

 

There shall not exist any action, suit, investigation, litigation or proceeding
or other legal or regulatory developments, pending or threatened in any court or
before any arbitrator or Governmental Authority that, in the reasonable opinion
of Administrative Agent, singly or in the aggregate, materially impairs the
Transactions, the financing thereof or any of the other transactions
contemplated by the Loan Documents or that could reasonably be expected to
result in a Material Adverse Effect.

 

All partnership, corporate and other proceedings taken or to be taken in
connection with the Transactions and all documents incidental thereto shall be
reasonably satisfactory in form and substance to Administrative Agent and its
counsel, and Administrative Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.

 

The Administrative Agent and the Lenders shall have received the Projections and
all of the financial statements described in Section 4.04(a).

 

The Administrative Agent shall have received a solvency certificate dated the
Effective Date and signed by a Financial Officer of the Borrower.

 

The Administrative Agent shall have received such other instruments and
documents incidental and appropriate to the transactions provided for herein as
the Administrative Agent or its special counsel may reasonably request prior to
the Effective Date, and all such documents shall be in form and substance
satisfactory to the Administrative Agent.

 

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 (i) of the Lenders to continue the Original Loans
and the obligation of the Lenders to

 

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make Loans and (ii) of the Issuing Bank to permit the Existing Letters of Credit
to remain outstanding and to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 11.02) at or prior to 3:00 p.m. on May 30, 2014 (and, in the
event such conditions are not so satisfied or waived, the Aggregate Commitment
shall terminate at such time).

 

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

 

The representations and warranties of each Credit Party set forth in this
Agreement and the other Loan Documents 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 that
such representations and warranties specifically refer to an earlier date, in
which case they shall be true and correct as of such earlier date.

 

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.

 

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 Borrowing Base Deficiency exists or would be caused thereby.

 

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a),
(b) and (c) of this Section.

 

Affirmative Covenants

 

Until the Aggregate Commitment has expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been paid
in full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Administrative Agent and the Lenders that:

 

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

 

within 90 days after the end of each fiscal year of the Borrower, the audited
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows of the Borrower and its Consolidated Subsidiaries as of
the end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by KPMG LLP or other
independent public accountants reasonably acceptable to the Administrative Agent
(without a “going concern” or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the

 

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Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;

 

within 45 days after the end of each fiscal quarter of the Borrower, (i) the
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows of the Borrower and its Consolidated Subsidiaries 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 the Borrower and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes, and (ii) a
quarterly operating and capital expenditures budget, and financial forecasts,
including cash flow projections covering proposed fundings, repayments,
additional advances, investments and other cash receipts and disbursements, each
for the following fiscal quarter in a format reasonably consistent with the
projections, budgets and forecasts theretofore provided to the Lenders, and
promptly following the preparation thereof, material updates to any of the
foregoing from time to time prepared by management of the Borrower;

 

concurrently with any delivery of financial statements under clause (a) or
(b) above, a certificate in a form reasonably acceptable to Administrative Agent
signed by a Financial Officer of the Borrower (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 7.13;

 

concurrently with the delivery of financial statements under clause (a) or
(b) above, notice of the date and time of a conference call with Lenders to
discuss financial information, which conference calls the Borrower shall host
not later than 5 Business Days after such distribution; provided that any
conference call hosted by the Borrower which is generally available to holders
of its debt and/or equity securities shall satisfy this condition;

 

within sixty (60) days after the conclusion of each fiscal year, the Borrower’s
annual operating and capital expenditure budgets, and financial forecasts,
including cash flow projections covering proposed fundings, repayments,
additional advances, investments and other cash receipts and disbursements, each
for the following fiscal year in a format reasonably consistent with
projections, budgets and forecasts theretofore provided to the Lenders, and
promptly following the preparation thereof, material updates to any of the
foregoing from time to time prepared by management of the Borrower;

 

promptly after the same become publicly available, copies of all periodic and
other reports, proxy statements and other materials filed by the Borrower or any
Restricted Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be;

 

promptly following the delivery of any Asset Coverage Reserve Report to the
Second Lien Administrative Agent, a copy of such Asset Coverage Reserve Report
and a Reserve Report

 

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Certificate and (ii) promptly, but in any event within two (2) Business Days
upon delivery or receipt, copies of all material written notices received by the
Borrower in connection with the Second Lien Loan Documents or the Third Lien
Loan Documents;

 

together with the Reserve Reports required under Section 3.01 or the Asset
Coverage Reserve Reports required under clause (g) above, a report, in
reasonable detail, setting forth (i) the Swap Agreements then in effect, the
notional volumes of and prices for, on a monthly basis and in the aggregate, the
Crude Oil and Natural Gas for each such Swap Agreement and the term of each such
Swap Agreement, (ii) the notional volumes of Crude Oil and Natural Gas for each
such Swap Agreement and (iii) a list of the top fifteen (15) customers
purchasing Hydrocarbons from the Borrower or any Subsidiary in the six month
period prior to the “as of” date of the most recently delivered Reserve Report
or Asset Coverage Reserve Report, as applicable; and

 

promptly following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidiary, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.

 

Documents required to be delivered pursuant to this Section 6.01 (to the extent
any such documents are included in materials otherwise filed with the SEC) may
be delivered electronically and if so delivered, shall be deemed to have been
delivered on the date (1) on which the Borrower posts such documents, or
provides a link thereto, on the Borrower’s website on the Internet at
www.claytonwilliams.com or (2) on which such documents are posted on the
Borrower’s behalf on an Internet or intranet website, if any, to which each
Lender and the Administrative Agent have access (whether a commercial,
third-party website or whether sponsored by the Administrative Agent); provided
that: (i) upon request, the Borrower shall deliver paper copies of such
documents to the Administrative Agent or any Lender until a written request to
cease delivering paper copies is given by the Administrative Agent or such
Lender and (ii) the Borrower shall notify the Administrative Agent and, upon
request, each Lender (by telecopier or electronic mail) of the posting of any
such documents and, upon request, provide to the Administrative Agent by
electronic mail electronic versions (i.e., soft copies) of such documents.
Notwithstanding anything contained herein, in every instance the Borrower shall
be required to provide paper copies of the compliance certificates required by
Section 6.01(c) to the Administrative Agent. Except for such compliance
certificates, the Administrative Agent shall have no obligation to request the
delivery or to maintain copies of the documents referred to above, and in any
event shall have no responsibility to monitor compliance by the Borrower with
any such request for delivery, and each Lender shall be solely responsible for
requesting delivery to it or maintaining its copies of such documents.

 

Notices of Material Events.  The Borrower will furnish to the Administrative
Agent and each Lender prompt written notice of the following:

 

as soon as possible, but in any event within 5 days of obtaining knowledge
thereof, the occurrence of any Default;

 

as soon as possible, but in any event within 15 days after obtaining knowledge
of the filing or commencement of any action, suit or proceeding by or before any
arbitrator or

 

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Governmental Authority against or affecting any Credit Party or any Affiliate
thereof that, if adversely determined, could reasonably be expected to result in
a Material Adverse Effect;

 

as soon as possible, but in any event within 15 days after the occurrence of any
ERISA Event that, alone or together with any other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower
and the Restricted Subsidiaries in an aggregate amount exceeding $1,000,000;

 

as soon as possible, but in any event within 15 days after obtaining knowledge
of any release by any Credit Party, or any other Person of any Hazardous
Material into the environment, which could reasonably be expected to have a
Material Adverse Effect;

 

as soon as possible, but in any event within 15 days after any notice alleging
any violation of any Environmental Law by any Credit Party or any other
Environmental Liability, which could reasonably be expected to have a Material
Adverse Effect;

 

as soon as possible, but in any event within 15 days after the occurrence of any
breach or default under, or repudiation or termination of, any Material Sales
Contract, which could reasonably be expected to have a Material Adverse Effect;

 

promptly following the execution and delivery thereof, copies of any amendment,
modification, waiver or other change to the Second Lien Loan Documents or Third
Lien Loan Documents, together with a certificate of a Responsible Officer
certifying that such copies are true, correct and complete as of the date of
delivery;

 

promptly following the furnishing or receipt thereof, copies of any default
notices under the Second Lien Loan Documents or Third Lien Loan Documents not
otherwise required to be furnished to the Lenders pursuant to any other
provisions of this Agreement; and

 

as soon as possible, but in any event within five days of becoming aware of any
other development that results in, or could reasonably be expected to result in,
a Material Adverse Effect.

 

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

 

Existence; Conduct of Business.  The Borrower will, and will cause each
Restricted Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 7.03 or any
Disposition permitted under Section 7.04 nor shall the Borrower or any
Restricted Subsidiary be required to preserve any right or franchise unrelated
to the Borrowing Base Properties if the Borrower or such Restricted Subsidiary
determines that the preservation thereof is no longer desirable in the conduct
of its business and that the loss thereof is not adverse in any material respect
to the Administrative Agent or any Lender.

 

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Payment of Obligations.  The Borrower will, and will cause each Restricted
Subsidiary to, pay its obligations, including Tax liabilities, that, if not
paid, could result in a Material Adverse Effect 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 Restricted Subsidiary, as applicable, has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (c) the failure to
make payment pending such contest could not reasonably be expected to result in
a Material Adverse Effect or any Collateral becoming subject to forfeiture or
loss as a result of such contest.

 

Maintenance of Properties; Insurance.  The Borrower will, and will cause each
Restricted Subsidiary and use commercially reasonable efforts to cause each
operator of Borrowing Base Properties to:

 

keep and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted, and

 

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. Upon request of the Administrative Agent, the Borrower will furnish
or cause to be furnished to the Administrative Agent from time to time a summary
of the respective insurance coverage of the Borrower and its Restricted
Subsidiaries in form and substance reasonably satisfactory to the Administrative
Agent, and, if requested, will furnish the Administrative Agent copies of the
applicable policies. Upon demand by Administrative Agent, the Borrower will
cause any insurance policies covering any such property to be endorsed (a) to
provide that such policies may not be cancelled, reduced or affected in any
manner for any reason without fifteen (15) days prior notice to Administrative
Agent, (b) to include the Administrative Agent as loss payee with respect to all
property/casualty policies and additional insured with respect to all liability
policies and (c) to provide for such other matters as the Lenders may reasonably
require.

 

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

 

Compliance with Laws.  The Borrower will, and will cause each Restricted
Subsidiary to, comply with all Requirements of Law 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.

 

Use of Proceeds and Letters of Credit.  The proceeds of the Loans will be used
only to (a) pay the fees, expenses and transaction costs of the Transactions,
(b) prepay, redeem or defease the Existing Senior Notes and the Indebtedness
under the Second Lien Credit Agreement to the

 

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extent permitted under Section 7.15 or Section 7.16, as applicable, and
(c) finance the working capital needs of the Borrower, including capital
expenditures, and for general corporate purposes of the Borrower and the
Guarantors, in the ordinary course of business, including the exploration,
acquisition and development of Oil and Gas Interests. No part of the proceeds of
any Loan will be used, whether directly or indirectly, to purchase or carry any
margin stock (as defined in Regulation U issued by the Board). Letters of Credit
will be issued only to support general corporate purposes of the Borrower and
the Restricted Subsidiaries. The Borrower will not request any Borrowing or
Letter of Credit, and the Borrower shall not use, and shall procure that its
Subsidiaries and its or their respective directors, officers, employees and
agents shall not use, the proceeds of any Borrowing or Letter of Credit (A) in
furtherance of an offer, payment, promise to pay, or authorization of the
payment or giving of money, or anything else of value, to any Person in
violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing
or facilitating any activities, business or transaction of or with any
Sanctioned Person, or in any Sanctioned Country, or (C)  in any manner that
would result in the violation of  any Sanctions applicable to any party hereto.
The Borrower will not fund all or part of any repayment of the Obligations out
of proceeds derived from transactions which would be prohibited by Sanctions or
would otherwise cause any Person to be in breach of Sanctions.

 

Mortgages and Other Security.  The Borrower will, and will cause each Material
Restricted Subsidiary to, execute and deliver to the Administrative Agent, for
the benefit of the Secured Parties, (a) by no later than each Redetermination
Date (or a later date acceptable to the Administrative Agent in its sole
discretion) and, at the request of the Administrative Agent, at any time between
Borrowing Base Redeterminations, Mortgages in form and substance reasonably
acceptable to the Administrative Agent together with such other assignments,
conveyances, amendments, agreements and other writings, including, without
limitation, UCC-1 financing statements (each duly authorized and executed, as
applicable) as the Administrative Agent shall reasonably deem necessary or
appropriate to grant, evidence and perfect and maintain Liens in Oil and Gas
Interests having an Engineered Value equal to or greater than ninety percent
(90%) or such higher percentage as the Administrative Agent may require at any
time an Event of Default is continuing of the Engineered Value of the Oil and
Gas Interests included in the Borrowing Base Properties as reflected on the
Reserve Report most recently delivered to the Administrative Agent pursuant to
Section 3.01 or Section 3.03, (b) promptly after entering into any such
agreement (to the extent not already subject to a Lien pursuant to the Security
Instruments), collateral assignments of all right, title and interest of any
Credit Party in and to any gathering, handling, storing, processing,
transportation, supply, pipeline or marketing agreement with any Affiliate that
is not a Credit Party, and (c) Security Instruments in form and substance
reasonably acceptable to the Administrative Agent together with such other
assignments, conveyances, amendments, agreements and other writings, including,
without limitation, UCC-1 financing statements (each duly authorized and
executed, as applicable), as the Administrative Agent shall reasonably deem
necessary or appropriate to grant, evidence and perfect Liens in substantially
all personal property of the Borrower or such Restricted Subsidiary, as the case
may be, in each case, subject only to Permitted Encumbrances and other Liens
permitted under Section 7.02.

 

Title Data.  The Borrower will, and will cause each Restricted Subsidiary to, by
no later than 45 days after the Fourth Amendment Effective Date (or a later date
acceptable to the Administrative Agent in its sole discretion) and from time to
time thereafter at the request of the

 

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Administrative Agent, deliver to the Administrative Agent title information in
form and substance reasonably acceptable to the Administrative Agent with
respect to that portion of the Oil and Gas Interests evaluated by such Reserve
Report as the Administrative Agent shall deem reasonably necessary or
appropriate to verify (i) the title of the Credit Parties to not less than
seventy percent (70%) of the Engineered Value of the Borrowing Base Properties
that are required to be subject to a Mortgage pursuant to Section 6.09, and
(ii) the validity, perfection and priority of the Liens created by such
Mortgages and such other matters regarding such Mortgages as Administrative
Agent shall reasonably request.

 

Swap Agreements.  Upon the request of the Administrative Agent, the Borrower
shall, within thirty (30) days of such request, provide to the Administrative
Agent copies of all agreements, documents and instruments evidencing the Swap
Agreements not previously delivered to the Administrative Agent, certified as
true and correct by a Responsible Officer of the Borrower, and such other
information regarding such Swap Agreements as the Administrative Agent may
reasonably request.

 

Operation of Oil and Gas Interests.

 

The Borrower will, and will cause each Restricted Subsidiary to, maintain,
develop and operate its Oil and Gas Interests in a good and workmanlike manner,
and observe and comply with all of the terms and provisions, express or implied,
of all oil and gas leases relating to such Oil and Gas Interests so long as such
Oil and Gas Interests are capable of producing Hydrocarbons and accompanying
elements in paying quantities, except where such failure to comply could not
reasonably be expected to have a Material Adverse Effect.

 

Borrower will, and will cause each Restricted Subsidiary to, comply in all
respects with all contracts and agreements applicable to or relating to its Oil
and Gas Interests or the production and sale of Hydrocarbons and accompanying
elements therefrom, except to the extent a failure to so comply could not
reasonably be expected to have a Material Adverse Effect.

 

Material Restricted Subsidiaries.  In the event any Person is or becomes a
Material Restricted Subsidiary, Borrower will (a) promptly take all action
necessary to comply with Section 6.14, (b) promptly take all such action and
execute and deliver, or cause to be executed and delivered, to the
Administrative Agent all such opinions, documents, instruments, agreements, and
certificates similar to those described in Sections 5.01(b) and 5.01(c) that the
Administrative Agent may reasonably request, and (c) promptly cause such
Material Restricted Subsidiary to (i) become a party to this Agreement and
Guarantee the Obligations by executing and delivering to the Administrative
Agent a Counterpart Agreement in the form of Exhibit B, (ii) to the extent
required to comply with Section 6.09, execute and deliver Mortgages and other
Security Instruments creating Liens prior and superior in right to any other
Person, subject to Permitted Encumbrances, in such Material Restricted
Subsidiary’s Oil and Gas Interests and substantially all of such Material
Restricted Subsidiary’s personal property, and (iii) to the extent required to
comply with Section 6.10, all title opinions and other information. Upon
delivery of any such Counterpart Agreement to the Administrative Agent, notice
of which is hereby waived by each Credit Party, such Material Restricted
Subsidiary shall be a Guarantor and shall be as fully a party hereto as if such
Material Restricted Subsidiary were an original signatory hereto. Each Credit
Party expressly agrees that its obligations arising hereunder shall not be
affected or

 

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diminished by the addition or release of any other Credit Party hereunder. This
Agreement shall be fully effective as to any Credit Party that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Credit Party hereunder. With respect to each such Material
Restricted Subsidiary, the Borrower shall promptly send to the Administrative
Agent written notice setting forth with respect to such Person the date on which
such Person became a Material Restricted Subsidiary of the Borrower, and
supplement the data required to be set forth in the Schedules to this Agreement
as a result of the acquisition or creation of such Material Restricted
Subsidiary; provided that such supplemental data must be reasonably acceptable
to the Administrative Agent.

 

Pledged Equity Interests.  On the date hereof and at the time hereafter that any
Material Restricted Subsidiary of the Borrower is created or acquired or any
Unrestricted Subsidiary or Non-Material Restricted Subsidiary becomes a Material
Restricted Subsidiary, the Borrower and the Material Restricted Subsidiaries (as
applicable) shall execute and deliver to the Administrative Agent for the
benefit of the Secured Parties, the Security Agreement (or an amendment or
supplement to, or amendment and restatement of, the Security Agreement), in form
and substance reasonably acceptable to the Administrative Agent, from the
Borrower and/or the Material Restricted Subsidiaries (as applicable) covering
all Equity Interests owned by the Borrower or such Material Restricted
Subsidiaries in such Material Restricted Subsidiaries, together with all
certificates (or other evidence acceptable to the Administrative Agent)
evidencing the issued and outstanding Equity Interests of each such Material
Restricted Subsidiary of every class owned by such Credit Party (as applicable)
which, if certificated, shall be duly endorsed or accompanied by stock powers
executed in blank (as applicable), as the Administrative Agent shall deem
necessary or appropriate to grant, evidence and perfect a first priority
security interest in the issued and outstanding Equity Interests owned by
Borrower or any Material Restricted Subsidiary in each Material Restricted
Subsidiary.

 

Designation and Conversion of Restricted and Unrestricted Subsidiaries.

 

Unless designated as an Unrestricted Subsidiary on Schedule 4.13 as of the
Effective Date or thereafter, assuming compliance with Section 6.15(b), any
Person that becomes a Subsidiary of the Borrower or any of its Restricted
Subsidiaries shall be classified as a Restricted Subsidiary.

 

The Borrower may designate by prior written notice thereof to the Administrative
Agent, any Restricted Subsidiary, including a newly formed or newly acquired
Subsidiary, as an Unrestricted Subsidiary if (i) immediately prior, and after
giving effect, to such designation, (A) the representations and warranties of
the Borrower and its Restricted Subsidiaries contained in each of the Loan
Documents are true and correct in all material respects on and as of such date
as if made on and as of the date of such redesignation (or, if stated to have
been made expressly as of an earlier date, were true and correct in all material
respects as of such date), and (B) no Default exists or would result therefrom
(and the Borrower shall be in compliance, on a pro forma basis, with the
covenants set forth in Section 7.13); (ii) such Subsidiary (A) is not the owner
or the operator, by contract or otherwise, of any Oil and Gas Interests and
(B) is not a guarantor or the primary obligor with respect to any indebtedness,
liabilities or other obligations under any Senior Notes, Second Lien Debt or
other Material Indebtedness; and (iii) the Investment deemed to be made in such
Subsidiary pursuant to the next sentence would be

 

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permitted to be made at the time of such designation under Section 7.06. The
designation of any Restricted Subsidiary as an Unrestricted Subsidiary shall
constitute an Investment in an Unrestricted Subsidiary in an amount equal to the
aggregate amount of the Borrower’s or any Restricted Subsidiary’s Investments
previously made in or to such Subsidiary. Except as provided in this
Section 6.15(b), no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary.

 

The Borrower may designate by prior written notice thereof to the Administrative
Agent any Unrestricted Subsidiary to be a Restricted Subsidiary if
(i) immediately prior, and after giving effect to such designation, the
representations and warranties of the Borrower and its Restricted Subsidiaries
contained in each of the Loan Documents are true and correct in all material
respects on and as of such date as if made on and as of the date of such
redesignation (or, if stated to have been made expressly as of an earlier date,
were true and correct in all material respects as of such date), (ii) no Default
exists or would result therefrom (and the Borrower shall be in compliance, on a
pro forma basis, with the covenants set forth in Section 7.13) and (iii) the
Borrower is in compliance with the requirements of Section 6.09. Any such
designation shall (x) be treated as a cash dividend in an amount equal to the
lesser of the fair market value of the Borrower’s direct and indirect ownership
interest in such Subsidiary or the amount of the Borrower’s cash investment
previously made for purposes of the limitation on Investments under
Section 7.06(b) or under any other subsection of Section 7.06, as the case may
be, and (y) constitute the incurrence at the time of such designation of any
Investment, Indebtedness or Liens of such Subsidiary existing at such time.

 

Accounts.  No Credit Party shall establish or maintain a deposit account,
securities account or commodities account, without delivering to the
Administrative Agent a control agreement signed by the Administrative Agent, the
depository bank, the other parties thereto and the applicable Credit Party, and
otherwise in form and substance reasonably satisfactory to the Administrative
Agent, covering the applicable deposit account, securities account or
commodities account; provided, however, that in the case of any deposit account,
securities account or commodities account acquired pursuant to an acquisition
permitted under Section 7.06 (and which was not formed in contemplation of such
acquisition), so long as such acquiring Credit Party provides the Administrative
Agent with written notice of the existence of such deposit account, securities
account or commodities account within five (5) Business Days following the date
of such acquisition (or such later date as the Administrative Agent may agree in
its sole discretion), such Credit Party will have thirty (30) days (or such
later date as the Administrative Agent may agree in its sole discretion) to
subject such deposit account, securities account or commodities account to a
control agreement reasonably satisfactory to the Administrative Agent. Other
than accounts as to which the time limit set forth in the proviso in the
immediately preceding sentence has not expired, none of the Credit Parties will
deposit or maintain Collateral (including the proceeds thereof) in a deposit
account, securities account or commodities account that is not subject to a
control agreement. Other than in the case of any deposit account, securities
account or commodities account acquired pursuant to an acquisition permitted
under Section 7.06 (and which was not formed in contemplation of such
acquisition), unless the Administrative Agent otherwise consents in writing,
each Credit Party shall maintain, and shall cause each of its Subsidiaries to
maintain, at all times its deposit accounts, securities accounts and commodities
accounts with the Lenders; provided that to the extent that any Credit

 

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Party replaces any account acquired pursuant to an acquisition permitted under
Section 7.06 that is not maintained with a Lender, such replacement account
shall be maintained with a Lender.

 

Environmental Matters.  If an Event of Default is continuing or if the
Administrative Agent at any time has a reasonable basis to believe that there
exists a violation of any Environmental Law by the Borrower or any Restricted
Subsidiary or that there exists any other Environmental Liabilities that would
reasonably be expected to result in a Material Adverse Effect, then the Borrower
and each relevant Restricted Subsidiary shall, promptly upon the receipt of a
request from the Administrative Agent, cause the performance of, or allow the
Administrative Agent access to the real property for the purpose of conducting,
an environmental assessment, including subsurface sampling of soil and
groundwater, and cause the preparation of a report. Such assessments and
reports, to the extent not conducted by the Administrative Agent, shall be
conducted and prepared by a reputable environmental consulting firm acceptable
to the Administrative Agent and shall be in form and substance acceptable to the
Administrative Agent. The Borrower shall be responsible for (and reimburse the
Administrative Agent for) all costs associated with any such assessments and
reports.

 

Negative Covenants

 

Until the Aggregate Commitment has expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the
Administrative Agent and the Lenders that:

 

Indebtedness.  The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, create, incur, assume or permit to exist any Indebtedness,
except:

 

the Obligations and Guarantees of the Obligations;

 

Indebtedness existing on the date hereof and set forth in Schedule 7.01 and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof (except by an amount equal to
the reasonable premium paid and fees and expenses reasonably incurred
therewith);

 

intercompany Indebtedness between the Borrower and any Restricted Subsidiary or
between Restricted Subsidiaries to the extent permitted by Section 7.06(b);
provided that any such Indebtedness owed by either the Borrower or a Guarantor
shall be subordinated to the Indebtedness on terms set forth in the Article VIII
or on such terms as are reasonably acceptable to the Administrative Agent;
provided, further, that upon the request of the Administrative Agent at any
time, such Indebtedness shall be evidenced by promissory notes having terms
reasonably satisfactory to the Administrative Agent, and the sole originally
executed counterparts thereof shall be pledged and delivered to the
Administrative Agent, for the benefit of the Secured Parties, as security for
the Obligations;

 

(i) Indebtedness of the Borrower and the Restricted Subsidiaries incurred to
finance the acquisition, construction or improvement of any fixed or capital
assets (including office

 

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equipment, data processing equipment and motor vehicles), including Capital
Lease Obligations and any Indebtedness assumed in connection with the
acquisition of any assets or secured by a Lien on any assets prior to the
acquisition thereof or (ii) any Indebtedness of any Restricted Subsidiary issued
and outstanding on or prior to the date on which such Restricted Subsidiary was
acquired by the Borrower or any Restricted Subsidiary, and not incurred in
contemplation thereof, in a transaction permitted hereunder, and extensions,
renewals and replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; provided that (A) with respect to the
Indebtedness incurred pursuant to clause (i) of this Section 7.01(d), such
Indebtedness is incurred prior to or within 180 days after such acquisition or
the completion of such construction or improvement and (B) the aggregate
principal amount of Indebtedness permitted by this Section 7.01(d) at any time
outstanding shall not exceed the greater of (1) $7,500,000 and (2) 5% of the
Borrowing Base then in effect;

 

Indebtedness (other than Indebtedness for borrowed money) incurred or deposits
made by the Borrower or any Restricted Subsidiary (i) under worker’s
compensation laws, unemployment insurance laws or similar legislation, (ii) in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which the Borrower or any Restricted Subsidiary is a
party, (iii) to secure public or statutory obligations of the Borrower or any
Restricted Subsidiary, and (iv) of cash or U.S. Government Securities made to
secure the performance of statutory obligations, surety, stay, customs and
appeal bonds to which the Borrower or any Restricted Subsidiary is party in
connection with the operation of the Oil and Gas Interests, in each case in the
ordinary course of business;

 

Indebtedness of the Borrower or any Restricted Subsidiary under (i) Swap
Agreements to the extent permitted under Section 7.07, (ii) Advance Payment
Contracts permitted under Section 7.14 and (iii) Sale and Leaseback Transactions
to the extent permitted under Section 7.14;

 

Indebtedness under the Senior Notes, including any Indebtedness constituting
Guarantees thereof by the Borrower or any Restricted Subsidiary and any
Permitted Refinancing thereof; provided that at the time of and immediately
after giving effect to any Permitted Refinancing thereof, (i) no Default shall
have occurred and be continuing and (ii) the Borrower shall be in pro forma
compliance with Section 7.13; provided, further, that, with respect to any
Indebtedness consisting of Permitted Junior Lien Debt, at least three
(3) Business Days prior to the incurrence of such Indebtedness, the Borrower
shall deliver to the Administrative Agent a certificate of a Responsible Officer
certifying that such Indebtedness is permitted under the Loan Documents and the
Intercreditor Agreement;

 

Guarantees in respect of Indebtedness otherwise permitted pursuant to this
Section 7.01;

 

[Reserved];

 

Indebtedness in connection with the endorsement of negotiable instruments, Cash
Management Obligations and other similar obligations in respect of netting
services, overdraft protection and similar arrangements, in each case in the
ordinary course of business;

 

Indebtedness in respect of insurance premium financing for insurance being
acquired or maintained by the Borrower or any Restricted Subsidiary under
customary terms and conditions;

 

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other unsecured Indebtedness of the Borrower or any Restricted Subsidiary;
provided that the aggregate principal amount of Indebtedness permitted by this
clause (l) shall not exceed $7,500,000 at any time outstanding; and

 

Indebtedness incurred pursuant to the Second Lien Loan Documents (and any
Permitted Second Lien Refinancing thereof) in an aggregate principal amount not
to exceed the sum of (i) $350,000,000 and (ii) any Permitted Second Lien
Financing Charges, as such amount may be reduced pursuant to Section 7.16(b)(i).

 

Liens.  The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, except:

 

any Lien created pursuant to this Agreement or the Security Instruments;

 

Permitted Encumbrances;

 

any Lien on any property or asset of the Borrower or any Restricted Subsidiary
existing on the date hereof and set forth in Schedule 7.02; provided that
(i) such Lien shall not apply to any other property or asset of the Borrower or
any other Restricted Subsidiary (other than proceeds and accessions and
additions to such property) and (ii) such Lien shall secure only those
obligations which it secures on the date hereof and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;

 

any Lien existing on any property or asset prior to the acquisition thereof by
the Borrower or any Restricted Subsidiary or existing on any property or asset
of any Person that becomes a Restricted Subsidiary after the date hereof prior
to the time such Person becomes a Restricted Subsidiary; provided that (i) such
Lien secures Indebtedness permitted by clause (d) of Section 7.01, (ii) such
Lien is not created in contemplation of or in connection with such acquisition
or such Person becoming a Restricted Subsidiary, as the case may be, (iii) such
Lien shall not apply to any other property or assets of the Borrower or any
other Restricted Subsidiary and (iv) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date such
Person becomes a Restricted Subsidiary, as the case may be and extensions,
renewals and replacements thereof that do not increase the outstanding principal
amount thereof;

 

Liens on fixed or capital assets (including office equipment, data processing
equipment and motor vehicles) acquired, constructed or improved by the Borrower
or any Restricted Subsidiary; provided that (i) such Liens secure Indebtedness
permitted by clause (d) of Section 7.01, (ii) such Liens and the Indebtedness
secured thereby are incurred prior to or within 180 days after such acquisition
or the completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed the cost of acquiring, constructing or improving
such fixed or capital assets and (iv) such Liens shall not apply to any other
property or assets of the Borrower or any other Restricted Subsidiaries (other
than proceeds and accessions and additions to such property);

 

[Reserved];

 

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Liens securing insurance premium financing under customary terms and conditions,
provided that no such Lien may extend to or cover any property other than the
insurance being acquired with such financing, the proceeds thereof and any
unearned or refunded insurance premiums related thereto;

 

Liens on property not constituting the Collateral and not otherwise permitted by
this Section 7.02 so long as neither (i) the aggregate outstanding principal
amount of the obligations secured thereby nor (ii) the aggregate fair market
value (determined as of the date such Lien is incurred) of the assets subject
thereto exceeds (as to the Borrower and all Restricted Subsidiaries) $5,000,000
at any one time;

 

Liens securing Indebtedness permitted pursuant to Section 7.01(m); provided that
such Liens are subject to the Intercreditor Agreement; and

 

Permitted Junior Liens securing the Senior Notes.

 

Fundamental Changes.  The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or Dispose of (in
one transaction or in a series of transactions) all or substantially all of its
assets, or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be
continuing:

 

any Restricted Subsidiary may merge into the Borrower in a transaction in which
the Borrower is the surviving entity;

 

any Restricted Subsidiary may merge into any other Restricted Subsidiary in a
transaction in which the surviving entity is a Restricted Subsidiary;

 

any Restricted Subsidiary may Dispose of its assets to the Borrower or to
another Restricted Subsidiary;

 

Dispositions permitted by Section 7.04 may be made; and

 

any Restricted Subsidiary may liquidate or dissolve if the Borrower determines
in good faith that such liquidation or dissolution is in the best interests of
the Borrower and is not materially disadvantageous to the Lenders.

 

Dispositions.  The Borrower will not, and will not permit any Restricted
Subsidiary to, Dispose of any property except:

 

the sale of Hydrocarbons in the ordinary course of business;

 

farmouts of undeveloped acreage and assignments in connection with such
farmouts; provided that Dispositions made pursuant to this Section 7.04(b) shall
not exceed, together with all Investments made in the form of, or pursuant to,
farm-out agreements or development agreements (including any drillco agreements)
or other similar agreements pursuant to Section 7.06(d), $10,000,000 in the
aggregate;

 

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the Disposition of equipment and other property in the ordinary course of
business, that is obsolete or no longer necessary in the business of the
Borrower or any of its Restricted Subsidiaries or that is being replaced by
equipment of comparable value and utility;

 

the Disposition of Equity Interests in Unrestricted Subsidiaries;

 

Liens permitted by Section 7.02, Investments permitted by Section 7.06 and
Restricted Payments permitted by Section 7.08;

 

Dispositions of Permitted Investments in the ordinary course of business;

 

any Credit Party may dispose of its property to another Credit Party;

 

sales or discounts of overdue accounts receivable in the ordinary course of
business, in connection with the compromise or collection thereof, and not in
connection with any financing transaction;

 

the Borrower or any Restricted Subsidiary may directly Dispose of Borrowing Base
Properties or indirectly Dispose of Borrowing Base Properties pursuant to a
Disposition of all, but not less than all, of the Equity Interests of any
Restricted Subsidiary or enter into Hedge Modifications; provided that the sum
of (A) the Engineered Value (as assigned by the Administrative Agent) of all
Borrowing Base Properties directly and indirectly Disposed of plus (B) the
economic effect (as determined by the Administrative Agent) of all Hedge
Modifications entered into between Scheduled Redeterminations does not exceed,
in the aggregate for the Borrower and the Restricted Subsidiaries taken as a
whole, five percent (5%) of the Borrowing Base most recently determined;
provided, further, that Borrower shall promptly and in any event within three
(3) Business Days thereafter, provide written notice to the Administrative Agent
of any such Hedge Modification, setting forth in reasonable detail the terms of
such Hedge Modification;

 

so long as no Default exists or would exist after giving effect to such
Disposition or Hedge Modification, as the case may be, the Borrower and the
Restricted Subsidiaries may directly Dispose of Borrowing Base Properties or
indirectly Dispose of Borrowing Base Properties pursuant to a Disposition of
all, but not less than all, of the Equity Interests of any Restricted Subsidiary
and enter into Hedge Modifications not otherwise permitted by Section 7.04(i);
provided that:

 

(i) the Borrower provides the Administrative Agent with (A) at least fifteen
(15) days prior written notice of such Disposition or (B) notice of such Hedge
Modification within three (3) Business Days thereafter, setting forth in
reasonable detail the Borrowing Base Properties that are subject to such
Disposition or the terms of such Hedge Modification, as the case may be;

 

(ii) the Borrowing Base shall be reduced, effective immediately upon such
Disposition or Hedge Modification by (A) in the case of a Disposition, an amount
equal to the value, if any, assigned to such property in the Borrowing Base then
in effect (as determined by the Administrative Agent and the Required Lenders)
or (B) in the case of a

 

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Hedge Modification, the economic effect of such Hedge Modification (as
determined by the Administrative Agent and the Required Lenders);

 

(iii) with respect to any Hedge Modification, all consideration received by the
Borrower or Restricted Subsidiary as a result of such Hedge Modification is cash
and such cash is held by the Borrower in a segregated account subject to a first
priority security interest in favor of the Administrative Agent to secure the
Obligations pending the completion of the Administrative Agent’s determination
of the economic effect of such Hedge Modification pursuant to any adjustment to
the Borrowing Base referenced in clause (ii) above;

 

(iv)(A) with respect to any Disposition of Borrowing Base Properties, the
consideration received shall be at least equal to the fair market value of the
Oil and Gas Interests subject to such Disposition and (B) with respect to any
Hedge Modification, the consideration received for such Hedge Modification is at
least equal to fair market value, in each case, as reasonably determined in good
faith by the board of directors of the Borrower and, if requested by the
Administrative Agent, the Borrower shall deliver to the Administrative Agent a
certificate of a Responsible Officer certifying to that effect;

 

(v) with respect to any Disposition of Borrowing Base Properties, at least 90%
of the consideration received by the Borrower or any Restricted Subsidiary in
respect of any such Disposition is cash or cash equivalents;

 

(vi) the Borrower prepays the Loans (and cash collateralizes any portion of such
Borrowing Base Deficiency attributable to LC Exposure) to the extent required by
Sections 2.11(b) and 2.11(c) as a result of such Disposition or Hedge
Modification (as determined after giving effect to the Administrative Agent’s
determination of the economic effect of such Hedge Modification pursuant to
clause (ii) above), which prepayment (and cash collateralization, if any) may be
made with the amounts deposited in the segregated account described in clause
(iii) above; and

 

(vii) unless otherwise approved in writing by all of the Lenders, such
Disposition by the Borrower or the Restricted Subsidiaries (whether pursuant to
one transaction or a series of related transactions) is not a direct or indirect
Disposition of all or substantially all of the Borrowing Base Properties; and

 

provided no Default exists or would result therefrom, the Disposition of Oil and
Gas Interests to the Incentive Partnerships and to various employees of the
Borrower and its Restricted Subsidiaries as incentive compensation to such
employees, in each case to the extent set forth on Schedule 7.04 and as in
effect on the Fourth Amendment Effective Date.

 

Nature of Business.  The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, engage to any material extent in any business other
than businesses of the type conducted by the Borrower and its Restricted
Subsidiaries on the date of execution of this Agreement and businesses
reasonably related thereto.

 

Investments, Loans, Advances, Guarantees and Acquisitions.  The Borrower will
not, nor will it permit any of its Restricted Subsidiaries to, purchase, hold or
acquire (including pursuant

 

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to any merger with any Person that was not a wholly owned Restricted Subsidiary
prior to such merger) any capital stock, evidences of Indebtedness or other
securities (including any option, warrant or other right to acquire any of the
foregoing) of, make or permit to exist any loans or advances to, Guarantee any
Indebtedness of, or make or permit to exist any investment or any other interest
in, any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other Person constituting a business
unit (all of the foregoing, “Investments”), except:

 

Permitted Investments;

 

Investments  (i) made by any Credit Party in or to any Credit Party, (ii) made
by any Restricted Subsidiary in or to any Credit Party, (iii) made by the
Borrower or any Restricted Subsidiary in or to any Unrestricted Subsidiary in an
aggregate amount for all such Investments at any one time outstanding not to
exceed $5,000,000, and (iv) made by the Borrower or any Restricted Subsidiary in
or to any Non-Material Restricted Subsidiary in an aggregate amount for all such
Investments at any one time outstanding not to exceed $1,000,000;

 

Investments made by the Borrower or any Restricted Subsidiary pursuant to the
commitments in effect on the Fourth Amendment Effective Date set forth on
Schedule 7.06(c); provided that the Borrower’s or any Restricted Subsidiary’s
commitments set forth on Schedule 7.06(c) shall not be increased or otherwise
altered in any manner adverse to the interests of the Borrower or any of its
Restricted Subsidiaries, on the one hand, and the Lenders, on the other hand,
unless otherwise consented to by the Administrative Agent;

 

Guarantees constituting Indebtedness permitted by Section 7.01 (other than
Guarantees in respect of Capital Lease Obligations) and performance guarantees,
in each case incurred in the ordinary course of business;

 

Investments by the Borrower and its Restricted Subsidiaries that are
(i) customary in the oil and gas business, (ii) made in the ordinary course of
the Borrower’s or such Restricted Subsidiary’s business, and (iii) made in the
form of, or pursuant to, oil, gas and mineral leases, operating agreements,
farm-in agreements, farm-out agreements, development agreements, unitization
agreements, joint bidding agreements, services contracts and other similar
agreements that a reasonable and prudent oil and gas industry owner or operator
would find acceptable; provided that Investments made in the form of, or
pursuant to, farm-out agreements or development agreements (including any
drillco agreements) or other similar agreements shall not exceed, together with
all Dispositions made pursuant to Section 7.04(b), $10,000,000 in the aggregate;

 

Investments consisting of Swap Agreements to the extent permitted under
Section 7.07;

 

Investments existing as of the date hereof and set forth on Schedule 7.06(g);

 

Investments consisting of (i) loans and advances to employees for moving,
entertainment, travel and other similar expenses in the ordinary course of
business and (ii) other short term loans to employees not to exceed, with
respect to the foregoing clauses (i) and (ii) together, $250,000 in the
aggregate at any time outstanding;

 

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Investments representing the non-cash portion of the consideration received for
any Disposition of any assets permitted under Section 7.04, not to exceed 10% of
the total consideration received for such Disposition;

 

demand deposits with financial institutions, prepaid expenses and extensions of
trade credit in the ordinary course of business (and any Investments received in
satisfaction or partial satisfaction thereof from financially troubled account
debtors to the extent reasonably necessary in order to prevent or limit loss);

 

other Investments by the Borrower and the Restricted Subsidiaries; provided
that, on the date any such Investment is made, the amount of such Investment,
together with all other Investments made pursuant to this clause (k) of
Section 7.06 (in each case determined based on the cost of such Investment)
since the Effective Date, does not exceed in the aggregate $5,000,000 plus the
amount of dividends, distributions and returns of capital, in each case,
consisting of cash and cash equivalents, received by the Borrower or the
applicable Restricted Subsidiary from Investments made under this
Section 7.06(k); and

 

Investments by the Borrower or any Restricted Subsidiary consisting of the
payment of each Incentive Partnership’s share of the costs and expenses incurred
to drill, complete and operate oil and gas wells located on the properties
covered by the Oil and Gas Interests owned by such Incentive Partnership to the
extent set forth on Schedule 7.06(l) and as in effect on the Fourth Amendment
Effective Date.

 

Swap Agreements.  The Borrower will not, nor will the Borrower permit any of its
Restricted Subsidiaries to, enter into any Swap Agreement, except the Existing
Swap Agreements and Swap Agreements entered into in the ordinary course of
business and not for speculative purposes to:

 

hedge or mitigate Crude Oil and Natural Gas price risks to which the Borrower or
any Restricted Subsidiary has actual exposure (whether or not treated as a hedge
for accounting purposes under GAAP); provided that at the time the Borrower or
any Restricted Subsidiary enters into any such Swap Agreement, such Swap
Agreement (x) does not have a term greater than sixty (60) months from the date
such Swap Agreement is entered into, and (y) when aggregated with all other Swap
Agreements then in effect would not cause the aggregate notional volume per
month for each of Crude Oil and Natural Gas, calculated separately, under all
Swap Agreements then in effect (other than Excluded Hedges) to exceed, as of the
date such Swap Agreement is executed, (A) for any month during the first three
years of the forthcoming five year period, eighty percent (80%) of the
“forecasted production from total proved reserves” (as defined below) of the
Borrower and the Restricted Subsidiaries, taken as a whole, and (B) for any
month during the last two years of the forthcoming five year period, eighty
percent (80%) of the “forecasted production from proved producing reserves” of
the Borrower and the Restricted Subsidiaries, taken as a whole; and

 

effectively cap, collar or exchange interest rates (from fixed to floating
rates, from one floating rate to another floating rate or otherwise) with
respect to any interest-bearing liability or investment of the Borrower or any
Restricted Subsidiary.

 

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As used in this Section 7.07, “forecasted production from proved producing
reserves” and “forecasted production from total proved reserves” means the
forecasted production from proved producing reserves or total proved reserves,
as the case may be, of each of Crude Oil and Natural Gas as reflected in the
most recent Reserve Report delivered to the Administrative Agent pursuant to
Section 3.01, after giving effect to any pro forma adjustments for the
consummation of any Acquisitions or Dispositions since the effective date of
such Reserve Report.

 

Each Credit Party and each Lender agrees and acknowledges that (i) the Existing
Swap Agreements are Swap Agreements permitted under this Section 7.07, (ii) as
of the Effective Date, the counterparty to each Existing Swap Agreement is a
Lender Counterparty (or was a Lender Counterparty under and as defined in the
Original Credit Agreement), (iii) the obligations of the Credit Parties under
the Existing Swap Agreements are included in the defined term “Lender Hedging
Obligations” and such obligations are entitled to the benefits of, and are
secured by the Liens granted under, the Security Instruments, and (iv) as of the
Effective Date, the aggregate notional volume of Hydrocarbons under all Swap
Agreements of the Credit Parties then in effect does not exceed the percentages
of forecasted production from total proved reserves and forecasted production
from proved producing reserves, as the case may be, permitted pursuant to this
Section 7.07 (calculated as if a Credit Party was entering into a new
transaction under a Swap Agreement on the Effective Date).

 

Restricted Payments.  The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, declare or make, or agree to pay or make, directly
or indirectly, any (a) Restricted Payment, except that (i) the Borrower may
declare and pay dividends with respect to its Equity Interests payable solely in
additional shares of its common stock, (ii) any Restricted Subsidiary may make
Restricted Payments to the Borrower or any Guarantor, and (iii) Restricted
Subsidiaries may declare and pay dividends ratably with respect to their Equity
Interests or (b) Restricted Contribution.

 

Transactions with Affiliates.  The Borrower will not, nor will it permit any of
its Restricted Subsidiaries to, sell, lease or otherwise transfer any property
or assets to, or purchase, lease or otherwise acquire any property or assets
from, or otherwise engage in any other transactions with, any of its Affiliates,
except (a) in the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or such Restricted Subsidiary than
could be obtained on an arm’s-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its Restricted Subsidiaries
or between or among Restricted Subsidiaries not involving any other Affiliate,
(c) transactions described on Schedule 7.09, (d) any Restricted Payment
permitted by Section 7.08 and (e) Investments permitted by Section 7.06.

 

Restrictive Agreements.  The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into, incur or permit
to exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Borrower or any Restricted Subsidiary
to create, incur or permit to exist any Lien upon any of its property or assets
to secure the Obligations, or (b) the ability of any Restricted Subsidiary to
pay dividends or other distributions with respect to any of its Equity Interests
or to make or repay loans or advances to the Borrower or any Restricted
Subsidiary or to Guarantee Indebtedness of

 

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the Borrower or any Restricted Subsidiary; provided that (i) the foregoing shall
not apply to restrictions and conditions imposed by law or by this Agreement,
the Second Lien Loan Documents or the Indenture (or any documents evidencing or
relating to the issuance of any permitted Senior Notes or any Permitted
Refinancing or any Second Lien Debt), and (ii) clause (a) of the foregoing shall
not apply to (A) restrictions or conditions imposed by any agreement relating to
secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness,
(B) customary provisions in leases and other contracts restricting the
assignment thereof and (C) restrictions with respect to Oil and Gas Interests
that are not Borrowing Base Properties and are not included in the most recent
Reserve Report delivered pursuant to Section 3.01.

 

Disqualified Stock.  The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, issue any Disqualified Stock.

 

Amendments to Organizational Documents.  The Borrower will not, nor will it
permit any of its Restricted Subsidiaries to, enter into or permit any
modification or amendment of, or waive any material right or obligation of any
Person under its Organizational Documents if the effect thereof would be
materially adverse to the Administrative Agent or any Lender or violate
Section 7.10.

 

Financial Covenants.

 

Consolidated Current Ratio.  The Borrower will not permit the Consolidated
Current Ratio as of the last day of any fiscal quarter ending on or after the
Effective Date, to be less than 1.00 to 1.00.

 

Leverage Ratio.  The Borrower will not permit the Consolidated Senior Debt
Leverage Ratio as of the last day of any fiscal quarter to be greater than 2.00
to 1.00.

 

Sale and Leaseback Transactions and other Off-Balance Sheet Liabilities.  The
Borrower will not, nor will it permit any Restricted Subsidiary to, enter into
or suffer to exist any (i) Sale and Leaseback Transaction, except Sale and
Leaseback Transactions in which the aggregate amount of liability incurred by
the Borrower or any Restricted Subsidiary does not exceed $5,000,000 for all
such Sale and Leaseback Transactions, taken as a whole, or (ii) any other
transaction pursuant to which it incurs or has incurred Off-Balance Sheet
Liabilities, except for (x) Swap Agreements permitted under the terms of
Section 7.07 and (y) Advance Payment Contracts; provided that the aggregate
amount of all Advance Payments received by the Borrower or any Restricted
Subsidiary that have not been satisfied by delivery of production at any time
does not exceed, in the aggregate $5,000,000.

 

Senior Notes Restrictions.  The Borrower will not, nor will it permit any
Restricted Subsidiary to, directly or indirectly, retire, redeem, defease,
repurchase, pay or prepay any part of the principal of, or interest on, the
Senior Notes other than (a) retirements, redemptions, defeasances, repurchases,
payments or prepayments on the Senior Notes in an aggregate amount not to exceed
$50,000,000; provided that both before and after giving pro forma effect to such
retirement, redemption, defeasance, repurchase, payment or prepayment, (x) there
are no outstanding Loans hereunder (other than Letters of Credit) and (y) the
Borrower shall have at

 

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least $25,000,000 of unrestricted cash, (b) a Permitted Refinancing of the
Senior Notes and (c) regularly scheduled payments of interest in an aggregate
amount not to exceed $50,000,000 in any fiscal year.   The Borrower will not,
nor will it permit any of its Restricted Subsidiaries to, enter into or permit
any modification or amendment of the Senior Notes Documents the effect of which
is to (i) increase the maximum principal amount of the Senior Notes or the rate
of interest on any of the Senior Notes (other than as a result of the imposition
of a default rate of interest in accordance with the terms of the Senior Notes
Documents), (ii) change or add any event of default or any covenant with respect
to the Senior Notes Documents if the effect of such change or addition is to
cause any one or more of the Senior Notes Documents to be more restrictive on
the Borrower or any of its Subsidiaries than such Senior Notes Documents were
prior to such change or addition, (iii) shorten the dates upon which scheduled
payments of principal or interest on the Senior Notes are due, (iv) change any
redemption or prepayment provisions of the Senior Notes, (v) alter the
subordination provisions, if any, with respect to any of the Senior Notes
Documents, (vi) grant any Liens in any assets of the Borrower or any of its
Subsidiaries, except for Permitted Junior Liens, or (vii) permit any Subsidiary
to Guarantee the Senior Notes unless such Subsidiary is (or concurrently with
any such Guarantee becomes) a Guarantor hereunder.

 

Second Lien Debt Restrictions1.       The Borrower will not, and will not permit
any Restricted Subsidiary to:

 

directly or indirectly, retire, redeem, defease, repurchase, pay or prepay any
part of the principal of, or interest on, or make any other payment in respect
of, the Second Lien Debt other than:

 

regularly scheduled payments of interest and fees and expense reimbursement and
indemnification obligations;

 

optional prepayments in connection with a Permitted Second Lien Refinancing; and

 

mandatory prepayments required by the Second Lien Credit Agreement in effect as
of the Fourth Amendment Effective Date, so long as both before and after giving
effect to such prepayment (x) no Default or Event of Default exists or is
continuing and (y) no Borrowing Base Deficiency exists; provided that if such
Default or Event of Default is cured or waived or such Borrowing Base Deficiency
no longer exists, then such prepayment may be paid following such cure or
waiver;

 

enter into or permit any refinancing of the Second Lien Loan Documents, unless:

 

the principal amount of such refinancing does not exceed the principal amount of
the Second Lien Debt being so refinanced (it being understood and agreed that
(x) if the principal amount of the Indebtedness being so refinanced is reduced
by any payment, prepayment or commitment reduction or in connection with a debt
exchange or similar transaction, then the principal amount of such refinancing
shall not exceed the principal amount of the Indebtedness being so refinanced
after taking into account any discount or reduction that may have

 

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resulted from such payment, prepayment, commitment reduction, exchange or
similar transaction and (y) such refinancing shall not consist of additional
borrowings or issuances of Indebtedness above what is required to refinance the
Indebtedness being so refinanced) plus any Permitted Second Lien Refinancing
Charges;

 

the covenant, default and remedy provisions of such refinancing are not
materially more restrictive to the Borrower and its Subsidiaries than those
imposed by the Second Lien Credit Agreement being refinanced, unless such
provisions are proposed by the Borrower to be incorporated into the applicable
Loan Documents;

 

no restrictions are imposed on the Borrower’s or any Restricted Subsidiary’s
ability to make payments on the Obligations other than those existing in the
Second Lien Credit Agreement as in effect on the date hereof;

 

such refinancing is subject to the Intercreditor Agreement;

 

no Subsidiary of the Borrower is required to Guarantee such refinancing unless
such Subsidiary is (or concurrently with any such Guarantee becomes) a Guarantor
hereunder; and

 

such Permitted Refinancing does not provide for any scheduled repayment,
mandatory redemption (excluding, for the avoidance of doubt, mandatory
prepayments) or payment of a sinking fund obligation prior to the date that is
91 days after the Maturity Date; or

 

enter into or permit any modification or amendment of the Second Lien Loan
Documents, the effect of which is to:

 

permit any payments not otherwise permitted by clause (a) above or modify or
amend the Second Lien Loan Documents in a manner that contravenes any of the
provisions of clause (b) above (after giving effect to such provisions so that
they apply to such modification or amendment and the applicable Second Lien Loan
Documents);

 

adversely affect the Lien priority rights of the Secured Parties or the rights
of the Secured Parties to receive payments owing pursuant to the Loan Documents;

 

except as otherwise provided for in the Intercreditor Agreement, add any Liens
securing the collateral granted under the Second Lien Loan Documents;

 

confer any additional rights on any holder of Second Lien Debt in a manner
adverse to any Secured Party;

 

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move up the timing of any stated maturity, interest payment date or amortization
payment, in each case, as set forth in the Second Lien Credit Agreement as in
effect on the Fourth Amendment Effective Date; or

 

contravene any of the provisions of the Intercreditor Agreement or breach any of
the provisions of the other Loan Documents.

 

Anti-Hoarding.  To the extent any Loans are outstanding as of the end of the
last Business Day of each week, the Borrower will not permit the aggregate
amount of unrestricted cash held by it and its Restricted Subsidiaries, as of
such Business Day, to exceed $30,000,000.  If, as of the end of any such
Business Day, any Loans are outstanding and unrestricted cash exceeds such
amount (excluding, at the Borrowers’ option, any outstanding checks), then on
such Business Day (or, with the Administrative Agent’s written consent, within
one Business Day thereafter), the Borrower shall, to the extent of such excess,
prepay to the Administrative Agent for the ratable benefit of the Lenders the
outstanding principal amount of the Loans. Such prepayment may be waived,
extended or amended with the consent of the Required Lenders and the Borrowers. 
To effectuate the payment required hereunder, the Borrower hereby authorizes any
Lender, in its capacity as a depository bank, to, upon written notice from the
Administrative Agent, initiate debit entries to any and all accounts held by any
Borrower or any Subsidiary thereof with such bank and to debit the amount set
forth in such written notice (which, for the avoidance of doubt, shall be an
amount not to exceed the lesser of (i) the outstanding principal amount of the
Loans and (ii) such excess amount) from such accounts.  The foregoing
authorizations to initiate debit entries shall remain in full force and effect
until the Administrative Agent terminates such respective arrangement.  The
Borrower represents that such Borrower or a Subsidiary thereof, or any one or
more of them, is and will be the owner(s) of all funds in such accounts.  The
Borrower, for itself and its Subsidiaries, acknowledges that (x) such debit
entries may cause an overdraft of such accounts which may result in such bank’s
refusal to honor items drawn on such accounts until adequate deposits are made
to such account, (y) such bank is under no duty or obligation to initiate any
debit entry for any purpose and (z) if a debit is not made, the payment may be
late or past due.

 

Lease Restrictions.  The Borrower and its Restricted Subsidiaries shall not,
without the consent of the Administrative Agent, allow more than ten percent
(10%) of the net acreage consisting of Core Assets of the Borrower and its
Restricted Subsidiaries, measured as of the Fourth Amendment Effective Date, to
lapse, expire or otherwise terminate in any manner; provided that such
percentage shall be adjusted following the Fourth Amendment Effective Date to
take into account any disposition of Core Assets as reasonably determined
between the Borrower and the Administrative Agent (it being understood and
agreed that such adjustment referred to in this proviso shall not in and of
itself result in a Default or an Event of Default).

 

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Guarantee of Obligations

 

Guarantee of Payment.  Each Guarantor unconditionally and irrevocably guarantees
to the Administrative Agent for the benefit of the Secured Parties, the punctual
payment of all Obligations now or which may in the future be owing by any Credit
Party (the “Guaranteed Liabilities”).  This Guarantee is a guaranty of payment
and not of collection only.  The Administrative Agent shall not be required to
exhaust any right or remedy or take any action against the Borrower or any other
Person or any collateral.  The Guaranteed Liabilities include interest accruing
after the commencement of a proceeding under bankruptcy, insolvency or similar
laws of any jurisdiction at the rate or rates provided in the Loan Documents,
the Swap Agreements between any Credit Party and any Lender Counterparty and the
Cash Management Agreements, as the case may be.  Each Guarantor agrees that, as
between the Guarantor and the Administrative Agent, the Guaranteed Liabilities
may be declared to be due and payable for the purposes of this Guarantee
notwithstanding any stay, injunction or other prohibition which may prevent,
delay or vitiate any declaration as regards the Borrower or any other Guarantor
and that in the event of a declaration or attempted declaration, the Guaranteed
Liabilities shall immediately become due and payable by each Guarantor for the
purposes of this Guarantee.

 

Guarantee Absolute.  Each Guarantor guarantees that the Guaranteed Liabilities
shall be paid strictly in accordance with the terms of this Agreement, the Swap
Agreements and the Cash Management Agreements to which any Secured Party is a
party.  The liability of each Guarantor hereunder is absolute and unconditional
irrespective of:  (a) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Loan Documents or the Guaranteed
Liabilities, or any other amendment or waiver of or any consent to departure
from any of the terms of any Loan Document or Guaranteed Liability, including
any increase or decrease in the rate of interest thereon; (b) any release or
amendment or waiver of, or consent to departure from, any other guaranty or
support document, or any exchange, release or non-perfection of any collateral,
for all or any of the Loan Documents or Guaranteed Liabilities; (c) any present
or future law, regulation or order of any jurisdiction (whether of right or in
fact) or of any agency thereof purporting to reduce, amend, restructure or
otherwise affect any term of any Loan Document or Guaranteed Liability;
(d) without being limited by the foregoing, any lack of validity or
enforceability of any Loan Document or Guaranteed Liability; and (e) any other
setoff, defense or counterclaim whatsoever (in any case, whether based on
contract, tort or any other theory) with respect to the Loan Documents or the
transactions contemplated thereby which might constitute a legal or equitable
defense available to, or discharge of, the Borrower or a Guarantor (other than
the defense of payment or performance).

 

Guarantee Irrevocable.  This Guarantee is a continuing guaranty of the payment
of all Guaranteed Liabilities now or hereafter existing under this Agreement,
the Swap Agreements to which any Secured Party is a party and the Cash
Management Agreements, and shall remain in full force and effect until payment
in full of all Guaranteed Liabilities and other amounts payable hereunder and
until this Agreement, the Swap Agreements and the Cash Management Agreements are
no longer in effect or, if earlier, when the Guarantor has been designated an
Unrestricted Subsidiary in accordance with Section 6.15(b).

 

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Reinstatement.  This Guarantee shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Guaranteed
Liabilities is rescinded or must otherwise be returned by the Administrative
Agent, any Lender or any Lender Counterparty on the insolvency, bankruptcy or
reorganization of the Borrower, or any other Credit Party, or otherwise, all as
though the payment had not been made.

 

Subrogation.  No Guarantor shall exercise any rights which it may acquire by way
of subrogation, by any payment made under this Guarantee or otherwise, until all
the Guaranteed Liabilities have been paid in full and this Agreement and the
Swap Agreements are no longer in effect.  If any amount is paid to the Guarantor
on account of subrogation rights under this Guarantee at any time when all the
Guaranteed Liabilities have not been paid in full, the amount shall be held in
trust for the benefit of the Secured Parties and shall be promptly paid to the
Administrative Agent to be credited and applied to the Guaranteed Liabilities,
whether matured or unmatured or absolute or contingent, in accordance with the
terms of this Agreement and the Swap Agreements.  If any Guarantor makes payment
to any Secured Party of all or any part of the Guaranteed Liabilities and all
the Guaranteed Liabilities are paid in full and this Agreement and the Swap
Agreements are no longer in effect, the Administrative Agent, Lenders and Lender
Counterparties shall, at such Guarantor’s request, execute and deliver to such
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to such Guarantor of
an interest in the Guaranteed Liabilities resulting from the payment.

 

Subordination.  Without limiting the rights of the Administrative Agent, the
Lenders and the Lender Counterparties under any other agreement, any liabilities
owed by the Borrower to any Guarantor in connection with any extension of credit
or financial accommodation by any Guarantor to or for the account of the
Borrower, including but not limited to interest accruing at the agreed contract
rate after the commencement of a bankruptcy or similar proceeding, are hereby
subordinated to the Guaranteed Liabilities, and such liabilities of the Borrower
to such Guarantor, if the Administrative Agent so requests after the occurrence
and during the continuation of a Default, shall be collected, enforced and
received by any Guarantor as trustee for the Administrative Agent and shall be
paid over to the Administrative Agent on account of the Guaranteed Liabilities
but without reducing or affecting in any manner the liability of the Guarantor
under the other provisions of this Guarantee.

 

Payments Generally.  All payments by the Guarantors shall be made in the manner,
at the place and in the currency (the “Payment Currency”) required by the Loan
Documents and the Swap Agreement, as the case may be; provided, however, that if
the Payment Currency is other than Dollars any Guarantor may, at its option (or,
if for any reason whatsoever any Guarantor is unable to effect payments in the
foregoing manner, such Guarantor shall be obligated to) pay to the
Administrative Agent at its principal office the equivalent amount in Dollars
computed at the selling rate of the Administrative Agent or a selling rate
chosen by the Administrative Agent, most recently in effect on or prior to the
date the Guaranteed Liability becomes due, for cable transfers of the Payment
Currency to the place where the Guaranteed Liability is payable.  In any case in
which any Guarantor makes or is obligated to make payment in Dollars, the
Guarantor shall hold the Administrative Agent, the Lenders and the Lender
Counterparties harmless from any loss incurred by the Administrative Agent, any
Lender or any Lender Counterparty arising from any change in the value of
Dollars in relation to the Payment Currency between the date the

 

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Guaranteed Liability becomes due and the date the Administrative Agent, such
Lender or such Lender Counterparty is actually able, following the conversion of
the Dollars paid by such Guarantor into the Payment Currency and remittance of
such Payment Currency to the place where such Guaranteed Liability is payable,
to apply such Payment Currency to such Guaranteed Liability.

 

Setoff.  Each Guarantor agrees that, in addition to (and without limitation of)
any right of setoff, banker’s lien or counterclaim the Administrative Agent, any
Lender or any Lender Counterparty may otherwise have, the Administrative Agent,
such Lender or such Lender Counterparty shall be entitled, at its option, to
offset balances (general or special, time or demand, provisional or final) held
by it for the account of any Guarantor at any office of the Administrative
Agent, such Lender or such Lender Counterparty, in Dollars or in any other
currency, against any amount payable by such Guarantor under this Guarantee
which is not paid when due (regardless of whether such balances are then due to
such Guarantor), in which case it shall promptly notify such Guarantor thereof;
provided that the failure of the Administrative Agent, such Lender, or such
Lender Counterparty to give such notice shall not affect the validity thereof.

 

Formalities.  Each Guarantor waives presentment, notice of dishonor, protest,
notice of acceptance of this Guarantee or incurrence of any Guaranteed Liability
and any other formality with respect to any of the Guaranteed Liabilities or
this Guarantee.

 

Limitations on Guarantee.  The provisions of the Guarantee under this
Article VIII are severable, and in any action or proceeding involving any state
corporate law, or any state, federal or foreign bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of any Guarantor under this Guarantee would otherwise be held or
determined to be avoidable, invalid or unenforceable on account of the amount of
such  Guarantor’s liability under this Guarantee, then, notwithstanding any
other provision of this Guarantee to the contrary, the amount of such liability
shall, without any further action by the Guarantors, the Administrative Agent,
any Lender or any Lender Counterparty, be automatically limited and reduced to
the highest amount that is valid and enforceable as determined in such action or
proceeding (such highest amount determined hereunder being the relevant
Guarantor’s “Maximum Liability”). This Section 8.10 with respect to the Maximum
Liability of the Guarantors is intended solely to preserve the rights of the
Administrative Agent, Lenders and Lender Counterparties hereunder to the maximum
extent not subject to avoidance under applicable law, and no Guarantor nor any
other Person shall have any right or claim under this Section 8.10 with respect
to the Maximum Liability, except to the extent necessary so that none of  the
obligations of any Guarantor hereunder shall not be rendered voidable under
applicable law.

 

Keepwell.  Each Qualified ECP Guarantor hereby jointly and severally absolutely,
unconditionally and irrevocably undertakes to provide such funds or other
support as may be needed from time to time by each other Credit Party to honor
all of its obligations under this Agreement in respect of Swap Obligations
(provided, however, that each Qualified ECP Guarantor shall only be liable under
this Section 8.11 for the maximum amount of such liability that can be hereby
incurred without rendering its obligations under this Section 8.11, or otherwise
under this Agreement, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount). The
obligations of each Qualified ECP Guarantor under this Section shall remain in
full force and effect until the Aggregate

 

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Commitment has expired or terminated and the principal of and interest on each
Loan and all fees payable hereunder have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed.   Each Qualified ECP Guarantor intends that this Section 8.11
constitute, and this Section 8.11 shall be deemed to constitute, a “keepwell,
support, or other agreement” for the benefit of each other Credit Party for all
purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Events of Default

 

If any of the following events (“Events of Default”) shall occur:

 

the Borrower shall fail to pay any principal of any Loan (including any payments
required under Section 2.11) 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 or otherwise;

 

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 clause (a) of this Article) payable
under this Agreement, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of three (3) Business Days;

 

any representation or warranty made or deemed made by or on behalf of the
Borrower or any Restricted Subsidiary in or in connection with this Agreement or
any amendment or modification hereof or waiver hereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof or waiver
hereunder or in any Loan Document furnished pursuant to or in connection with
this Agreement or any amendment or modification thereof or waiver hereunder,
shall prove to have been incorrect in any material respect when made or deemed
made and such materiality is continuing;

 

the Borrower or any Restricted Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in Section 6.02, Section 6.03 (with
respect to the Borrower’s or any Restricted Subsidiary’s existence),
Section 6.05 (with respect to insurance), Section 6.08, or in Article VII;

 

the Borrower or any Restricted Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Article) or any Loan Document, and
such failure shall continue unremedied for a period of 30 days after receipt of
written notice thereof from the Administrative Agent to the Borrower (which
notice will be given at the request of any Lender);

 

the Borrower or any Restricted Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable and
such failure shall continue beyond the applicable grace period, if any.

 

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any event or condition occurs that results in any Material Indebtedness, the
Second Lien Debt or the Senior Notes becoming due prior to its or their
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, the Second Lien Debt or the Senior Notes or any trustee or agent
on its or their behalf to cause any Material Indebtedness, the Second Lien Debt
or the Senior Notes to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its or their scheduled maturity;
provided that this clause (g) shall not apply to (i) secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness and (ii) Indebtedness that becomes due as a
result of a change in law, tax regulation or accounting treatment so long as
such Indebtedness is paid when due;

 

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

 

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

 

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

 

one or more judgments for the payment of money in an aggregate amount in excess
of $15,000,000 shall be rendered against the Borrower or any Restricted
Subsidiary or any combination thereof and either the same shall remain
undischarged or unsatisfied for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of the Borrower or any
Restricted Subsidiary to enforce any such judgment;

 

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

 

the delivery by any Guarantor to the Administrative Agent of written notice that
a Guarantee under Article VIII has been revoked;

 

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a Change of Control shall occur;

 

any provision of any Loan Document, at any time after its execution and delivery
and for any reason other than as expressly permitted hereunder or thereunder or
satisfaction in full of all the Obligations, ceases to be in full force and
effect; or any Credit Party or any other Person contests in any manner the
validity or enforceability of any provision of any Loan Document; or any Credit
Party denies that it has any or further liability or obligation under any
provision of any Loan Document, or purports to revoke, terminate or rescind any
provision of any Loan Document; or

 

any Security Instrument after delivery thereof pursuant to Section 5.01, 6.09,
6.13, or 6.14 shall for any reason (other than pursuant to the terms thereof)
cease to create a valid and perfected first priority Lien (subject to Permitted
Encumbrances) on the Collateral purported to be covered thereby;

 

then, and in every such event (other than an event with respect to the Borrower
or any Restricted Subsidiary described in clause (h) or (i) of this Article),
and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Majority Lenders shall, by
notice to the Borrower, take either or both of the following actions, at the
same or different times: (i) terminate the Aggregate Commitment, and thereupon
the Aggregate Commitment shall terminate immediately, and (ii) declare the Loans
then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Aggregate Commitment shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.  Without limiting the
foregoing, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent, the Issuing Bank and each Lender may protect
and enforce its rights under this Agreement and the other Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in this Agreement or any other Loan Document,
and the Administrative Agent, the Issuing Bank and each Lender may enforce
payment of any Obligations due and payable hereunder or enforce any other legal
or equitable right and remedies which it may have under this Agreement, any
other Loan Document, or under applicable law or in equity.

 

The Administrative Agent

 

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and

 

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to exercise such powers as are delegated to the Administrative Agent by the
terms hereof, together with such actions and powers as are reasonably incidental
thereto.

 

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

 

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein.  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,
(b) the Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby 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 11.02), 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 any Credit 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 not be
liable for any action taken or not taken by it with the consent or at the
request of the Majority Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 11.02) or in the absence of its own gross negligence or willful
misconduct.  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 the Administrative Agent
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, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article V or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.  No Person identified as a Syndication Agent,
Documentation Agent, Sole Bookrunner or Lead Arranger, in each case in its
respective capacity as such, shall have any responsibilities or duties, or incur
any liability, under this Agreement or the other Loan Documents.

 

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.  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.

 

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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
paragraphs 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.

 

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Borrower.  Upon any such
resignation, the Majority Lenders shall have the right, with the consent of the
Borrower (which consent shall not be unreasonably withheld or delayed), to
appoint a successor; provided that no consent of the Borrower shall be required
if any Event of Default has occurred and is continuing.  If no successor shall
have been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent which
shall be a bank with an office in Chicago, Illinois or New York, New York, or an
Affiliate of any such bank that is a financial institution.  Upon the acceptance
of its appointment as Administrative Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder.  The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor.  After the Administrative Agent’s
resignation hereunder, the provisions of this Article and Section 11.03 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.

 

Each Lender acknowledges and agrees that the extensions of credit made hereunder
are commercial loans and letters of credit and not investments in a business
enterprise or securities.  Each Lender further represents that it is engaged in
making, acquiring or holding commercial loans in the ordinary course of its
business and  has, independently and without reliance upon the Administrative
Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement as a Lender, and to make, acquire or hold Loans hereunder.  Each
Lender shall, independently and without reliance upon the Administrative Agent
or any other Lender and based on such documents and information (which may
contain material, non-public information within the meaning of the United States
securities laws concerning the Borrower and its Affiliates) 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 related agreement or
any document furnished hereunder or thereunder and in deciding whether or to the
extent to which it will continue as a lender or assign or otherwise transfer its
rights, interests and obligations hereunder.

 

Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to
release any Collateral that it is permitted to be sold or released pursuant to
the terms of the Loan

 

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Documents.  Each Lender and the Issuing Bank hereby authorizes the
Administrative Agent to execute and deliver to the Borrower, at the Borrower’s
sole cost and expense, any and all releases of Liens, termination statements,
assignments or other documents reasonably requested by the Borrower in
connection with any Disposition of Collateral to the extent such Disposition is
permitted by the terms of this Agreement or is otherwise authorized by the terms
of the Loan Documents.

 

The Secured Parties hereby irrevocably authorize the Administrative Agent, at
the direction of the Required Lenders, to credit bid all or any portion of the
Obligations (including by accepting some or all of the Collateral in
satisfaction of some or all of the Obligations pursuant to a deed in lieu of
foreclosure or otherwise) and in such manner purchase (either directly or
through one or more acquisition vehicles) all or any portion of the Collateral
(a) at any sale thereof conducted under the provisions of the Bankruptcy Code,
including under Sections 363, 1123 or 1129 of the Bankruptcy Code, or any
similar laws in any other jurisdictions to which a Credit Party is subject, or
(b) at any other sale, foreclosure or acceptance of collateral in lieu of debt
conducted by (or with the consent or at the direction of) the Administrative
Agent (whether by judicial action or otherwise) in accordance with any
applicable law.  In connection with any such credit bid and purchase, the
Obligations owed to the Secured Parties shall be credit bid by the
Administrative Agent at the direction of the Required Lenders on a ratable basis
(with Obligations with respect to contingent or unliquidated claims receiving
contingent interests in the acquired assets on a ratable basis that shall vest
upon the liquidation of such claims in an amount proportional to the liquidated
portion of the contingent claim amount used in allocating the contingent
interests) for the asset or assets so purchased (or for the equity interests or
debt instruments of the acquisition vehicle or vehicles that are issued in
connection with such purchase).  In connection with any such bid (i) the
Administrative Agent shall be authorized to form one or more acquisition
vehicles and to assign any successful credit bid to such acquisition vehicle or
vehicles, (ii) each of the Secured Parties’ ratable interests in the Obligations
which were credit bid shall be deemed without any further action under this
Agreement to be assigned to such vehicle or vehicles for the purpose of closing
such sale, (iii) the Administrative Agent shall be authorized to adopt documents
providing for the governance of the acquisition vehicle or vehicles (provided
that any actions by the Administrative Agent with respect to such acquisition
vehicle or vehicles, including any disposition of the assets or equity interests
thereof, shall be governed, directly or indirectly, by, and the governing
documents shall provide for, control by the vote of the Required Lenders or
their permitted assignees under the terms of this Agreement or the governing
documents of the applicable acquisition vehicle or vehicles, as the case may be,
irrespective of the termination of this Agreement and without giving effect to
the limitations on actions by the Required Lenders contained in Section 11.02 of
this Agreement), (iv) the Administrative Agent on behalf of such acquisition
vehicle or vehicles shall be authorized to issue to each of the Secured Parties,
ratably on account of the relevant Obligations which were credit bid, interests,
whether as equity, partnership, limited partnership interests or membership
interests, in any such acquisition vehicle  and/or debt instruments issued by
such acquisition vehicle, all without the need for any Secured Party or
acquisition vehicle to take any further action, and (v) to the extent that
Obligations that are assigned to an acquisition vehicle are not used to acquire
Collateral for any reason, such Obligations shall automatically be reassigned to
the Secured Parties pro rata and the equity interests and/or debt instruments
issued by any acquisition vehicle on account of such Obligations shall
automatically be cancelled, without the need for any Secured Party or any

 

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acquisition vehicle to take any further action.  Notwithstanding that the
ratable portion of the Obligations of each Secured Party are deemed assigned to
the acquisition vehicle or vehicles as set forth in clause (ii) above, each
Secured Party shall execute such documents and provide such information
regarding the Secured Party (and/or any designee of the Secured Party which will
receive interests in or debt instruments issued by such acquisition vehicle) as
the Administrative Agent may reasonably request in connection with the formation
of any acquisition vehicle, the formulation or submission of any credit bid or
the consummation of the transactions contemplated by such credit bid.

 

Miscellaneous

 

Notices.

 

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

 

if to the Borrower, to Clayton Williams Energy, Inc., Six Desta Drive,
Suite 6500, Midland, Texas 79705, Attention: Mel G. Riggs, Facsimile No. (432)
688-3247;

 

if to the Administrative Agent or Issuing Bank, to JPMorgan Chase Bank, N.A., 10
South Dearborn, Floor 19, IL1 0010, Chicago, Illinois 60693, Attention of Loan
and Agency Services, Attention of Nida Mischke (Telecopy No. (888) 266-8058 and
Email JPM.Agency.Servicing.5@jpmchase.com), with a copy to 2200 Ross Avenue,
Floor 3, Dallas, Texas 75201-2787, Attention of Cathy Johann (Telecopy No. (214)
290-2332), and for all other correspondence other than borrowings, continuation,
conversion and Letter of Credit requests, 2200 Ross Avenue, Floor 3, Dallas,
Texas 75201-2787, Attention of David Morris (Telecopy No. (214) 965-2884);

 

if to any other Lender, to its address (or telecopy number) set forth in its
Administrative Questionnaire.

 

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 unless otherwise agreed by the Administrative Agent and
the applicable Lender.  The Administrative Agent or the Borrower may, in their
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.

 

Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto.  All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt if
received during the recipient’s normal business hours.

 

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Waivers; Amendments.

 

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

 

Subject to Section 11.02(c) below, neither this Agreement nor any provision
hereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Credit Parties and the Majority
Lenders or by the Credit Parties and the Administrative Agent with the consent
of the Majority Lenders; provided that no such agreement shall:

 

(i) increase the Borrowing Base without the written consent of each Lender;

 

(ii) increase the Commitment of any Lender or, except as set forth in the
definition of Applicable Percentage, increase the Applicable Percentage of any
Lender, in each case, without the written consent of such Lender;

 

(iii) increase the Maximum Facility Amount without the written consent of each
Lender;

 

(iv) reduce the principal amount of any Loan or LC Disbursement or reduce the
rate of interest thereon, or reduce any fees payable hereunder, without the
written consent of each Lender affected thereby;

 

(v) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any of the Aggregate Commitment, without the
written consent of each Lender affected thereby (it being understood that any
waiver of a mandatory prepayment of the Loans or a mandatory reduction of the
Commitments shall not constitute a postponement or waiver of a scheduled payment
or date of expiration);

 

(vi) change Section 2.18(b) or Section 2.18(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender;

 

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(vii) except in connection with any Dispositions permitted in Section 7.04,
release any Guarantor from its obligations under Article VIII or release any of
the Collateral without the written consent of each Lender; or

 

(viii) change any of the provisions of this Section or the definition of
“Super-Majority Lenders”, “Majority Lenders”, “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or make any determination or grant
any consent hereunder, without the written consent of each Lender;

 

provided further that no such agreement shall (x) amend, modify or otherwise
affect the rights or duties of the Administrative Agent or the Issuing Bank
hereunder without the prior written consent of the Administrative Agent or the
Issuing Bank, as the case may be or (y) change any of the provisions of
Section 2.20 without the prior written consent of the Administrative Agent and
the Issuing Bank.

 

Notwithstanding anything to the contrary contained in this Section 11.02, the
Administrative Agent may, with the consent of the Borrower only, amend, modify
or supplement this Agreement or any of the other Loan Documents to correct any
clerical errors or cure any ambiguity, omission, mistake, defect or
inconsistency.

 

Expenses; Indemnity; Damage Waiver.

 

The Borrower shall pay (i) all reasonable and documented out-of-pocket expenses
incurred by the Administrative Agent, the Lead Arranger and their Affiliates,
including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of this
Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable and documented
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 and (iii) all documented out-of-pocket expenses incurred
by the Administrative Agent, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement, including its rights under this
Section, 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.

 

THE CREDIT PARTIES SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE LEAD 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 HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE, INCURRED BY OR

 

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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 AGREEMENT OR
INSTRUMENT CONTEMPLATED HEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR
RESPECTIVE OBLIGATIONS HEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS OR ANY
OTHER TRANSACTIONS CONTEMPLATED HEREBY, (II) ANY LOAN OR LETTER OF CREDIT OR THE
USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE 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), (III) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS
MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY
RESTRICTED SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE
BORROWER OR ANY RESTRICTED SUBSIDIARY, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER OR NOT SUCH CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING IS BROUGHT BY
YOU, YOUR EQUITY HOLDERS, AFFILIATES, CREDITORS OR ANY OTHER THIRD PERSON AND
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO; 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 OR FROM A CLAIM BROUGHT BY A
CREDIT PARTY AGAINST SUCH INDEMNITEE FOR MATERIAL BREACH IN BAD FAITH OF SUCH
INDEMNITEE’S OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS.  FOR
THE AVOIDANCE OF DOUBT, WITH RESPECT TO THE FOREGOING PROVISO “ANY INDEMNITEE”
MEANS ONLY THE INDEMNITEE OR INDEMNITEES, AS THE CASE MAY BE, THAT ARE
DETERMINED BY SUCH COURT TO HAVE BEEN GROSSLY NEGLIGENT OR TO HAVE ENGAGED IN
WILLFUL MISCONDUCT OR MATERIALLY BREACHED THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN BAD FAITH AND NOT ANY OTHER INDEMNITEE. THIS SECTION 9.03(b) SHALL
NOT APPLY WITH RESPECT TO TAXES OTHER THAN ANY TAXES THAT REPRESENT LOSSES,
CLAIMS OR DAMAGES ARISING FROM ANY NON-TAX CLAIM.

 

To the extent that any Credit Party fails to pay any amount required to be paid
by it to the Administrative Agent or the Issuing Bank under paragraph (a) or
(b) of this Section, each Lender severally agrees to pay to the Administrative
Agent or the Issuing Bank, as the case may be, such Lender’s Applicable
Percentage of such unpaid amount with respect to amounts to be paid to the
Issuing Bank and such Lender’s Applicable Percentage of such unpaid amount with
respect to amounts to be paid to the Administrative Agent (in each case,
determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought); provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the

 

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case may be, was incurred by or asserted against the Administrative Agent or the
Issuing Bank in its capacity as such.

 

To the extent permitted by applicable law,  no party hereto shall assert, and
each such party hereby waives, any claim against any other party hereto 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 or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof; provided that, nothing in this clause (d) shall relieve the
Borrower of any obligation it may have to indemnify an Indemnitee against
special, indirect, consequential or punitive damages asserted against such
Indemnitee by a third party.

 

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

 

Successors and Assigns.

 

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) no Credit Party may 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 such Credit Party 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.  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
paragraph (c) of this Section) 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.

 

Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may
assign to one or more Persons (other than an Ineligible Institution) all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment, participations in Letters of Credit and the Loans at
the time owing to it) with the prior written consent (such consent not to be
unreasonably withheld) of:

 

the Borrower, provided that, the Borrower shall be deemed to have consented to
an assignment unless it shall have objected thereto by written notice to the
Administrative Agent within five (5) Business Days after having received notice
thereof, provided that no consent of the Borrower shall be required for an
assignment to a Lender, an Affiliate of a Lender, a Federal Reserve Bank, an
Approved Fund or, if an Event of Default has occurred and is continuing, any
other assignee;

 

the Administrative Agent; and

 

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the Issuing Bank.

 

Assignments shall be subject to the following additional conditions:

 

except in the case of an assignment to a Lender, an Affiliate of a Lender, an
Approved Fund 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;

 

each partial assignment shall be made as an assignment of a proportionate part
of all the assigning Lender’s rights and obligations in respect of such Lender’s
Commitment and such Lender’s Loans under this Agreement;

 

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

 

the assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire.

 

For the purposes of this Section 11.04(b), the term “Approved Fund” and
“Ineligible Institution” have the following meanings:

 

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

 

“Ineligible Institution” means a (a) natural person, (b) a Defaulting Lender or
its Lender Parent, (c) company, investment vehicle or trust for, or owned and
operated for the primary benefit of, a natural person or relative(s) thereof or
(d) or the Borrower or any of its Affiliates.

 

Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of
this Section, 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 2.15,
Section 2.16, Section 2.17 and Section 11.03).  Any

 

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assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section 11.04 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 paragraph (c) of this Section except that any
attempted assignment or transfer by any Lender that does not comply with clause
(C) of Section 11.04(b)(ii) shall be null and void.

 

The Administrative Agent, acting for this purpose as a non-fiduciary agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment and Applicable Percentage of, and
principal amount (and stated interest) of the Loans and LC Disbursements owing
to, each Lender pursuant to the terms hereof from time to time (the
“Register”).  The entries in the Register shall be conclusive, and the Credit
Parties, the Administrative Agent, the Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary.  The Register shall be available for inspection by the Credit
Parties, the Issuing Bank and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.

 

Upon its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section any
written consent to such assignment required by paragraph (b) of this Section,
the Administrative Agent shall accept such Assignment and Assumption and record
the information contained therein in the Register; provided that if either the
assigning Lender or the assignee shall have failed to make any payment required
to be made by it pursuant to Section 2.06(d) or Section 2.06(e), Section 2.07,
Section 2.18(d) or Section 11.03(c), the Administrative Agent shall have no
obligation to accept such Assignment and Assumption and record the information
therein in the Register unless and until such payment shall have been made in
full, together with all accrued interest thereon.  No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.

 

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”), other than an Ineligible Institution, in all or a portion of
such Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that (A) such
Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Administrative Agent,
the Issuing Bank and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or

 

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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
first proviso to Section 11.02(b) that affects such Participant.  Subject to
paragraph (c)(ii) of this Section, the Borrower agrees that each Participant
shall be entitled to the benefits of Section 2.15, Section 2.16 and Section 2.17
(subject to the requirements and limitations therein, including the requirements
under 2.17(f) (it being understood, however, that the documentation required
under Section 2.17(f) 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
(A) agrees to be subject to the provisions of Section 2.19 as if it were an
assignee under paragraph (b) of this Section; and (B) shall not be entitled to
receive any greater payment under Section 2.15 or 2.17, with respect to any
participation, than its participating Lender would have been entitled to
receive, except to the extent such entitlement to receive a greater payment
results from a Change in Law that occurs after the Participant acquired the
applicable participation. Each Lender that sells a participation agrees, at the
Borrower’s request and expense, to use reasonable efforts to cooperate with the
Borrower to effectuate the provisions of Section 2.19(b) with respect to any
Participant.  To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 11.08 as though it were a Lender, provided
that such Participant agrees to be subject to Section 2.18(c) as though it were
a Lender. Each Lender that sells a participation shall, acting solely for this
purpose as a non-fiduciary agent of the Borrower, maintain a register on which
it enters the name and address of each Participant and the principal amounts
(and stated interest) of each Participant’s interest in the Loans or other
obligations under the Loan Documents (the “Participant Register”); provided that
no Lender shall have any obligation to disclose all or any portion of the
Participant Register (including the identity of any Participant or any
information relating to a Participant’s interest in any Commitments, Loans,
Letters of Credit or its other obligations under any Loan Document) to any
Person except to the extent that such disclosure is necessary to establish that
such Commitment, Loan, 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.  For the avoidance of
doubt, the Administrative Agent (in its capacity as Administrative Agent) shall
have no responsibility for maintaining a Participant Register.

 

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 without limitation any pledge or assignment to secure obligations to a
Federal Reserve Bank or other central banking authority, and this Section 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.

 

So long as Ares constitutes Second Lien Majority Lenders (as defined in the
Second Lien Credit Agreement in effect as of the Fourth Amendment Effective
Date), if a Secured Party

 

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receives a bona fide offer from an entity that is not a commercial bank or
investment bank that regularly participates in or leads oil and gas
reserve-based, revolving credit facilities subject to a borrowing base
(including any such entity that is an existing non-Secured Party (or an
Affiliate thereof)) to purchase its interest in the Obligations, then such
Secured Party shall provide Ares with written notice of such bona fide offer,
which such notice shall specify the identity of such bona fide purchaser(s) and
the amount (both the size and the price) of such bona fide offer.  Within five
Business Days from receipt of such notice, Ares, subject to the following
proviso, shall have the exclusive right to purchase such Obligations on
identical terms to the terms specified in the written notice, and such purchase
shall be deemed automatically approved by the Borrower and the Administrative
Agent.  In the event Ares does not purchase such Obligations in accordance with
the terms specified above within the five Business Day period, then such Secured
Party shall have the right to accept such bona fide offer on the terms specified
in the written notice; provided, however, that if such Secured Party receives
within 10 Business Days of receipt of such notice a different offer, or a
counter offer, to the original offer identified to Ares in such written notice
referred to above, then such Secured Party agrees to present Ares with written
notice of such different offer or counter offer pursuant to the same terms and
conditions specified above.  In the event of a refinancing of the Obligations,
any proposed increase in the pro rata share of such Obligations held by an
existing Secured Party that is not a commercial bank or investment bank that
regularly participates in or leads oil and gas reserve-based, revolving credit
facilities subject to a borrowing base, shall also be subject to the right of
first refusal on the terms set forth in this paragraph.

 

Survival.  All covenants, agreements, representations and warranties made by the
Credit Parties herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, the Issuing
Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Aggregate Commitment has not expired or terminated.  The
provisions of Section 2.15, Section 2.16, Section 2.17 and Section 11.03 and
Article X 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 Aggregate
Commitment or the termination of this Agreement or any provision hereof.

 

Counterparts; Integration; Effectiveness; Electronic Execution.

 

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.  This Agreement
and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS

 

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REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES 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.  Except as
provided in Section 5.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.  Delivery of an executed counterpart of a signature
page of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

 

Delivery of an executed counterpart of a signature page of this Agreement by
telecopy, emailed pdf. or any other electronic means that reproduces an image of
the actual executed signature page shall be effective as delivery of a manually
executed counterpart of this Agreement.  The words “execution,” “signed,”
“signature,” “delivery,” and words of like import in or relating to any document
to be signed in connection with this Agreement and the transactions contemplated
hereby shall be deemed to include Electronic Signatures, deliveries or the
keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature, physical
delivery thereof or the use of a paper-based recordkeeping system, as the case
may be, to the extent and as provided for in any applicable law, including the
Federal Electronic Signatures in Global and National Commerce Act, the New York
State Electronic Signatures and Records Act, or any other similar state laws
based on the Uniform Electronic Transactions Act; provided that nothing herein
shall require the Administrative Agent to accept electronic signatures in any
form or format without its prior written consent.

 

Severability.  Any provision of this Agreement 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; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

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 at any time owing by such Lender or
Affiliate to or for the credit or the account of the Borrower against any of and
all the obligations of any Credit Party now or hereafter existing under this
Agreement held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured.  The rights of each Lender under this Section and Section 8.08 are in
addition to other rights and remedies (including other rights of setoff) which
such Lender may have.

 

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GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

 

THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK.

 

EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF
NEW YORK SITTING IN NEW YORK COUNTY, BOROUGH OF MANHATTAN, AND OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL
COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. 
NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT,
THE ISSUING BANK OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY CREDIT PARTY OR ITS PROPERTIES
IN THE COURTS OF ANY JURISDICTION.

 

EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH
(B) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 11.01.  NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.

 

WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER

 

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AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

 

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.

 

Confidentiality.  Each of the Administrative Agent, the Issuing Bank and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority (including any self-regulatory authority, such as
the National Association of Insurance Commissioners), (c) to the extent required
by Requirements of Law or by any subpoena or similar legal process, (d) to any
other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Credit Parties and their obligations, (g) with the consent of the Borrower,
(h) to the extent such Information (i) becomes publicly available other than as
a result of a breach of this Section or (ii) becomes available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
from a source other than a Credit Party or (i) in connection with any proposed
amendments to the Loan Documents, to the secured parties under the Second Lien
Loan Documents to the extent required to comply with Section 4.05(a) of the
Intercreditor Agreement.  For the purposes of this Section, “Information” means
all information received from any Credit Party relating to any Credit Party or
its business, other than any such information that is available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
prior to disclosure by any Credit Party; provided that, in the case of
information received from any Credit Party after the date hereof, such
information is clearly identified at the time of delivery as confidential.  Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

Material Non-Public Information.

 

EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN
SECTION 11.12(a) FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL
NON-PUBLIC INFORMATION CONCERNING THE BORROWER AND ITS RELATED PARTIES OR THEIR
RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES
REGARDING THE USE OF MATERIAL NON-

 

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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 WILL BE SYNDICATE-LEVEL INFORMATION, WHICH
MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER, THE CREDIT
PARTIES 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.

 

Authorization to Distribute Certain Materials to Public-Siders.

 

If the Borrower does not file this Agreement with the SEC, then the Borrower
hereby authorizes the Administrative Agent to distribute the execution version
of this Agreement and the Loan Documents to all Lenders, including their
Public-Siders. The Borrower acknowledges its understanding that Public-Siders
and their firms may be trading in any of the Parties’ respective securities
while in possession of the Loan Documents.

 

The Borrower represents and warrants that none of the information in the Loan
Documents constitutes or contains material non-public information within the
meaning of the federal and state securities laws. To the extent that any of the
executed Loan Documents constitutes at any time a material non-public
information within the meaning of the federal and state securities laws after
the date hereof, the Company agrees that it will promptly make such information
publicly available by press release or public filing with the SEC.

 

Interest Rate Limitation.  Notwithstanding anything herein to the contrary, if
at any time the interest rate applicable to any Loan, together with all fees,
charges and other amounts which are treated as interest on such Loan under
applicable law (collectively the “Charges”), shall exceed the maximum lawful
rate (the “Maximum Rate”) which may be contracted for, charged, taken, received
or reserved by the Lender holding such Loan in accordance with applicable law,
the rate of interest payable in respect of such Loan hereunder, together with
all Charges payable in respect thereof, shall be limited to the Maximum Rate
and, to the extent lawful, the interest and Charges that would have been payable
in respect of such Loan but were not payable as a result of the operation of
this Section shall be cumulated and the interest and Charges payable to such
Lender in respect of other Loans or periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together with interest
thereon at the Federal Funds

 

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Effective Rate to the date of repayment, shall have been received by such
Lender.  In the event that, notwithstanding Section 11.09, applicable law is the
law of the State of Texas and such applicable law provides for an interest
ceiling under Chapter 303 of the Texas Finance Code (the “Texas Finance Code”)
as amended, for each day, the ceiling shall be the “weekly ceiling” as defined
in the Texas Finance Code and shall be used in this Note and the other Loan
Documents for calculating the Maximum Rate and for all other purposes.  Chapter
346 of the Texas Finance Code (which regulates certain revolving credit accounts
(formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this
Agreement or to any Loan, nor shall this Agreement or any Loan be governed by or
be subject to the provisions of such Chapter 346 in any manner whatsoever.

 

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

 

Original Credit Agreement.  On the Effective Date, this Agreement shall
supersede and replace in its entirety the Original Credit Agreement; provided,
however, that (a) all loans, letters of credit, and other indebtedness,
obligations and liabilities outstanding under the Original Credit Agreement on
such date shall continue to constitute Loans, Letters of Credit and other
indebtedness, obligations and liabilities under this Agreement, (b) the
execution and delivery of this Agreement or any of the Loan Documents hereunder
shall not constitute a novation, refinancing or any other fundamental change in
the relationship among the parties and (c) the Loans, Letters of Credit, and
other indebtedness, obligations and liabilities outstanding hereunder, to the
extent outstanding under the Original Credit Agreement immediately prior to the
date hereof, shall constitute the same loans, letters of credit, and other
indebtedness, obligations and liabilities as were outstanding under the Original
Credit Agreement.

 

Reaffirmation and Grant of Security Interest.  Each Credit Party hereby
(a) confirms that each Collateral Document (as defined in the Original Credit
Agreement) to which it is a party or is otherwise bound and all Collateral
encumbered thereby, will continue to guarantee or secure, as the case may be, to
the fullest extent possible in accordance with the Loan Documents, the payment
and performance of all Obligations and Guaranteed Liabilities under this
Agreement and the Secured Indebtedness (as such term is defined in the
Mortgages) and all other indebtedness, obligations and liabilities under the
Mortgages, as the case may be, and (b) reaffirms its grant to the Administrative
Agent for the benefit of the Secured Parties of a continuing Lien on and
security interest in and to such Credit Party’s right, title and interest in, to
and under all Collateral as collateral security for the prompt payment and
performance in full when due of the Obligations and Guaranteed Liabilities under
this Agreement and the Secured Indebtedness and all other indebtedness,
obligations and liabilities under the Mortgages (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms thereof.

 

Reallocation of Commitments and Loans.  The Lenders party to the Original Credit
Agreement have agreed among themselves to reallocate their respective
Commitments (as defined in the Original Credit Agreement) as contemplated by
this Agreement, and to, among

 

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other things, allow certain financial institutions identified by the Lead
Arranger in consultation with the Borrower, to become a party to this Agreement
as a Lender (each, a “New Lender”) by acquiring an interest in the Aggregate
Commitment.  On the Fourth Amendment Effective Date and after giving effect to
such reallocation and adjustment of the Aggregate Commitment, the Commitment and
Applicable Percentage of each Lender, including each New Lender, shall be as set
forth on Schedule 2.01 and each Lender, including each New Lender, shall own its
Applicable Percentage of the outstanding Loans.  The reallocation and adjustment
to the Commitments of each Lender, including each New Lender, as contemplated by
this Section 11.19 shall be deemed to have been consummated pursuant to the
terms of the Assignment and Assumption attached as Exhibit A hereto as if each
of the Lenders, including each New Lender, had executed an Assignment and
Assumption with respect to such reallocation and adjustment.  The Borrower and
the Administrative Agent hereby consent to such reallocation and adjustment of
the Commitments and each New Lender’s acquisition of an interest in the
Aggregate Commitment.  The Administrative Agent hereby waives the $3,500
processing and recordation fee set forth in Section 11.04(b)(ii)(C) with respect
to the assignments and reallocations of the Commitments contemplated by this
Section 11.19.  To the extent requested by any Lender, and in accordance with
Section 2.16, the Borrower shall pay to such Lender, within the time period
prescribed by Section 2.16, any amounts required to be paid by the Borrower
under Section 2.16 in the event the payment of any principal of any Eurodollar
Loan or the conversion of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto is required in connection with the
reallocation contemplated by this Section 11.19.

 

Release of Guarantees and Liens.

 

At such time as the Loans and the other obligations under the Loan Documents
(other than contingent indemnification obligations and obligations under or in
respect of Swap Agreements and Cash Management Agreements) shall have been paid
in full, the Aggregate Commitment has been terminated and no Letters of Credit
shall be outstanding (other than Letters of Credit that have been cash
collateralized or otherwise backstopped in a manner satisfactory to the Issuing
Bank), the Collateral shall be released from the Liens created by the Security
Instruments, and the Security Instruments and all obligations (other than those
expressly stated to survive such termination) of each Credit Party under the
Security Instruments shall terminate, all without delivery of any instrument or
performance of any act by any Person; and

 

If any of the Collateral shall be sold, transferred or otherwise disposed of by
the Borrower or any Restricted Subsidiary in a transaction permitted by this
Agreement, then the Administrative Agent, at the request and sole expense of the
Borrower or any Restricted Subsidiary, shall execute and deliver to the Borrower
or any Restricted Subsidiary all releases or other documents reasonably
necessary or desirable for the release of the Liens created by the Security
Instruments on such Collateral.  At the request and sole expense of the
Borrower, a Guarantor shall be released from its obligations hereunder and under
the other Security Instruments in the event that all the Equity Interests of
such Guarantor shall be Disposed of in a transaction permitted by this
Agreement; provided that the Borrower shall have delivered to the Administrative
Agent, at least five (5) Business Days prior to the date of the proposed
release, a written request for release identifying the relevant Guarantor and
the terms of the Disposition in reasonable detail, including the price thereof
and any anticipated expenses in connection

 

115

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therewith, together with a certification by the Borrower stating that such
transaction is in compliance with this Agreement and the other Loan Documents.

 

Flood Insurance Regulation.  Notwithstanding any provision in any Mortgage 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) located on the Mortgaged Properties
within an area having special flood hazards and in which flood insurance is
available under the National Flood Insurance Act of 1968 included in the
definition of “Mortgaged Properties” and no such Building or Manufactured
(Mobile) Home shall be encumbered by any Mortgage.  The Administrative Agent
reminds each Lender and participant that, pursuant to Flood Insurance
Regulations, each federally regulated lender (whether acting as a Lender or
participant) is responsible for assuring its own compliance with the flood
insurance requirements.  As used herein, “Flood Insurance Regulations” shall
mean (i) the National Flood Insurance Act of 1968 as now or hereafter in effect
or any successor statute thereto, (ii) the Flood Disaster Protection Act of 1973
as now or hereafter in effect or any successor statue thereto, (iii) the
National Flood Insurance Reform Act of 1994 (amending 42 USC 4001, et seq.), as
the same may be amended or recodified from time to time, and (iv) the Flood
Insurance Reform Act of 2004 and any regulations promulgated thereunder.

 

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

 

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

 

the effects of any Bail-In Action on any such liability, including, if
applicable:

 

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

 

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

 

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

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

 

BORROWER:

 

 

 

CLAYTON WILLIAMS ENERGY, INC.

 

a Delaware corporation

 

 

 

 

 

By:

 

 

 

Michael L. Pollard, Senior Vice President

 

 

 

 

 

GUARANTORS:

 

 

 

 

 

SOUTHWEST ROYALTIES, INC.
WARRIOR GAS CO.
CWEI ACQUISITIONS, INC.
ROMERE PASS ACQUISITION L.L.C.
CWEI ROMERE PASS ACQUISITION
CORP.
BLUE HEEL COMPANY
TEX-HAL PARTNERS, INC.
DESTA DRILLING GP, LLC
WEST COAST ENERGY PROPERTIES
GP, LLC
CLAJON INDUSTRIAL GAS, INC.
CLAYTON WILLIAMS PIPELINE
CORPORATION

 

 

 

 

 

By:

 

 

 

Michael L. Pollard, Senior Vice President
of each of the Guarantors listed above

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Signature Page

 

 

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

 

 

DESTA DRILLING, L.P.

 

a Texas limited partnership

 

 

 

By: Desta Drilling GP, LLC, its general partner

 

 

 

 

 

By:

 

 

 

Michael L. Pollard, Senior Vice President

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Signature Page

 

 

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

 

 

JPMORGAN CHASE BANK, N.A., as

 

Administrative Agent, Issuing Bank and a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

Mark E. Olson

 

 

Title:

Authorized Officer

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

WELLS FARGO BANK, N.A.,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

UNION BANK, N.A.,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

COMPASS BANK,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

FROST BANK,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

THE ROYAL BANK OF SCOTLAND PLC,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

KEYBANK NATIONAL ASSOCIATION,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

NATIXIS, NEW YORK BRANCH,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

UBS AG, STAMFORD BRANCH,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

FIFTH THIRD BANK,

 

as a Lender

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Signature Page

 

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

 

 

 

U.S. BANK NATIONAL ASSOCIATION,

 

 

as a Lender

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Signature Page

 

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

 

 

 

WHITNEY BANK,

 

 

as a Lender

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Signature Page

 

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

 

 

 

BANK OF AMERICA, N.A.,

 

 

as a Lender

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Signature Page

 

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

 

 

 

BRANCH BANKING AND TRUST COMPANY,

 

 

as a Lender

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Signature Page

 

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

 

 

 

CAPITAL ONE, NATIONAL ASSOCIATION,

 

 

as a Lender

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Signature Page

 

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

 

 

 

PNC BANK, NATIONAL ASSOCIATION,

 

 

as a Lender

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

CLAYTON WILLIAMS ENERGY, INC. THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Signature Page

 

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

 

EXHIBIT A

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/Approved Fund of [identify Lender]]

 

 

 

 

 

3.

 

Borrower:

 

Clayton Williams Energy, Inc.

 

 

 

 

 

4.

 

Administrative Agent: JPMorgan Chase Bank, N.A., as the administrative agent
under the Credit Agreement

 

 

 

 

 

5.

 

Credit Agreement:

 

Third Amended and Restated Credit Agreement, dated as of April 23, 2014 among
Clayton Williams Energy, Inc., as Borrower, certain Subsidiaries of Borrower, as
Guarantors, the Lenders

 

1

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parties thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent

 

6.                                      Assigned Interest:

 

Facility Assigned

 

Aggregate
Commitment/Loans
for all Lenders

 

Amount of
Commitment/Loans
Assigned

 

Applicable
Percentage of
Commitment/Loans

 

 

 

$

 

 

$

 

 

 

%

 

 

$

 

 

$

 

 

 

%

 

 

$

 

 

$

 

 

 

%

 

Effective Date:                    , 20

 

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

 

 

ASSIGNOR

 

 

 

[NAME OF ASSIGNOR]

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

 

 

ASSIGNEE

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

By:

 

 

 

Title:

 

2

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[Consented to and] Accepted:

 

 

 

JPMORGAN CHASE BANK, N.A.

 

as Administrative Agent and Issuing Bank

 

 

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

 

 

[Consented to:]

 

 

 

CLAYTON WILLIAMS ENERGY, INC.

 

 

 

 

 

 

 

By:

 

 

 

Title:

 

 

3

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ANNEX 1

 

Third Amended and Restated Credit Agreement dated as of April 23, 2014 among
Clayton Williams Energy, Inc., as Borrower, certain Subsidiaries of Borrower, as
Guarantors, the Lenders party thereto and JPMorgan Chase Bank, N.A., as
Administrative Agent.

 

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 Subsidiary or Affiliates or any other Person obligated in respect
of any Loan Document or (iv) the performance or observance by the Borrower, any
Subsidiary 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 6.01 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.

 

1

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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.

 

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.  Acceptance and
adoption of the terms of this Assignment and Assumption by the Assignee and the
Assignor by Electronic Signature or delivery of an executed counterpart of a
signature page of this Assignment and Assumption by any Electronic System 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.

 

2

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EXHIBIT B

 

COUNTERPART AGREEMENT

 

This COUNTERPART AGREEMENT, dated [             ] (this “Counterpart Agreement”)
is delivered pursuant to that certain Third Amended and Restated Credit
Agreement, dated as of April 23, 2014 (as it may be amended, supplemented or
otherwise modified, the “Credit Agreement”; the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Clayton Williams Energy, Inc., as Borrower, certain Subsidiaries of Borrower, as
Guarantors, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent (the “Administrative Agent”).

 

Section 1.  Pursuant to Section 6.13 of the Credit Agreement, the undersigned
hereby:

 

(a)                               agrees that this Counterpart Agreement may be
attached to the Credit Agreement and that by the execution and delivery hereof,
the undersigned becomes a Guarantor under the Credit Agreement and agrees to be
bound by all of the terms thereof;

 

(b)                               represents and warrants that each of the
representations and warranties set forth in the Credit Agreement and each other
Loan Document and applicable to the undersigned is true and correct both before
and after giving effect to this Counterpart Agreement, except to the extent that
any such representation and warranty relates solely to any earlier date, in
which case such representation and warranty is true and correct as of such
earlier date (if applicable to the undersigned);

 

(c)                                certifies that no Default has occurred or is
continuing as of the date hereof, or will result from the transactions
contemplated hereby on the date hereof;

 

(d)                               agrees to irrevocably and unconditionally
guaranty the due and punctual payment in full of all Obligations when the same
shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. § 362(a)) and in accordance with Article VIII of
the Credit Agreement; and

 

(e)                                (i) agrees that this counterpart may also be
attached to the Security Agreement, (ii) agrees that the undersigned will comply
with all the terms and conditions of the Security Agreement as if it were an
original signatory thereto, (iii) grants to the Administrative Agent a security
interest in all of the undersigned’s right, title and interest in and to all
“Collateral” (as such term is defined in the Security Agreement) of the
undersigned, in each case whether now or hereafter existing or in which the
undersigned now has or hereafter acquires an interest and wherever the same may
be located and (iv) delivers to the Administrative Agent supplements to all
schedules attached to the Security Agreement.  All such Collateral shall be
deemed to be part of the “Collateral” and hereafter subject to each of the terms
and conditions of the Security Agreement.

 

1

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

 

Section 2.  The undersigned agrees from time to time, upon request of the
Administrative Agent, to take such additional actions and to execute and deliver
such additional documents and instruments as the Administrative Agent may
reasonably request to effect the transactions contemplated by, and to carry out
the intent of, this Counterpart Agreement.  Neither this Counterpart Agreement
nor any term hereof may be changed, waived, discharged or terminated, except by
an instrument in writing signed by the party (including, if applicable, any
party required to evidence its consent to or acceptance of this Counterpart
Agreement) against whom enforcement of such change, waiver, discharge or
termination is sought.  Any notice or other communication herein required or
permitted to be given shall be given pursuant to Section 11.01 of the Credit
Agreement, and for all purposes thereof, the notice address of the undersigned
shall be the address as set forth on the signature page hereof.  In case any
provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

 

THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES THEREOF.

 

2

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

 

IN WITNESS WHEREOF, the undersigned has caused this Counterpart Agreement to be
duly executed and delivered by its duly authorized officer as of the date above
first written.

 

 

 

 

[NAME OF SUBSIDIARY]

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attention:

 

 

 

Telecopier

 

 

 

 

 

with a copy to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attention:

 

 

 

Telecopier

 

 

 

 

 

ACKNOWLEDGED AND ACCEPTED,

 

 

as of the date above first written:

 

 

 

 

 

JPMORGAN CHASE BANK, N.A.,

 

 

as Administrative Agent

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

3

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EXHIBIT C

 

FORM OF INTEREST ELECTION REQUEST

 

Reference is made to the Third Amended and Restated Credit Agreement, dated as
of April 23, 2014 (as it may be amended, supplemented or otherwise modified, the
“Credit Agreement”; the terms defined therein and not otherwise defined herein
being used herein as therein defined), by and among Clayton Williams
Energy, Inc., as Borrower, certain Subsidiaries of Borrower, as Guarantors, the
Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.

 

Pursuant to Section 2.08 of the Credit Agreement, the Borrower desires to
convert or to continue the following Loans, each such conversion and/or
continuation to be effective as of [mm/dd/yy]:

 

$[   ,   ,   ]

 

Eurodollar Loans to be continued with Interest Period of      month(s)

 

 

 

$[   ,   ,   ]

 

ABR Loans to be converted to Eurodollar Loans with Interest Period of     
month(s)

 

 

 

$[   ,   ,   ]

 

Eurodollar Loans to be converted to ABR Loans

 

The Borrower hereby certifies that as of the date hereof, no Default has
occurred and is continuing or would result from the consummation of the
conversion and/or continuation contemplated hereby.

 

Date: [mm/dd/yy]

CLAYTON WILLIAMS ENERGY, INC.

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

1

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EXHIBIT D

 

NOTE

 

New York, New York

 

           ,          

 

FOR VALUE RECEIVED, the undersigned CLAYTON WILLIAMS ENERGY, INC., a Delaware
corporation (“Borrower”) hereby unconditionally promises to pay to
                      (the “Lender”) or its registered assigns the principal sum
equal to its Commitment as set forth in the Credit Agreement (as hereinafter
defined), or, if greater or less, the aggregate unpaid principal amount of the
Loans advanced by Lender to Borrower pursuant to the terms of the Credit
Agreement, together with interest on the unpaid principal balance thereof as set
forth in the Credit Agreement, both principal and interest payable as therein
provided in lawful money of the United States of America at the offices of
Administrative Agent provided in Section 11.01 of the Credit Agreement, or at
such other place, as from time to time may be designated by Administrative Agent
in accordance with the Credit Agreement.

 

The principal and all accrued interest on this Note shall be due and payable in
accordance with the terms and provisions of the Credit Agreement.

 

This Note is executed pursuant to that certain Third Amended and Restated Credit
Agreement dated as of April 23, 2014, between Borrower, certain Subsidiaries of
the Borrower, as Guarantors, the Administrative Agent and the Lenders party
thereto (as amended, modified, supplemented or restated from time to time, the
“Credit Agreement”; the terms defined therein and not otherwise defined herein
being used herein as therein defined), is one of the promissory notes referred
to in Section 2.09(e) therein and is secured by the Security Instruments. 
Reference is made to the Credit Agreement and the Loan Documents for a statement
of prepayment rights and obligations of Borrower, for a statement of the terms
and conditions under which the due date of this Note may be accelerated and for
statements regarding other matters affecting this Note (including without
limitation the obligations of the holder hereof to advance funds hereunder,
principal and interest payment due dates, voluntary and mandatory prepayments,
exercise of rights and remedies, payment of attorneys’ fees, court costs and
other costs of collection and certain waivers by Borrower and others now or
hereafter obligated for payment of any sums due hereunder).  Upon the occurrence
of an Event of Default, the Administrative Agent may declare forthwith to be
entirely and immediately due and payable the principal balance hereof and the
interest accrued hereon, and the Lender shall have all rights and remedies of
the Lender under the Credit Agreement and the other Loan Documents.  This Note
may be prepaid in accordance with the terms and provisions of the Credit
Agreement.

 

Regardless of any provision contained in this Note, the holder hereof shall
never be entitled to receive, collect or apply, as interest on this Note, any
amount in excess of the Maximum Rate, and, if the holder hereof ever receives,
collects, or applies as interest, any such amount which would be excessive
interest, it shall be deemed a partial prepayment of principal and treated
hereunder as such; and, if the indebtedness evidenced hereby is paid in full,
any remaining excess shall forthwith be paid to Borrower.  In determining
whether or not the interest paid or payable, under any specific contingency,
exceeds the Maximum Rate, Borrower and the holder hereof shall, to the maximum
extent permitted under applicable law (i) characterize any

 

1

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

 

non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) spread the
total amount of interest throughout the entire contemplated term of the
obligations evidenced by this Note and/or referred to in the Credit Agreement so
that the interest rate is uniform throughout the entire term of this Note;
provided that, if this Note is paid and performed in full prior to the end of
the full contemplated term thereof; and if the interest received for the actual
period of existence thereof exceeds the Maximum Rate, the holder hereof shall
refund to Borrower the amount of such excess or credit the amount of such excess
against the indebtedness evidenced hereby, and, in such event, the holder hereof
shall not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving or receiving interest in excess of the Maximum Rate.

 

If any payment of principal or interest on this Note shall become due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall in such case be included in
computing interest in connection with such payment.

 

If this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceeding at law or in equity or in bankruptcy,
receivership or other court proceedings, Borrower agrees to pay all costs of
collection, including, but not limited to, court costs and reasonable attorneys’
fees.

 

Borrower and each surety, endorser, guarantor and other party ever liable for
payment of any sums of money payable on this Note, jointly and severally waive
presentment and demand for payment, notice of intention to accelerate the
maturity, protest, notice of protest and nonpayment, as to this Note and as to
each and all installments hereof, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment hereof,
or in any indulgences, or by any release or change in any security for the
payment of this Note, and hereby consent to any and all such renewals,
extensions, indulgences, releases or changes.

 

This Note shall be governed by and construed in accordance with the applicable
laws of the United States of America and the laws of the State of New York.

 

THIS NOTE, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENTS AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

2

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

 

EXECUTED as of the date and year first above written.

 

 

 

BORROWER:

 

 

 

CLAYTON WILLIAMS ENERGY, INC.

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

3

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EXHIBIT E

 

FORM OF LENDER CERTIFICATE

        , 200

 

To:          JPMORGAN CHASE BANK, N.A.,
                as Administrative Agent

 

The Borrower, the Guarantors, the Administrative Agent and the Lenders have
entered into that certain Third Amended and Restated Credit Agreement dated as
of April 23, 2014 (as the same has been and may further be amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”). 
Unless otherwise defined herein, capitalized terms used herein have the meaning
specified in the Credit Agreement.

 

[Language for Existing Lender]

 

[               Please be advised that the undersigned has agreed (a) to
increase its Commitment under the Credit Agreement effective           , 20  
(the “Effective Date”) from $                 to $             and (b) that,
from and after the Effective Date, it shall continue to be a Lender in all
respects under the Credit Agreement and the other Loan Documents.]

 

[Language for New Lender]

 

[               Please be advised that the undersigned has agreed (a) to become
a Lender under the Credit Agreement effective           , 20   (the “Effective
Date”) with a Commitment of $             and (b) that, from and after the
Effective Date, it shall be deemed to be a Lender in all respects under the
Credit Agreement and the other Loan Documents and shall be bound thereby.]

 

 

Very truly yours,

 

 

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

1

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

 

1.              Accepted and Agreed:

 

JPMORGAN CHASE BANK, N.A.,

 

as Administrative Agent

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

Accepted and Agreed:

 

 

 

CLAYTON WILLIAMS ENERGY, INC.

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

2

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EXHIBIT F-1

 

U.S. TAX COMPLIANCE CERTIFICATE

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

 

Reference is made to the Third Amended and Restated Credit Agreement, dated as
of April 23, 2014 (as it may be amended, supplemented, restated or otherwise
modified from time to time, the “Credit Agreement”), by and among Clayton
Williams Energy, Inc., as Borrower, certain Subsidiaries of Borrower, as
Guarantors, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent.

 

Pursuant to the provisions of Section 2.17 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 promissory 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 non-U.S. Person status on IRS Form W-8BEN (or applicable
successor form).  By executing this certificate, the undersigned agrees that
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent, and (2) the
undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

 

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

 

 

[NAME OF LENDER]

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

Date:            , 20[  ]

 

1

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EXHIBIT F-2

 

U.S. TAX COMPLIANCE CERTIFICATE

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

 

Reference is made to the Third Amended and Restated Credit Agreement, dated as
of April 23, 2014 (as it may be amended, supplemented, restated or otherwise
modified from time to time, the “Credit Agreement”), by and among Clayton
Williams Energy, Inc., as Borrower, certain Subsidiaries of Borrower, as
Guarantors, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent.

 

Pursuant to the provisions of Section 2.17 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
non-U.S. Person status on IRS Form W-8BEN (or applicable successor form).  By
executing this certificate, the undersigned agrees that (1) if the information
provided on this certificate changes, the undersigned shall promptly so inform
such Lender in writing, and (2) the undersigned shall have at all times
furnished such Lender with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

 

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

 

 

[NAME OF PARTICIPANT]

 

 

By:

 

 

Name:

 

Title:

 

 

Date:            , 20[  ]

 

1

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EXHIBIT F-3

 

U.S. TAX COMPLIANCE CERTIFICATE

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

 

Reference is made to the Third Amended and Restated Credit Agreement, dated as
of April 23, 2014 (as it may be amended, supplemented, restated or otherwise
modified from time to time, the “Credit Agreement”), by and among Clayton
Williams Energy, Inc., as Borrower, certain Subsidiaries of Borrower, as
Guarantors, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent.

 

Pursuant to the provisions of Section 2.17 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 (or
applicable successor form) accompanied by one of the following forms from each
of its partners/members that is claiming the portfolio interest exemption:
(i) an IRS Form W-8BEN (or applicable successor form) or (ii) an IRS Form W-8IMY
(or applicable successor form) accompanied by an IRS Form W-8BEN (or applicable
successor form) from each of such partner’s/member’s beneficial owners that is
claiming the portfolio interest exemption.  By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender and (2) the
undersigned shall have at all times furnished such Lender with a properly
completed and currently effective certificate in either the calendar year in
which each payment is to be made to the undersigned, or in either of the two
calendar years preceding such payments.

 

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

 

 

[NAME OF PARTICIPANT]

 

 

By:

 

 

Name:

 

Title:

 

 

Date:            , 20[  ]

 

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EXHIBIT F-4

 

U.S. TAX COMPLIANCE CERTIFICATE

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

 

Reference is made to the Third Amended and Restated Credit Agreement, dated as
of April 23, 2014 (as it may be amended, supplemented, restated or otherwise
modified from time to time, the “Credit Agreement”), by and among Clayton
Williams Energy, Inc., as Borrower, certain Subsidiaries of Borrower, as
Guarantors, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent.

 

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
Loan(s) (as well as any promissory 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
promissory 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 (or applicable successor form) accompanied by one of the following
forms from each of its partners/members that is claiming the portfolio interest
exemption: (i) an IRS Form W-8BEN (or applicable successor form) or (ii) an IRS
Form W-8IMY (or applicable successor form) accompanied by an IRS Form W-8BEN (or
applicable successor form) from each of such partner’s/member’s beneficial
owners that is claiming the portfolio interest exemption.  By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform 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:

 

 

1

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

 

Title:

 

Date:            , 20[  ]

 

2

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

 

SCHEDULE 1.01

 

EXISTING LETTERS OF CREDIT

 

Letter of Credit #

 

Applicant

 

Beneficiary

 

Amount

 

Type

 

Letter of Credit
Expiration Date

 

S-634643

 

Warrior Gas Co.

 

Railroad Commission of Texas

 

$

25,000.00

 

Standard

 

10/31/2014

 

S-879727

 

Southwest Royalties, Inc.

 

Railroad Commission of Texas

 

$

2,000,000.00

 

Standard

 

3/31/2015

 

S-902066

 

Clayton Williams Energy, Inc.

 

Railroad Commission of Texas

 

$

2,000,000.00

 

Standard

 

7/31/2014

 

S-959732

 

Clayton Williams Pipeline Corporation

 

Railroad Commission of Texas

 

$

25,000.00

 

Standard

 

12/31/2014

 

S-705155

 

Clayton Williams Energy, Inc.

 

The Travelers Indemnity Company

 

$

1,003,000.00

 

Standard

 

8/31/2014

 

 

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

 

SCHEDULE 2.01

 

APPLICABLE PERCENTAGES AND COMMITMENTS

 

Lender

 

Title

 

Applicable
Percentage

 

Commitment as of the
Fourth Amendment
Effective Date

 

JPMorgan Chase Bank, N.A.

 

Administrative Agent

 

16.686747

%

$

16,686,747

 

Wells Fargo Bank, N.A.

 

Syndication Agent

 

9.337349

%

$

9,337,349

 

Union Bank, N.A.

 

Documentation Agent

 

9.337349

%

$

9,337,349

 

Compass Bank

 

 

 

6.024096

%

$

6,024,096

 

Frost Bank

 

 

 

6.024096

%

$

6,024,096

 

Toronto Dominion (Texas) LLC

 

 

 

6.024096

%

$

6,024,096

 

KeyBank National Association

 

 

 

6.024096

%

$

6,024,096

 

Natixis, New York Branch

 

 

 

6.024096

%

$

6,024,096

 

UBS AG, Stamford Branch

 

 

 

5.000000

%

$

5,000,000

 

Fifth Third Bank

 

 

 

4.216867

%

$

4,216,867

 

U.S. Bank National Association

 

 

 

4.216867

%

$

4,216,867

 

Whitney Bank

 

 

 

4.216867

%

$

4,216,867

 

Bank of America, N.A.

 

 

 

4.216867

%

$

4,216,867

 

Branch Banking and Trust Company

 

 

 

4.216867

%

$

4,216,867

 

Capital One, National Association

 

 

 

4.216867

%

$

4,216,867

 

PNC Bank, National Association

 

 

 

4.216867

%

$

4,216,867

 

TOTAL:

 

 

 

100.000000000

%

$

100,000,000.00

 

 

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

 

SCHEDULE 4.04

 

MATERIAL LIABILITIES

 

None.

 

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

 

SCHEDULE 4.06

 

DISCLOSED MATTERS

 

None.

 

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

 

SCHEDULE 4.13

 

CAPITALIZATION

 

Legal Name

 

Jurisdiction
of
Organization

 

Shares
Outstanding

 

Owner

 

 

 

 

 

 

 

Material Restricted Subsidiaries (Guarantors):

 

 

 

 

 

 

 

 

 

Warrior Gas Co.

 

Texas

 

2000

 

Clayton Williams Energy, Inc.

Clajon Industrial Gas, Inc.

 

Texas

 

1000

 

Warrior Gas Co.

CWEI Acquisitions, Inc.

 

Delaware

 

1000

 

Clayton Williams Energy, Inc.

Clayton Williams Pipeline Corporation

 

Delaware

 

1000

 

Clayton Williams Energy, Inc.

Romere Pass Acquisition L.L.C.

 

Delaware

 

N/A

 

CWEI Romere Pass Acquisition Corp.

CWEI Romere Pass Acquisition Corp.

 

Delaware

 

1000

 

Clayton Williams Energy, Inc.

Southwest Royalties, Inc.

 

Delaware

 

1000

 

Clayton Williams Energy, Inc.

Blue Heel Company

 

Delaware

 

1000

 

Southwest Royalties, Inc.

Tex-Hal Partners, Inc.

 

Delaware

 

1000

 

Southwest Royalties, Inc.

Desta Drilling GP, LLC

 

Texas

 

N/A

 

Clayton Williams Energy, Inc.

Desta Drilling, L.P.

 

Texas

 

N/A

 

Desta Drilling GP, LLC — 1%
Clayton Williams Energy, Inc. - 99%

West Coast Energy Properties GP, LLC

 

Texas

 

N/A

 

Clayton Williams Energy, Inc.

 

 

 

 

 

 

 

Non-Material Restricted Subsidiaries (Non-Guarantors):

 

 

 

 

 

 

 

 

 

Clayton Williams Trading Co.

 

Texas

 

1000

 

Clayton Williams Energy, Inc.

Warrior Mississippi Corp.

 

Delaware

 

1000

 

Clayton Williams Energy, Inc.

CWEI Aviation, Inc.

 

Texas

 

1000

 

Clayton Williams Energy, Inc.

CWEI Partners GP, LLC

 

Delaware

 

N/A

 

Clayton Williams Energy, Inc.

CWEI Partners Operating, LLC

 

Delaware

 

N/A

 

Clayton Williams Energy Partners, LP

Clayton Williams Energy Partners, LP

 

Delaware

 

N/A

 

CWEI Partners GP, LLC — 0.1%
Clayton Williams Energy, Inc. — 99.9%

 

 

 

 

 

 

 

Unrestricted Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

CWEI Andrews Properties GP, LLC

 

Delaware

 

N/A

 

Clayton Williams Energy, Inc.

CWEI Andrews Properties, LP

 

Delaware

 

N/A

 

CWEI Andrews Properties GP, LLC

West Coast Energy Properties, L.P.

 

Texas

 

N/A

 

West Coast Energy Properties GP, LLC

 

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

 

SCHEDULE 7.01

 

EXISTING INDEBTEDNESS

 

Other Indebtedness:

 

·                  Capital Lease Obligations — vehicles

~$800,000

 

 

Operating Lease Obligations:

 

·                  Two drilling rigs

~$1,700,000

·                  Office space and business machines

~$6,100,000

 

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

 

SCHEDULE 7.02

 

EXISTING LIENS

 

Liens securing capital lease obligations described on Schedule 7.01.

 

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

 

SCHEDULE 7.04

 

INCENTIVE OIL AND GAS INTERESTS

 

APO Incentive Plan

 

Year
Formed

 

No. of
Participants

 

No. of
Units

 

Area of Interest

 

Working
Interest
Assigned

 

West Coast Energy Properties PA

 

2006

 

20

 

100.00

 

West Coast Properties — California and Texas

 

7.50

%

CWEI RMS/Warwink PA

 

2007

 

23

 

100.00

 

RMS/Warwink area in West Texas

 

5.00

%

CWEI South Louisiana VI PA

 

2008

 

34

 

100.00

 

South Louisiana

 

7.00

%

CWEI Crockett County PA

 

2008

 

33

 

100.00

 

Crockett Co., TX

 

7.00

%

CWEI Utah PA

 

2008

 

30

 

100.00

 

Utah

 

5.60

%

CEWI Sacramento Basin I PA

 

2008

 

9

 

100.00

 

California, Counties of Colusa, Sutter, Yolo, Solano and Sacramento

 

7.00

%

 

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

 

SCHEDULE 7.06(c)

 

INVESTMENT COMMITMENTS

 

Investments pursuant to existing commitments as general partner in the following
Unrestricted Subsidiaries:

·                  West Coast Energy Properties, L.P.

·                                          CWEI Andrews Properties GP, LLC, for
further investment in CWEI Andrews Properties, L.P.

 

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

 

SCHEDULE 7.06(g)

 

EXISTING INVESTMENTS

 

·                  Limited partnership interest (31.9%) in ClayDesta Buildings,
LP

 

·                  West Coast Energy Properties GP, LLC

 

·                  CWEI Andrews Properties GP, LLC

 

·                  Dalea Investment Group, LLC

 

·                  Hall-Houston Exploration IV, LP

 

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

 

SCHEDULE 7.06(l)

 

COSTS RELATING TO INCENTIVE OIL AND GAS INTERESTS

 

APO Incentive Plan

 

Year
Formed

 

No. of
Participants

 

No. of
Units

 

Area of Interest

 

Working
Interest
Assigned

 

West Coast Energy Properties PA

 

2006

 

20

 

100.00

 

West Coast Properties — California and Texas

 

7.50

%

CWEI RMS/Warwink PA

 

2007

 

23

 

100.00

 

RMS/Warwink area in West Texas

 

5.00

%

CWEI South Louisiana VI PA

 

2008

 

34

 

100.00

 

South Louisiana

 

7.00

%

CWEI Crockett County PA

 

2008

 

33

 

100.00

 

Crockett Co., TX

 

7.00

%

CWEI Utah PA

 

2008

 

30

 

100.00

 

Utah

 

5.60

%

CEWI Sacramento Basin I PA

 

2008

 

9

 

100.00

 

California, Counties of Colusa, Sutter, Yolo, Solano and Sacramento

 

7.00

%

 

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

 

SCHEDULE 7.09

 

TRANSACTIONS WITH AFFILIATES

 

None.

 

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