Exhibit 10.1

 

 

AMENDED AND RESTATED CREDIT AGREEMENT 

CREDIT AGREEMENT

 

dated as of April 28, 2017,

 

Among

 

BONANZA CREEK ENERGY, INC.,
as Borrower,

 

KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent and Issuing Lender,

 

and

 

THE LENDERS NAMED HEREIN
as Lenders

 

$191,666,666.66

 

 

 

 

 

TABLE OF CONTENTS

 

Page 

 

ARTICLE I   DEFINITIONS AND ACCOUNTING TERMS 1 Section 1.01   Certain Defined
Terms 1 Section 1.02   Computation of Time Periods 33 Section 1.03   Accounting
Terms; Changes in GAAP 33 Section 1.04   Types of Advances 34 Section 1.05   UCC
Terms 34 Section 1.06   Rounding 34 Section 1.07   Letter of Credit Amounts 34
Section 1.08   Guarantees 34 Section 1.09   Miscellaneous 34 ARTICLE II   CREDIT
FACILITIES 35 Section 2.01   Commitment for Advances 35 Section 2.02   Borrowing
Base 36 Section 2.03   Method of Borrowing 40 Section 2.04   Termination and
Reduction of the Commitments; Aggregate Maximum Credit Amounts 42 Section
2.05   Prepayment of Advances 42 Section 2.06   Repayment of Advances 45 Section
2.07   Letters of Credit 45 Section 2.08   Fees 52 Section 2.09   Interest 53
Section 2.10   Illegality 53 Section 2.11   Breakage Costs 54 Section
2.12   Increased Costs 54 Section 2.13   Payments and Computations 56 Section
2.14   Taxes 57 Section 2.15   Mitigation Obligations; Replacement of Lenders 60
Section 2.16   Defaulting Lender 61 ARTICLE III   CONDITIONS 63 Section
3.01   Conditions to Closing and Initial Borrowing 64 Section 3.02   Conditions
Precedent to All Borrowings 67

 

 

 

 

TABLE OF CONTENTS

(continued)

 

Page

 

ARTICLE IV   REPRESENTATIONS AND WARRANTIES 69 Section 4.01   Existence;
Subsidiaries 69 Section 4.02   Power; No Conflicts 69 Section
4.03   Authorization and Approvals 69 Section 4.04   Enforceable Obligations 70
Section 4.05   Financial Condition and Financial Statements 70 Section
4.06   True and Complete Disclosure 70 Section 4.07   Litigation; Compliance
with Laws 71 Section 4.08   Use of Proceeds 71 Section 4.09   Investment Company
Act 71 Section 4.10   Taxes 71 Section 4.11   ERISA and Employee Matters 72
Section 4.12   Condition and Maintenance of Property; Casualties 72 Section
4.13   Compliance with Agreements; No Defaults 72 Section 4.14   Environmental
Condition 73 Section 4.15   Permits, Licenses, Etc 73 Section 4.16   Gas
Imbalances, Prepayments 73 Section 4.17   Marketing of Production 74 Section
4.18   Restriction on Liens 74 Section 4.19   Solvency 74 Section 4.20   Hedging
Agreements 74 Section 4.21   Insurance 74 Section 4.22   Sanctions; FCPA 74
Section 4.23   Oil and Gas Properties 74 Section 4.24   Line of Business;
Foreign Operations 76 Section 4.25   [Reserved] 76 Section 4.26   Location of
Business and Offices 76 Section 4.27   Intellectual Property 76 Section
4.28   Senior Debt Status 76 Section 4.29   Flood Hazard Insurance 76

 

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TABLE OF CONTENTS

(continued)

 

Page

 

ARTICLE V   AFFIRMATIVE COVENANTS 76 Section 5.01   Compliance with Laws, Etc 77
Section 5.02   Maintenance of Insurance 77 Section 5.03   Preservation of
Corporate Existence, Etc 78 Section 5.04   Payment of Taxes, Etc 78 Section
5.05   Visitation Rights; Periodic Meetings 78 Section 5.06   Reporting
Requirements 78 Section 5.07   Maintenance of Property 83 Section
5.08   Agreement to Pledge; Guaranty 83 Section 5.09   Use of Proceeds 84
Section 5.10   Title Evidence and Opinions 85 Section 5.11   Further Assurances;
Cure of Title Defects 85 Section 5.12   Operation and Maintenance of Oil and Gas
Properties 85 Section 5.13   Sanctions; FCPA 86 Section 5.14   Reserved 87
Section 5.15   Environmental Matters 87 Section 5.16   ERISA Compliance 87
Section 5.17   Deposit Accounts 87 Section 5.18   Post-Closing 87 ARTICLE
VI   NEGATIVE COVENANTS 87 Section 6.01   Liens, Etc 88 Section
6.02   Indebtedness, Guarantees, and Other Obligations 90 Section
6.03   Agreements Restricting Liens and Distributions 90 Section 6.04   Merger
or Consolidation; Asset Sales 91 Section 6.05   Restricted Payments 92 Section
6.06   Investments 93 Section 6.07   [Reserved] 94 Section 6.08   Affiliate
Transactions 94 Section 6.09   Compliance with ERISA 94 Section
6.10   Sale-and-Leaseback 94 Section 6.11   Change of Business; Foreign
Operations or Subsidiaries 94

 

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TABLE OF CONTENTS

(continued)

 

Page

 

Section 6.12   Name Change 95 Section 6.13   Use of Proceeds; Letters of Credit
95 Section 6.14   Gas Imbalances, Take-or-Pay or Other Prepayments 95 Section
6.15   Hedging Limitations 95 Section 6.16   Additional Subsidiaries 96 Section
6.17   Financial Covenants 97 Section 6.18   Asset Coverage Ratio 97 Section
6.19   Fiscal Year; Fiscal Quarter 97 Section 6.20   Limitation on Operating
Leases 97 Section 6.21   Prepayment of Certain Debt and Other Obligations 97
Section 6.22   [Reserved] 97 Section 6.23   Environmental Matters 97 Section
6.24   Marketing Activities 98 Section 6.25   Sale or Discount of Receivables 98
ARTICLE VII   EVENTS OF DEFAULT; REMEDIES 98 Section 7.01   Events of Default 98
Section 7.02   Optional Acceleration of Maturity 100 Section 7.03   Automatic
Acceleration of Maturity 100 Section 7.04   Right of Set-off 101 Section
7.05   Non-exclusivity of Remedies 101 Section 7.06   Application of Proceeds
101 ARTICLE VIII   THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER 103 Section
8.01   Appointment and Authority 103 Section 8.02   Rights as a Lender 103
Section 8.03   Exculpatory Provisions 103 Section 8.04   Reliance by
Administrative Agent and Issuing Lender 104 Section 8.05   Delegation of Duties
105 Section 8.06   Resignation of Agent or Issuing Lender 105 Section
8.07   Non-Reliance on Administrative Agent and Other Lenders 106 Section
8.08   No Other Duties, etc 106 Section 8.09   Indemnification 106

 

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TABLE OF CONTENTS

(continued)

 

Page

 

Section 8.10   Administrative Agent May File Proofs of Claim 108 Section
8.11   Collateral and Guaranty Matters 108 Section 8.12   Credit Bidding 109
ARTICLE IX   MISCELLANEOUS 110 Section 9.01   Costs and Expenses 110 Section
9.02   Indemnification; Waiver of Damages 110 Section 9.03   Waivers and
Amendments 112 Section 9.04   Severability 113 Section 9.05   Survival of
Representations and Obligations 113 Section 9.06   Binding Effect 114 Section
9.07   Successors and Assigns 114 Section 9.08   Confidentiality 117 Section
9.09   Notices, Etc 118 Section 9.10   Usury Not Intended 119 Section
9.11   Usury Recapture 120 Section 9.12   Payments Set Aside 121 Section
9.13   Performance of Duties 121 Section 9.14   All Powers Coupled with Interest
121 Section 9.15   Governing Law 121 Section 9.16   Submission to Jurisdiction;
Service of Process 122 Section 9.17   Waiver of Venue 122 Section
9.18   Execution in Counterparts; Electronic Execution 122 Section
9.19   Keepwell 122 Section 9.20   Independent Effect of Covenants 123 Section
9.21   USA Patriot Act 123 Section 9.22   Flood Insurance Regulations 123
Section 9.23   NON-RELIANCE 123 Section 9.24   WAIVER OF JURY TRIAL 123 Section
9.25   Reversal of Payments 124 Section 9.26   Injunctive Relief 124 Section
9.27   No Advisory or Fiduciary Responsibility 124

 

 

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TABLE OF CONTENTS

(continued)

 

Page

 

Section 9.28   Inconsistencies with Other Documents 125 Section
9.29   Acknowledgement and Consent to Bail-In of EEA Financial Institutions 125
Section 9.30   Restatement 125 Section 9.31   ORAL AGREEMENTS 126

 

 

 

 

-vi- 

 

 

 

SCHEDULES:           Schedule I - Pricing Grid Schedule II - Notice Information
and Commitments Schedule 4.01 - Subsidiaries of Borrower Schedule 4.07 -
Litigation Schedule 4.20 - Hedging Contracts Schedule 4.23 - Back-In and
Reversionary Interests Schedule 4.26 - Principal Business and Chief Executive
Office             EXHIBITS:           Exhibit A - Form of Assignment and
Acceptance Exhibit B - Form of Compliance Certificate Exhibit C - Form of
Amended and Restated Guaranty Exhibit D-1 - Form of Amended and Restated
Colorado Mortgage Exhibit D-2 - Form of Amended and Restated Arkansas Mortgage
Exhibit E - Form of Note Exhibit F - Form of Notice of Borrowing Exhibit G -
Form of Notice of Conversion or Continuation Exhibit H - Form of Amended and
Restated Pledge and Security Agreement Exhibit I - Form of Transfer Letters
Exhibit J-1 - Form of U.S. Tax Compliance Certificate Exhibit J-2 - Form of U.S.
Tax Compliance Certificate Exhibit J-3 - Form of U.S. Tax Compliance Certificate
Exhibit J-4 - Form of U.S. Tax Compliance Certificate Exhibit K - Form of
Solvency Certificate

 

 

 

-vii- 

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

This Amended and Restated Credit Agreement dated as of April 28, 2017, is among
Bonanza Creek Energy, Inc., a Delaware corporation (the “Borrower”), the lenders
party hereto from time to time (the “Lenders”), and KeyBank National
Association, as administrative agent for such Lenders (in such capacity, the
“Administrative Agent”) and as issuing lender for such Lenders (in such
capacity, the “Issuing Lender”).

 

A.       The Borrower is a party to that certain Credit Agreement dated as of
March 29, 2011 among the Borrower, the lenders party thereto from time to time
(the “Existing Lenders”) and KeyBank National Association (as successor by
assignment to BNP Paribas), as administrative agent (in such capacity, the
“Existing Agent”) and issuing lender (in such capacity, the “Existing Issuing
Lender”) (as amended prior to the date hereof, the “Existing Credit Agreement”).

 

B.       In order to secure the full and punctual payment and performance of the
loans under the Existing Credit Agreement, the Borrower and its Subsidiaries
executed and delivered mortgages, deeds of trust, security agreements, pledge
agreements, financing statements and other security instruments in favor of the
Existing Agent (collectively, the “Existing Security Documents”) granting a
mortgage lien and continuing security interest in and to the collateral
described in such Existing Security Documents.

 

C.       The Borrower, the Existing Agent, the Existing Issuing Lender, and the
Existing Lenders desire to (i) amend and restate (but not extinguish) the
Existing Credit Agreement in its entirety as hereinafter set forth through the
execution of this Agreement and (ii) have the obligations of the Borrower
hereunder continue to be secured by the liens and security interests created
under the Existing Security Documents.

 

D.       It is the intention of the parties hereto that this Agreement is an
amendment and restatement of the Existing Credit Agreement, and is not a new or
substitute credit agreement or novation of the Existing Credit Agreement.

 

The parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

 

Section 1.01         Certain Defined Terms. As used in this Agreement, the terms
defined above shall have the meanings set forth therein and the following terms
shall have the following meanings (unless otherwise indicated, such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):

 

“Acceptable Accountant” means (a) Hein & Associates LLP, and (b) such other
independent certified public accountants reasonably acceptable to the
Administrative Agent.

 

“Acceptable Letter of Credit Maturity Date” has the meaning set forth in Section
2.07 hereof.

 

“Acceptable Security Interest” in any Property means a Lien which (a) exists in
favor of the Administrative Agent for the benefit of the Secured Parties, (b) is
superior to all Liens or rights of any other Person in the Property encumbered
thereby, other than Permitted Subject Liens, (c) secures the Secured
Obligations, (d) is enforceable, except as such enforceability may be limited by
any applicable Debtor Relief Laws, and (e) other than as to Excluded Perfection
Collateral, is perfected.

 

 

 

 

“Account Control Agreement” shall mean, as to any deposit account or security
account of any Loan Party held with a bank or other financial institution, an
agreement or agreements in form and substance reasonably acceptable to the
Administrative Agent, among the Loan Party owning such deposit account or
security account, as applicable, the Administrative Agent, and such other bank
or financial institution governing such deposit account or security account, as
applicable.

 

“Acquisition” means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which any Loan Party (a)
acquires any going business or all or substantially all of the assets of any
Person, or division thereof, whether through purchase of assets, merger or
otherwise or (b) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (by
percentage or voting power) of, or a Control Percentage of, the Voting
Securities of a Person.

 

“Additional Trigger” has the meaning set forth in Section 2.05(b)(i).

 

“Adjusted EBITDAX” means (a) for the calculations to be made for the fiscal
quarter ending June 30, 2017, consolidated EBITDAX of the Borrower and its
Subsidiaries for such fiscal quarter multiplied by four; (b) for the
calculations to be made for the fiscal quarter ending September 30, 2017,
consolidated EBITDAX of the Borrower and its Subsidiaries for the two-fiscal
quarter period then ended multiplied by two; (c) for the calculations to be made
for the fiscal quarter ending December 31, 2017, consolidated EBITDAX of the
Borrower and its Subsidiaries for the three-fiscal quarter period then ended
multiplied by 4/3; and (d) for the calculations to be made for each fiscal
quarter ending on or after March 31, 2018, consolidated EBITDAX of the Borrower
and its Subsidiaries for the four-fiscal quarter period then ended.

 

“Adjusted Interest Expense” means (a) for the calculations to be made for the
fiscal quarter ending June 30, 2017, consolidated Interest Expense of the
Borrower and its Subsidiaries for such fiscal quarter multiplied by four; (b)
for the calculations to be made for the fiscal quarter ending September 30,
2017, consolidated Interest Expense of the Borrower and its Subsidiaries for the
two-fiscal quarter period then ended multiplied by two; (c) for the calculations
to be made for the fiscal quarter ending December 31, 2017, consolidated
Interest Expense of the Borrower and its Subsidiaries for the three-fiscal
quarter period then ended multiplied by 4/3; and (d) for the calculations to be
made for each fiscal quarter ending on or after March 31, 2018, consolidated
Interest Expense of the Borrower and its Subsidiaries for the four-fiscal
quarter period then ended.

 

“Adjusted Reference Rate” means, for any day, the fluctuating rate per annum of
interest equal to the greatest of (a) the Reference Rate in effect on such day,
(b) the Federal Funds Rate in effect on such day plus ½ of 1% and (c) the
Eurodollar Rate plus 1.00%; provided, that in no event shall the Adjusted
Reference Rate be less than 0.00%. Any change in the Adjusted Reference Rate due
to a change in the Reference Rate, Eurodollar Rate or Federal Funds Rate shall
be effective on the effective date of such change in the Reference Rate,
Eurodollar Rate or Federal Funds Rate.

 

“Administrative Agent” means KeyBank, in its capacity as administrative agent
pursuant to Article VIII until its resignation or removal, and any successor
administrative agent appointed pursuant to Section 8.06.

 

“Administrative Questionnaire” means an administrative questionnaire in a form
supplied by the Administrative Agent or such other form provided by a Lender and
acceptable to the Administrative Agent.

 

 -2-

 

 

“Advance” means an advance by a Lender to the Borrower pursuant to Section
2.01(a) as part of a Borrowing and refers to a Reference Rate Advance or a
Eurodollar Rate Advance.

 

“Advance Payment Contract” means (a) any contract evidencing production payment
(whether volumetric or dollar denominated) granted or sold by any Person that is
payable from a specified share of proceeds received from production from
specified Oil and Gas Properties, or (b) any contract whereby any Person
receives or becomes entitled to receive (either directly or indirectly) any
payment (an “Advance Payment”) as consideration for (i) Hydrocarbons produced or
to be produced from Oil and Gas Properties owned by such Person or Affiliate of
such Person in advance of the delivery of such Hydrocarbons (and regardless of
whether such Hydrocarbons are actually produced or actual delivery is required)
to or for the account of the purchaser thereof or (ii) a right or option to
receive such Hydrocarbons (or a cash payment in lieu of such Hydrocarbons);
provided that inclusion of customary and standard “take or pay” provisions in
any gas sales or purchase contract or any other similar contract shall not, in
and of itself, cause such gas sales or purchase contract to constitute an
Advance Payment Contract for the purposes of this definition.

 

“Affiliate” means, as to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person or any Subsidiary of such Person. The
term “control” (including the terms “controlled by” or “under common control
with”) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of a Control Percentage, by contract, or otherwise.

 

“Agent Parties” has the meaning set forth in Section 9.09(c)(ii) hereof.

 

“Agreement” means this Credit Agreement, as the same may be further amended,
supplemented, restated, and otherwise modified from time to time.

 

“Annual Reporting Package” has the meaning set forth in Section 5.06(a) hereof.

 

“Applicable Margin” means with respect to any Advance, (a) other than as
provided in the following clause (b), the rate per annum set forth in the
Pricing Grid for the relevant Type of such Advance based on the relevant
Utilization Level applicable from time to time, and (b) at all times if a
Borrowing Base Deficiency exists the rate per annum set forth in the Pricing
Grid for the relevant Type of such Advance based on the relevant Utilization
Level applicable from time to time plus 2.00% per annum. The Applicable Margin
for any Advance shall change when and as the relevant Utilization Level changes;
provided, however, that if at any time the Borrower fails to deliver an
Engineering Report pursuant to Section 2.02(b)(i) or (ii), then upon notice from
the Administrative Agent, the “Applicable Margin” shall mean the rate per annum
set forth in the Pricing Grid when Utilization Level is at its highest level,
until such Engineering Report is delivered and the Borrowing Base is
redetermined as provided herein.

 

“Approved Counterparty” means (a) any Lender Swap Counterparty, (b) any other
Person whose long term senior unsecured debt rating is BBB+/Baa1 by Standard &
Poor’s Ratings Group or of Moody’s Investors Service, Inc. (or their equivalent)
or higher and (c) any other Person that is reasonably acceptable to the
Administrative Agent.

 

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

 

“ASC” means FASB Accounting Standards Codification.

 

 -3-

 

 

“Asset Coverage Ratio” means, as of any date of determination, the ratio of (a)
the Total Present Value to (b) the aggregate Commitments of all of the Lenders
at such date of determination.

 

“Assignment and Acceptance” means an assignment and acceptance entered into by a
Lender and an Eligible Assignee, and accepted by the Administrative Agent, in
substantially the form of the attached Exhibit A.

 

“Attributable Indebtedness” means, on any date of determination, (a) in respect
of any Capital Lease Obligation of any Person, the capitalized amount thereof
that would appear on a balance sheet of such Person prepared as of such date in
accordance with GAAP, and (b) in respect of any Synthetic Lease, the capitalized
amount or principal amount of the remaining lease payments under the relevant
lease that would appear on a balance sheet of such Person prepared as of such
date in accordance with GAAP if such lease were accounted for as a Capital Lease
Obligation.

 

“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.

 

“Banking Service Provider” means any Lender or Affiliate of a Lender that
provides Banking Services to any Loan Party.

 

“Banking Services” means each and any of the following bank services provided to
any Loan Party by any Banking Service Provider: (a) commercial credit cards, (b)
stored value cards and (c) any other Treasury Management Arrangement (including,
without limitation, controlled disbursement, purchase card arrangements,
automated clearinghouse transactions, return items, overdrafts and interstate
depository network services).

 

“Banking Services Obligations” means any and all obligations of any Loan Party
owing to Banking Service Providers, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor) in connection
with Banking Services.

 

“Bankruptcy Code” means United States Code, 11 U.S.C. §§ 101–1532.

 

“Bankruptcy Court” means the United States Bankruptcy Court for the District of
Delaware.

 

“BB Hedge” means any hedge position or Hedge Contract considered by the
Administrative Agent in determining the then effective Borrowing Base.

 

“BB Value” means (a) as to any Oil and Gas Property, the value, if any,
attributed to such Oil and Gas Property under the then effective Borrowing Base,
as determined by the Administrative Agent in good faith, (b) as to any Hedge
Event, the net effect of such Hedge Event (after giving effect to any new hedge
position or Hedge Contract entered into since the determination of the Borrowing
Base then in effect), if any, on the then effective Borrowing Base, as
determined by the Administrative Agent in good faith, and (c) as to the
incurrence of any Lien describe in Section 6.01(g) that has triggered the notice
required thereunder, the effect of such Lien on the then effective Borrowing
Base, as determined by the Administrative Agent in good faith.

 

 -4-

 

 

“BCA” means the Backstop Commitment Agreement dated as of December 23, 2016
among the Borrower and certain other parties thereto.

 

“Borrower” has the meaning set forth in the introductory paragraph hereof.

 

“Borrowing” means a borrowing consisting of Advances made on the same day by the
Lenders pursuant to Section 2.01(a).

 

“Borrowing Base” means at any particular time, the Dollar amount determined in
accordance with Section 2.02 on account of Proven Reserves attributable to Oil
and Gas Properties of any Loan Party located in the United States of America,
subject to an Acceptable Security Interest to the extent required under Section
5.08, and described in the most recent Independent Engineering Report or
Internal Engineering Report, as applicable, delivered to the Administrative
Agent and the Lenders pursuant to Section 2.02.

 

“Borrowing Base Deficiency” means, at any time, an amount equal to the excess of
(a) the aggregate Credit Exposure over (b) the aggregate Commitments; provided
that, solely for purposes of determining the existence and amount of any
Borrowing Base Deficiency, Letter of Credit Obligations to the extent Cash
Collateralized as required by or otherwise in accordance with this Agreement
shall not be considered in determining Credit Exposure.

 

“Business Day” means a day (a) other than a Saturday, Sunday, or other day on
which the Administrative Agent is authorized to close under the laws of, or is
in fact closed in, New York or in Cleveland, Ohio, and (b) if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on by commercial banks in the London interbank market.

 

“Capital Lease” means any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a balance sheet
of such Person under GAAP.

 

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any Capital Lease, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

 

“Cash Collateral Account” means a special interest bearing cash collateral
account pledged by the Borrower to the Issuing Lender containing cash deposited
pursuant to Sections 2.05(b), 7.02(b), or 7.03(b) or any other provision
hereunder to be maintained with the Issuing Lender in accordance with the terms
hereof and bear interest or be invested in the Issuing Lender’s reasonable
discretion.

 

“Cash Collateralize” means, to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the Issuing Lender or Lenders, as
collateral for Letter of Credit Obligations or obligations of Lenders to fund
participations in respect of Letter of Credit Obligations, cash or deposit
account balances or, if the Administrative Agent and the Issuing Lender shall
agree in their sole discretion, other credit support, in each case pursuant to
documentation in form and substance reasonably satisfactory to the
Administrative Agent and the Issuing Lender. “Cash Collateral” shall have a
meaning correlative to the foregoing and shall include the proceeds of such cash
collateral and other credit support.

 

“Casualty Event” means the damage, destruction or condemnation, including by
process of eminent domain or any Disposition of property in lieu of
condemnation, as the case may be, of property of any Person or any of its
Subsidiaries.

 

 -5-

 

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, state and local analogs, and all rules and
regulations and requirements thereunder in each case as now or hereafter in
effect.

 

“Certificated Equipment” means any equipment the ownership of which is evidenced
by, or under applicable Legal Requirement, is required to be evidenced by, a
certificate of title.

 

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

 

(a)                any “person” or “group” (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any
employee benefit plan of such person or its Subsidiaries, and any person or
entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) (other than the holders of the Equity Interests
of the Borrower as of the Closing Date) becomes the “beneficial owner” (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
except that a “person” or “group” shall be deemed to have “beneficial ownership”
of all equity interests that such “person” or “group” has the right to acquire,
whether such right is exercisable immediately or only after the passage of time
(such right, an “option right”)), directly or indirectly, of more than 35% of
the Equity Interests of the Borrower entitled to vote in the election of members
of the board of directors (or equivalent governing body) of the Borrower;

 

(b)               there shall have occurred under any indenture or other
instrument evidencing any Indebtedness in excess of $5,000,000 any “change in
control” or similar provision (as set forth in the indenture, agreement or other
evidence of such Indebtedness) obligating the Borrower or any of its
Subsidiaries to repurchase, redeem or repay all or any part of the Indebtedness
provided for therein; or

 

(c)       the Borrower ceases to own, either directly or indirectly, 100% of the
Equity Interest in any Subsidiary other than as a result of a sale of assets or
merger permitted under Section 6.04 of this Agreement.

 

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

 

“Chapter 11 Cases” means the Chapter 11 bankruptcy cases of Borrower and its
Subsidiaries being jointly administered under the case title In re Bonanza Creek
Energy, Inc., et al., 17-10015 (KJC) commenced on January 4, 2017 in the United
States Bankruptcy Court for the District of Delaware.

 

“Closing Date” means the date on which the conditions specified in Section 3.01
are satisfied (or waived in accordance with Section 9.03).

 

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

 

 

 -6-

 

  

“Collateral” means all “Collateral”, “Pledged Collateral” and “Mortgaged
Properties” (as defined in each of the Mortgages and the Security Agreement, as
applicable) or similar terms used in the Security Instruments.

 

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Advances and to acquire participations in Letters of Credit hereunder,
which shall at any time be the lesser of (a) such Lender’s Maximum Credit
Amount, and (b) such Lender’s Pro Rata Share of the then effective Borrowing
Base.

 

“Commitment Fee Rate” means the per annum commitment fee rate set forth on the
Pricing Grid applicable from time to time. The Commitment Fee Rate shall change
when and as the relevant Utilization Level changes.

 

“Commitment Termination Date” means the earlier of (a) the Maturity Date and (b)
the earlier termination in whole of the aggregate Maximum Credit Amounts
pursuant to Section 2.04 or Article VII.

 

“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 or any rule,
regulation or order of the Commodity Futures Trading Commission (or the
application or official interpretation of any thereof).

 

“Compliance Certificate” means a compliance certificate substantially in the
form of the attached Exhibit B signed by a Responsible Officer of the Borrower.

 

“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 Cash Balance” means, at any time, the aggregate amount of cash and
cash equivalents held or owned by the Borrower and the Guarantors; provided that
Consolidated Cash Balance shall exclude (a) any cash or cash equivalents set
aside to pay royalty obligations, working interest obligations, production
payments, ad valorem taxes and severance taxes of the Borrower or any Guarantor,
in each case owing in the ordinary course of business and then due and owing (or
required to be paid within seven Business Days) to third parties and for which
the Borrower or such Guarantor has issued (or will issue) checks or has
initiated (or will initiate) wires or ACH transfers, in each case within seven
Business Days of the date of determination in order to pay, (b) any cash or cash
equivalents set aside to pay payroll, payroll taxes, other taxes, employee wage
and benefit payments and trust and fiduciary obligations of the Borrower or any
Guarantor, in each case that is incurred in the ordinary course of business and
that is then due and owing (or required to be paid within three Business Days of
such date of determination), (c) cash and cash equivalents of the Borrower and
the Guarantors designated to be paid as a purchase price escrow deposit under a
binding acquisition agreement with a third party within thirty days of the date
of determination, (d) certain other amounts as may be agreed to by the Majority
Lenders and the Borrower and (e) amounts held in (A) that certain escrow account
maintained with Citibank, N.A. with account number ending 2464, established on
or prior to the Closing Date for purposes of holding funds equal in amount to
the Loan Parties’ good faith estimate of all professional fees, costs and other
expenses incurred in connection with the Chapter 11 Cases until such time as
payment of such professional fees, costs and expenses is approved by the
Bankruptcy Court and (B) that certain escrow account maintained with Wells Fargo
Bank, National Association with account number ending 7800 established for
purposes of holding funds that are dedicated to the upgrading and maintenance of
the roads located on the properties of 70 Ranch, LLC, a Colorado limited
liability company whose address is 8301 E. Prentice Avenue, Suite 100, Greenwood
Village, Colorado 80111 so long as such account does not maintain a balance of
funds attributable to the Loan Parties in an aggregate amount in excess of
$200,000. For the avoidance of doubt, the calculation of Consolidated Cash
Balance

 

 -7-

 

on the Closing Date shall be made after giving effect to any fees, expenses and
other amounts required to be paid on the Closing Date.

 

“Consolidated Cash Balance Limit” means $25,000,000.

 

“Consolidated Cash Sweep Date” means the second Business Day of each calendar
week.

 

“Consolidated Net Income” means, for any period, the net income (or loss) of the
Borrower and its Subsidiaries for such period, determined on a consolidated
basis, without duplication, in accordance with GAAP; provided, that in
calculating Consolidated Net Income of the Borrower and its Subsidiaries for any
period, there shall be excluded (a) the net income (or loss) of any Person
(other than a Subsidiary which shall be subject to clause (c) below), in which
the Borrower or any of its Subsidiaries has a joint interest with a third party,
except to the extent such net income is actually paid in cash to the Borrower or
any of its Subsidiaries by dividend or other distribution during such period,
(b) the net income (or loss) of any Person accrued prior to the date it becomes
a Subsidiary of the Borrower or any of its Subsidiaries or is merged into or
consolidated with the Borrower or any of its Subsidiaries or that Person’s
assets are acquired by the Borrower or any of its Subsidiaries except to the
extent included pursuant to the foregoing clause (a), (c) the net income (if
positive), of any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary to the Borrower or any of
its Subsidiaries of such net income (i) is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Subsidiary or (ii) would be subject to any taxes payable on such dividends or
distributions, but in each case only to the extent of such prohibition or taxes,
(d) any gain or loss from any Disposition of Property during such period, (e)
realized gains (or losses) on Hedge Contracts resulting from unscheduled
unwinds, settlements or terminations of such Hedge Contracts, (f) any
extraordinary gains or losses during such period, and (g) the cumulative effect
of any change in GAAP.

 

“Contracts” means all contracts, agreements, operating agreements, farm-out or
farm-in agreements, sharing agreements, mineral purchase agreements, contracts
for the purchase, exchange, transportation, processing or sale of Hydrocarbons,
rights-of-way, easements, surface leases, equipment leases, permits, franchises,
licenses, pooling or unitization agreements, and unit or pooling designations
and orders now or hereafter affecting any of the Oil and Gas Properties,
Operating Equipment, Fixture Operating Equipment, or Hydrocarbons now or
hereafter covered hereby, or which are useful or appropriate in drilling for,
producing, treating, handling, storing, transporting or marketing oil, gas or
other minerals produced from any of the Oil and Gas Properties, and all as such
contracts and agreements as they may be amended, restated, modified, substituted
or supplemented from time-to-time.

 

“Control Percentage” means, with respect to any Person, the percentage of the
outstanding Voting Securities (including any options, warrants or similar rights
to purchase such Voting Securities) of such Person having ordinary voting power
which gives the direct or indirect holder of such Voting Securities the power to
elect a majority of the board of directors (or other applicable governing body)
of such Person.

 

“Convert,” “Converting,” “Conversion,” “Converted” and “Conversion” each refers
to a conversion of Advances of one Type into Advances of another Type pursuant
to Section 2.03(b).

 

“Credit Exposure” means, as to any Lender at any time, the aggregate principal
amount at such time of its outstanding Advances and such Lender’s participation
in Letter of Credit Obligations at such time.

 

 -8-

 

“Credit Extensions” means (a) an Advance made by any Lender, and (b) the
issuance, increase or extension of any Letter of Credit by the Issuing Lender.

 

“Current Assets” means, for any period, the current assets of the Borrower and
its consolidated Subsidiaries. For purposes of this definition “Current Assets”
shall include, as of the date of calculation, the unused amount of the aggregate
Commitments and shall exclude, as of the date of calculation, (a) the current
portion of deferred tax assets, (b) any assets representing a valuation account
arising from the application of ASC 410, 718 and 815, and (c) any cash deposited
with or at the request of a counterparty to any Hedge Contract.

 

“Current Liabilities” means, for any period, the current liabilities of the
Borrower and its consolidated Subsidiaries. For purposes of this definition
“Current Liabilities” shall exclude, as of the date of calculation, (a) the
current portion of long-term Debt, (b) any liabilities representing a valuation
account arising from the application of ASC 410, 718 and 815, and (c) the
current portion of deferred tax obligations.

 

“Current Ratio” means, as of any date of determination, the ratio of (a) Current
Assets to (b) Current Liabilities.

 

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

 

“Default” means (a) an Event of Default or (b) any event or condition which with
notice or lapse of time or both would become an Event of Default.

 

“Default Rate” means a per annum rate equal to (a) in the case of principal of
any Advance, 2.00% plus the rate otherwise applicable to such Advance as
provided in Sections 2.09(a) or (b), (b) in the case of any other Obligation
other than Letter of Credit fees, 2.00% plus the non-default rate applicable to
Reference Rate Advances as provided in Section 2.09(a), and (c) when used with
respect to Letter of Credit fees, a rate equal to the Applicable Margin for
Eurodollar Rate Advances plus 2.00% per annum.

 

“Defaulting Lender” means, subject to Section 2.16(b), any Lender that (a) has
failed to (i) fund its Pro Rata Share of any Advance or participation in Letters
of Credit required to be funded by it hereunder within two Business Days of the
date required to be funded by it hereunder unless such Lender notifies the
Administrative Agent and the Borrower in writing that such failure is the result
of such Lender’s good faith determination that one or more conditions precedent
to funding (each of which conditions precedent, together with any applicable
default, shall be specifically identified in such writing) has not been
satisfied, or (ii) pay to the Administrative Agent, the Issuing Lender or any
other Lender any other amount required to be paid by it hereunder (including in
respect of its participation in Letters of Credit) within three Business Days of
the date when due, (b) has notified the Borrower, the Administrative Agent, or
the Issuing Lender in writing that it does not intend to comply with its funding
obligations hereunder, or has made a public statement to that effect (unless
such writing or public statement relates to such Lender’s obligation to fund an
Advance hereunder and states that such position is based on such Lender’s good
faith determination that a condition precedent to funding (which condition
precedent, together with any applicable default, shall be specifically
identified in such writing or public statement) cannot be satisfied), (c) has
failed, within three Business Days after written request by the Administrative
Agent or the Borrower, to confirm in writing to the Administrative Agent and the
Borrower that it will comply with its prospective funding obligations hereunder
(provided that such Lender shall cease to be a Defaulting Lender pursuant to
this clause (c) upon receipt of such written

 

 -9-

 

confirmation by the Administrative Agent and the Borrower in form and substance
reasonably satisfactory to the Administrative Agent and the Borrower), or (d)
has, or has a direct or indirect parent company that has, (i) become the subject
of a proceeding under any Debtor Relief Law, (ii) had appointed for it a
receiver, custodian, conservator, trustee, administrator, or assignee for the
benefit of creditors or similar Person charged with reorganization or
liquidation of its business or assets, including the Federal Deposit Insurance
Corporation or any other state or federal regulatory authority acting in such a
capacity, or (iii) become the subject of a Bail-In Action; provided that a
Lender shall not be a Defaulting Lender solely by virtue of the ownership or
acquisition of any Equity Interest in that Lender or any direct or indirect
parent company thereof by a Governmental Authority so long as such ownership
interest does not result in or provide such Lender with immunity from the
jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Lender (or such
Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts
or agreements made with such Lender. Any determination by the Administrative
Agent that a Lender is a Defaulting Lender under any one or more of clauses (a)
through (d) above shall be conclusive and binding absent manifest error, and
such Lender shall be deemed to be a Defaulting Lender (subject to Section
2.16(b)) upon delivery of written notice of such determination to the Borrower,
the Issuing Lender and each Lender.

 

“Deposit Account” shall have the meaning given to the term in the Uniform
Commercial Code (or any successor statute), as adopted and in force in the State
of New York or, when the laws of any other state govern the method or manner of
the perfection or enforcement of any Lien in any of the Collateral, the Uniform
Commercial Code (or any successor statute) of such other state.

 

“Disclosure Statement” means that certain Disclosure Statement for Debtors’
Joint Prepackaged Plan of Reorganization under Chapter 11 of the Bankruptcy
Code, dated December 23, 2016 [D.I. 21], as supplemented by that certain
Supplement to Disclosure Statement for Debtors’ Joint Prepackaged Plan of
Reorganization under Chapter 11 of the Bankruptcy Code, dated January 26, 2017
[D.I. 192-1], as may be amended, restated, modified or further supplemented from
time to time with the consent of the Administrative Agent and the Majority
Lenders.

 

“Disposition,” “Dispose” or “Disposed” means any sale, lease, transfer,
assignment, farm-out, conveyance, release, abandonment, or other disposition of
any Property (including any working interest, overriding royalty interest,
production payments, net profits interest, royalty interest, or mineral fee
interest), including any Casualty Event.

 

“Disqualified Equity Interests” means any Equity Interests that, by their terms
(or by the terms of any security or other Equity Interest into which they are
convertible or for which they are exchangeable) or upon the happening of any
event or condition, (a)  mature or are mandatorily redeemable (other than solely
for Qualified Equity Interests), pursuant to a sinking fund obligation or
otherwise (except as a result of a change of control or asset sale so long as
any rights of the holders thereof upon the occurrence of a change of control or
asset sale event shall be subject to the prior repayment in full of the Advances
and all other Obligations that are accrued and payable and the termination of
the Commitments), (b) are redeemable at the option of the holder thereof (other
than solely for Qualified Equity Interests) (except as a result of a change of
control or asset sale so long as any rights of the holders thereof upon the
occurrence of a change of control or asset sale event shall be subject to the
prior repayment in full of the Advances and all other Obligations that are
accrued and payable and the termination of the Commitments), in whole or in
part, (c) provide for the scheduled payment of dividends in cash or other
Property or (d) are or become convertible into or exchangeable for Indebtedness
or any other Equity Interests that would constitute Disqualified Equity
Interests, in each case, prior to the date that is 180 days after the Maturity
Date; provided that if such Equity Interests is issued pursuant to a plan for
the benefit of the Borrower or its Subsidiaries or by any such plan to such
employees, such Equity Interests shall not

 

 -10-

 

constitute Disqualified Equity Interests solely because they may be required to
be repurchased by the Borrower or its Subsidiaries in order to satisfy
applicable statutory or regulatory obligations.

 

“Dollars” and “$” means lawful money of the United States of America.

 

“EBITDAX” means, for any period, without duplication, the amount equal to:

 

(a)  Consolidated Net Income for such period plus

 

(b)  the sum of the following, to the extent deducted in determining
Consolidated Net Income for such period, (i) Interest Expense, (ii) income and
franchise Taxes, (iii) depreciation, amortization, depletion, exploration
expenses, and other non-cash charges and non-cash losses for such period,
including any provision for the reduction in the carrying value of assets
recorded in accordance with GAAP and non-cash charges resulting from the
requirements of ASC 410, 718 and 815 (except, in any event, to the extent that
such non-cash charges are reserved for cash charges to be taken in the future),
and including losses from Dispositions (other than Dispositions of Hydrocarbons
in the ordinary course of business), (iv) unusual and non-recurring losses
reasonably acceptable to the Administrative Agent, and (v) professional fees,
costs and other expenses incurred in the fiscal quarter ending June 30, 2017 in
connection with the Chapter 11 Cases and the emergence therefrom, including
severance payments, retention bonuses and expenses associated with fresh start
accounting; minus

 

(c)        all non-cash gains and non-cash items which were included in
determining such Consolidated Net Income (including non-cash income resulting
from the requirements of ASC 410, 718 and 815); minus

 

(d)       unusual and non-recurring gains which were included in determining
such Consolidated Net Income; minus

 

(e)       any payments in connection with minimum volume commitments received in
such period in connection with volumes which were not delivered which were
included in determining such Consolidated Net Income;

 

provided that, such EBITDAX shall be subject to pro forma adjustments for (i)
any Acquisition or series of related Acquisitions for consideration in excess of
5% of the then effective Borrowing Base and (ii) any non-ordinary course
Disposition or series of related Dispositions that yields gross proceeds to the
Borrower in excess of 5% of the then effective Borrowing Base assuming that such
transactions had occurred on the first day of the applicable calculation period
for the ratios set forth in Section 6.17(a) and (b), which adjustments shall be
made in a manner reasonably acceptable to the Administrative Agent and with
supporting documentation reasonably acceptable to the Administrative Agent.

 

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

 

 -11-

 

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

 

“Eligible Assignee” means any Person that meets the requirements to be an
assignee under Section 9.07(b)(iii), (v) and (vi) (subject to such consents, if
any, as may be required under Section 9.07(b)(iii)).

 

“Employee Benefit Plan” means any employee benefit plan within the meaning of
Section 3(3) of ERISA that is (currently or hereafter), or within the prior six
(6) years was, maintained or contributed to by any Loan Party or any current or
former ERISA Affiliate.

 

“Engineering Report” means either an Independent Engineering Report or an
Internal Engineering Report.

 

“Engineering Report Volumes” means, as of any date of determination, the
anticipated volume of production of oil, gas or natural gas reserves, as
applicable, from the Oil and Gas Properties of the Loan Parties as reflected in
the Engineering Report most recently delivered pursuant to Section 2.02(b) prior
to such date of determination.

 

“Environment” or “Environmental” means ambient air, indoor air, surface water
and groundwater (including potable water, navigable water and wetlands), the
land surface or subsurface strata, natural resources, the workplace or as
otherwise defined in any Environmental Law.

 

“Environmental Claims” means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, orders, claims, liens, notices of
noncompliance or violation, investigations or proceedings arising as a result of
any actual or alleged violation of or liability under any Environmental Law or
Environmental Permit, including, without limitation, any and all claims by
Governmental Authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from, related to or arising out of
the presence, Release or threatened Release of Hazardous Materials or alleged
injury or threat of injury to public health, safety or the Environment.

 

“Environmental Law” means any Legal Requirement relating to (a) the protection
of human health and safety from environmental hazards or exposure to hazardous
or toxic materials, (b) the protection, conservation, management or use of the
Environment, natural resources and wildlife, (c) the protection or use of
surface water and groundwater, (d) the management, manufacture, processing,
possession, distribution, presence, use, generation, transportation, treatment,
storage, disposal, Release, threatened Release, abatement, removal, remediation
or handling of, or exposure to, any hazardous or toxic material, or (e) the
prevention of pollution and includes, without limitation, the following federal
statutes and the regulations promulgated thereunder: CERCLA, the Clean Air Act,
42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq., the Toxic
Substances Control Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act,
42 U.S.C. § 300f et seq., the Occupational Safety and Health Act, 29 U.S.C. §
651 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et
seq., the Endangered Species Act, 16 U.S.C. § 1531 et seq. and any equivalent
state or local laws and regulations, as each of the foregoing has been amended.

 

“Environmental Permit” means any permit, license, order, approval, registration
or other authorization required by or from a Governmental Authority under
Environmental Law.

 

 -12-

 

“Equity Interest” means with respect to any Person, any shares, interests,
participation, or other equivalents (however designated) of corporate stock,
membership interests or partnership interests (or any other ownership interests)
of such Person.

 

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

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) who
together with any Loan Party or any of its Subsidiaries is treated as a single
employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b) of ERISA.

 

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

 

“Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D
of the Federal Reserve Board (or any successor), as in effect from time to time.

 

“Eurodollar Base Rate” means (a) in determining Eurodollar Rate for purposes of
determining the Eurodollar Rate for the Adjusted Reference Rate, the rate per
annum for Dollar deposits quoted by the Administrative Agent for the purpose of
calculating effective rates of interest for loans making reference to the “Daily
Three-Month LIBOR” or the “LIBOR Market Index Rate” or other words of similar
import, as the inter-bank offered rate in effect from time to time for delivery
of funds for three (3) months in amounts approximately equal to the principal
amount of the applicable Advances; provided that, the Administrative Agent may
base its quotation of the inter-bank offered rate upon such offers or other
market indicators of the inter-bank market as the Administrative Agent in its
reasonable discretion deems appropriate including the rate determined under the
following clause (b), and (b) in determining Eurodollar Rate for all other
purposes, the rate per annum (rounded upward to the nearest whole multiple of
1/100th of 1.00%) equal to the interest rate per annum set forth on the Reuters
Screen LIBOR1 page (or any replacement page) as the London Interbank Offered
Rate, for deposits in Dollars at 11:00 a.m. (London, England time) two Business
Days before the first day of the applicable Interest Period, as the rate for
Dollar deposits with a maturity comparable to such Interest Period; provided
that, if such quotation is not available for any reason, then for purposes of
this clause (b), Eurodollar Base Rate shall then be the rate determined by the
Administrative Agent to be the rate at which deposits in Dollars for delivery on
the first day of such Interest Period in immediately available funds in the
approximate amount of the Advances being made, continued or Converted by the
Lenders and with a term equivalent to such Interest Period would be offered by
the Administrative Agent’s London branch (or other branch or Affiliate of the
Administrative Agent, or in the event that the Administrative Agent does not
have a London branch, the London branch of a Lender chosen by the Administrative
Agent) to major banks in the London or other offshore inter-bank market for
Dollars at their request at approximately 11:00 a.m. (London time) two Business
Days prior to the commencement of such Interest Period; provided further that,
if the rate determined under the preceding clause (a) or clause (b) is less than
zero, then “Eurodollar Base Rate” shall be deemed to be zero for such
determination.

 

“Eurodollar Rate” means a rate per annum determined by the Administrative Agent
(which determination shall be conclusive in the absence of manifest error)
pursuant to the following formula:

 

Eurodollar Rate  = Eurodollar Base Rate
1.00 – Eurodollar Rate Reserve Percentage

 

“Eurodollar Rate Advance” means an Advance which bears interest as provided in
Section 2.09(b).

 

 -13-

 

“Eurodollar Rate Reserve Percentage” means, as of any day, the reserve
percentage (expressed as a decimal, carried out to five decimal places) in
effect on such day, whether or not applicable to any Lender, under regulations
issued from time to time by the Federal Reserve Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities. The Eurodollar Rate for each
outstanding Advance shall be adjusted automatically as of the effective date of
any change in the Eurodollar Rate Reserve Percentage.

 

“Event of Default” has the meaning specified in Section 7.01.

 

“Excluded Funds” means cash and cash equivalents held in any of the following
accounts: (a) accounts designated solely for payroll or employee benefits, (b)
trust accounts held exclusively for the payment of taxes of the Borrower or any
Guarantor and (c) suspense or trust accounts held exclusively for royalty and
working interest payments owing to third parties.

 

“Excluded Perfection Collateral” shall mean collectively (a) cash and cash
equivalents constituting Excluded Funds (other than the Cash Collateral Accounts
and the funds and investments therein), (b) any commercial tort claim where the
amount of damages expected to be claimed is less than $250,000 and, when
combined with all other commercial tort claims excluded hereunder, is less than
$1,000,000 in the aggregate, (c) any letter of credit right to the extent a
security interest therein cannot be perfected by the filing of a financing
statement under the UCC and the amount thereof is less than $250,000 and, when
combined with all other letter of credit rights excluded hereunder, is less than
$1,000,000 in the aggregate, and (d) Certificated Equipment.

 

“Excluded Properties” means the “Excluded Collateral”, as defined in the
Security Agreement, which includes (a) Excluded Trademark Collateral, as defined
therein, (b) Excluded Contracts, as defined therein, and (c) Excluded PMSI
Collateral, as defined therein.

 

“Excluded Swap Obligations” means, with respect to any Guarantor, any Swap
Obligations if, and to the extent that, all or a portion of the guarantee of
such Loan Party of, or the grant by such Loan Party of a security interest to
secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal
under the Commodity Exchange Act by virtue of such Loan Party’s failure for any
reason to constitute an “eligible contract participant” as defined in the
Commodity Exchange Act at the time the guarantee of such Loan Party 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 (as defined by the Commodity Exchange Act), such exclusion shall
apply only to the portion of such Swap Obligation that is attributable to swaps
(as defined by the Commodity Exchange Act) for which such guarantee or Lien 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 Recipient, U.S.
federal withholding Taxes imposed on amounts payable to or for the account of
such Recipient with respect to an applicable interest in an Advance or
Commitment pursuant to a law in effect on the date on which (i) such Recipient
acquires such interest in the Advance or Commitment (other than pursuant to an
assignment request by the Borrower under Section 2.15 or reallocation pursuant
to Section 2.16) or (ii) such Recipient changes its lending office, except in
each case to the extent that, pursuant to Section 2.14, additional amounts with
respect to such Taxes were payable either to such Recipient’s

 

 -14-

 

assignor immediately before such Recipient became a party hereto or to such
Recipient immediately before it changed its lending office, (c) Taxes
attributable to such Recipient’s failure to comply with Section 2.14(g) and (d)
any U.S. federal withholding Taxes imposed under FATCA.

 

“Existing 2021 Indenture” means the Indenture dated April 9, 2013, between the
Borrower and Delaware Trust Company, as successor trustee, as modified, renewed,
or supplemented from time to time prior to the date hereof.

 

“Existing 2023 Indenture” means the Indenture dated July 18, 2014, between the
Borrower and Delaware Trust Company, as successor trustee, as supplemented by
the First Supplemental Indenture dated as of July 18, 2014, and as may be
further modified, renewed, or supplemented from time to time prior to the date
hereof.

 

“Existing Agent” has the meaning set forth in the recitals hereof.

 

“Existing Credit Agreement” has the meaning set forth in the recitals hereof.

 

“Existing Indentures” means the Existing 2021 Indenture and the Existing 2023
Indenture.

 

“Existing Issuing Lender” has the meaning set forth in the recitals hereof.

 

“Existing Lenders” has the meaning set forth in the recitals hereof.

 

“Existing Mortgages” means those certain mortgages or deeds of trust delivered
by the Loan Parties to the Existing Agent (or to BNP Paribas, as the predecessor
to the Existing Agent) pursuant to the Existing Credit Agreement.

 

“Existing Notes” means (a) the 5.75% Senior Notes due 2023, issued by the
Borrower under the Existing 2023 Indenture and (b) the 6.75% Senior Notes due
2021, issued by the Borrower under the Existing 2021 Indenture.

 

“Existing Security Documents” has the meaning set forth in the recitals hereof.

 

“Expiration Date” means, with respect to any Letter of Credit, the date on which
such Letter of Credit will expire or terminate in accordance with its terms.

 

“Extraordinary Cash Proceeds” means, with respect to any settlement or
litigation proceeding, the proceeds of such settlement or litigation proceeding
after payment of all out of pocket fees and expenses actually incurred in
connection with such settlement or proceeding.

 

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

 

“FCPA” means the United States Foreign Corrupt Practices Act of 1977, as
amended, and the rules and regulations thereunder.

 

 -15-

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted median of the rates on overnight federal funds transactions with
members of the Federal Reserve System reported by depository institutions on
such day for individual transactions, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day; provided that (a) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate charged to the Administrative Agent (in its
individual capacity) on such day on such transactions as determined by the
Administrative Agent, and (c) in any event, the Federal Funds Rate shall not be
less than zero.

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System or any of its successors.

 

“Fee Letter” means that certain Fee Letter dated as of April 28, 2017 between
the Borrower and the Administrative Agent.

 

“FERC” has the meaning set forth in Section 4.23(e) hereof.

 

“Final Order” means, as applicable, an order or judgment of the Bankruptcy Court
or other court of competent jurisdiction with respect to the relevant subject
matter that has not been reversed, stayed, modified or amended, and as to which
the time to appeal or seek certiorari has expired and no appeal or petition for
certiorari has been timely taken, or as to which any appeal that has been taken
or any petition for certiorari that has been or may be filed has been resolved
by the highest court to which the order or judgment could be appealed or from
which certiorari could be sought or the new trial, reargument or rehearing shall
have been denied, resulted in no modification of such order or has otherwise
been dismissed with prejudice.

 

“Firm Transportation Contracts” has the meaning set forth in Section 3.01(s)
hereof.

 

“Fixture Operating Equipment” means any of the items described in the first
sentence of the definition of “Operating Equipment,” which, as a result of being
incorporated into realty or structures or improvements located therein or
thereon, with the intent that they remain there permanently, constitute fixtures
under the laws of the state in which such equipment is located.

 

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

 

“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is
not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that
is resident or organized under the laws of a jurisdiction other than that in
which the Borrower is resident for tax purposes. For purposes of this
definition, the United States, each State thereof and the District of Columbia
shall be deemed to constitute a single jurisdiction.

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, with
respect to any Issuing Lender, such Defaulting Lender’s Pro Rata Share of the
outstanding Letter of Credit Exposure other than Letter of Credit Exposure as to
which such Defaulting Lender’s participation obligation has been funded by it,
reallocated to other Lenders or Cash Collateralized in accordance with the terms
hereof.

 

 -16-

 

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

 

“GAAP” means United States generally accepted accounting principles as in effect
from time to time, applied on a basis consistent with the requirements of
Section 1.03.

 

“Gathering Properties” means gathering systems and pipelines.

 

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

 

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

 

“Governmental Unit” has the meaning set forth in Section 101(27) of the
Bankruptcy Code.

 

“Guarantee” of or by any Person (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 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, (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation or (e) for the purpose of assuming in any other manner the obligee in
respect of such Indebtedness or other obligation of the payment or performance
thereof or to protect such obligee against loss in respect thereof (whether in
whole or in part).

 

“Guarantor” means each direct and indirect Subsidiary of the Borrower that has
executed a Guaranty as required by Section 6.16.

 

“Guaranty” means an Amended and Restated Guaranty Agreement in substantially the
form of the attached Exhibit C and executed by a Guarantor.

 

“Hazardous Materials” means any substances or materials (a) defined as hazardous
wastes, hazardous substances, pollutants, contaminants, chemical substances or
mixtures or toxic substances under any Environmental Law, (b) which are toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise harmful to public health or the Environment and are
regulated by any Environmental Law, (c) the presence of which require
investigation or remediation under any Environmental Law, (d) the Release of
which requires an Environmental Permit, or (e) which contain, without
limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam
insulation, petroleum hydrocarbons, petroleum derived substances or wastes,
crude oil, natural gas or synthetic gas.

 

“Hedge Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, puts, commodity
swaps, commodity options, forward commodity

 

 -17-

 

contracts, equity or equity index swaps or options, bond or bond price or bond
index swaps or options or forward bond or forward bond price or forward bond
index transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap transactions, currency
options, spot contracts, or any other similar transactions or any combination of
any of the foregoing (including any options to enter into any of the foregoing),
whether or not any such transaction is governed by or subject to any master
agreement, and (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or governed by,
any form of master agreement published by the International Swaps and
Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together
with any related schedules, a “Master Agreement”), including any such
obligations or liabilities under any Master Agreement; provided that, a “Hedge
Contract” shall not include any “Master Agreement” or other agreement that
provides solely for the sale by any Loan Party of physical Hydrocarbons in
exchange for cash in the ordinary course of its business.

 

“Hedge Event” means any novation, assignment, unwinding (including the addition
of an offsetting Hedge Contract), termination, expiration or amendment of a BB
Hedge.

 

“Hedge Termination Value” means, in respect of any one or more Hedge Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Hedge Contracts, (a) for any date on or after the
date such Hedge Contracts 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 Hedge Contracts, as determined based upon one
or more mid-market or other readily available quotations provided by any
recognized dealer in such Hedge Contracts (which may include a Lender or any
Affiliate of a Lender).

 

“Hydrocarbon Hedge Agreement” means a Hedge Contract which is intended to reduce
or eliminate the risk of fluctuations in the price of Hydrocarbons.

 

“Hydrocarbons” means oil, gas, coal seam gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, and all other liquid and gaseous
hydrocarbons produced or to be produced in conjunction therewith from a well
bore and all products, by-products, and other substances derived therefrom or
the processing thereof, and all other minerals and substances produced in
conjunction with such substances, including, but not limited to, sulfur,
geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores,
or substances of value and the products and proceeds therefrom.

 

“Indebtedness” means, with respect to any Person at any date and without
duplication, the sum of the following:

 

(a)                all liabilities, obligations and indebtedness for borrowed
money including, but not limited to, obligations evidenced by bonds, debentures,
notes or other similar instruments of any such Person;

 

(b)               all obligations to pay the deferred purchase price of property
or services of any such Person (including, without limitation, all obligations
under non-competition, earn-out or similar agreements), except trade payables
arising in the ordinary course of business not more than ninety (90) days past
due, or that are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided for on the books of such Person;

 

(c)                the Attributable Indebtedness of such Person and all
outstanding payment obligations with respect to such Person’s Capital Lease
Obligations and Synthetic Leases (regardless of whether accounted for as
indebtedness under GAAP);

 

 -18-

 

(d)               all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person to the
extent of the value of such property (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business);

 

(e)                all Indebtedness of any other Person secured by a Lien on any
asset owned or being purchased by such Person (including indebtedness arising
under conditional sales or other title retention agreements except trade
payables arising in the ordinary course of business), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse
(limited to the lower of (i) the fair market value of such asset and (ii) the
amount of such indebtedness of obligations secured);

 

(f)                all obligations, contingent or otherwise, of any such Person
relative to the face amount of letters of credit, whether or not drawn,
including, without limitation, any Letter of Credit Obligation, and banker’s
acceptances issued for the account of any such Person;

 

(g)                all obligations of any such Person in respect of Disqualified
Equity Interests;

 

(h)               all obligations of such Person under any Hedge Contract;

 

(i)                 all Guarantees of any such Person with respect to any of the
foregoing;

 

(j)                 the outstanding attributed principal amount under any asset
securitization program; and

 

(k)               obligations to deliver commodities, goods or services,
including, without limitation, Hydrocarbons, in consideration of one or more
advance payments, other than gas balancing arrangements in the ordinary course
of business, including obligations of such Person owing in connection with any
Advance Payment Contract.

 

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The Indebtedness of any Person shall include
all obligations of such Person of the character described above to the extent
such Person remains legally liable in respect thereof notwithstanding that any
such obligation is not included as a liability of such Person under GAAP.

 

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

 

“Indemnitee” has the meaning set forth in Section 9.02(a) hereof.

 

“Independent Engineer” means (a) Netherland, Sewell & Associates, Inc. or (b)
any other independent petroleum engineering firm selected by the Borrower and
reasonably acceptable to the Majority Lenders.

 

“Independent Engineering Report” means a report, in form and substance
reasonably satisfactory to the Administrative Agent and the Required Lenders,
prepared by an Independent Engineer, addressed to the Administrative Agent and
the Lenders with respect to the Oil and Gas Properties owned by any Loan Party
(or to be acquired by any Loan Party, as applicable) which are or are to be
included in the Borrowing Base, which report shall (a) specify the location,
quantity, and type of the estimated Proven Reserves attributable to such Oil and
Gas Properties, (b) contain a projection of the rate of production of

 

 -19-

 

such Oil and Gas Properties, (c) contain an estimate of the net operating
revenues to be derived from the production and sale of Hydrocarbons from such
Proven Reserves based on product price and cost escalation assumptions
reasonably specified by the Administrative Agent and the Lenders, (d) contain an
attendant reserve database capable of producing a match of the reserves (it
being understood that, for purposes of the Initial Engineering Report only, the
one-line report shall satisfy this requirement), and (e) contain such other
information as is customarily obtained from and provided in such reports or is
otherwise reasonably requested by the Administrative Agent.

 

“Initial Engineering Report” means an Independent Engineering Report dated
effective as of January 1, 2017.

 

“Interest Coverage Ratio” means, as of any date of determination, the ratio of
(a) Adjusted EBITDAX to (b) Adjusted Interest Expense.

 

“Interest Expense” means, for the Borrower and its consolidated Subsidiaries for
any period, total interest expense incurred, whether expensed or capitalized, in
connection with any Indebtedness for such period, whether paid or accrued,
including all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing, imputed interest
under Capital Leases and Synthetic Leases, and net costs under Interest Hedge
Agreements, all as determined in conformity with GAAP.

 

“Interest Hedge Agreement” means a Hedge Contract between the Borrower and one
or more financial institutions providing for the exchange of nominal interest
obligations between the Borrower and such financial institution or the cap of
the interest rate on any Indebtedness of the Borrower.

 

“Interest Period” means, for each Eurodollar Rate Advance comprising part of the
same Borrowing, the period commencing on the date of such Eurodollar Rate
Advance or the date of the Conversion of any Reference Rate Advance into a
Eurodollar Rate Advance and ending on the last day of the period selected by the
Borrower pursuant to the provisions below and Section 2.03 and, thereafter, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below and Section 2.03. The duration of each
such Interest Period shall be one, two, three or six months, in each case as the
Borrower may, upon notice received by the Administrative Agent not later than
12:00 noon. (Cleveland, Ohio time) on the third Business Day prior to the first
day of such Interest Period, select; provided, however, that:

 

(a)                the Borrower may not select any Interest Period which ends
after the Commitment Termination Date;

 

(b)               Interest Periods commencing on the same date for Advances
comprising part of the same Borrowing shall be of the same duration;

 

(c)                whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day, provided that if
such extension would cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest Period shall occur
on the next preceding Business Day; and

 

(d)               any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest

 

 -20-

 

Period) shall end on the last Business Day of the calendar month in which it
would have ended if there were a numerically corresponding day in such calendar
month.

 

“Internal Engineering Report” means a report, in form and substance reasonably
satisfactory to the Administrative Agent and the Required Lenders, prepared by
the Borrower and certified by a Responsible Officer of the Borrower, addressed
to the Administrative Agent and the Lenders with respect to the Oil and Gas
Properties owned by any Loan Party (or to be acquired by any Loan Party, as
applicable) which are or are to be included in the Borrowing Base, which report
shall (a) specify the location, quantity, and type of the estimated Proven
Reserves attributable to such Oil and Gas Properties, (b) contain a projection
of the rate of production of such Oil and Gas Properties, (c) contain an
estimate of the net operating revenues to be derived from the production and
sale of Hydrocarbons from such Proven Reserves based on product price and cost
escalation assumptions reasonably specified by the Administrative Agent and the
Lenders, (d) contain an attendant reserve database capable of producing a match
of the reserves, and (e) contain such other information as is customarily
obtained from and provided in such reports or is otherwise reasonably requested
by the Administrative Agent.

 

“Investment” means, as to any Person, any direct or indirect purchase,
acquisition or investment by such Person, whether by means of (a) the purchase
or other acquisition of Equity Interests or other securities of another Person,
(b) a loan, advance or capital contribution to, guarantee (by guaranty or other
arrangement) or assumption of Indebtedness of, or purchase or other acquisition
of any other Indebtedness or equity participation or interest in, another
Person, including any partnership or joint venture interest in such other
Person, or (c) the purchase or other acquisition (in one transaction or a series
of transactions) of substantially all or a portion of the business or assets of
another Person. For purposes of covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment but giving
effect to any cash repayments of loans or cash return of Investments.

 

“Issuing Lender” means KeyBank, and any successor issuing lender pursuant to
Section 8.06.

 

“KeyBank” means KeyBank National Association, a national banking association.

 

“LC Payment Date” has the meaning set forth in Section 2.07(c)(i) hereof.

 

“Lease Operating Statement” means a statement, in form and substance reasonably
satisfactory to the Administrative Agent, prepared by the Borrower with respect
to the Oil and Gas Properties owned by any Loan Party (or to be acquired by any
Loan Party, as applicable), which statement shall contain production, revenue,
and expense data for the time period covered by such statement and such other
information reasonably requested by the Administrative Agent.

 

“Leases” means all oil and gas leases, oil, gas and mineral leases, oil, gas and
casinghead gas leases or any other instruments, agreements, or conveyances under
and pursuant to which the owner thereof has or obtains the right to enter upon
lands and explore for, drill, and develop such lands for the production of
Hydrocarbons.

 

“Legal Requirement” means, as to any Person, any law, statute, ordinance,
decree, requirement, order, judgment, rule, regulation (or official
interpretation of any of the foregoing) of, and the terms of any license or
Permit issued by, any Governmental Authority, including, but not limited to,
Regulations T, U, and X, which is applicable to such Person.

 

“Lender Hedge Obligations” means all obligations of any Loan Party owing to any
Lender Swap Counterparty under any Hedge Contract; provided that, (a) when any
Lender Swap Counterparty assigns

 

 -21-

 

or otherwise transfers any interest held by it under any Hedge Contract to any
other Person pursuant to the terms of such agreement, the obligations thereunder
shall constitute Lender Hedge Obligations (and therefore Secured Obligations)
only if such assignee or transferee is also then a Lender or an Affiliate of a
Lender and (ii) if a Lender Swap Counterparty ceases to be a Lender hereunder or
an Affiliate of a Lender hereunder, obligations owing to such Lender Swap
Counterparty shall be included as Lender Hedge Obligations only to the extent
such obligations arise from such transactions entered into prior to the date
such Lender Swap Counterparty ceased to be a Lender or an Affiliate of a Lender
(without giving effect to any extension, increases or modifications (including
blending) thereof which are made after such Lender Swap Counterparty ceases to
be a Lender or an Affiliate of a Lender).

 

“Lender Parties” means Lenders, the Issuing Lender, and the Administrative
Agent.

 

“Lender Swap Counterparty” means (a) any Person that is a Lender or Affiliate of
a Lender on the date hereof and that is a counterparty to any Hedge Contract
with any Loan Party listed on Schedule 4.20 and (b) any counterparty to any
other Hedge Contract with any Loan Party; provided that such counterparty is a
Lender or an Affiliate of a Lender at the time such Hedge Contract is entered
into. For the avoidance of doubt, “Lender Swap Counterparty” shall not include
any participant of a Lender pursuant to Section 9.07(d) other than to the extent
such participant is otherwise a Lender or an Affiliate of a Lender.

 

“Lender” means a party hereto that (a) is a lender listed on the signature pages
of this Agreement on the date hereof or (b) is an Eligible Assignee that became
a lender under this Agreement pursuant to Section 2.15 or 9.07.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify the Borrower and the
Administrative Agent.

 

“Letter of Credit” means, individually, any standby letter of credit issued by
the Issuing Lender for the account of the Borrower or any other Loan Party in
connection with the Commitments and that is subject to this Agreement.

 

“Letter of Credit Application” means the Issuing Lender’s standard form letter
of credit application for standby letters of credit that has been executed by
the Borrower and accepted by the Issuing Lender in connection with the issuance
of a Letter of Credit.

 

“Letter of Credit Documents” means all Letters of Credit, Letter of Credit
Applications, and agreements, documents, and instruments entered into in
connection with or relating thereto.

 

“Letter of Credit Exposure” means, at any time, the sum of (a) the aggregate
undrawn maximum face amount of each Letter of Credit at such time plus (b) the
aggregate unpaid amount of all Reimbursement Obligations at such time.

 

“Letter of Credit Obligations” means any obligations of the Borrower under this
Agreement in connection with the Letters of Credit, including the Reimbursement
Obligations.

 

“Leverage Ratio” means, as of any date of determination, the ratio of (a) the
Borrower’s consolidated Indebtedness (other than (i) Indebtedness under surety
bonds, performance bonds, and other similar bonds and (ii) Indebtedness under
Hedge Contracts) on such date to (b) Adjusted EBITDAX.

 

 -22-

 

“Lien” means any mortgage, lien, pledge, assignment, charge, deed of trust,
security interest, hypothecation, preference, deposit arrangement or encumbrance
(or other type of arrangement having the practical effect of the foregoing) to
secure or provide for the payment of any obligation of any Person, whether
arising by contract, operation of law, or otherwise (including, without
limitation, the interest of a vendor or lessor under any conditional sale
agreement, Synthetic Lease, Capital Lease, or other title retention agreement).

 

“Liquid Investments” means:

 

(a)                direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States maturing
within 180 days from the date of any acquisition thereof;

 

(b)               negotiable or nonnegotiable certificates of deposit, time
deposits, or other similar banking arrangements maturing within 180 days from
the date of acquisition thereof (“bank debt securities”), issued by (A) any
Lender (or any Affiliate of any Lender) or (B) any other bank or trust company
which has combined capital and surplus of not less than $500,000,000 and
(ii) commercial paper issued by (A) any Lender (or any Affiliate of any Lender)
or (B) any other Person if at the time of purchase such commercial paper is
rated not less than “A-1” (or the then equivalent) by the rating service of
Standard & Poor’s Ratings Group or not less than “P-1” (or the then equivalent)
by the rating service of Moody’s Investors Service, Inc., or upon the
discontinuance of both of such services, such other nationally recognized rating
service or services, as the case may be, as shall be selected by the Borrower
with the consent of the Majority Lenders;

 

(c)                deposits in money market funds investing exclusively in
investments described in clauses (a) and (b) above; and

 

(d)               repurchase agreements relating to investments described in
clauses (a) and (b) above with a market value at least equal to the
consideration paid in connection therewith, with any Person who regularly
engages in the business of entering into repurchase agreements and has a
combined capital surplus and undivided profit of not less than $500,000,000, if
at the time of entering into such agreement the debt securities of such Person
are rated not less than “AA” (or the then equivalent) by the rating service of
Standard & Poor’s Ratings Group or of Moody’s Investors Service, Inc.

 

“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Documents, the Guaranty, the Security Instruments, the Fee Letter, and each
other agreement, instrument, or document executed by the Borrower, any
Guarantor, or any of their officers at any time in connection with this
Agreement. For the avoidance of doubt, “Loan Documents” does not include Hedge
Contracts.

 

“Loan Party” means the Borrower and each Guarantor.

 

“Majority Lenders” means Lenders holding more than 50% of the aggregate Credit
Exposure; provided that, if no Advances or Letter of Credit Obligations are then
outstanding, “Majority Lenders” shall mean Lenders having more than 50% of the
aggregate Maximum Credit Amounts at such time; provided further that the Maximum
Credit Amounts of, and the portion of the Advances and Letter of Credit Exposure
held or deemed held by, any Defaulting Lender shall be excluded for purposes of
making a determination of Majority Lenders unless all of the Lenders are
Defaulting Lenders.

 

“Material Adverse Change” means any material adverse change in, or material
adverse effect on, (a) the business, property, operations, or condition
(financial or otherwise) of the Borrower and the Guarantors taken as a whole,
(b) the ability of the Borrower and Guarantors, taken as a whole, to perform

 

 -23-

 

any of their obligations under this Agreement and the other Loan Document to
which any of them is a party, (c) the validity or enforceability of any of this
Agreement and the other Loan Documents or (d) the rights or remedies of or
benefits available to the Administrative Agent, any other agent, the Issuing
Lender or the Lenders under this Agreement and the other Loan Documents.

 

“Material Adverse Effect” means any event, which individually, or together with
all other events, has had or would reasonably be expected to have a material and
adverse effect on the business, assets, liabilities, finances, properties,
results of operations or condition (financial or otherwise) of the Borrower and
its Subsidiaries, taken as a whole, except to the extent such event results
from, arises out of, or is attributable to, the following (either alone or in
combination): (i) any change after the date hereof in global, national or
regional political conditions (including hostilities, acts of war, sabotage,
terrorism or military actions, or any escalation or material worsening of any
such hostilities, acts of war, sabotage, terrorism or military actions existing
or underway) or in the general business, market, financial or economic
conditions affecting the industries, regions and markets in which the Borrower
and its Subsidiaries operate, including any change in the United States or
foreign economies or securities, commodities or financial markets, or force
majeure events or “acts of God”; (ii) any changes after the date hereof in
applicable Legal Requirements or GAAP, or in the interpretation or enforcement
thereof; (iii) the execution, announcement or performance of the BCA or the
transactions contemplated hereby or thereby (including any act or omission of
the Borrower or its Subsidiaries expressly required or prohibited, as
applicable, by the BCA); (iv) changes in the market price or trading volume of
the claims or equity or debt securities of the Borrower or any of its
Subsidiaries (but not the underlying facts giving rise to such changes unless
such facts are otherwise excluded pursuant to the clauses contained in this
definition); (v) the departure of officers or directors of the Borrower or any
of its Subsidiaries (but not the underlying facts giving rise to such departure
unless such facts are otherwise excluded pursuant to the clauses contained in
this definition); (vi) the filing or pendency of the Chapter 11 Cases or actions
taken in connection with the Chapter 11 Cases that are directed by the
Bankruptcy Court and made in compliance with the Bankruptcy Code; (vii)
declarations of national emergencies or natural disasters; or (viii) any matters
expressly disclosed in the Disclosure Statement or the disclosure schedules
delivered by the Borrower to the Administrative Agent on April 28, 2017;
provided, that the exceptions set forth in clauses (i) and (ii) shall not apply
to the extent that such event is disproportionately adverse to the Borrower and
its Subsidiaries, taken as a whole, as compared to other companies in the
industries in which the Borrower and its Subsidiaries operate.

 

“Maturity Date” means March 31, 2021.

 

“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Schedule II under the caption “Maximum Credit Amounts”, as
the same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the aggregate Maximum Credit Amounts pursuant to
Section 2.04 or (b) modified from time to time pursuant to any assignment
permitted by Section 9.07. The aggregate amount of the Maximum Credit Amount on
the date hereof is $191,666,666.66.

 

“Maximum Rate” means the maximum nonusurious interest rate under applicable law
(determined under such laws after giving effect to any items which are required
by such laws to be construed as interest in making such determination, including
without limitation if required by such laws, certain fees and other costs).

 

“Mid-Con Assets” means collectively, Properties in Dorcheat Macedonia (AR) and
the McKamie Patton (AR) fields.

 

 -24-

 

“Minimum Collateral Amount” means, at any time, (i) with respect to cash
collateral consisting of cash or deposit account balances, an amount equal to
104% of the Letter of Credit Exposure of the Issuing Lender with respect to
Letters of Credit issued and outstanding at such time and (ii) otherwise, an
amount determined by the Administrative Agent and the Issuing Lender in their
sole discretion exercised in good faith.

 

“Mortgage” means each of the mortgages, deeds of trust, amended and restated
mortgages or amended and restated deeds of trust executed by any one or more
Loan Party in substantially the form of the attached Exhibit D-1 or Exhibit D-2,
as applicable, or such other form as may be reasonably requested by the
Administrative Agent, together with any assumptions or assignments of the
obligations thereunder by any Loan Party.

 

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

 

“Net Cash Proceeds” means, with respect to any Disposition, all cash and Liquid
Investments received (directly or indirectly) by any Loan Party from such
Disposition after payment of all reasonable out of pocket fees and expenses
actually incurred by such Loan Party directly in connection with such
Disposition minus (a) taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), minus (b) if applicable, the principal amount of Indebtedness
that is secured by such asset (if any) and that is required to be repaid in
connection with the sale thereof (other than the Advances) and minus (c) any
amounts provided as a reserve, in accordance with GAAP, against any liabilities
under any indemnification obligations or purchase price adjustments associated
with such Disposition.

 

“Non-Consenting Lender” means any Lender that does not consent to a proposed
agreement, amendment, waiver, consent or release with respect to this Agreement
or any other Loan Document that (i) requires the consent of each Lender,
including any increases to the Borrowing Base and (ii) has been approved by the
Required Lenders.

 

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

 

“Non-Structure Mortgage” means each Mortgage that expressly excludes Buildings
(as defined in the applicable Flood Insurance Regulation) and Manufactured
(Mobile) Homes (as defined in the applicable Flood Insurance Regulation) from
the definition of “Collateral”, “Mortgaged Property” or other comparable defined
term as used therein such that and no Building or Manufactured (Mobile) Home is
encumbered by such Mortgage.

 

“Notes” means a promissory note of the Borrower payable to any Lender in the
amount of such Lender’s Commitment, in substantially the form of the attached
Exhibit E, evidencing indebtedness of the Borrower to such Lender resulting from
Advances owing to such Lender.

 

“Notice of Borrowing” means a notice of borrowing substantially in the form of
the attached Exhibit F signed by a Responsible Officer of the Borrower.

 

“Notice of Conversion or Continuation” means a notice of conversion or
continuation substantially in the form of the attached Exhibit G signed by a
Responsible Officer of the Borrower.

 

“NYMEX Pricing” shall mean, as of any date of determination with respect to any
month (a) for crude oil, the closing settlement price for the Light, Sweet Crude
Oil futures contract for each month, and (b) for natural gas, the closing
settlement price for the Henry Hub Natural Gas futures contract for such

 

 -25-

 

month, in each case as published by New York Mercantile Exchange (NYMEX) on its
website currently located at www.nymex.com or any successor thereto (as such
pricing may be corrected or revised from time to time by the NYMEX in accordance
with its rules and regulations).

 

“O&G Definitions” means the definitions for oil and gas reserves promulgated by
the Society of Petroleum Evaluation Engineers (or any generally recognized
successor) as in effect at the time in question.

 

“Obligations” means all principal, interest (including post-petition interest),
fees, reimbursements, indemnifications, and other amounts payable by the
Borrower or any Guarantor to the Administrative Agent, the Issuing Lender, or
the Lenders under the Loan Documents, including without limitation, the Letter
of Credit Obligations and Reimbursement Obligations.

 

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

 

“Oil and Gas Properties” means fee mineral interests, term mineral interests,
Leases, subleases, farm-outs, royalties, overriding royalties, net profit
interests, carried interests, production payments and similar mineral interests,
and all unsevered and unextracted Hydrocarbons in, under, or attributable to
such oil and gas Properties and interests.

 

“Operating Equipment” means all surface or subsurface machinery, equipment,
facilities, supplies or other Property of whatsoever kind or nature now or
hereafter located on any of the Property affected by the Oil and Gas Properties
which are useful for the production, treatment, storage or transportation of
Hydrocarbons, including all oil wells, gas wells, water wells, injection wells,
casing, tubing, rods, pumping units and engines, christmas trees, derricks,
separators, gun barrels, flow lines, pipelines, tanks, gas systems (for
gathering, treating and compression), water systems (for treating, disposal and
injection), supplies, derricks, wells, power plants, poles, cables, wires,
meters, processing plants, compressors, dehydration units, lines, transformers,
starters and controllers, machine shops, tools, storage yards and equipment
stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading racks, shipping facilities and all
additions, substitutes and replacements for, and accessories and attachments to,
any of the foregoing. Operating Equipment shall not include any items
incorporated into realty or structures or improvements located therein or
thereon in such a manner that they no longer remain personalty under the laws of
the state in which such equipment is located.

 

“Operating Lease” means, as to any Person as determined in accordance with GAAP,
any lease of Property (whether real, personal or mixed) by such Person as lessee
which is not a Capital Lease.

 

“Order” means any judgment, order, award, injunction, writ, permit, license or
decree of any Governmental Unit or arbitrator of applicable jurisdiction.

 

“Original Mortgaged Properties” means the Oil and Gas Properties of any Loan
Party that were subject to an Existing Mortgage (other than such Original
Mortgaged Properties which were Disposed of as permitted under the Existing
Credit Agreement).

 

“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 Advance, Commitment or
Loan Document).

 

 -26-

 

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
required by the Borrower pursuant to Section 2.15).

 

“Participant” has the meaning set forth in Section 9.07(d) hereof.

 

“Participant Register” has the meaning set forth in Section 9.07(d) hereof.

 

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

 

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

 

“PDP Reserves” means the Proven Reserves which are categorized as both
“developed” and “producing” under the O&G Definitions.

 

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to the provisions of Title IV of ERISA or Sections 412 and 430
of the Code or Section 302 of ERISA.

 

“Permit” means any approval, certificate of occupancy, consent, waiver,
exemption, variance, franchise, order, permit, authorization, right or license
of or from any Governmental Authority, including without limitation, an
Environmental Permit.

 

“Permitted Asset Swap” means the Disposition of Specified Properties made by a
Loan Party in exchange for other Specified Properties so long as each of the
following conditions are met: (a) such exchange is made with a Person (the
“transferee”) that is not an Affiliate of any Loan Party or any Subsidiary, (b)
the Specified Properties received shall also be pledged as Collateral pursuant
to Mortgages, (c) no Proven Reserves are attributable to the Specified
Properties being Disposed of, and (d) the fair market value of the Specified
Properties being Disposed of are substantially equivalent to the fair market
value of the Specified Properties being acquired (in any case, as reasonably
determined by the board of directors or the equivalent governing body of the
Borrower, or its designee, and, if requested by the Administrative Agent, the
Borrower shall deliver a certificate of a Responsible Officer of the Borrower
certifying to that effect).

 

“Permitted Liens” means the Liens permitted under Section 6.01; provided that
(a) Liens described in clauses (d) and (g) of Section 6.01 shall remain
“Permitted Liens” only for so long as no action to enforce such Lien has been
commenced or such Liens are being diligently contested in good faith by
appropriate proceedings and adequate reserves have been made in accordance with
GAAP, and (b) no intention to subordinate the priority of the Lien granted in
favor of the Administrative Agent and the Secured Parties is to be hereby
implied or expressed by the permitted existence of any Permitted Liens.

 

“Permitted Subject Liens” means the Permitted Liens permitted under paragraphs
(b) through (j) and (l) of Section 6.01.

 

 -27-

 

“Person” means an individual, partnership, corporation (including a business
trust), joint stock company, limited liability corporation or company, limited
liability partnership, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof or any
trustee, receiver, custodian or similar official.

 

“Plan of Reorganization” means the Debtors’ Third Amended Joint Prepackaged Plan
of Reorganization under Chapter 11 of the Bankruptcy Code, dated April 6, 2017
[D.I. 493-1], as amended, restated, supplemented or otherwise modified from time
to time with the consent of the Administrative Agent and the Majority Lenders
(such consent not to be unreasonably withheld).

 

“Platform” has the meaning set forth in Section 9.09(c)(i) hereof.

 

“Pricing Grid” means the pricing information set forth in Schedule I.

 

“Pro Rata Share” means, with respect to any Lender, the ratio (expressed as a
percentage) of the Maximum Credit Amount of such Lender to the aggregate Maximum
Credit Amounts of all the Lenders (or if the aggregate Maximum Credit Amounts
have been terminated, the ratio (expressed as a percentage) of outstanding
Advances owing to such Lender to the aggregate outstanding Advances owing to all
such Lenders).

 

“Property” of any Person means any property or assets (whether real, personal,
or mixed, tangible or intangible) of such Person.

 

“Protected Period” means the period between the Closing Date and the date that
is the earlier of (a) the date of the first redetermination to occur in
connection with the Independent Engineering Report delivered on or before April
1, 2018, and (b) the date of any redetermination that occurs because of an Asset
Coverage Ratio test.

 

“Proven Reserves” means, at any particular time, the estimated quantities of
Hydrocarbons which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs attributable
to Oil and Gas Properties included or to be included in the Borrowing Base under
then existing economic and operating conditions (i.e., prices and costs as of
the date the estimate is made) and which are “proved reserves” as defined in the
O&G Definitions.

 

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

 

“Qualified Equity Interests” means any Equity Interests that are not
Disqualified Equity Interests.

 

“Quarterly Reporting Package” has the meaning set forth in Section 5.06(b).

 

“Realty Collateral” has the meaning set forth in the Mortgages.

 

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

 

 -28-

 

“Reference Rate” means a fluctuating interest rate per annum as shall be in
effect from time to time equal to the rate of interest publicly announced by
KeyBank, as its reference rate, whether or not the Borrower has notice thereof.

 

“Reference Rate Advance” means an Advance which bears interest as provided in
Section 2.09(a).

 

“Register” has the meaning set forth in Section 9.07(c) hereof.

 

“Regulations T, U, and X” mean Regulations T, U, and X of the Federal Reserve
Board, as the same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.

 

“Reimbursement Obligations” means all of the obligations of the Borrower to
reimburse the Issuing Lender for amounts paid by the Issuing Lender under
Letters of Credit as established by the Letter of Credit Applications and
Section 2.07(c).

 

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

 

“Release” or “Released” means any depositing, spilling, leaking, seepage,
pumping, pouring, placing, emitting, discarding, abandoning, emptying,
discharging, dispersing, injecting, escaping, leaching, dumping, disposing,
emanating, or migrating of any Hazardous Material in, into, onto or through the
Environment.

 

“Required Lenders” means, Lenders holding at least 66 2/3% of the aggregate
Credit Exposure; provided that, if no Advances or Letter of Credit Obligations
are then outstanding, “Required Lenders” shall mean Lenders having at least 66
2/3% of the aggregate Maximum Credit Amounts at such time; provided further
that, the Maximum Credit Amounts of, and the portion of the Advances and Letter
of Credit Exposure held or deemed held by, any Defaulting Lender shall be
excluded for purposes of making a determination of Required Lenders unless all
of the Lenders are Defaulting Lenders.

 

“Resignation Effective Date” has the meaning set forth in Section 8.06(a)
hereof.

 

“Response” shall have the meaning set forth in CERCLA or under any other
Environmental Law.

 

“Responsible Financial Officer” means any Responsible Person who is a Chief
Financial Officer, Chief Accounting Officer, Treasurer or any other individual
designated as Principal Financial Officer.

 

“Responsible Officer” means (a) with respect to any Person that is a
corporation, such Person’s Chief Executive Officer, President, Chief Financial
Officer, Chief Accounting Officer, Vice President, Treasurer, Secretary or any
other individual designated as Principal Financial Officer, (b) with respect to
any Person that is a limited liability company, a manager or the Responsible
Officer of such Person’s managing member or manager, and (c) with respect to any
Person that is a general partnership or a limited liability partnership, the
Responsible Officer of such Person’s general partner or partners.

 

“Restricted Payment” means, with respect to any Person, (a) any direct or
indirect dividend or distribution (whether in cash, securities or other
Property) or any direct or indirect payment of any kind or character (whether in
cash, securities or other Property) on account of any Equity Interest of such
Person, including in consideration for or otherwise in connection with any
retirement, purchase, redemption or other acquisition of any Equity Interest of
such Person, or any options, warrants or rights to purchase or

 

 -29-

 

acquire any such Equity Interest of such Person or (b) principal or interest
payments (in cash, Property or otherwise) on, or redemptions of, subordinated
debt of such Person; provided that the term “Restricted Payment” shall not
include any dividend or distribution payable solely in common Equity Interests
of such Person or warrants, options or other rights to purchase such common
Equity Interests.

 

“Returns” has the meaning set forth in Section 4.10(b).

 

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

 

“Sanctioned Person” means, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by OFAC or the U.S.
Department of State, (b) any Person located, organized or resident in a
Sanctioned Country or (c) any Person owned 50% or more by any Person or Persons
described in clause (a).

 

“Sanctions” means economic or financial sanctions or trade embargoes imposed,
administered or enforced from time to time by OFAC or the U.S. Department of
State.

 

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

 

“Secured Obligations” means (a) all Obligations, (b) Lender Hedge Obligations,
and (c) the Banking Services Obligations. Notwithstanding anything to the
contrary contained herein, “Secured Obligations” shall not include the Excluded
Swap Obligations.

 

“Secured Parties” means the Administrative Agent, the Issuing Lender, the
Lenders, the Lender Swap Counterparties, and the Banking Service Providers.

 

“Security Agreement” means the Amended and Restated Pledge and Security
Agreement, in substantially the form of the attached Exhibit H, executed by the
Borrower or any of the Guarantors, and if applicable, the Administrative Agent.

 

“Security Instruments” means, collectively, (a) the Mortgages, (b) the Transfer
Letters, (c) the Security Agreement, (d) the Account Control Agreements, (e)
each other agreement, instrument or document executed at any time in connection
with the documents and agreements listed in (a) through (d) above, (f) each
agreement, instrument or document executed in connection with the Cash
Collateral Account, and (g) each other agreement, instrument or document
executed at any time in connection with securing the Secured Obligations.

 

“Solvent” means, with respect to any Person as of the date of any determination,
that on such date (a) the fair value of the Property of such Person on a
consolidated basis, is greater than the total amount of liabilities, including
contingent liabilities, of such Person, on a consolidated basis, (b) the present
fair saleable value of the assets of such Person, on a consolidated basis, is
not less than the amount that will be required to pay the probable liability of
such Person, on a consolidated basis, on its debts as they become absolute and
matured, (c) such Person is able to pay its debts and other liabilities,
contingent obligations, and other commitments as they mature in the ordinary
course of business, (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person’s ability to pay as
such debts and liabilities mature, and (e) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person’s Property would constitute unreasonably
small capital. In computing the amount of contingent liabilities at any time,
such liabilities shall be computed at the amount which, in light of the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

 

 -30-

 

“Specified Properties” means, collectively, the Oil and Gas Properties and the
Gathering Properties.

 

“Strip Price” shall mean, at any time, (a) for the remainder of the current
calendar year, the average NYMEX Pricing for the remaining contracts in the
current calendar year, (b) for each of the succeeding seven complete calendar
years, the average NYMEX Pricing for the twelve months in each such calendar
year, and (c) for each calendar year thereafter, the average NYMEX Pricing for
the twelve months in such seventh calendar year increased by 2% for each such
year thereafter.

 

“Structure Mortgage” shall mean each Mortgage other than a Non-Structure
Mortgage.

 

“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
Person, a majority of whose outstanding Voting Securities (other than directors’
qualifying shares) shall at any time be owned by such parent or one or more
Subsidiaries of such parent. Unless otherwise specified, all references herein
to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or
Subsidiaries of the Borrower.

 

“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.

 

“Synthetic Lease” means any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such
transaction is considered borrowed money indebtedness for tax purposes but is
classified as an Operating Lease in accordance with GAAP.

 

“Tax Group” has the meaning set forth in Section 4.10(a).

 

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

 

“Termination Event” means the occurrence of any of the following: (a) a
“reportable event” described in Section 4043 of ERISA with respect to a Pension
Plan for which the thirty (30) day notice requirement has not been waived by the
PBGC, or (b) the failure with respect to any Pension Plan to make the “minimum
required contribution” (as defined in Section 430 of the Code or Section 303 of
ERISA), or (c) the filing pursuant to Section 412(c) of the Code or Section
302(c) of ERISA of an application for a waiver of the minimum funding standard
with respect to any Pension Plan, or (d) the withdrawal of any Loan Party or any
ERISA Affiliate from a Pension Plan during a plan year in which it was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA, or (e) the termination of a Pension Plan, the filing of a notice of
intent to terminate a Pension Plan or the treatment of a Pension Plan amendment
as a termination, under Section 4041 of ERISA, or (f) the institution of
proceedings to terminate, or the appointment of a trustee with respect to, any
Pension Plan by the PBGC, or (g) the occurrence of any event or condition which
is expected to constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan,
or (h) the imposition of a Lien pursuant to Section 430(k) of the Code or
Section 303(k) of ERISA, or (i) the determination that any Pension Plan or
Multiemployer Plan is considered an at-risk plan or a plan in endangered or
critical status within the meaning of Sections 430 or 432 of the Code or
Sections 303 or 305 of ERISA, or (j) the partial or complete withdrawal of any
Loan Party or any ERISA Affiliate from a Multiemployer Plan, or (k) the

 

 -31-

 

receipt by any Loan Party or any of its ERISA Affiliates from a Multiemployer
Plan of any notice concerning the imposition of withdrawal liability or a
determination that a Multiemployer Plan is, or is expected to be, “insolvent”
(within the meaning of Section 4245 of ERISA), or (l) any event or condition
which results in the termination of a Multiemployer Plan under Section 4041A of
ERISA or the institution by PBGC of proceedings to terminate a Multiemployer
Plan under Section 4042 of ERISA, or (m) the imposition of any liability under
Title IV of ERISA, other than for PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate.

 

“Total Present Value” means, as of any date of determination, the calculation of
the present value (discounted at 9% per annum) of the projected future net
revenues attributable to the Total Present Value Production. Each calculation of
such projected future net revenues shall be made in accordance with the then
existing standards of the Society of Petroleum Engineers, provided that in any
event (i) appropriate deductions shall be made for severance and ad valorem
taxes, and for operating, gathering, transportation and marketing costs required
for the production and sale of such reserves (other than those payable to
another Loan Party), (ii) appropriate adjustments shall be made for Hedge
Contracts permitted by this Agreement as in effect on the date of such
determination, (iii) the pricing assumptions used in determining Total Present
Value for any particular reserves shall be based upon the Strip Price in effect
on the last day of the fiscal month immediately preceding the date of such
determination, and (iv) the cash-flows derived from the pricing assumptions set
forth in clauses (ii) and (iii) above shall be further adjusted to account for
the contracted basis differential in a manner reasonably acceptable to the
Administrative Agent; provided, however, that for purposes of this calculation,
no more than 30% of the Total Present Value shall be attributable to Oil and Gas
Properties described in the most recently delivered Engineering Report that are
not categorized as PDP Reserves.

 

“Total Present Value Production” means, at any time of determination, the
projected production of Hydrocarbons (measured by volume unit or BTU equivalent,
not sales price) from properties and interests owned by any Loan Party, as such
production is projected in the most recent Engineering Report delivered pursuant
to Section 5.06(e), after deducting projected production from any properties or
interests sold or under contract for sale (other than those sold or under
contract for sale to another Loan Party) that had been included in such report
and after adding projected production from any properties or interests that had
not been reflected in such report but that are reflected in a separate or
supplemental report which is reasonably satisfactory to the Administrative
Agent.

 

“Trade Date” has the meaning set forth in Section 9.07(b)(i) hereof.

 

“Transfer Letters” means, collectively, the letters in lieu of transfer orders
in substantially the form of the attached Exhibit I and executed by the Borrower
or any Guarantor executing a Mortgage.

 

“Treasury Management Arrangement” means any agreement or other arrangement
governing the provision of treasury or cash management services, including
deposit accounts, overdraft, credit or debit card, funds transfer, automated
clearinghouse, zero balance accounts, returned check concentration, controlled
disbursement, lockbox, account reconciliation and reporting and trade finance
services and other cash management services.

 

“Trigger Event” means (a) any Disposition of Oil and Gas Properties and (b) any
Hedge Event.

 

“Trigger Event Date” means (a) as to any Disposition of Oil and Gas Properties,
the date such Disposition is consummated and (b) as to any Hedge Event, the date
such Hedge Event is effected.

 

“Type” has the meaning set forth in Section 1.04.

 

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“UCC” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, however, in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.

 

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

 

“U.S. Tax Compliance Certificate” has the meaning set forth in Section
2.14(g)(ii)(B) hereof.

 

“Utilization Level” means the applicable category (being Level I, Level II,
Level III, Level IV or Level V) of pricing criteria contained in Schedule I,
which is at any time of its determination based on the percentage obtained by
dividing (a) the outstanding principal amount of the Advances and the Letter of
Credit Exposure at such time by (b) the Commitments at such time.

 

“Voting Securities” means (a) with respect to any corporation (including any
unlimited liability company), capital stock of such corporation having general
voting power under ordinary circumstances to elect directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have special voting power or rights by reason of the happening of
any contingency), (b) with respect to any partnership, any partnership interest
or other ownership interest having general voting power to elect the general
partner or other management of the partnership or other Person, and (c) with
respect to any limited liability company, membership certificates or interests
having general voting power under ordinary circumstances to elect managers (or
the individuals performing similar functions) of such limited liability company.

 

“Wells” has the meaning set forth in Section 2.02(b)(iv) hereof.

 

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

 

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

 

Section 1.02         Computation of Time Periods. In this Agreement, with
respect to the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including” and the words “to”
and “until” each means “to but excluding”.

 

Section 1.03         Accounting Terms; Changes in GAAP. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lenders hereunder shall
(unless otherwise disclosed to the Lenders in writing at the time of delivery
thereof) be prepared, in accordance with GAAP applied on a basis consistent with
those used in the preparation of the latest financial statements furnished to
the Lenders hereunder. All calculations made for the purposes of determining
compliance with this Agreement shall (except as otherwise expressly provided
herein) be made by application of GAAP applied on a basis consistent with those
used in the preparation of the annual or quarterly financial statements
furnished to the Lenders pursuant to Section 5.06 hereof most recently delivered
prior to or concurrently with such calculations. If at any time any change in
GAAP would

 

 -33-

 

affect the computation of any financial ratio or requirement set forth herein,
and either the Borrower or the Majority Lenders shall so request, the
Administrative Agent, the Lenders and the Borrower shall negotiate in good faith
to amend such ratio or requirement to preserve the original intent thereof in
light of such change in GAAP (subject to the approval of the Majority Lenders);
provided that, (i) until so amended, (a) such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein,
and (b) the Borrower shall provide to the Administrative Agent and the Lenders
financial statements and other documents required under this Agreement or as
reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect to
such change in GAAP and (ii) terms of an accounting or financial nature used
herein shall be construed, and computations of amounts and ratios referred to
herein shall be made without giving effect to any change to or modification of
GAAP which would require the capitalization of leases (whether or not existing
on the Closing Date) that would be characterized as “operating leases” under
GAAP as in effect on the Closing Date. In addition, all calculations and defined
accounting terms used herein shall, unless expressly provided otherwise, when
referring to any Person, refer to such Person on a consolidated basis and mean
such Person and its consolidated subsidiaries.

 

Section 1.04         Types of Advances. Advances are distinguished by “Type.”
The “Type” of an Advance refers to the determination whether such Advance is a
Eurodollar Rate Advance or Reference Rate Advance as determined in accordance
with Section 2.03.

 

Section 1.05         UCC Terms. Terms defined in the UCC in effect on the date
hereof and not otherwise defined herein shall, unless the context otherwise
indicates, have the meanings provided by those definitions. Subject to the
foregoing, the term “UCC” refers, as of any date of determination, to the UCC
then in effect.

 

Section 1.06         Rounding. Any financial ratios required to be maintained
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio or percentage is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

 

Section 1.07         Letter of Credit Amounts. Unless otherwise specified, all
references herein to the amount of a Letter of Credit at any time shall be
deemed to mean the maximum face amount of such Letter of Credit after giving
effect to all increases thereof contemplated by such Letter of Credit or the
Letter of Credit Application therefor (at the time specified therefor in such
applicable Letter of Credit or Letter of Credit Application and as such amount
may be reduced by (a) any permanent reduction of such Letter of Credit or
(b) any amount which is drawn, reimbursed and no longer available under such
Letter of Credit).

 

Section 1.08         Guarantees. Unless otherwise specified, the amount of any
Guarantee shall be the lesser of the principal amount of the obligations
guaranteed and still outstanding and the maximum amount for which the
guaranteeing Person may be liable pursuant to the terms of the instrument
embodying such Guarantee.

 

Section 1.09         Miscellaneous. 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

 

 -34-

 

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 “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, (e) any reference to any law or
regulation herein shall, unless otherwise specified, refer to such law or
regulation as amended, modified or supplemented from time to time, and (f) 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. Titles and
captions of Articles, Sections and subsections in, and the table of contents of,
this Agreement are for convenience only, and neither limit nor amplify the
provisions of this Agreement.

 

ARTICLE II
CREDIT FACILITIES

 

Section 2.01         Commitment for Advances.

 

(a)                Advances. Each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make Advances to the Borrower from
time to time on any Business Day during the period from the date of this
Agreement until the Commitment Termination Date; provided that, after giving
effect to such Advances, each Lender’s Credit Exposure shall not exceed such
Lender’s Commitment at such time. Each Borrowing shall, in the case of
Borrowings consisting of Reference Rate Advances, be in an aggregate amount not
less than $1,000,000 and in integral multiples of $500,000 in excess thereof,
and in the case of Borrowings consisting of Eurodollar Rate Advances, be in an
aggregate amount not less than $2,000,000 and in integral multiples of $500,000
in excess thereof, and in each case shall consist of Advances of the same Type
made on the same day by the Lenders ratably according to their respective
Commitments. Subject to the terms of this Agreement, the Borrower may from time
to time borrow, prepay, and reborrow Advances.

 

(b)               Evidence of Indebtedness. The Advances made by each Lender
shall be evidenced by one or more accounts or records maintained by such Lender
and by the Administrative Agent in the ordinary course of business. The accounts
or records maintained by the Administrative Agent and the Lenders shall be
conclusive absent manifest error of the amount of the Advances made by such
Lenders to the Borrower and the interest and payments thereon. Any failure to so
record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Borrower hereunder to pay any amount owing with respect to
the Obligations. In the event of any conflict between the accounts and records
maintained by any Lender and the accounts and records of the Administrative
Agent in respect of such matters, the accounts and records of the Administrative
Agent shall control in the absence of manifest error. Upon the request of any
Lender to the Borrower made through the Administrative Agent, the Borrower shall
execute and deliver to such Lender (through the Administrative Agent) the
applicable Notes which shall evidence such Lender’s Advances to the Borrower in
addition to such accounts or records. Each Lender may attach schedules to such
Notes and endorse thereon the date, Type (if applicable), amount, and maturity
of its Advances and payments with respect thereto. In addition to the accounts
and records referred to in the immediately preceding sentences, each Lender,
Issuing Lender and Administrative Agent shall maintain in accordance with its
usual practice accounts or records evidencing the purchases and sales by such
Lender of participations in Letters of Credit. In the event of any conflict
between the accounts and records maintained by the Administrative Agent and the
accounts and records of any Lender (other than the Issuing Lender) in respect of
such matters, the accounts and records of the Administrative Agent shall control
in the absence of manifest error. In the event of any conflict among

 

 -35-

 

the accounts and records maintained by the Administrative Agent, the accounts
and records maintained by the Issuing Lender as to Letters of Credit issued by
it, and the accounts and records of any other Lender in respect of such matters,
the accounts and records of the Issuing Lender shall control in the absence of
manifest error.

 

Section 2.02         Borrowing Base.

 

(a)                Borrowing Base. The initial Borrowing Base in effect as of
Closing Date has been set by the Administrative Agent and the Lenders and
acknowledged by the Borrower as $191,666,666.66. Such initial Borrowing Base
shall remain in effect until the next redetermination made pursuant to this
Section 2.02. The Borrowing Base shall be determined in accordance with the
standards set forth in Section 2.02(e) and is subject to periodic
redetermination pursuant to Sections 2.02(b) and 2.02(c), and mandatory
reductions pursuant to Section 2.02(d).

 

(b)               Calculation of Borrowing Base.

 

(i)                 The Borrower shall deliver to the Administrative Agent and
the Lenders on or before each April 1st, beginning April 1, 2018, an Independent
Engineering Report dated effective as of the immediately preceding January 1st,
and such other information as may be reasonably requested by any Lender with
respect to the Oil and Gas Properties included or to be included in the
Borrowing Base or in the Total Present Value, as applicable. Any time after the
Protected Period, in the normal course of business (but in any event within 30
days after the Administrative Agent’s and the Lenders’ receipt of such
Independent Engineering Report (and such additional Engineering Report, if any,
required under the last sentence of subsection (iv) below) and other
information), (A) the Administrative Agent shall deliver to each Lender the
Administrative Agent’s recommendation for the redetermined Borrowing Base, (B)
the Administrative Agent and the Lenders shall redetermine the Borrowing Base in
accordance with Section 2.02(e), and (C) the Administrative Agent shall promptly
notify the Borrower in writing of the amount of the Borrowing Base as so
redetermined.

 

(ii)               The Borrower shall deliver to the Administrative Agent and
the Lenders, on or before each October 1st, beginning October 1, 2017, an
Internal Engineering Report or an Independent Engineering Report dated effective
as of the immediately preceding July 1st and, in each instance, such other
information as may be reasonably requested by the Administrative Agent or any
Lender with respect to the Oil and Gas Properties included or to be included in
the Borrowing Base or in the Total Present Value, as applicable. Any time after
the Protected Period, in the normal course of business (but in any event within
30 days after the Administrative Agent’s and the Lenders’ receipt of such
Internal Engineering Report or Internal Engineering Report (and such additional
Engineering Report, if any, required under the last sentence of subsection (iv)
below) and other information), (A) the Administrative Agent shall deliver to
each Lender the Administrative Agent’s recommendation for the redetermined
Borrowing Base, (B) the Administrative Agent and the Lenders shall redetermine
the Borrowing Base in accordance with Section 2.02(e), and (C) the
Administrative Agent shall promptly notify the Borrower in writing of the amount
of the Borrowing Base as so redetermined.

 

(iii)             Any time after the Protected Period, in the event that the
Borrower does not furnish to the Administrative Agent and the Lenders the
Independent Engineering Report, Internal Engineering Report or other information
specified in clauses (i) and (ii) above by the date specified therein (or such
additional Engineering Report, if any, required under the last sentence of
subsection (iv) below), the Administrative Agent and the Lenders may nonetheless
redetermine the Borrowing Base and redesignate the Borrowing Base from
time-to-time thereafter in their sole discretion (but subject to Section
2.02(e)) until the Administrative Agent and the Lenders receive the relevant
Independent Engineering Report, Internal Engineering Report, or other
information, as applicable, at which time the

 

 -36-

 

Administrative Agent and the Lenders shall redetermine the Borrowing Base as
otherwise specified in this Section 2.02.

 

(iv)             Each delivery of an Engineering Report (including, without
limitation, the initial Engineering Report delivered pursuant to Section 3.01)
by the Borrower to the Administrative Agent and the Lenders shall constitute a
representation and warranty by the Borrower to the Administrative Agent and the
Lenders that (A) the Borrower and the Guarantors, as applicable, own the Oil and
Gas Properties specified therein subject to an Acceptable Security Interest to
the extent required hereunder (other than any thereof that have been Disposed of
since the date of such Engineering Report in a Disposition permitted by this
Agreement and noted to the Administrative Agent under the certificate required
under Section 5.06(e)(iv)(D)) and free and clear of any Liens (except Permitted
Liens), (B) on and as of the date of such Engineering Report each Oil and Gas
Property identified as PDP Reserves therein was developed for oil and gas, and
the wells pertaining to such Oil and Gas Properties that are described therein
as producing wells (“Wells”), were each producing oil and/or gas in paying
quantities, except for Wells that were utilized as water or gas injection wells,
carbon dioxide wells or as water disposal wells (each as noted in such
Engineering Report) or wells that were shut in for maintenance, repair or offset
drilling activity (each as noted in such Engineering Report), (C) the
descriptions of the nature of the record title interests of the Borrower and the
Guarantors, as applicable, set forth in such Engineering Report are complete and
accurate in all material respects, and take into account all Permitted Liens,
(D) there are no “back-in” or “reversionary” interests held by third parties
which could reduce the interests of the Borrower or any of the Guarantors in
such Oil and Gas Properties except as set forth in the Engineering Report, (E)
no operating or other agreement to which the Borrower or any of the Guarantors
is a party or by which the Borrower or any of the Guarantors is bound affecting
any part of such Oil and Gas Properties requires the Borrower or any of the
Guarantors to bear any of the costs relating to such Oil and Gas Properties
greater than the record title interest of the Borrower or any of the Guarantors
in such portion of the such Oil and Gas Properties as set forth in such
Engineering Report, except in the event the Borrower or any of the Guarantors is
obligated under an operating agreement to assume a portion of a defaulting
party’s share of costs, and (F) the Borrower’s and the Guarantors’ ownership of
the Hydrocarbons and the undivided interests in the Oil and Gas Properties as
specified in such Engineering Report (i) will, after giving full effect to all
Permitted Liens, afford the Borrower or the applicable Guarantor not less than
those net interests (expressed as a fraction, percentage or decimal) in the
production from or which is allocated to such Hydrocarbons specified as net
revenue interest in such Engineering Report and (ii) will cause the Borrower or
the applicable Guarantor to bear not more than that portion (expressed as a
fraction, percentage or decimal), specified as working interest in such
Engineering Report, of the costs of drilling, developing and operating the wells
identified in such Engineering Report or identified in the exhibits to the
Mortgages encumbering such Oil and Gas Properties (except for any increases in
working interest with a corresponding increase in the net revenue interest in
such Oil and Gas Property) other than any discrepancy disclosed by the Borrower
or such Guarantor in writing to the Administrative Agent at or prior to the
delivery of such Engineering Report. Notwithstanding anything herein to the
contrary, if the Administrative Agent is notified of such discrepancy, then the
Borrower shall promptly (but in any event within 10 days after such original
Engineering Report was required to be delivered or such longer period as the
Administrative Agent may agree in its sole discretion) deliver an updated
Internal Engineering Report (or an Independent Engineering Report if the
original Engineering Report was required to be an Independent Engineering
Report) taking into account such discrepancy.

 

(c)                Interim Redeterminations. In addition to the scheduled
Borrowing Base redeterminations provided for in Section 2.02(b), the Borrowing
Base may be further redetermined by the Lenders as follows, in each case, based
on such information as the Administrative Agent and the Lenders deem relevant
(but in accordance with Section 2.02(e)):

 

 -37-

 

(i)                 the Administrative Agent may, and shall at the request of
the Required Lenders, make one redetermination of the Borrowing Base during any
six-month period between scheduled redeterminations; provided that, such
redetermination may not be exercised prior to the end of the Protected Period;

 

(ii)               upon any violation of the Asset Coverage Ratio under Section
6.18 during the Protected Period, the Administrative Agent shall make a
redetermination of the Borrowing Base;

 

(iii)             prior to the end of the Protected Period, the Administrative
Agent shall, at the request of the Borrower, make a redetermination of the
Borrowing Base; provided that, (A) such redetermination under this clause (iii)
may not be exercised by the Borrower more than one time during the Protected
Period, (B) no such interim redetermination of the Borrowing Base may result in
a lower Borrowing Base than the Borrowing Base in effect immediately prior to
such redetermination, and (C) the Lenders shall not be required to increase the
Borrowing Base in connection with such redetermination request; and

 

(iv)             the Administrative Agent shall, at the request of the Borrower,
make one redetermination of the Borrowing Base during any six-month period
between scheduled redeterminations; provided that, such redetermination under
this clause (iv) may not be exercised prior to the end of the Protected Period.

 

For the avoidance of doubt, such additional redeterminations of the Borrowing
Base shall not constitute nor be construed as a consent to any transaction or
proposed transaction that would not be permitted under the terms of this
Agreement. The party requesting the redetermination under this paragraph (c)
shall give the other party at least 10 days’ prior written notice that a
redetermination of the Borrowing Base pursuant to this paragraph (c) is to be
performed (or such shorter period as the Administrative Agent and the Borrower
may agree to in their sole discretion). In connection with any redetermination
of the Borrowing Base under this Section 2.02(c), the Borrower shall provide the
Administrative Agent and the Lenders with such information regarding the
Borrower and the Guarantors’ business (including, without limitation, its Oil
and Gas Properties, the Proven Reserves, and production relating thereto) as the
Administrative Agent or any Lender may reasonably request; provided that, in the
case of requests for an increase to the Borrowing Base of an amount in excess of
5% of the Borrowing Base then in effect, the request of an updated Independent
Engineering Report is deemed to be reasonable. The Administrative Agent shall
promptly notify the Borrower in writing of each redetermination of the Borrowing
Base pursuant to this Section 2.02(c) and the amount of the Borrowing Base as so
redetermined.

 

(d)               Mandatory Reductions.

 

(i)                 If any Trigger Event has the effect of causing the sum of
(A) the BB Value of all Dispositions of Oil and Gas Properties made since either
the Closing Date or, after the end of the Protected Period, the date of the most
recent scheduled Borrowing Base redetermination, as applicable, (including such
Trigger Event), and (B) the BB Value of BB Hedges which have been subject of any
Hedge Event since either the Closing Date or, after the end of the Protected
Period, the date of the most recent scheduled Borrowing Base redetermination, as
applicable (including such Trigger Event) to exceed 5% of the Borrowing Base
then in effect, then effective as of the applicable Trigger Event Date, the
Borrowing Base shall be automatically reduced by the BB Value of Oil and Gas
Properties and/or BB Hedges, as applicable, that are covered by such Trigger
Event as determined by the Administrative Agent (unless otherwise instructed by
the Required Lenders). If any notice event is triggered under Section 6.01(g) as
to any Lien, then effective as of the date such notice is delivered to the
Administrative Agent, the Borrowing Base shall be automatically reduced by the
BB Value attributed to such Lien. For the avoidance of doubt, the mandatory
reduction in the Borrowing Base required under this clause (d) shall

 

 -38-

 

not constitute nor be construed as a consent to any transaction or proposed
transaction that would not be permitted under the terms of this Agreement.

 

(ii)               Notwithstanding anything to the contrary set forth in clause
(i) above, in the event that the Loan Parties sell the Mid-Con Assets during the
Protected Period, either the Borrower or the Required Lenders may request a
Borrowing Base redetermination; provided that (A) in the event that 100% of the
consideration received in respect of such Disposition is in cash, such
redetermination may not result in a reduction of the Borrowing Base in an amount
in excess of $35,000,000 and (B) in the event that less than 100% of the
consideration received in respect of such Disposition is in cash, such
redetermination may not result in a reduction of the Borrowing Base in an amount
in excess of the lesser of (1) $35,000,000 divided by the percentage of the
consideration received in respect of such Disposition in cash and (2)
$50,000,000.

 

(e)                Standards for Redetermination. Each redetermination of the
Borrowing Base by the Administrative Agent and the Lenders pursuant to this
Section 2.02 shall be made (i) in the sole discretion of the Administrative
Agent and the Lenders (but in accordance with the other provisions of this
Section 2.02(e)), (ii) in accordance with the Administrative Agent’s and the
Lenders’ customary internal standards and practices for valuing and
redetermining the value of Oil and Gas Properties in connection with reserve
based oil and gas loan transactions, (iii) in conjunction with the most recent
Independent Engineering Report or Internal Engineering Report, as applicable, or
other information received by the Administrative Agent and the Lenders relating
to the Proven Reserves of the Borrower and the Guarantors, and (iv) based upon
the estimated value of the Proven Reserves owned by the Borrower and the
Guarantors as determined by the Administrative Agent and the Lenders. In valuing
and redetermining the Borrowing Base, the Administrative Agent and the Lenders
may also consider the business, financial condition, and Indebtedness
obligations of the Borrower and the Guarantors and such other factors as the
Administrative Agent and the Lenders customarily deem appropriate, including
without limitation, commodity price assumptions, projections of production,
operating expenses, general and administrative expenses, capital costs, working
capital requirements, liquidity evaluations, dividend payments, environmental
costs, and legal costs. In that regard, the Borrower acknowledges that the
determination of the Borrowing Base contains a value cushion (market value in
excess of loan value), which is essential for the adequate protection of the
Administrative Agent and the Lenders. Subject to the last sentence of Section
5.08(a), to the extent a Proven Reserve is not encumbered by an Acceptable
Security Interest, such Proven Reserve shall not be included or considered for
inclusion in the Borrowing Base to the extent an Acceptable Security Interest
thereon would be necessary to cause the Administrative Agent to have an
Acceptable Security Interest in (x) at least 95% (by value) of the Proven
Reserves and the Oil and Gas Properties relating thereto, (y) 90% (by value) of
the Loan Parties’ other Specified Properties, and (z) 100% (by value) of the
Original Mortgaged Properties (other than such Original Mortgaged Properties
which are Disposed of as permitted under Section 6.04(c)). At all times after
the Administrative Agent has given the Borrower notification of a
redetermination of the Borrowing Base under this Section 2.02, the Borrowing
Base shall be equal to the redetermined amount or such lesser amount designated
by the Borrower and disclosed in writing to the Administrative Agent and the
Lenders until the Borrowing Base is subsequently redetermined in accordance with
this Section 2.02; provided that the Borrower shall not request that the
Borrowing Base be reduced to a level that would result in a Borrowing Base
Deficiency (without giving effect to the proviso in the definition thereof).
Notwithstanding anything herein to the contrary, (x) to the extent the
redetermined Borrowing Base is less than or equal to the Borrowing Base in
effect prior to such redetermination, such redetermined Borrowing Base must be
approved by the Required Lenders, and (y) to the extent the redetermined
Borrowing Base is greater than the Borrowing Base in effect prior to such
redetermination, such redetermined Borrowing Base must be approved by all of the
Lenders.

 

 -39-

 

Section 2.03         Method of Borrowing.

 

(a)                Notice. Each Borrowing shall be made pursuant to the
applicable Notice of Borrowing given by Borrower to Administrative Agent not
later than (i) in the case of the Borrowings to be made on the Closing Date (y)
1:00 p.m. (Cleveland, Ohio time) on the second Business Day before the date of
the proposed Borrowing, in the case of a Eurodollar Rate Advance or (z) 12:00
noon (Cleveland, Ohio time) on the Business Day of the proposed Borrowing, in
the case of a Reference Rate Advance or (ii) in the case of all Borrowings to be
made after the Closing Date, (y) 1:00 p.m. (Cleveland, Ohio time) on the third
Business Day before the date of the proposed Borrowing, in the case of a
Eurodollar Rate Advance or (z) 12:00 noon (Cleveland, Ohio time) on the Business
Day of the proposed Borrowing, in the case of a Reference Rate Advance, which
shall give to each Lender prompt notice of such proposed Borrowing, by facsimile
or by electronic mail. Each Notice of Borrowing shall be by facsimile or by
electronic mail (with a PDF file of the executed Notice of Borrowing attached),
specifying (i) the requested date of such Borrowing (which shall be a Business
Day), (ii) the requested Type of Advances comprising such Borrowing, (iii) the
aggregate amount of such Borrowing, and (iv) if such Borrowing is to be
comprised of Eurodollar Rate Advances, the requested Interest Period for each
such Advance; provided that, all Borrowings to be made on the Closing Date shall
consist only of Reference Rate Advance (which may, subject to the terms of this
Agreement, be thereafter Converted into Eurodollar Rate Advances) unless a
breakfunding agreement reasonably satisfactory to the Administrative Agent has
been executed by the Borrower concurrent with the delivery of such Notice of
Borrowing. In the case of a proposed Borrowing comprised of Eurodollar Rate
Advances, the Administrative Agent shall promptly notify each Lender of the
applicable interest rate under Section 2.09(b). Each Lender shall, before 2:00
p.m. (Cleveland, Ohio time) on the date of such Borrowing, make available for
the account of its applicable Lending Office to the Administrative Agent at its
address referred to in Section 9.09, or such other location as the
Administrative Agent may specify by notice to the Lenders, in same day funds,
such Lender’s pro rata share of such Borrowing. After the Administrative Agent’s
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article III, the Administrative Agent will make such funds available to
the Borrower at its account with the Administrative Agent or as otherwise
directed by the Borrower with written notice to the Administrative Agent.

 

(b)               Conversions and Continuations. In order to elect to Convert or
continue an Advance under this paragraph, the Borrower shall deliver an
irrevocable Notice of Conversion or Continuation to the Administrative Agent at
the Administrative Agent’s office no later than 12:00 noon (Cleveland, Ohio
time) (i) on the Business Day of the proposed Conversion date in the case of a
Conversion to a Reference Rate Advance and (ii) at least three Business Days in
advance of the proposed Conversion or continuation date in the case of a
Conversion to, or a continuation of, a Eurodollar Rate Advance. Each such Notice
of Conversion or Continuation shall be in writing or by facsimile or by
electronic mail (with a PDF file of the executed Notice of Conversion or
Continuation attached), specifying (i) the requested Conversion or continuation
date (which shall be a Business Day), (ii) the amount and Type of the Advance to
be Converted or continued, (iii) whether a Conversion or continuation is
requested and, if a Conversion, into what Type of Advance, and (iv) in the case
of a Conversion to, or a continuation of, a Eurodollar Rate Advance, the
requested Interest Period. Promptly after receipt of a Notice of Conversion or
Continuation under this paragraph, the Administrative Agent shall provide each
Lender with a copy thereof and, in the case of a Conversion to or a continuation
of a Eurodollar Rate Advance, notify each Lender of the applicable interest rate
under Section 2.09(b). The portion of Advances comprising part of the same
Borrowing that are Converted to Advances of another Type shall constitute a new
Borrowing.

 

(c)                Certain Limitations. Notwithstanding anything to the contrary
contained in paragraphs (a) and (b) above:

 

 -40-

 

(i)                 at no time shall there be more than ten Interest Periods
applicable to outstanding Eurodollar Rate Advances;

 

(ii)               if any Lender shall, at least one Business Day before the
date of any requested Borrowing, Conversion, or continuation, notify the
Administrative Agent that the introduction of any Legal Requirement after the
date hereof, or any change in or in the interpretation of any Legal Requirement
as in effect on the date hereof, makes it unlawful, or that any central bank or
other Governmental Authority asserts that it is unlawful, for such Lender or its
Lending Office to perform its obligations under this Agreement to make
Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances, the
right of the Borrower to select Eurodollar Rate Advances from such Lender shall
be suspended until such Lender shall notify the Administrative Agent that the
circumstances causing such suspension no longer exist, and the Advance made by
such Lender in respect of such Borrowing, Conversion, or continuation shall be a
Reference Rate Advance;

 

(iii)             if the Administrative Agent is unable to determine the
Eurodollar Rate for Eurodollar Rate Advances comprising any requested Borrowing,
the right of the Borrower to select Eurodollar Rate Advances for such Borrowing
or for any subsequent Borrowing shall be suspended until the Administrative
Agent shall notify the Borrower and the Lenders that the circumstances causing
such suspension no longer exist, and each Advance comprising such Borrowing
shall be a Reference Rate Advance;

 

(iv)             if the Majority Lenders shall, at least one Business Day before
the date of any requested Borrowing, notify the Administrative Agent that the
Eurodollar Rate for Eurodollar Rate Advances comprising such Borrowing will not
adequately reflect the cost to such Lenders of making or funding their
respective Eurodollar Rate Advances, as the case may be, for such Borrowing, the
right of the Borrower to select Eurodollar Rate Advances for such Borrowing or
for any subsequent Borrowing shall be suspended until the Administrative Agent
shall notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist, and each Advance comprising such Borrowing shall be
a Reference Rate Advance;

 

(v)               if the Borrower shall fail to select the duration or
continuation of any Interest Period for any Eurodollar Rate Advances in
accordance with the provisions contained in the definition of “Interest Period”
in Section 1.01 and paragraph (b) above, the Administrative Agent shall
forthwith so notify the Borrower and the Lenders and such Advances shall be made
available to the Borrower on the date of such Borrowing as Eurodollar Rate
Advances with an Interest Period of one month or, if an existing Advance,
Convert into Reference Rate Advances; and

 

(vi)             no Borrowing may be made as, continued as or Converted into,
Eurodollar Rate Advances at any time that a Default has occurred and is
continuing.

 

(d)               Notices Irrevocable. Each Notice of Borrowing and Notice of
Continuation or Conversion delivered by the Borrower hereunder, including its
deemed request for borrowing made hereunder, shall be irrevocable and binding on
the Borrower.

 

(e)                Funding by Lenders; Administrative Agent Reliance. Unless the
Administrative Agent shall have received notice from a Lender before the date of
any Borrowing that such Lender will not make available to the Administrative
Agent such Lender’s Pro Rata Share of any Borrowing, the Administrative Agent
may assume that such Lender has made its Pro Rata Share of such Borrowing
available to the Administrative Agent on the date of such Borrowing in
accordance with Section 2.03(a), and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made its Pro Rata

 

 -41-

 

Share of such Borrowing available to the Administrative Agent, such Lender and
the Borrower severally agree to immediately repay to the Administrative Agent on
demand such corresponding amount, together with interest on such amount, for
each day from the date such amount is made available to the Borrower until the
date such amount is repaid to the Administrative Agent, at (i) in the case of
the Borrower, the interest rate applicable on such day to Advances comprising
such Borrowing and (ii) in the case of such Lender, the lesser of (A) the
greater of the Federal Funds Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation and
(B) the Maximum Rate. If such Lender shall repay to the Administrative Agent
such corresponding amount and interest as provided above, such corresponding
amount so repaid shall constitute such Lender’s Advance as part of such
Borrowing for purposes of this Agreement even though not made on the same day as
the other Advances comprising such Borrowing.

 

(f)                Payments by Borrower; Presumptions by Administrative Agent.
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 Lender 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 Lender,
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 Lender, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Lender, with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
lesser of (i) the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation and (ii) the Maximum Rate.

 

Section 2.04         Termination and Reduction of the Commitments; Aggregate
Maximum Credit Amounts.

 

(a)                Unless previously terminated, the Commitments shall terminate
on the Commitment Termination Date. If at any time the aggregate Maximum Credit
Amounts are terminated or reduced to zero, then the Commitments shall terminate
on the effective date of such termination or reduction.

 

(b)               The Borrower shall have the right, upon at least three
Business Days’ irrevocable notice (provided that, as to a notice of the
termination in whole of the Maximum Credit Amounts, such notice 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) to the
Administrative Agent, to terminate in whole or reduce ratably in part the unused
portion of the aggregate Maximum Credit Amounts; provided that (i) each partial
reduction shall be in the aggregate amount of $5,000,000 or in integral
multiples of $1,000,000 in excess thereof, and (ii) the Borrower shall not
terminate or reduce the aggregate Maximum Credit Amounts if, after giving effect
to any concurrent prepayment of the Advances in accordance with Section 2.05(d),
the total Credit Exposures would exceed the total Commitments.

 

(c)                Any reduction and termination of the Commitments and Maximum
Credit Amounts pursuant to this Section 2.04 shall be applied ratably to each
Lender’s Commitment and Maximum Credit Amount and shall be permanent, with no
obligation of the Lenders to reinstate such Commitments or Maximum Credit
Amounts.

 

Section 2.05         Prepayment of Advances.

 

 -42-

 

(a)                Optional. The Borrower shall have no right to prepay any
principal amount of any Advance except as provided in this Section 2.05(a) and
all notices given pursuant to this Section 2.05(a) shall be irrevocable and
binding upon the Borrower (provided that any such notice as to the repayment in
full of all outstanding Advances 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). Each payment
of any Advance pursuant to this Section 2.05(a) shall be made in a manner such
that all Advances comprising part of the same Borrowing are paid in whole or
ratably in part other than Advances owing to a Defaulting Lender as provided in
Section 2.16. The Borrower may prepay the Advances, after giving by 12:00 noon
(Cleveland, Ohio time), (i) in the case of Eurodollar Rate Advances, at least
three Business Days’ or (ii) in the case of Reference Rate Advances, same
Business Day irrevocable prior written notice to the Administrative Agent
stating the proposed date and aggregate principal amount of such prepayment. If
any such notice is given, the Borrower shall prepay the Advances in whole or
ratably in part in an aggregate principal amount equal to the amount specified
in such notice, together with accrued and unpaid interest to the date of such
prepayment on the principal amount prepaid and amounts, if any, required to be
paid pursuant to Section 2.11 as a result of such prepayment being made on such
date and without payment of any other premium or penalty; provided, however,
that each partial prepayment with respect to: (A) any amounts prepaid in respect
of Eurodollar Rate Advances shall be applied to Eurodollar Rate Advances
comprising part of the same Borrowing; (B) any prepayments made in respect of
Reference Rate Advances shall be made in a minimum amount of $1,000,000 and in
integral multiples of $500,000 in excess thereof, and (C) any prepayments made
in respect of any Borrowing comprised of Eurodollar Rate Advances shall be made
in an aggregate principal amount of at least $2,000,000 and in integral
multiples of $500,000 in excess thereof. Full prepayments of any Borrowing are
permitted without restriction of amounts.

 

(b)               Borrowing Base Deficiency.

 

(i)                 Other than as provided in clauses (ii), (iii) and (iv)
below, if a Borrowing Base Deficiency exists, the Borrower shall, after receipt
of written notice from the Administrative Agent regarding such deficiency, take
any of the following actions (and the failure of the Borrower to take such
actions to remedy such Borrowing Base Deficiency shall constitute an election of
clause (C) below):

 

(A)             deliver, within 20 days after the date such deficiency notice is
received by the Borrower from the Administrative Agent, to the Administrative
Agent written notice indicating the Borrower’s election to prepay Advances or,
if the Advances have been repaid in full, make deposits into the Cash Collateral
Account to provide cash collateral for the Letter of Credit Exposure, such that
the Borrowing Base Deficiency is cured within 30 days after the date such
deficiency notice is received by the Borrower from the Administrative Agent;

 

(B)              (i) deliver, within 20 days after the date such deficiency
notice is received by the Borrower from the Administrative Agent, written notice
to the Administrative Agent indicating the Borrower’s election to pledge as
Collateral for the Secured Obligations additional Oil and Gas Properties
acceptable to the Administrative Agent and the Required Lenders such that the
Borrowing Base Deficiency is cured within 30 days after the date such deficiency
notice is received by the Borrower from the Administrative Agent and (ii)
provide such pledge of additional Oil and Gas Properties within such time
period;

 

(C)              (i) deliver, within 20 days after the date such deficiency
notice is received by the Borrower from the Administrative Agent, written notice
to the Administrative Agent indicating the Borrower’s election to repay the
Advances and make deposits into the Cash Collateral

 

 -43-

 

Account to provide cash collateral for the Letters of Credit, each in five
monthly installments equal to one-fifth of such Borrowing Base Deficiency with
the first such installment due 30 days after the date such deficiency notice is
received by the Borrower from the Administrative Agent (or such earlier date as
agreed to between the Borrower and the Administrative Agent) and each following
installment due 30 days after the preceding installment due date and (ii) make
such payments and deposits within such time periods; or

 

(D)             (i) deliver, within 20 days after the date such deficiency
notice is received by the Borrower from the Administrative Agent, written notice
to the Administrative Agent indicating the Borrower’s election to combine the
options provided in clause (B) and clause (C) above, and also indicating the
amount to be prepaid in installments and the amount to be provided as additional
Collateral, and (ii) make such five equal consecutive monthly installments and
deliver such additional Collateral within the time required under clause (B) and
clause (C) above.

 

For the avoidance of doubt, (x) unless the Borrower delivers the requisite
written notice to the Administrative Agent of its election under clause (B), (C)
or (D) above, the Borrower is deemed to have elected to cure such Borrowing Base
Deficiency as provided in clause (C) above, (y) if a scheduled Borrowing Base
redetermination or a Borrowing Base redetermination allowed under Section
2.02(c) (each, an “Additional Trigger”) occurs during the existence of a
Borrowing Base Deficiency and an incremental Borrowing Base Deficiency amount
results as a result of such Additional Trigger, then the Borrower shall remedy
such incremental Borrowing Base Deficiency pursuant to the terms of this Section
2.05(b)(i), including, if selected by the Borrower, with additional five monthly
installments as to such incremental amount, and (z) in any event, all
outstanding Advances shall be paid in full on the Commitment Termination Date
and all Letter of Credit Exposure shall be Cash Collateralized in the Minimum
Collateral Amount on the Commitment Termination Date.

 

(ii)               If, during the existence of a Borrowing Base Deficiency, any
Loan Party (or the Administrative Agent as loss payee or assignee) receives
Extraordinary Cash Proceeds, whether as one payment or a series of payments,
then the Borrower shall, within three Business Days after receipt of such
proceeds, prepay the Borrowings and Cash Collateralize the Letter of Credit
Exposure, in an aggregate amount equal to the lesser of (i) such Borrowing Base
Deficiency and (ii) 100% of such proceeds.

 

(iii)             If the Borrowing Base is reduced under Section 2.02(d) and
such reduction results in a Borrowing Base Deficiency, then the Borrower shall
(A) with respect to a Disposition of any Oil and Gas Properties, prepay Advances
or, if the Advances have been repaid in full, make deposits into the Cash
Collateral Account to provide cash collateral for the Letter of Credit Exposure,
such that the Borrowing Base Deficiency is cured within one Business Day after
the date the Net Cash Proceeds of such Disposition are received, (B) with
respect to a Hedge Event, prepay Advances or, if the Advances have been repaid
in full, make deposits into the Cash Collateral Account to provide cash
collateral for the Letter of Credit Exposure, such that the Borrowing Base
Deficiency is cured on the Business Day the proceeds of such Hedge Event are
received, and (C) with respect to a reduction in the Borrowing Base as a result
of a notice event triggered under Section 6.01(g), prepay Advances or, if the
Advances have been repaid in full, make deposits into the Cash Collateral
Account to provide cash collateral for the Letter of Credit Exposure, such that
the Borrowing Base Deficiency on account thereof is cured within one Business
Day after such reduction in the Borrowing Base.

 

(iv)             If a Disposition of Specified Properties or a Hedge Event
occurs during the period when a Borrowing Base Deficiency already exists, then
in addition to the requirement to repay the Advances and make deposits into the
Cash Collateral Account to provide cash collateral for the Letters of Credit to
cure any Borrowing Base Deficiency occurring as a result thereof (as provided in
clause (iii)

 

 -44-

 

above), the Borrower shall apply any remaining proceeds resulting from such
Disposition or Hedge Event on the date such proceeds are received as prepayments
of all unpaid monthly installments or payments required under this Section
2.05(b), applied pro rata to such payments.

 

(v)               Each prepayment pursuant to this Section 2.05(b) shall be
accompanied by accrued and unpaid interest on the amount prepaid to the date of
such prepayment and amounts, if any, required to be paid pursuant to
Section 2.11 as a result of such prepayment being made on such date. Each
prepayment under this Section 2.05(b) shall be applied to the Advances as
determined by the Administrative Agent and agreed to by the Lenders in their
sole discretion.

 

(c)                Excess Cash. If, at any time when Credit Exposure is greater
than zero, the Consolidated Cash Balance exceeds the Consolidated Cash Balance
Limit as of the end of the last Business Day of any calendar week, then the
Borrower shall, on the immediately following Consolidated Cash Sweep Date,
prepay the Advances in an aggregate principal amount equal to such excess, and,
if any excess remains after prepaying all of the Advances as a result of the
Letter of Credit Exposure, Cash Collateralize the Letter of Credit Exposure in
an amount equal to such excess. Each prepayment pursuant to this Section 2.05(c)
shall be accompanied by accrued and unpaid interest on the amount prepaid to the
date of such prepayment. Each prepayment under this Section 2.05(c) shall be
applied first to Reference Rate Advances and then to Eurodollar Rate Advances.
Notwithstanding anything to the contrary contained herein, prepayments under
this clause (c) shall not be subject to the reimbursement, indemnity or payment
obligations under Section 2.11.

 

(d)               Reduction of Maximum Credit Amounts. On the date of each
reduction of the aggregate Maximum Credit Amounts pursuant to Section 2.04, the
Borrower agrees to make a prepayment in respect of the outstanding amount of the
Advances, and if the Advances have been repaid in full, make deposits into the
Cash Collateral Account to provide cash collateral for the Letter of Credit
Exposure, such that, the aggregate unpaid principal amount of all Advances plus
the Letter of Credit Exposure that has not been Cash Collateralized does not
exceed the aggregate Commitments, as so reduced. Each prepayment pursuant to
this Section 2.05(d) shall be accompanied by accrued and unpaid interest on the
amount prepaid to the date of such prepayment and amounts, if any, required to
be paid pursuant to Section 2.11 as a result of such prepayment being made on
such date. Each prepayment under this Section 2.05(d) shall be applied first to
Reference Rate Advances and then to Eurodollar Rate Advances.

 

(e)                Ratable Prepayment. Each payment of any Advance pursuant to
this Section 2.05 shall be made in a manner such that all Advances comprising
part of the same Borrowing are paid in whole or ratably in part.

 

Section 2.06         Repayment of Advances. The Borrower shall repay to the
Administrative Agent for the ratable benefit of the Lenders the outstanding
principal amount of each Advance, together with any accrued and unpaid interest
thereon, on the Maturity Date or such earlier date pursuant to Section 7.02 or
Section 7.03.

 

Section 2.07         Letters of Credit.

 

(a)                Commitment for Letters of Credit. Subject to the terms and
conditions set forth in this Agreement, the Issuing Lender agrees, in reliance
upon the agreements of the other Lenders set forth in this Section 2.07, from
time to time on any Business Day during the period from the Closing Date until
the Commitment Termination Date, to issue, increase or extend the Expiration
Date of Letters of Credit for the account of any Loan Party, provided that no
Letter of Credit will be issued, increased, or extended:

 

 -45-

 

(i)                 if such issuance, increase, or extension would cause the
Letter of Credit Exposure to exceed the lesser of (A) $15,000,000 and (B) an
amount equal to (1) the Commitments in effect at such time minus (2) the sum of
the aggregate outstanding amount of all Advances;

 

(ii)               unless such Letter of Credit has an Expiration Date not later
than the earlier of (A) 12 months after its issuance or extension and (B) five
Business Days prior to the Maturity Date (an “Acceptable Letter of Credit
Maturity Date”); provided that, (1) if the Commitments are terminated in whole
pursuant to Section 2.04, the Borrower shall either (A) deposit into the Cash
Collateral Account cash in an amount equal to the Minimum Collateral Amount for
the Letters of Credit which have an expiry date beyond the date the Commitments
are terminated or (B) provide a replacement letter of credit (or other security)
reasonably acceptable to the Administrative Agent and the Issuing Lender in an
amount equal to the Minimum Collateral Amount, and (2) any such Letter of Credit
with a one-year tenor may expressly provide for an automatic extension of one
additional year so long as such Letter of Credit expressly allows the Issuing
Lender, at its sole discretion, to elect not to provide such extension within
the time periods agreed to in the applicable Letter of Credit; provided that, in
any event, such automatic extension may not result in an Expiration Date that
occurs after the fifth Business Day prior to the Maturity Date;

 

(iii)             unless such Letter of Credit is a standby letter of credit not
supporting the repayment of indebtedness for borrowed money of any Person;

 

(iv)             unless such Letter of Credit is in form and substance
acceptable to the Issuing Lender in its sole discretion exercised in good faith;

 

(v)               unless the Borrower has delivered to the Issuing Lender a
completed and executed Letter of Credit Application;

 

(vi)             unless such Letter of Credit is governed by (A) the Uniform
Customs and Practice for Documentary Credits (2007 Revision), International
Chamber of Commerce Publication No. 600, or (B) the International Standby
Practices (ISP98), International Chamber of Commerce Publication No. 590, in
either case, including any subsequent revisions thereof approved by a Congress
of the International Chamber of Commerce and adhered to by the Issuing Lender;

 

(vii)           if any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Issuing
Lender from issuing, increasing or extending such Letter of Credit, or any Legal
Requirement applicable to the Issuing Lender or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing
Lender refrain from, the issuance, increase or extension of letters of credit
generally or such Letter of Credit in particular or shall impose upon the
Issuing Lender with respect to such Letter of Credit any restriction, reserve or
capital requirement (for which the Issuing Lender is not otherwise compensated
hereunder) not in effect on the date hereof, or shall impose upon the Issuing
Lender any unreimbursed loss, cost or expense which was not applicable on the
date hereof and which the Issuing Lender in good faith deems material to it;

 

(viii)         if the issuance, increase or extension of such Letter of Credit
would violate one or more policies of the Issuing Lender applicable to letters
of credit generally;

 

(ix)             if Letter of Credit is to be denominated in a currency other
than Dollars;

 

 -46-

 

(x)               if such Letter of Credit supports the obligations of any
Person in respect of (x) a lease of real property, or (y) an employment contract
if the Issuing Lender reasonably determines that the Borrower’s obligation to
reimburse any draws under such Letter of Credit may be limited; or

 

(xi)             any Lender is at such time a Defaulting Lender hereunder,
unless such Defaulting Lender’s Fronting Exposure as to Letters of Credit has
been fully reallocated or Cash Collateralized pursuant to Section 2.16 below or
the Issuing Lender has entered into other satisfactory arrangements with the
Borrower or such Lender to eliminate the Issuing Lender’s risk with respect to
such Lender.

 

(b)               Requesting Letters of Credit. Each Letter of Credit shall be
issued, increased or extended pursuant to a Letter of Credit Application given
by the Borrower to the Administrative Agent and the Issuing Lender by facsimile,
electronic mail or other writing not later than 12:00 noon (Cleveland, Ohio
time) on the third Business Day before the proposed date of issuance, increase
or extension for the Letter of Credit. Each Letter of Credit Application shall
be fully completed and shall specify the information required therein. Each
Letter of Credit Application shall be irrevocable and binding on the Borrower.
Subject to the terms and conditions hereof, the Issuing Lender shall before 3:00
p.m. (Cleveland, Ohio time) on the date of such Letter of Credit Application
issue, increase or extend such Letter of Credit to the beneficiary of such
Letter of Credit.

 

(c)                Reimbursements for Letters of Credit; Funding of
Participations.

 

(i)                 With respect to any Letter of Credit, in accordance with the
related Letter of Credit Application, the Borrower agrees to pay on the Business
Day the Borrower receives notice of such drawing from the Issuing Bank if such
notice is received by the Borrower prior to 12:00 noon (Cleveland, Ohio time)
or, if such notice is received after 12:00 noon (Cleveland, Ohio time), then on
the Business Day following such notice to the Administrative Agent (the
applicable date, the “LC Payment Date”) on behalf of the Issuing Lender an
amount equal to any amount paid by the Issuing Lender under such Letter of
Credit. Upon the Issuing Lender’s demand for payment under the terms of a Letter
of Credit Application, the Borrower may, with a written notice, request that the
Borrower’s obligations to the Issuing Lender thereunder be satisfied with the
proceeds of an Advance in the same amount (notwithstanding any minimum size or
increment limitations on individual Advances). If the Borrower does not make
such request and does not otherwise make the payments demanded by the Issuing
Lender as required under this Agreement or the Letter of Credit Application,
then the Borrower shall be deemed for all purposes of this Agreement to have
requested such an Advance in the same amount and the transfer of the proceeds
thereof to satisfy the Borrower’s obligations to the Issuing Lender, and the
Borrower hereby unconditionally and irrevocably authorizes, empowers, and
directs the Lenders to make such Advance, to transfer the proceeds thereof to
the Issuing Lender in satisfaction of such obligations, and to record and
otherwise treat such payments as an Advance to the Borrower. The Administrative
Agent and each Lender may record and otherwise treat the making of such
Borrowings as the making of a Borrowing to the Borrower under this Agreement as
if requested by the Borrower. Nothing herein is intended to release any of the
Borrower’s obligations under any Letter of Credit Application, but only to
provide an additional method of payment therefor. The making of any Borrowing
under this Section 2.07(c) shall not constitute a cure or waiver of any Default,
other than the payment Default which is satisfied by the application of the
amounts deemed advanced hereunder, caused by the Borrower’s failure to comply
with the provisions of this Agreement or the Letter of Credit Application.

 

(ii)               Each Lender (including the Lender acting as Issuing Lender)
shall, upon notice from the Administrative Agent that the Borrower has requested
or is deemed to have requested an Advance pursuant to Section 2.03 and
regardless of whether (A) the conditions in Section 3.02 have been met, (B) such
notice complies with Section 2.03, or (C) a Default exists, make funds available
to the Administrative Agent for the account of the Issuing Lender in an amount
equal to such Lender’s Pro Rata

 

 -47-

 

Share of the amount of such Advance not later than 2:00 p.m. (Cleveland, Ohio
time) on the Business Day specified in such notice by the Administrative Agent
if such notice is sent no later than 11:00 a.m. (Cleveland, Ohio time) on such
day (or not later than 2:00 p.m. (Cleveland, Ohio time) on the immediately
following Business Day if such notice is sent later than 11:00 a.m. (Cleveland,
Ohio time)), whereupon each Lender that so makes funds available shall be deemed
to have made an Advance to the Borrower in such amount. The Administrative Agent
shall remit the funds so received to the Issuing Lender.

 

(iii)             Until all the Lenders shall have made their respective
Advances available to the Administrative Agent pursuant to this Section 2.07 or
the Borrower has otherwise made a payment to the Issuing Lender of all unpaid
Letter of Credit Obligations, (x) the unpaid Letter of Credit Obligations then
due from the Borrower (but in any case, only after the LC Payment Date) shall
bear interest at the lesser of (A) the Default Rate and (B) the Maximum Rate for
the period from the date such payment is required to the date on which such
payment is made and such interest shall be payable as provided in Section
2.09(c) and (y) to the extent the Borrower has not paid such interest or is not
required to pay such interest, then each Lender that has not made the Advances
available to the Administrative Agent pursuant to this Section 2.07(c) agrees to
pay interest on the amount that such Lender was required to make hereunder from
such date such amount was due until the date such amount is paid to the Issuing
Lender (either by such Lender or by the Borrower) at the lesser of (A) the
Federal Funds Rate for such day for the first three days and thereafter the
interest rate applicable to the Advance and (B) the Maximum Rate. Whenever, at
any time after the Administrative Agent has received from any Lender such
Lender’s Advance, the Administrative Agent receives any payment on account
thereof, the Administrative Agent will pay to such Lender its participating
interest in such amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender’s Advance was
outstanding and funded), which payment shall be subject to repayment by such
Lender if such payment received by the Administrative Agent is required to be
returned. Each Lender’s obligation to make the Advance pursuant to this Section
2.07 shall be absolute and unconditional and shall not be affected by any
circumstance, including (1) any set-off, counterclaim, recoupment, defense or
other right which such Lender or any other Person may have against the Issuing
Lender, the Administrative Agent or any other Person for any reason whatsoever;
(2) the occurrence or continuance of a Default or the termination of the
Commitments; (3) any breach of this Agreement by any Loan Party or any other
Lender; or (4) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing.

 

(iv)             If at any time, the Commitments shall have expired or shall
have been terminated while any Letter of Credit Exposure is outstanding, each
Lender, at the sole option of the Issuing Lender, shall fund its participation
in such Letters of Credit in an amount equal to such Lender’s Pro Rata Share of
the unpaid amount of the Borrower’s payment obligations under drawn Letters of
Credit. The Issuing Lender shall notify the Administrative Agent, and in turn,
the Administrative Agent shall notify each such Lender of the amount of such
participation, and such Lender will transfer to the Administrative Agent for the
account of the Issuing Lender on the next Business Day following such notice, in
immediately available funds, the amount of such participation. At any time after
the Issuing Lender has made a payment under any Letter of Credit and has
received from any Lender funding of its participation in respect of such payment
in accordance with this clause (iv), if the Administrative Agent receives for
the account of the Issuing Lender any payment in respect of the related Letter
of Credit Exposure or interest thereon (whether directly from the Borrower or
otherwise, including proceeds of cash collateral applied thereto by the
Administrative Agent), the Administrative Agent shall distribute to such Lender
its Pro Rata Share thereof in the same funds as those received by the
Administrative Agent.

 

(d)               Participations. Upon the date of the issuance or increase of a
Letter of Credit, the Issuing Lender shall be deemed to have sold to each other
Lender and each other Lender shall have been deemed

 

 -48-

 

to have purchased from the Issuing Lender a participation in the related Letter
of Credit Obligations equal to such Lender’s Pro Rata Share at such date and
such sale and purchase shall otherwise be in accordance with the terms of this
Agreement. The Issuing Lender shall promptly notify each such participant Lender
by facsimile, telephone, or electronic mail (PDF) of each Letter of Credit
issued or increased and the actual dollar amount of such Lender’s participation
in such Letter of Credit.

 

(e)                Obligations Unconditional. The obligations of the Borrower
under this Agreement in respect of each Letter of Credit shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, notwithstanding the following circumstances:

 

(i)                 any lack of validity or enforceability of any Letter of
Credit Documents;

 

(ii)               any amendment or waiver of or any consent to departure from
any Letter of Credit Documents;

 

(iii)             the existence of any claim, set-off, defense or other right
which any Loan Party may have at any time against any beneficiary or transferee
of such Letter of Credit (or any Persons for whom any such beneficiary or any
such transferee may be acting), the Issuing Lender, any Lender or any other
person or entity, whether in connection with this Agreement, the transactions
contemplated in this Agreement or in any Letter of Credit Documents or any
unrelated transaction;

 

(iv)             any statement or any other document presented under such Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect to
the extent the Issuing Lender would not be liable therefor pursuant to the
following paragraph (g);

 

(v)               payment by the Issuing Lender under such Letter of Credit
against presentation of a draft or certificate which does not comply with the
terms of such Letter of Credit; or

 

(vi)             any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing;

 

provided, however, that nothing contained in this paragraph (e) shall be deemed
to constitute a waiver of any remedies of the Borrower in connection with the
Letters of Credit, including, without limitation, those remedies specified in
paragraph (g) below.

 

(f)                Prepayments of Letters of Credit. In the event that any
Letter of Credit shall be outstanding or shall be drawn and not reimbursed on or
prior to the Acceptable Letter of Credit Maturity Date, the Borrower shall pay
to the Administrative Agent an amount equal to the Minimum Collateral Amount
allocable to such Letter of Credit, such amount to be due and payable on the
Acceptable Letter of Credit Maturity Date, and to be held in the Cash Collateral
Account and applied in accordance with paragraph (h) below.

 

(g)                Liability of Issuing Lender. The Borrower assumes all risks
of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Lender nor any of its officers or directors shall be liable or responsible for:

 

(i)                 the use which may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith;

 

 -49-

 

(ii)               the validity, sufficiency or genuineness of documents, or of
any endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged;

 

(iii)             payment by the Issuing Lender against presentation of
documents which do not comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate reference to the
relevant Letter of Credit; or

 

(iv)             any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit (including the Issuing Lender’s own
negligence),

 

except that the Borrower shall have a claim against the Issuing Lender, and the
Issuing Lender shall be liable to, and shall promptly pay to, the Borrower, to
the extent of any direct, as opposed to consequential, damages suffered by the
Borrower which were caused by the Issuing Lender’s willful misconduct or gross
negligence (as determined in a final, non-appealable judgment of a court of
competent jurisdiction) in determining whether documents presented under a
Letter of Credit comply with the terms of such Letter of Credit. In furtherance
and not in limitation of the foregoing, the Issuing Lender may accept documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.

 

(h)               Cash Collateral Account.

 

(i)                 If the Borrower is required to deposit funds in the Cash
Collateral Account pursuant to Sections 2.05(b), 7.02(b), 7.03(b) or any other
provision under this Agreement, then the Borrower and the Administrative Agent
shall establish the Cash Collateral Account and the Borrower shall execute any
documents and agreements, including the Administrative Agent’s standard form
assignment of deposit accounts, that the Administrative Agent requests in
connection therewith to establish the Cash Collateral Account and grant the
Administrative Agent a first priority (subject to inchoate tax liens), perfected
Lien in such account and the funds therein. The Borrower hereby pledges to the
Administrative Agent and grants the Administrative Agent a security interest in
the Cash Collateral Account, whenever established, all funds held in the Cash
Collateral Account from time to time, and all proceeds thereof as security for
the payment of the Secured Obligations. The Borrower hereby agrees to maintain a
first priority (subject to inchoate tax liens) security interest in all the Cash
Collateral Account and such Cash Collateral as security for the Secured
Obligations and as security for the Defaulting Lenders’ obligation to fund
participations in respect of Letter of Credit Exposure, to be applied pursuant
to Section 2.07(i)(ii) below.

 

(ii)               Funds held in the Cash Collateral Account shall be held as
cash collateral for obligations with respect to Letters of Credit and promptly
applied by the Administrative Agent at the request of the Issuing Lender to any
reimbursement or other obligations under Letters of Credit that exist or occur.
To the extent that any surplus funds are held in the Cash Collateral Account
above the Letter of Credit Exposure during the existence of an Event of Default
the Administrative Agent may (A) hold such surplus funds in the Cash Collateral
Account as cash collateral for the Obligations or (B) apply such surplus funds
to any Obligations in any manner directed by the Majority Lenders. If no Default
exists, then at the Borrower’s written request, the Administrative Agent shall
promptly release any surplus funds held in the Cash Collateral Account above the
Minimum Collateral Amount so long as the release thereof would not result in a
Borrowing Base Deficiency (without giving effect to the proviso set forth in the
definition thereof).

 

(iii)             Funds held in the Cash Collateral Account may be invested in
Liquid Investments maintained with, and under the sole dominion and control of,
the Administrative Agent or in

 

 -50-

 

another investment if mutually agreed upon by the Borrower and the
Administrative Agent, but the Administrative Agent shall have no obligation to
make any investment of the funds therein. The Administrative Agent shall
exercise reasonable care in the custody and preservation of any funds held in
the Cash Collateral Account and shall be deemed to have exercised such care if
such funds are accorded treatment substantially equivalent to that which the
Administrative Agent accords its own property, it being understood that the
Administrative Agent shall not have any responsibility for taking any necessary
steps to preserve rights against any parties with respect to any such funds.

 

(i)                 Defaulting Lender. At any time that there shall exist a
Defaulting Lender, within one Business Day following the written request of the
Administrative Agent or the Issuing Lender (with a copy to the Administrative
Agent) the Borrower shall Cash Collateralize the Issuing Lender’s Fronting
Exposure with respect to such Defaulting Lender (determined after giving effect
to Section 2.16 and any Cash Collateral provided by such Defaulting Lender) in
an amount not less than the Minimum Collateral Amount.

 

(i)                 Grant of Security Interest by Defaulting Lender; Agreement
to Provide Cash Collateral. To the extent cash collateral is provided by any
Defaulting Lender, such Defaulting Lender hereby grants to the Administrative
Agent, for the benefit of the Issuing Lender, and agrees to maintain, a first
priority security interest in all such Cash Collateral as security for such
Defaulting Lender’s obligation to fund participations in respect of Letter of
Credit Obligations, to be applied pursuant to clause (ii) below. Such Defaulting
Lender shall execute any documents and agreements, including the Administrative
Agent’s standard form assignment of deposit accounts, that the Administrative
Agent requests in connection therewith to establish such cash collateral account
and to grant the Administrative Agent a first priority security interest in such
account and the funds therein. If at any time the Administrative Agent
determines that Cash Collateral is subject to any right or claim of any Person
other than the Administrative Agent and the Issuing Lender as herein provided,
or that the total amount of such Cash Collateral is less than the Minimum
Collateral Amount, the Borrower will, promptly upon demand by the Administrative
Agent, pay or provide to the Administrative Agent additional Cash Collateral in
an amount sufficient to eliminate such deficiency (after giving effect to any
Cash Collateral provided by the Defaulting Lender).

 

(ii)               Application. Notwithstanding anything to the contrary
contained in this Agreement, Cash Collateral provided under this Section 2.07(i)
or Section 2.16 in respect of Letters of Credit shall be applied to the
satisfaction of the Defaulting Lender’s obligation to fund participations in
respect of Letter of Credit Exposure (including, as to Cash Collateral provided
by a Defaulting Lender, any interest accrued on such obligation) for which the
Cash Collateral was so provided, prior to any other application of such property
as may otherwise be provided for herein.

 

(iii)             Termination of Requirement. Cash Collateral (or the
appropriate portion thereof) provided to reduce the Issuing Lender’s Fronting
Exposure shall no longer be required to be held as Cash Collateral pursuant to
this Section 2.07(i) following (i) the elimination of the applicable Fronting
Exposure (including by the termination of Defaulting Lender status of the
applicable Lender), or (ii) the determination by the Administrative Agent and
the Issuing Lender that there exists excess Cash Collateral; provided that,
subject to Section 2.16, the Person providing Cash Collateral and the Issuing
Lender may agree that Cash Collateral shall be held to support future
anticipated Fronting Exposure or other obligations; and provided further that to
the extent that such Cash Collateral was provided by the Borrower, such Cash
Collateral shall remain subject to the security interest granted pursuant to the
Loan Documents.

 

(iv)             Letters of Credit Issued for Guarantors. Notwithstanding that a
Letter of Credit issued or outstanding hereunder is in support of any
obligations of, or is for the account of, a Guarantor,

 

 -51-

 

the Borrower shall be obligated to reimburse the Issuing Lender hereunder for
any and all drawings under such Letter of Credit issued hereunder by the Issuing
Lender. The Borrower hereby acknowledges that the issuance of Letters of Credit
for the account of any Guarantor inures to the benefit of the Borrower, and that
the Borrower’s business (indirectly or directly) derives substantial benefits
from the businesses of such other Persons.

 

Section 2.08         Fees.

 

(a)                Commitment Fees. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee at a per
annum rate equal to the Commitment Fee Rate on the daily amount by which (i)
such Lender’s Commitment then in effect exceeds (ii) the sum of such Lender’s
outstanding Advances plus such Lender’s Pro Rata Share of the Letter of Credit
Exposure, from the Closing Date until the Commitment Termination Date; provided
that, no commitment fee shall accrue on the Commitment of a Defaulting Lender
during the period such Lender remains a Defaulting Lender. The commitment fees
shall be due and payable quarterly in arrears on the last day of each March,
June, September, and December commencing on June 30, 2017, and continuing
thereafter through and including the Commitment Termination Date.

 

(b)               Letter of Credit Fees.

 

(i)                 Subject to Section 2.16, the Borrower agrees to pay to the
Administrative Agent, for the pro rata benefit of the Lenders, a per annum
letter of credit fee for each Letter of Credit issued hereunder in an amount
equal to the Applicable Margin then in effect for Eurodollar Rate Advances times
the face amount of such Letter of Credit, during the period such Letter of
Credit is in effect, payable quarterly in arrears on the last day of each March,
June, September, and December commencing on June 30, 2017 and continuing
thereafter through and including the Commitment Termination Date.
Notwithstanding the foregoing, (A) upon the occurrence and during the
continuance of an Event of Default under Section 7.01(a), Section 7.01(c) (but
only as to a breach of Section 5.06(i)), or Section 7.01(e), the foregoing per
annum letter of credit fee shall be increased to the Default Rate, after as well
as before judgment, and (ii) upon the occurrence and during the continuance of
any Event of Default (including under Section 7.01(a) or Section 7.01(e)), upon
the request of the Majority Lenders, the foregoing per annum letter of credit
fee shall be increased to the Default Rate, after as well as before judgment.

 

(ii)               The Borrower also agrees to pay to the Issuing Lender, a
fronting fee with respect to each Letter of Credit issued by the Issuing Lender
hereunder equal to the greater of (x) $700 per annum or (y) 0.25% per annum
times the face amount of such Letter of Credit, during the period such Letter of
Credit is in effect, payable quarterly in arrears on the last day of each March,
June, September, and December commencing on June 30, 2017 and continuing
thereafter through and including the Commitment Termination Date.

 

(iii)             The Borrower also agrees to pay to the Issuing Lender such
other usual and customary fees associated with any transfers, amendments,
drawings, negotiations or reissuances of any Letters of Credit. Such fees shall
be due and payable as requested by the Issuing Lender in accordance with the
Issuing Lender’s then current fee policy.

 

(iv)             The Issuing Lender shall have no obligation to refund any
letter of credit fees previously paid by the Borrower, including any refund
claimed because any Letter of Credit is canceled prior to its Expiration Date.

 

 -52-

 

(c)                Other Fees. The Borrower agrees to pay to KeyBank the fees
provided for in the Fee Letter.

 

Section 2.09         Interest. The Borrower shall pay interest on the unpaid
principal amount of each Advance made by each Lender from the date of such
Advance until such principal amount shall be paid in full, at the following
rates per annum:

 

(a)                Reference Rate Advances. Each Reference Rate Advance shall
bear interest at the Adjusted Reference Rate in effect from time to time plus
the Applicable Margin for Reference Rate Advances in effect from time to time.
The Borrower shall pay to Administrative Agent for the ratable account of each
Lender all accrued but unpaid interest on such Lender’s Reference Rate Advances,
quarterly in arrears, on each March 31st, June 30th, September 30th, and
December 31st commencing on June 30, 2017, on the date such Reference Rate
Advance shall be paid in full and on the Commitment Termination Date.

 

(b)               Eurodollar Rate Advances. Each Eurodollar Rate Advance shall
bear interest during its Interest Period equal to at all times the Eurodollar
Rate for such Interest Period plus the Applicable Margin for Eurodollar Rate
Advances for such period. The Borrower shall pay to the Administrative Agent for
the ratable account of each Lender all accrued but unpaid interest on each of
such Lender’s Eurodollar Rate Advances on the last day of the Interest Period
therefor (and in the case of a Eurodollar Rate Advance with an Interest Period
of more than three months’ duration, on 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), on the date any Eurodollar Rate Advance is
repaid, and on the Commitment Termination Date.

 

(c)                Default Rate. Notwithstanding the foregoing, (i) upon the
occurrence and during the continuance of an Event of Default under Section
7.01(a) or Section 7.01(e), all Obligations shall bear interest, after as well
as before judgment, at the Default Rate and (ii) upon the occurrence and during
the continuance of any Event of Default (other than an Event of Default
addressed in the foregoing clause (i)), upon the request of the Majority
Lenders, all Obligations shall bear interest, after as well as before judgment,
at the Default Rate. Interest accrued pursuant to this Section 2.09(c) and all
interest accrued but unpaid on or after the Commitment Termination Date shall be
due and payable on demand (and if no such demand is made, then due and payable
on the otherwise due dates provided herein or if no such due dates are provided
herein on the last day of each calendar quarter). Interest shall continue to
accrue on the Obligations after the filing by or against any Loan Party of any
petition seeking any relief in bankruptcy or under any Debtor Relief Law.

 

Section 2.10         Illegality. If any Lender in its good faith judgment shall
notify the Borrower that, after the date hereof, the introduction of or any
change in or in the interpretation of any Legal Requirement makes it unlawful,
or that any central bank or other Governmental Authority asserts that it is
unlawful, for such Lender or its applicable Lending Office to perform its
obligations under this Agreement to make, maintain, or fund any Eurodollar Rate
Advances of such Lender then outstanding hereunder, (a) the Borrower shall, no
later than 12:00 noon (Cleveland, Ohio, time) (i) if not prohibited by law, on
the last day of the Interest Period for each outstanding Eurodollar Rate Advance
or (ii) if required by such notice, on the second Business Day following its
receipt of such notice, prepay all of the Eurodollar Rate Advances of such
Lender then outstanding, together with accrued but unpaid interest on the
principal amount prepaid to the date of such prepayment and amounts, if any,
required to be paid pursuant to Section 2.11 as a result of such prepayment
being made on such date, (b) such Lender shall simultaneously make a Reference
Rate Advance to the Borrower on such date in an amount equal to the aggregate
principal amount of the Eurodollar Rate Advances prepaid to such Lender, and
(c) the right of the Borrower to select Eurodollar Rate Advances from such
Lender for any subsequent Borrowing shall

 

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be suspended until such Lender shall notify the Borrower that the circumstances
causing such suspension no longer exist. Each Lender agrees to use commercially
reasonable efforts (consistent with its internal policies and legal and
regulatory restrictions) to designate a different Lending Office if the making
of such designation would avoid the effect of this paragraph and would not, in
the reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender.

 

Section 2.11         Breakage Costs. Upon demand of any Lender (with a copy to
the Administrative Agent) from time to time, the Borrower shall promptly
compensate such Lender for and hold such Lender harmless from any loss, cost or
expense incurred by it as a result of:

 

(a)                any continuation, Conversion, payment or prepayment
(including any deemed payment or repayment and any reallocated repayment to
Non-Defaulting Lenders provided for herein) of any Advance other than a
Reference Rate Advance on a day other than the last day of the Interest Period
for such Advance (whether voluntary, mandatory, automatic, by reason of
acceleration, or otherwise); provided that, the Borrower shall not be required
to compensate such Lender for any such loss, cost or expense incurred by it as a
result of any prepayment made by the Borrower pursuant to Section 2.05(c).

 

(b)               any failure by the Borrower (for a reason other than the
failure of such Lender to make an Advance) to prepay, borrow, continue or
Convert any Advance other than a Reference Rate Advance on the date or in the
amount notified by the Borrower; or

 

(c)                any assignment of an Eurodollar Rate Advance on a day other
than the last day of the Interest Period therefor as a result of a request by
the Borrower pursuant to Section 2.15;

 

including any loss of anticipated profits, any foreign exchange losses and any
loss or expense arising from the liquidation or reemployment of funds obtained
by it to maintain such Advance, from fees payable to terminate the deposits from
which such funds were obtained or from the performance of any foreign exchange
contract. The Borrower shall also pay any customary administrative fees charged
by such Lender in connection with the foregoing. For purposes of calculating
amounts payable by the Borrower to the Lenders under this Section 2.11, the
requesting Lender shall be deemed to have funded the Eurodollar Rate Advances
made by it at the Eurodollar Base Rate used in determining the Eurodollar Rate
for such Advance by a matching deposit or other borrowing in the offshore
interbank market for Dollars for a comparable amount and for a comparable
period, whether or not such Eurodollar Rate Advance was in fact so funded.

 

Section 2.12         Increased Costs.

 

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

 

(i)                 impose, modify, or deem applicable any reserve, special
deposit, compulsory loan, insurance charge, or similar requirement against
assets of, deposits with or for the account of, or credit extended or
participated in by, any Lender (or its applicable Lending Office) (except any
reserve requirement included in the Eurodollar Rate Reserve Percentage) or the
Issuing Lender;

 

(ii)               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; or

 

 -54-

 

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

 

and the result of any of the foregoing shall be to increase the cost to such
Lender (or its applicable Lending Office) or such other Recipient of making,
Converting to, continuing or maintaining any loan or of maintaining its
obligation to make or accept and purchase any such loan, or to increase the cost
to such Lender, the Issuing Lender or such other Recipient of participating in,
issuing or maintaining any Letter of Credit (or of maintaining its obligation to
participate in or to issue any Letter of Credit), or to reduce the amount of any
sum received or receivable by such Lender (or its applicable Lending Office),
the Issuing Lender or such other Recipient hereunder (whether of principal,
interest or any other amount) then, upon request of such Lender, the Issuing
Lender or such other Recipient, the Borrower will pay to such Lender, the
Issuing Lender or such other Recipient, as the case may be, such additional
amount or amounts as will compensate such Lender, the Issuing Lender or such
other Recipient, as the case may be, for such additional costs incurred or
reduction suffered.

 

(b)               Capital/Liquidity Requirements. If any Lender or Issuing
Lender determines that any Change in Law affecting such Lender or Issuing Lender
or any Lending Office of such Lender or such Lender’s or Issuing Lender’s
holding company, if any, regarding capital or liquidity requirements has or
would have the effect of reducing the rate of return on such Lender’s or Issuing
Lender’s capital or on the capital of financial institutions generally,
including such Lender’s or Issuing Lender’s holding company or any corporation
controlling such Lender or the Issuing Lender, if any, as a consequence of this
Agreement, the Commitments of such Lender or the Advances made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Lender, to a level below that which such Lender,
the Issuing Lender, the corporation controlling such Lender or the Issuing
Lender, or such Lender’s or Issuing Lender’s holding company could have achieved
but for such Change in Law (taking into consideration such Lender’s or Issuing
Lender’s policies, the policies of the corporation controlling such Lender or
the Issuing Lender, and the policies of such Lender’s or Issuing Lender’s
holding company with respect to capital adequacy or liquidity), then from time
to time within ten Business Days after written demand by such Lender or the
Issuing Lender, as the case may be, the Borrower shall pay to such Lender or
Issuing Lender, such additional amount or amounts as will compensate such Lender
or the Issuing Lender, the corporation controlling such Lender or the Issuing
Lender, or such Lender’s or Issuing Lender’s holding company for any such
reduction suffered.

 

(c)                Certificate. Any Lender or Issuing Lender claiming
compensation under this Section 2.12 shall furnish to the Borrower and the
Administrative Agent a statement setting forth the additional amount or amounts
necessary to compensate such Lender as specified in paragraphs (a) and (b) of
this Section 2.12 hereunder which shall be determined by such Lender in good
faith and which shall be conclusive in the absence of manifest error. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods. The Borrower shall pay such Lender or Issuing Lender, as
the case may be, the amount shown as due on any such certificate within 10
Business Days after receipt thereof.

 

(d)               Delay in Requests. Failure or delay on the part of any Lender
or Issuing Lender to demand compensation pursuant to this Section 2.12 shall not
constitute a waiver of such Lender’s or such Issuing Lender’s right to demand
such compensation, provided that the Borrower shall not be required to
compensate a Lender or Issuing Lender pursuant to this Section 2.12 for any
increased costs incurred or reductions suffered more than 270 days prior to the
date that such Lender or Issuing Lender, as the case may be, notifies the
Borrower and the Administrative Agent of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or Issuing Lender’s intention
to claim compensation

 

 -55-

 

therefor (except 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).

 

Section 2.13         Payments and Computations.

 

(a)                Payments. All payments of principal, interest, and other
amounts to be made by the Borrower under this Agreement and other Loan Documents
shall be made to the Administrative Agent in Dollars and in immediately
available funds, without setoff, deduction, or counterclaim.

 

(b)               Payment Procedures. The Borrower shall make each payment under
this Agreement and under the Notes not later than 12:00 noon (Cleveland, Ohio
time) on the day when due in Dollars to the Administrative Agent at the location
referred to in the Notes (or such other location as the Administrative Agent
shall designate in writing to the Borrower) in same day funds and, as to
payments of principal, accompanied by a notice of optional payment from the
Borrower, with appropriate insertions and executed by a Responsible Officer of
the Borrower. The Administrative Agent will promptly thereafter, and in any
event prior to the close of business on the day any timely payment is made,
cause to be distributed like funds relating to the payment of principal,
interest or fees ratably (other than amounts payable solely to the
Administrative Agent or a specific Lender pursuant to Sections 2.10, 2.11, 2.12,
2.14, 2.15, and 9.02 and such other provisions herein which expressly provide
for payments to a specific Lender, but after taking into account payments
effected pursuant to Section 7.04) in accordance with each Lender’s applicable
pro rata share to the Lenders for the account of their respective applicable
Lending Offices, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon receipt of other amounts due solely to the Administrative Agent,
the Issuing Lender or a specific Lender, the Administrative Agent shall
distribute such amounts to the appropriate party to be applied in accordance
with the terms of this Agreement.

 

(c)                Non-Business Day Payments. Whenever any payment shall be
stated to be 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 the computation of payment of interest or fees, as the case
may be; provided that if such extension would cause payment of interest on or
principal of Eurodollar Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.

 

(d)               Computations. Computations of interest shall be made by the
Administrative Agent on the basis of, (a) with respect to Eurodollar Rate
Advances and Reference Rate Advances based on the Federal Funds Rate and the
Eurodollar Rate, a year of 360 days and (b) with respect to Reference Rate
Advances based on the Reference Rate, a year of 365/366 days, and (c) with
respect to of all other interest and fees, on the basis of a year of 360 days,
in each case, for the actual number of days (including the first day, but
excluding the last day) occurring in the period for which such interest or fees
are payable. Each determination by the Administrative Agent of an amount of
interest or fees shall be conclusive and binding for all purposes, absent
manifest error.

 

(e)                Sharing of Payments by Lenders. If any Lender shall, by
exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Advances or other
Obligations hereunder resulting in such Lender receiving payment of a proportion
of the aggregate amount of its Advances and accrued but unpaid interest thereon
or other such Obligations greater than its pro rata share thereof as provided
herein, then the Lender receiving such greater proportion shall (a) notify the
Administrative Agent of such fact, and (b) take an assignment of, or purchase
participations in, (in any event, for cash at face value) the Advances and such
other Obligations

 

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of the other Lenders, or make such other adjustments as shall be equitable, 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 but unpaid
interest on their respective Advances and other amounts owing them; 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 (x) any payment made by the Borrower pursuant to and in accordance with
the express terms of this Agreement (including the application of funds arising
from the existence of a Defaulting Lender), or (y) any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Advances or participations in Letter of Credit Exposure to any assignee
or participant, other than to the Borrower or any Subsidiary, or any Affiliate
of any of the foregoing (as to which the provisions of this paragraph shall
apply).

 

Each Loan Party consents to the foregoing and agrees, to the extent it may
effectively do so under applicable Legal Requirement, that any Lender acquiring
a participation pursuant to the foregoing arrangements may exercise against each
Loan Party rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of each Loan Party in the
amount of such participation.

 

Section 2.14         Taxes.

 

(a)                Issuing Lender. For purposes of this Section 2.14, the term
“Lender” includes any Issuing Lender and the term “applicable Legal Requirement”
includes FATCA.

 

(b)               Payments Free of Taxes. Any and all payments by or on account
of any obligation of any Loan Party under any Loan Document shall be made
without deduction or withholding for any Taxes, except as required by applicable
Legal Requirement. If any applicable Legal Requirement 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 Legal Requirement
and, if such Tax is an Indemnified Tax, then the sum payable by the applicable
Loan Party shall be increased as necessary so that after such deduction or
withholding has been made (including such deductions and withholdings applicable
to additional sums payable under this Section) the applicable Recipient receives
an amount equal to the sum it would have received had no such deduction or
withholding been made.

 

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

 

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

 

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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.

 

(e)                Indemnification by the Lenders. Each Lender shall severally
indemnify the Administrative Agent, within 10 days after demand therefor, for
(i) any Indemnified Taxes attributable to such Lender (but only to the extent
that any Loan Party has not already indemnified the Administrative Agent for
such Indemnified Taxes and without limiting the obligation of the Loan Parties
to do so), (ii) any Taxes attributable to such Lender’s failure to comply with
the provisions of Section 9.07 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).

 

(f)                Evidence of Payments. As soon as practicable after any
payment of Taxes by any Loan Party to a Governmental Authority pursuant to this
Section 2.14, such Loan Party shall deliver to the Administrative Agent the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the Administrative Agent.

 

(g)                Status of Lenders.

 

(i)                 Any Lender that is entitled to an exemption from or
reduction of withholding Tax with respect to payments made under any Loan
Document shall deliver to the Borrower and the Administrative Agent, at the time
or times reasonably requested by the Borrower or the Administrative Agent, such
properly completed and executed documentation reasonably requested by the
Borrower or the Administrative Agent as will permit such payments to be made
without withholding or at a reduced rate of withholding. In addition, any
Lender, if reasonably requested by the Borrower or the Administrative Agent,
shall deliver such other documentation prescribed by applicable Legal
Requirement 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 2.14(g)(ii)(A) and (ii)(B) below)
shall not be required if in the Lender’s reasonable judgment such completion,
execution or submission would subject such Lender to any material unreimbursed
cost or expense or would materially prejudice the legal or commercial position
of such Lender.

 

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

 

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

 

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(B)              any Foreign Lender shall, to the extent it is legally entitled
to do so, deliver to the Borrower and the Administrative Agent (in such number
of copies as shall be requested by the recipient) on or prior to the date on
which such Foreign Lender becomes a Lender under this Agreement (and from time
to time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), whichever of the following is applicable: (i) 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, executed copies of IRS Form W-8BEN-E (or IRS Form W-8BEN, as
applicable) 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, as applicable) 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; (ii) executed copies of IRS Form
W-8ECI; (iii) 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 J-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)
executed copies of IRS Form W-8BEN-E (or IRS Form W-8BEN, as applicable); or
(iv) to the extent a Foreign Lender is not the beneficial owner, executed copies
of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E (or IRS
Form W-8BEN, as applicable), a U.S. Tax Compliance Certificate substantially in
the form of Exhibit J-2 or Exhibit J-3, IRS Form W-9, and/or other certification
documents from each beneficial owner, as applicable; provided that if the
Foreign Lender is a partnership and one or more direct or indirect partners of
such Foreign Lender are claiming the portfolio interest exemption, such Foreign
Lender may provide a U.S. Tax Compliance Certificate substantially in the form
of Exhibit J-4 on behalf of each such direct and indirect partner;

 

(C)              any Foreign Lender shall, to the extent it is legally entitled
to do so, deliver to the Borrower and the Administrative Agent (in such number
of copies as shall be requested by the recipient) on or prior to the date on
which such Foreign Lender becomes a Lender under this Agreement (and from time
to time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), executed copies of any other form prescribed by
applicable Legal Requirement 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 Legal Requirement
to permit the Borrower or the Administrative Agent to determine the withholding
or deduction required to be made; and

 

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

 

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amendments made to FATCA after the date of this Agreement.

 

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

 

(h)               Treatment of Certain Refunds. If any party determines, in its
sole discretion, that it has received a refund of any Taxes as to which it has
been indemnified pursuant to this Section 2.14 (including by the payment of
additional amounts pursuant to this Section 2.14), it shall pay to the
indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Section 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 (h) (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this paragraph (h), in no event will the indemnified party be required to pay
any amount to an indemnifying party pursuant to this paragraph (h) the payment
of which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid. This paragraph shall not be construed
to require any indemnified party to make available its Tax returns (or any other
information relating to its Taxes that it deems confidential) to the
indemnifying party or any other Person.

 

(i)                 Survival. Each party’s obligations under this Section 2.14
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.

 

Section 2.15         Mitigation Obligations; Replacement of Lenders.

 

(a)                Designation of a Different Lending Office. If any Lender
requests compensation under Section 2.12, or requires the Borrower to pay any
Indemnified Taxes or additional amounts to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.14, then such
Lender shall (at the request of the Borrower) use reasonable efforts to
designate a different lending office for funding or booking its Advances
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 2.12 or 2.14, as the case may be, in the future, and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

 

(b)               Replacement Lender. If any Lender requests compensation under
Section 2.12 or notifies the Borrower of its inability to make, maintain, or
fund any Eurodollar Rate Advances pursuant to Section 2.10, 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
2.14 and, in each case, such Lender has declined or is unable to designate a
different lending office in accordance with Section 2.15(a), or if any Lender is
a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its
sole expense and effort (and in the case of a Defaulting Lender, the
Administrative Agent may) upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate,

 

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without recourse (in accordance with and subject to the restrictions contained
in, and consents required by, Section 9.07), all of its interests, rights (other
than its existing rights to payments pursuant to Section 2.12 or Section 2.14)
and obligations under this Agreement and the related Loan Documents to an
Eligible Assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment); provided that:

 

(i)                 As to assignments required by the Borrower, the Borrower
shall have paid to the Administrative Agent the assignment fee (if any)
specified in Section 9.07, unless such fee has been waived by the Administrative
Agent;

 

(ii)               such Lender shall have received payment of an amount equal to
the outstanding principal of its applicable Advances and participations in
Letter of Credit Obligations, accrued but unpaid interest thereon, accrued but
unpaid fees and all other amounts payable to it hereunder and under the other
Loan Documents (including any amounts under Section 2.11) from the assignee (to
the extent of such outstanding principal and accrued but unpaid interest and
fees) or the Borrower (in the case of all other amounts);

 

(iii)             in the case of any such assignment resulting from a claim for
compensation under Section 2.12 or such Lender’s inability to make, maintain or
fund Eurodollar Rate Advances pursuant to Section 2.10 or payments required to
be made pursuant to Section 2.14, such assignment will result in a reduction in
such compensation or payments thereafter;

 

(iv)             such assignment does not conflict with any applicable Legal
Requirement; and

 

(v)               with respect to a Non-Consenting Lender, the proposed
amendment, modification, waiver, consent or release with respect to this
Agreement or any other Loan Document has been approved by the Required Lenders,
and such agreement, amendment, waiver, consent or release can be effected as a
result of such assignment (and, if applicable, one or more other assignments)
contemplated by this Section.

 

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower or the Administrative Agent to require such
assignment and delegation cease to apply. Solely for purposes of effecting any
assignment involving a Defaulting Lender or Non-Consenting Lender under this
Section 2.15 and to the extent permitted under applicable Legal Requirements,
each Lender hereby designates and appoints the Administrative Agent as true and
lawful agent and attorney-in-fact, with full power and authority, for and on
behalf of and in the name of such Lender to execute, acknowledge and deliver the
Assignment and Acceptance required hereunder if such Lender is a Defaulting
Lender or Non-Consenting Lender and such Lender shall be bound thereby as fully
and effectively as if such Lender had personally executed, acknowledged and
delivered the same.

 

Section 2.16         Defaulting Lender.

 

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

 

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

 

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(ii)               Defaulting Lender Waterfall. Any payment of principal,
interest, fees or other amounts received by the Administrative Agent for the
account of such Defaulting Lender (whether voluntary or mandatory, at maturity,
pursuant to Article VII or otherwise) or received by the Administrative Agent
from a Defaulting Lender pursuant to Section 7.04 shall be applied at such time
or times as may be determined by the Administrative Agent as follows: first, to
the payment of any amounts owing by such Defaulting Lender to the Administrative
Agent hereunder; second, to the payment on a pro rata basis of any amounts owing
by such Defaulting Lender to the Issuing Lender hereunder; third, to Cash
Collateralize the Issuing Lender’s Fronting Exposure with respect to such
Defaulting Lender in accordance with Section 2.07), if any, with respect to such
Defaulting Lender; fourth, as the Borrower may request (so long as no Default or
Event of Default exists), to the funding of any Advance hereunder in respect of
which such Defaulting Lender has failed to fund its portion thereof as required
by this Agreement, as determined by the Administrative Agent; fifth, if so
determined by the Administrative Agent and the Borrower, to be held in a deposit
account and released pro rata in order to (x) satisfy such Defaulting Lender’s
current or potential future funding obligations with respect to Advances under
this Agreement and (y) Cash Collateralize the Issuing Lender’s future Fronting
Exposure with respect to such Defaulting Lender with respect to future Letters
of Credit issued under this Agreement, in accordance with Section 2.07; sixth,
to the payment of any amounts owing to the Lenders or the Issuing Lender as a
result of any judgment of a court of competent jurisdiction obtained by any
Lender or the Issuing Lender against such Defaulting Lender as a result of such
Defaulting Lender’s breach of its obligations under this Agreement; seventh, so
long as no Default or Event of Default exists, to the payment of any amounts
owing to the Borrower as a result of any judgment of a court of competent
jurisdiction obtained by the Borrower against such Defaulting Lender as a result
of such Defaulting Lender’s breach of its obligations under this Agreement; and
eighth, to such Defaulting Lender or as otherwise directed by a court of
competent jurisdiction; provided that if (x) such payment is a payment of the
principal amount of any Advances or Letter of Credit Obligations in respect of
which such Defaulting Lender has not fully funded its appropriate share, and (y)
such Advances were made or the related Letters of Credit were issued at a time
when the conditions set forth in Section 3.02 were satisfied or waived, such
payment shall be applied solely to pay the Advances of, and Letter of Credit
Obligations owed to, all Non-Defaulting Lenders on the applicable pro rata basis
prior to being applied to the payment of any Advances of, or Letter of Credit
Obligations owed to, such Defaulting Lender until such time as all Advances and
funded and unfunded participations in Letter of Credit Obligations are held by
the Lenders pro rata in accordance with the applicable Commitments without
giving effect to Section 2.16(a)(iv). Any payments, prepayments or other amounts
paid or payable to a Defaulting Lender that are applied (or held) to pay amounts
owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section
2.16 shall be deemed paid to and redirected by such Defaulting Lender, and each
Lender irrevocably consents hereto.

 

(iii)             Certain Fees.

 

(A)             No Defaulting Lender shall be entitled to receive any commitment
fee for any period during which that Lender is a Defaulting Lender (and the
Borrower shall not be required to pay any such fee that otherwise would have
been required to have been paid to that Defaulting Lender).

 

(B)              Each Defaulting Lender shall be entitled to receive fees under
Section 2.08(b) for any period during which that Lender is a Defaulting Lender
only to the extent allocable to its Pro Rata Share of the stated amount of
Letters of Credit for which it has provided Cash Collateral pursuant to Section
2.07.

 

(C)              With respect to any fee under Section 2.08(b) not required to
be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the
Borrower shall (x) pay to each Non-

 

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Defaulting Lender that portion of any such fee otherwise payable to such
Defaulting Lender with respect to such Defaulting Lender’s participation in
Letter of Credit Exposure that has been reallocated to such Non-Defaulting
Lender pursuant to clause (iv) below, (y) pay to the Issuing Lender the amount
of any such fee otherwise payable to such Defaulting Lender to the extent
allocable to the Issuing Lender’s Fronting Exposure to such Defaulting Lender,
and (z) not be required to pay the remaining amount of any such fee.

 

(iv)             Reallocation of Participations to Reduce Fronting Exposure. All
or any part of such Defaulting Lender’s participation in Letter of Credit
Obligations shall be reallocated among the Non-Defaulting Lenders in accordance
with their respective Pro Rata Share (calculated without regard to such
Defaulting Lender’s Commitment) but only to the extent that (x) the conditions
set forth in Section 3.02 are satisfied at the time of such reallocation (and,
unless the Borrower shall have otherwise notified the Administrative Agent at
such time, the Borrower shall be deemed to have represented and warranted that
such conditions are satisfied at such time), and (y) such reallocation does not
cause the aggregate Credit Exposure of any Non-Defaulting Lender to exceed such
Non-Defaulting Lender’s Commitment then in effect. Subject to Section 9.29, no
reallocation hereunder shall constitute a waiver or release of any claim of any
party hereunder against a Defaulting Lender arising from that Lender having
become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a
result of such Non-Defaulting Lender’s increased exposure following such
reallocation.

 

(v)               Cash Collateral. If the reallocation described in clause (iv)
above cannot, or can only partially, be effected, the Borrower shall, without
prejudice to any right or remedy available to it hereunder or under Legal
Requirement, Cash Collateralize the Issuing Lender’s Fronting Exposure in
accordance with the procedures set forth in Section 2.07.

 

(b)               Defaulting Lender Cure. If the Borrower, the Administrative
Agent, and the Issuing Lender agree in writing that a Lender is no longer a
Defaulting Lender, the Administrative Agent will so notify the parties hereto,
whereupon as of the effective date specified in such notice and subject to any
conditions set forth therein (which may include arrangements with respect to any
Cash Collateral), that Lender will, to the extent applicable, purchase at par
that portion of outstanding Advances of the other Lenders or take such other
actions as the Administrative Agent may determine to be necessary to cause the
Advances and funded and unfunded participations in Letters of Credit to be held
pro rata by the Lenders in accordance with the Commitments (without giving
effect to Section 2.16(a)(iv), whereupon such Lender will cease to be a
Defaulting Lender; provided that no adjustments will be made retroactively with
respect to fees accrued or payments made by or on behalf of the Borrower while
that Lender was a Defaulting Lender; and provided, further, that except to the
extent otherwise expressly agreed by the affected parties, no change hereunder
from Defaulting Lender to Lender will constitute a waiver or release of any
claim of any party hereunder arising from that Lender’s having been a Defaulting
Lender. Notwithstanding the above, the Borrower’s and the Administrative Agent’s
right to replace a Defaulting Lender pursuant to this Agreement shall be in
addition to, and not in lieu of, all other rights and remedies available to the
Borrower or the Administrative Agent against such Defaulting Lender under this
Agreement, at law, in equity or by statute.

 

(c)                Letters of Credit. So long as any Lender is a Defaulting
Lender, the Issuing Lender shall not be required to issue, extend, renew or
increase any Letter of Credit unless it is satisfied that it will have no
Fronting Exposure after giving effect thereto.

 

ARTICLE III
CONDITIONS

 

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Section 3.01         Conditions to Closing and Initial Borrowing. The Existing
Credit Agreement shall be amended and restated in its entirety as set forth
herein and this Agreement shall become effective upon the occurrence of the
following conditions precedent:

 

(a)                Documentation. The Administrative Agent shall have received
the following duly executed by all the parties thereto, in form and substance
reasonably satisfactory to the Administrative Agent, the Issuing Lender and the
Lenders, and, where applicable, in sufficient copies for each Lender:

 

(i)                 this Agreement, a Note payable to each Lender in the amount
of such Lender’s Maximum Credit Amount, if requested by such Lender, the
Guaranty, the Security Agreement, and Mortgages encumbering (A) at least 95% (by
value) of the Proven Reserves and the Oil and Gas Properties relating thereto,
(B) 90% (by value) of the Loan Parties’ other Specified Properties, and (C) 100%
(by value) of the Original Mortgaged Properties;

 

(ii)               Transfer Letters executed in blank by the applicable Loan
Parties (in such number as requested by the Administrative Agent);

 

(iii)             Account Control Agreements to the extent required under
Section 5.17;

 

(iv)             (A) a favorable opinion of the Loan Parties’ counsel dated as
of the date of this Agreement and (B) local counsel opinions in such
jurisdictions where Mortgages need to be filed in order to comply with the
requirements of Section 5.08, in each case, covering matters as the
Administrative Agent may reasonably request;

 

(v)               copies, certified as of the date of this Agreement by a
Responsible Officer of each Loan Party of (A) the resolutions of the Board of
Directors (or other applicable governing body) of such Loan Party approving the
Loan Documents to which it is a party, (B) the partnership agreement, articles
or certificate of incorporation, or certificate of formation (as applicable) and
the limited liability company agreement, operating agreement, partnership
agreement or bylaws (as applicable) of such Loan Party, and (C) all other
documents evidencing other necessary corporate action and Governmental
Approvals, if any, with respect to the Loan Documents to which such Loan Party
is a party;

 

(vi)             certificates of a Responsible Officer of each Loan Party
certifying the names and true signatures of the officers of such Loan Party
authorized to sign this Agreement and the other Loan Documents to which such
Loan Party is a party;

 

(vii)           appropriate UCC-1 Financing Statements covering the Collateral
for filing with the appropriate authorities and any other documents, agreements
or instruments necessary to create an Acceptable Security Interest in such
Collateral;

 

(viii)         certificates evidencing the Equity Interests, if any, required in
connection with the Security Agreement and powers executed in blank for each
such certificate;

 

(ix)             insurance certificates in compliance with Section 5.02 and
otherwise reasonably satisfactory to the Administrative Agent;

 

(x)               certificates of good standing for each Loan Party in each
state in which each such Person is organized, which certificate shall be (A)
dated a date not sooner than 30 days prior to the date of this Agreement (or
such earlier date as agreed to by the Administrative Agent) and (B) otherwise
effective on the Closing Date; and

 

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(xi)             a solvency certificate dated as of the date of this Agreement
from a Responsible Financial Officer of the Borrower in substantially the form
attached as Exhibit K.

 

(b)               Payment of Fees. On the date of this Agreement, the Borrower
shall have paid (i) the fees required by Section 2.08(c), (ii) the upfront fees
payable on the Closing Date to the Administrative Agent for the account of each
Lender in an aggregate amount equal to 0.50% of each such Lender’s Commitment
and (iii) all costs and expenses payable pursuant to Section 9.01(a) to the
extent invoices for such fees, costs, and expenses have been presented to the
Borrower at least two Business Days prior to the Closing Date (it being
understood that this Section 3.01(b) may be satisfied concurrently with the
initial funding of Advances under this Agreement).

 

(c)                Financial Information. The Lenders shall have received (i) a
copy of the annual audit report for the Borrower and its consolidated
Subsidiaries for the fiscal year ending December 31, 2016, including therein the
Borrower’s and its consolidated Subsidiaries’ consolidated balance sheet as of
the end of such fiscal year and the Borrower’s and its consolidated
Subsidiaries’ consolidated statement of income, cash flows, and retained
earnings, in each case certified by an Acceptable Accountant, (ii) the Initial
Engineering Report in form and substance satisfactory to the Administrative
Agent, (iii) a balance sheet of the Borrower and its Subsidiaries assuming
emergence from bankruptcy on April 28, 2017, giving pro forma effect to
Borrowings in amount equal to $0.00 on the Closing Date (it being agreed and
understood that the opening balance sheet attached to the approved Disclosure
Statement shall be deemed satisfactory to the Lenders), and (iv) projections
prepared by management of the Borrower, of balance sheets, income statements and
cash flow statements on a quarterly basis for the first year following the
Closing Date and on an annual basis for the fiscal year ending December 31,
2018.

 

(d)               Security Instruments. The Administrative Agent shall have
received all appropriate evidence required by the Administrative Agent necessary
to determine that the Administrative Agent (for its benefit and the benefit of
the Secured Parties) shall have made arrangements for an Acceptable Security
Interest in the Collateral (which shall include, without duplication, (i) at
least 95% (by value) of the Loan Parties’ Proven Reserves and the Oil and Gas
Properties relating thereto, (ii) 90% (by value) of the Loan Parties’ other
Specified Properties, and (iii) 100% (by value) of the Original Mortgaged
Properties, and (iv) that all actions or filings necessary to protect, preserve
and validly perfect such Liens have been made or arrangements have been made so
that such Liens can be made, taken or obtained, as the case may be, and are in
full force and effect.

 

(e)                Title. Since June 30, 2016, the Administrative Agent shall
not have become aware (i) of any material title defects arising since such date
or (ii) that any title diligence materials reviewed by the Administrative Agent
(or counsels thereto) prior to such date were inaccurate in any material
respect, in the case of clauses (i) and (ii), to the extent the BB Value
attributable to such affected properties exceeds, in the aggregate, 5% of the
initial Borrowing Base as set forth in Section 2.02(a); provided however, any
defects or inaccuracies remedied upon effectiveness of and pursuant to, the Plan
of Reorganization shall not count towards such 5%.

 

(f)                Material Adverse Effect. No event or circumstance that has
had or could reasonably be expected to cause a Material Adverse Effect shall
have occurred, either individually or in the aggregate, since April 28, 2017.

 

(g)                No Proceeding or Litigation; No Injunctive Relief. There
shall be no adversary proceeding pending in the Bankruptcy Court, or litigation
commenced outside of the Chapter 11 Cases that is not stayed pursuant to section
362 of the Bankruptcy Code, seeking to enjoin or prevent the financing or the
transactions contemplated herein.

 

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(h)               Consents, Licenses, Approvals, etc.

 

(i)                 The Administrative Agent shall have received true copies
(certified to be such by the Loan Parties or other appropriate party) of all
material governmental and third party consents, licenses, and approvals
necessary (as determined in the reasonable discretion of the Administrative
Agent) in connection with this Agreement and the transactions contemplated
hereby and all such consents, licenses, and approvals shall be in full force and
effect.

 

(ii)               The Administrative Agent shall have received true copies
(certified to be such by the Loan Parties or other appropriate party) of all
authorizations, consents, and regulatory approvals required, if any, in
connection with the consummation of the Plan of Reorganization.

 

(i)                 USA Patriot Act. The Administrative Agent and the Lenders
shall have received (at least three (3) Business Days prior to Closing Date to
the extent requested at least ten (10) Business Days prior to the Closing Date,
unless the facts related thereto were not disclosed to the Administrative Agent
prior to such 10th Business Day), and be reasonably satisfied in form and
substance with, all documentation and other information required by bank
regulatory authorities under applicable “know-your-customer” and anti-money
laundering rules and regulations, including, but not restricted to, the Patriot
Act.

 

(j)                 Credit Exposure. The Administrative Agent shall be satisfied
that the Loan Parties have utilized all net cash proceeds received pursuant to
clause (k) below and all other unrestricted cash (it being understood that cash
subject to an Account Control Agreement shall not be considered restricted for
purposes of this clause (j)) existing on the balance sheet as of the Closing
Date to reduce the Credit Exposure; provided that the Loan Parties may maintain
a Consolidated Cash Balance of no greater than the Consolidated Cash Balance
Limit.

 

(k)               Equity Proceeds. The Administrative Agent shall have received
evidence reasonably satisfactory to the Administrative Agent that (x) each of
the holders of the Existing Notes shall have exchanged their Existing Notes for
a pro rata share of common equity issued by the Borrower and (y) the Borrower
has received common equity proceeds in an aggregate amount of not less than
$200,000,000.

 

(l)                 [Reserved].

 

(m)             Capital Structure. The Borrower’s capital structure and
financing plan shall be satisfactory to the Administrative Agent (it being
agreed and understood that the capital structure and financing plan contemplated
by and as set forth in the Plan of Reorganization (and any amendments or other
modifications thereto in form and substance reasonably acceptable to the
Administrative Agent and the Majority Lenders) is deemed satisfactory to the
Administrative Agent).

 

(n)               Conditions. The Administrative Agent shall have received a
certificate executed by a Responsible Officer of the Borrower certifying that
the conditions set forth in this Section 3.01 (other than conditions requiring a
determination by the Administrative Agent or the Lenders) have been met.

 

(o)               [Reserved].

 

(p)               Confirmation of Reorganization. The Bankruptcy Court shall
have entered an Order (the “Confirmation Order”) confirming the Plan of
Reorganization (and any amendments or other modifications thereto in form and
substance reasonably acceptable to the Administrative Agent and the Majority
Lenders) in form and substance reasonably acceptable to the Administrative Agent
and the Majority Lenders, and such Order shall be a Final Order. The
Confirmation Order shall authorize and

 

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approve the Credit Extensions under this Agreement and the other Loan Documents
and the performance of the Borrower and the Guarantors’ obligations hereunder
and thereunder.

 

(q)               Other Reorganization Actions. All other actions, documents,
and agreements necessary to implement the Plan of Reorganization shall have been
(or, to the extent contemplated by the Plan of Reorganization to occur after the
effective date of the Plan of Reorganization, shall, as soon as reasonably
practicable after such effective date, be) effected or executed and delivered,
as the case may be, including the final forms of the documents contained in the
Plan of Reorganization, to the required parties and, to the extent required,
filed with the applicable Governmental Units in accordance with applicable Legal
Requirements, and all such documents and agreements shall be reasonably
acceptable to the Administrative Agent and the Majority Lenders, solely as to
provisions that could be reasonably expected to affect the Lenders’ rights,
claims, recoveries, and/or obligations.

 

(r)                 Plan of Reorganization Conditions. Each of the conditions to
effectiveness listed in the Plan of Reorganization shall have been, or
concurrently on the Closing Date shall be, satisfied and shall be in full force
and effect or waived in accordance with the provisions thereof.

 

(s)                Firm Transportation Contracts. The Administrative Agent and
the Lenders shall be reasonably satisfied with the Loan Parties’ firm
transportation contracts, as such contracts may be assumed, rejected, or amended
prior to the Closing Date (the “Firm Transportation Contracts”).

 

(t)                 Notice of Borrowing. The Administrative Agent shall have
received a Notice of Borrowing duly executed by the Borrower in connection with
any Borrowing to be made on the Closing Date.

 

(u)               Matters Relating to Flood Hazard Properties. With respect to
each parcel of real property improved by a Building or Manufactured (Mobile)
Home subject to a Structure Mortgage, the Administrative Agent shall have
received (A) a “life of loan” flood hazard certification from the National
Research Center, or any successor agency thereto and, (B) if such parcel of real
property is located in a special flood hazard area:

 

(i)                 notices to (and confirmation of receipt by) the Borrower as
to the existence of a special flood hazard and, if applicable, the
unavailability of flood hazard insurance under the National Flood Insurance
Program because the community does not participate in the National Flood
Insurance Program; and

 

(ii)               to the extent flood hazard insurance is available in the
community in which the real property is located, a copy of one of the following:
(w) the flood hazard insurance policy, (x) the Borrower’s application for a
flood hazard insurance policy, together with proof of payment of the premium
associated therewith, (y) a declaration page confirming that flood hazard
insurance has been issued to the Borrower or (z) such other evidence of flood
hazard insurance satisfactory to the Administrative Agent.

 

Section 3.02         Conditions Precedent to All Borrowings. The obligation of
each Lender to make an Advance on the occasion of each Borrowing and of the
Issuing Lender to issue, increase, or extend any Letter of Credit and of any
reallocation of Letter of Credit Exposure provided in Section 2.16 shall be
subject to the further conditions precedent that on the date of such Borrowing
or the date of the issuance, increase, or extension of such Letter of Credit or
such reallocation:

 

(a)                the representations and warranties contained in Article IV of
this Agreement and the representations and warranties contained in the Security
Instruments, the Guaranty, and each of the other

 

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Loan Documents are true and correct in all material respects (unless already
qualified by materiality or Material Adverse Change in the text thereof, in
which case, such representations and warranties shall be true and correct in all
respects) on and as of the date of such Borrowing or the date of the issuance,
increase, or extension of such Letter of Credit, before and after giving effect
to such Borrowing or to the issuance, increase, or extension of such Letter of
Credit and to the application of the proceeds from such Borrowing, as though
made on 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 it shall
have been true and correct in all material respects (unless already qualified by
materiality or Material Adverse Change in the text thereof, in which case, such
representations and warranties shall be true and correct in all respects) as of
such earlier date;

 

(b)               no Default has occurred and is continuing or would result from
such Borrowing or from the application of the proceeds therefrom, or would
result from the issuance, increase, or extension of such Letter of Credit;

 

(c)                in the good faith reasonable expectation of the certifying
Responsible Officer of the Borrower and as certified to such in the applicable
Notice of Borrowing, or Letter of Credit Application (i) the Borrower intends to
apply the proceeds of such Credit Extension in such a manner that, and (ii)
after giving effect to the making of such Credit Extension and the application
of the proceeds thereof, the pro forma Consolidated Cash Balance as of the end
of the next Business Day following the Business Day on which such Credit
Extension is to be made will not exceed the Consolidated Cash Balance Limit;

 

(d)               the Borrower and its Subsidiaries shall have entered into
commodity Hedge Contracts hedging notional volumes equal to at least (x) the
Required Hedge Percentage of the production of natural gas and (y) the Required
Hedge Percentage of the production of oil, in each case, from the PDP Reserves
as set forth in the most recently delivered Engineering Report for each month
from the date of such Borrowing or the date of the issuance, increase, or
extension of such Letter of Credit or the date of the reallocation of Letter of
Credit Exposure until the date that is two years after the Closing Date;
provided that this clause (d) shall not be required on and after December 31,
2018. For purposes of this clause (d), the “Required Hedge Percentage” shall
mean the lesser of (A) 50% and (B) an amount (expressed as a percentage) equal
to (1) the aggregate Credit Exposure (after giving pro forma effect to the
Borrowing) over (2) the aggregate Commitments; provided that, the Required Hedge
Percentage shall not exceed the limitations set forth in Section 6.15; and

 

(e)                after giving effect to the making of such Credit Extension,
the Borrower would be in compliance with the financial covenant in Section
6.17(a) as of the most recent fiscal quarter end for which financial statements
have been delivered to the Administrative Agent after giving pro forma effect to
such Credit Extension (which calculation, for the avoidance of doubt, uses
outstanding Indebtedness on the date of such Credit Extension, including such
Credit Extension, and EBITDAX as of such fiscal quarter end); provided that this
clause (e) shall not apply to the initial Advances to be made on the Closing
Date (if any) nor to any Advance made prior to the delivery of financial
statements pursuant to Section 5.06(b) with respect to the fiscal quarter ending
September 30, 2017.

 

Each of: (i) the giving of the applicable Notice of Borrowing or Letter of
Credit Application, (ii) the acceptance by the Borrower of the proceeds of any
Borrowing, (iii) the issuance, increase, or extension of such Letter of Credit,
and (iv) the reallocation of the Letter of Credit Exposure, shall constitute a
representation and warranty by the Borrower that on the date of any Borrowing,
such issuance, increase, or extension of such Letter of Credit or such
reallocation, as applicable, that the foregoing conditions precedent have been
met.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

Each Loan Party represents and warrants as follows:

 

Section 4.01         Existence; Subsidiaries. (a) the Borrower is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware; (b) the Borrower is in good standing and qualified to do business in
each jurisdiction where its ownership or lease of Property or conduct of its
business requires such qualification, except where the failure to be so in good
standing and qualified could not reasonably be expected to result in a Material
Adverse Change; and (c) each Guarantor is duly organized, validly existing, and
in good standing under the laws of its jurisdiction of organization or formation
and in good standing and qualified to do business in each jurisdiction where its
ownership or lease of Property or conduct of its business requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to result in a Material Adverse Change. As of the date hereof, the
Borrower has no Subsidiaries other than those identified in Schedule 4.01.

 

Section 4.02         Power; No Conflicts. The execution and delivery by each
Loan Party and each Subsidiary thereof of the Loan Documents to which each such
Person is a party, in accordance with their respective terms and the Credit
Extensions hereunder do not and will not, by the passage of time, the giving of
notice or otherwise, (a) violate any Legal Requirement relating to any Loan
Party or any Subsidiary thereof, (b) conflict with, result in a breach of or
constitute a default under the articles of incorporation, bylaws or other
organizational documents of any Loan Party or any Subsidiary thereof, (c)
conflict with, result in a breach of or constitute a default under any material
indenture, material agreement or other material instrument to which such Person
is a party or by which any of its properties may be bound or any Governmental
Approval relating to such Person, or (d) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by such Person other than Permitted Liens. The performance by
each Loan Party and each Subsidiary thereof of the Loan Documents to which each
such Person is a party, in accordance with their respective terms and the
transactions contemplated hereby or thereby (other than the Credit Extensions)
do not and will not, by the passage of time, the giving of notice or otherwise,
(a) violate any Legal Requirement relating to any Loan Party or any Subsidiary
thereof except where such violation could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change, (b) conflict
with, result in a breach of or constitute a default under the articles of
incorporation, bylaws or other organizational documents of any Loan Party or any
Subsidiary thereof, (c) conflict with, result in a breach of or constitute a
default under any indenture, agreement or other instrument to which such Person
is a party or by which any of its properties may be bound or any Governmental
Approval relating to such Person except where such conflict, breach or default
could not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Change, or (d) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by such Person other than Permitted Liens.

 

Section 4.03         Authorization and Approvals. No consent, order,
authorization, or approval or other action by, and no notice to or filing with,
any Governmental Authority or any other Person is required for the due
execution, delivery, and performance by any Loan Party that is a party to this
Agreement, the Notes, or the other Loan Documents or the consummation of the
transactions contemplated hereby or thereby, except for (a) the filing of UCC-1
Financing Statements and the recordation of the Mortgages in the appropriate
state and county filing offices, (b) those consents and approvals that have been
obtained or made on or prior to the date hereof and that are in full force and
effect, and (c) such consents, orders, authorizations, approvals, notices or
filings required in connection

 

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with the operation of the business of the Loan Parties the failure to obtain of
which could not reasonably be expected to be adverse in any material respect to
any Secured Party or to result in a material liability of any Loan Party. At the
time of each Credit Extension, provided that the filings above have been duly
consummated, no authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority will be required for such Credit
Extension or the use of the proceeds of such Credit Extension.

 

Section 4.04         Enforceable Obligations. This Agreement, the Notes, and the
other Loan Documents to which any Loan Party is a party have been duly executed
and delivered by such Loan Parties. Each Loan Document is the legal, valid, and
binding obligation of the Borrower and each Guarantor which is a party to it
enforceable against the Borrower and each such Guarantor in accordance with its
terms, except as such enforceability may be limited by any applicable Debtor
Relief Laws.

 

Section 4.05         Financial Condition and Financial Statements.

 

(a)                The Borrower has delivered to the Administrative Agent and
the Lenders financial information delivered pursuant to Section 3.01. All
financial statements delivered pursuant to Section 3.01 or Section 5.06 are (or
will be when delivered) complete and correct in all material respects and fairly
present in all material respects on a consolidated basis the assets, liabilities
and financial position of the Borrower and its Subsidiaries as at such dates,
and the results of the operations and changes of financial position for the
periods then ended (other than customary year-end adjustments for unaudited
financial statements and the absence of footnotes from unaudited financial
statements), in each case, in accordance with GAAP. All such financial
statements, including the related schedules and notes thereto, have been (or
will have been when delivered) prepared in accordance with GAAP. Such financial
statements show (or will show when delivered) all material indebtedness and
other material liabilities, direct or contingent, of the Borrower and its
Subsidiaries as of the date thereof, including material liabilities for taxes,
material commitments, and Indebtedness, in each case, to the extent required to
be disclosed under GAAP. All pro forma financial statements and projections
delivered pursuant to Section 3.01 or Section 5.06 were (or will be when
delivered) prepared in good faith on the basis of the assumptions stated
therein, which assumptions are believed to be reasonable in light of then
existing conditions except that such financial projections and pro forma
statements shall be subject to normal year end closing and audit adjustments (it
being recognized by the Lenders that projections are not to be viewed as facts
and that the actual results during the period or periods covered by such
projections may vary from such projections).

 

(b)               Since the Closing Date, no event or circumstance that has had
or could reasonably be expected to cause a Material Adverse Change has occurred.

 

Section 4.06         True and Complete Disclosure. All written information
(excluding estimates, projections, other projected financial information,
forward looking statements and information of a general economic or industry
nature) heretofore or contemporaneously furnished by or on behalf of the
Borrower and its Subsidiaries in writing to any Lender or the Administrative
Agent for purposes of or in connection with this Agreement, any other Loan
Document or any transaction contemplated hereby or thereby is, and all other
such factual information (excluding estimates, projections, other projected
financial information, forward looking statements and information of a general
economic or industry nature) hereafter furnished by or on behalf of the Borrower
and its Subsidiaries in writing to the Administrative Agent or any of the
Lenders was or shall be, when taken as a whole and as modified or supplemented
by other information so furnished, true and accurate in all material respects on
the date as of which such information was or is dated or certified and did not
or does not contain, when taken as a whole, any untrue statement of a material
fact or omit, when taken as a whole, to state any material fact necessary to
make the statements contained therein not misleading in any material respect at
such time.

 

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All projections, estimates, and pro forma financial information furnished by any
Loan Party were prepared in good faith on the basis of the assumptions believed
in good faith to be reasonable at the time made, which assumptions are believed
to be reasonable in light of then existing conditions except that such financial
projections and statements shall be subject to normal year end closing and audit
adjustments (it being recognized by the Lenders that projections are not to be
viewed as facts or a guarantee of future performance, are subject to significant
uncertainties and contingencies, many of which are beyond the Loan Parties’
control and that the actual results during the period or periods covered by such
projections may vary from such projections and such variations may be material).

 

Section 4.07         Litigation; Compliance with Laws.

 

(a)                There is no pending or, to the knowledge of any Loan Party,
threatened in writing action or proceeding affecting any Loan Party or
Subsidiary thereof before any court, Governmental Authority or arbitrator which
could reasonably be expected to cause a Material Adverse Change other than as
set forth in Schedule 4.07 or which purports to affect the legality, validity,
binding effect or enforceability of this Agreement, any Note, or any other Loan
Document. As of the Closing Date and the date hereof (and after giving effect to
the effective date of the Plan of Reorganization), there is no pending or, to
the knowledge of any Loan Party, threatened in writing action or proceeding
instituted against any Loan Party or any Subsidiary thereof which seeks to
adjudicate any Loan Party or any Subsidiary thereof as bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any Debtor Relief
Law, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or for any substantial part
of its Property.

 

(b)               Each Loan Party and each Subsidiary thereof have complied in
all respects with all statutes, rules, regulations, orders and restrictions of
any Governmental Authority having jurisdiction over the conduct of their
respective businesses or the ownership of their respective Property except where
such failure to comply could not reasonably be expected to result in a Material
Adverse Change.

 

Section 4.08         Use of Proceeds. The proceeds of any Credit Extension will
be used by the Borrower for the purposes described in Section 5.09. No Loan
Party nor any Subsidiary thereof is engaged principally or as one of its
activities in the business of extending credit for the purpose of “purchasing”
or “carrying” any “margin stock” (as each such term is defined or used, directly
or indirectly, in Regulation U). No Loan Party nor any Subsidiary thereof (a) is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U) or (b) will use any
proceeds for the purpose of purchasing or carrying any margin stock or for any
other purpose which would constitute this transaction a “purpose credit”.

 

Section 4.09         Investment Company Act. No Loan Party is an “investment
company” or a company “controlled” by an “investment company” (as each such term
is defined or used in the Investment Company Act of 1940) and no Loan Party nor
any Subsidiary thereof is, or after giving effect to any Credit Extension will
be, subject to any other applicable Legal Requirement which limits its ability
to incur or consummate the transactions contemplated hereby to the extent such
limitations are applicable.

 

Section 4.10         Taxes.

 

(a)                Reports and Payments. All federal and all other material
Returns (as defined below in clause (b) of this Section) required to be filed by
or on behalf of any Loan Party (or with respect to the assets or activities
thereof, in the case of any Loan Party that is disregarded as separate from its
owner for applicable Tax purposes) or any member of a group that joins in the
filing of a consolidated, unitary, combined, affiliated or similar Tax group
that includes a Loan Party (hereafter collectively called the

 

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“Tax Group”) have been duly filed on a timely basis or appropriate extensions
have been obtained and such Returns are and will be true, complete and correct
in all material respects; and all material Taxes payable with respect to the
periods covered by such Returns or on subsequent assessments with respect
thereto or otherwise have or will be paid in full on a timely basis, except in
each case to the extent of Taxes that are being diligently contested in good
faith and reserves have been made in accordance with GAAP. The reserves for
accrued Taxes reflected in the financial statements delivered to the Lenders
under this Agreement are adequate in the aggregate for the payment of all unpaid
Taxes, whether or not disputed, for the period ended as of the date thereof and
for any period prior thereto, and for which the Tax Group may be liable in its
own right, as withholding agent or as a transferee of the assets of, or
successor to, any Person.

 

(b)               Returns Definition. “Returns” in this Section 4.10 shall mean
any U.S. federal, state, or local report, declaration of estimated Tax,
information statement or return relating to, filed, or required to be filed in
connection with, any Taxes, including any information return or report with
respect to backup withholding or other payments of third parties.

 

Section 4.11         ERISA and Employee Matters. Except as could not reasonably
be expected to result in a Material Adverse Change, (a) all Pension Plans are in
compliance with all applicable provisions of ERISA and the Code, (b) no
Termination Event has occurred or is reasonably expected to occur, and (c) there
has been no excise tax imposed under Section 4971 of the Code against any Loan
Party. Based upon GAAP existing as of the date of this Agreement and current
factual circumstances, to the knowledge of the Loan Parties, the annual cost
during the term of this Agreement to the Loan Parties for post-retirement
benefits to be provided to the current and former employees of any Loan Party
under Employee Benefit Plans that are welfare benefit plans (as defined in
Section 3(1) of ERISA) could not, in the aggregate, reasonably be expected to
cause a Material Adverse Change. Except as could not reasonably be expected to
result in a Material Adverse Change, to the knowledge of the Borrower, there are
no pending or threatened in writing strikes, work stoppages or other collective
labor disputes involving its employees or those of its Subsidiaries.

 

Section 4.12         Condition and Maintenance of Property; Casualties. Each
Loan Party and each Subsidiary thereof has good and indefeasible title to all of
its material Properties (other than Oil and Gas Properties, which are addressed
in Section 4.23) (“Other Properties”), free and clear of all Liens except for
Permitted Liens. The Other Properties used or to be used in the continuing
operations of each Loan Party and each Subsidiary thereof are in good repair,
working order and condition, normal wear and tear excepted. Since the Closing
Date, neither the business nor the Other Properties of each Loan Party and each
Subsidiary thereof, taken as a whole, has been materially and adversely affected
as a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking of
Property or cancellation of contracts, Permits, or concessions by a Governmental
Authority, riot, activities of armed forces, or acts of God or of any public
enemy (except to the extent such event is covered by insurance sufficient to
ensure that upon application of the proceeds thereof), which effect could
reasonably be expected to cause a Material Adverse Change.

 

Section 4.13         Compliance with Agreements; No Defaults.

 

(a)                Neither the Borrower nor any Subsidiary of the Borrower is a
party to any indenture, loan, or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate restriction or
provision of applicable Legal Requirement that could reasonably be expected to
result in a Material Adverse Change. No Loan Party or Subsidiary thereof is in
default in any material respect under or with respect to any contract,
agreement, lease, or other instrument to which a Loan Party or Subsidiary
thereof is a party which is continuing and which, if not cured, could reasonably
be expected to result in a Material Adverse Change.

 

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(b)               No Default has occurred and is continuing.

 

Section 4.14         Environmental Condition.

 

(a)                Permits, Etc. Each Loan Party and each Subsidiary thereof
(i) have obtained all Environmental Permits necessary for the ownership and
operation of their respective Properties and the conduct of their respective
businesses; (ii) have at all times been and are in compliance with all terms and
conditions of such Environmental Permits and with all other requirements of
applicable Environmental Laws; (iii) have not received notice of any violation
or alleged violation of any Environmental Law or Environmental Permit; and
(iv) are not subject to any pending or, to the Borrower’s knowledge, threatened
in writing Environmental Claim, except, in each case above, that could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change.

 

(b)               Certain Liabilities. None of the presently or previously owned
or operated Property of any Loan Party or of any of their current or, to any
Loan Party’s knowledge, former Subsidiaries, wherever located, (i) has been
placed on the National Priorities List, the Comprehensive Environmental Response
Compensation Liability Information System list, or their state or local analogs,
or have been otherwise investigated, designated, listed, or identified as a
potential site for removal, remediation, cleanup, closure, restoration,
reclamation, or any other Response under any Environmental Laws which,
individually or in the aggregate, has resulted in or could reasonably be
expected to result in a Material Adverse Change; (ii) is subject to a Lien
arising under or in connection with any Environmental Laws that attaches to any
revenues or to any Property currently owned, leased or operated by the Borrower
or any of the Guarantors, wherever located, which could, individually or in the
aggregate, reasonably be expected to cause a Material Adverse Change; or
(iii) has been the site of any Release of Hazardous Materials from present or
past operations which has caused at the site or at any third party site any
condition that, individually or in the aggregate, has resulted in or could
reasonably be expected to result in the need for a Response that would,
individually or in the aggregate, reasonably be expected to cause a Material
Adverse Change.

 

(c)                Certain Actions. Without limiting the foregoing, (i) all
necessary notices have been properly filed, and no further action is required
under current Environmental Law as to each Response or other restoration or
remedial project undertaken by any Loan Party or any Subsidiary thereof on any
of their presently or formerly owned, leased or operated Property, except as
could not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Change, and (ii) there are no facts, circumstances,
conditions or occurrences with respect to any Property owned, leased or operated
by any Loan Party or any Subsidiary thereof that could reasonably be expected to
form the basis of an Environmental Claim under Environmental Laws that could
reasonably be expected to result in a Material Adverse Change.

 

Section 4.15         Permits, Licenses, Etc. Each Loan Party and each Subsidiary
thereof possesses all authorizations, Permits, and licenses which are material
to the conduct of their business, except to the extent the failure to do so
could not reasonably be expected to result in a Material Adverse Change. Each
Loan Party and each Subsidiary thereof manages and operates its business in all
material respects in accordance with all applicable material Legal Requirements
and good industry practices.

 

Section 4.16         Gas Imbalances, Prepayments. No Loan Party or Subsidiary
thereof (a) is obligated in any material respect by virtue of any prepayment
made under any contract containing a “take-or-pay” or “prepayment” provision or
under any similar agreement to deliver Hydrocarbons produced from or allocated
to any Loan Party’s Oil and Gas Properties at some future date without receiving
full payment therefor at the time of delivery or (b) has produced gas, in any
material amount, subject to balancing rights of third parties or subject to
balancing duties under Legal Requirements in

 

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each case, other than those imbalances which (i) occur in the ordinary course of
business and (ii) do not, in the aggregate, exceed 1% of the value of the Proven
Reserves of the Loan Parties.

 

Section 4.17         Marketing of Production. No material agreements exist that
are not cancelable on 60 days- notice or less without penalty or detriment for
the sale of production from the Borrower’s or the Subsidiaries’ Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) and that (a)
pertain to the sale of production at a fixed price and (b) have a maturity or
expiry date of longer than six (6) months from the date hereof.

 

Section 4.18         Restriction on Liens. None of the Property of any Loan
Party or Subsidiary thereof is subject to any Lien other than Permitted Liens.
No Loan Party or Subsidiary thereof is a party to any agreement or arrangement
(other than this Agreement and the Security Instruments), or subject to any
order, judgment, writ or decree, that either restricts or purports to restrict
its ability to grant Liens to secure the Secured Obligations against their
respective Properties.

 

Section 4.19         Solvency. Before and after giving effect to each Credit
Extension, the Borrower and Guarantors, on a consolidated basis, are Solvent.

 

Section 4.20         Hedging Agreements. Schedule 4.20 sets forth, as of the
date hereof, a true and complete list of all Interest Hedge Agreements,
Hydrocarbon Hedge Agreements, and Hedge Contracts of the Loan Parties, the
material terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes), the net mark to market value thereof, all
credit support agreements relating thereto (including any margin required or
supplied), and the counterparty to each such agreement.

 

Section 4.21         Insurance. The Borrower has, and has caused all of the
Subsidiaries to have insurance as required under Section 5.02.

 

Section 4.22         Sanctions; FCPA. None of (a) the Borrower, any Subsidiary
or, to the knowledge of the Borrower, any of their respective directors,
officers, employees, or any agent or representative 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. The Borrower and its
Subsidiaries are in compliance in all material respects with the FCPA.

 

Section 4.23         Oil and Gas Properties.

 

(a)                Title. Each Loan Party has good and defensible title to all
of its Oil and Gas Properties evaluated in the most recently delivered
Engineering Report (other than any thereof Disposed of in a Disposition
permitted by this Agreement) free and clear of all Liens except for Permitted
Liens and any title deficiencies which are being addressed pursuant to Section
5.11(b). There are no “back-in” or “reversionary” interests held by third
parties which could reduce the interests of a Loan Party in the Oil and Gas
Properties except (i) as set forth on Schedule 4.23 hereto or (ii) ordinary
course revisions to working interests and net revenue interests relating to
payouts under joint operating agreements whose value does not, in the aggregate,
exceed 1% of the Borrowing Base then in effect. No operating or other agreement
to which any Loan Party is a party or by which any Loan Party is bound affecting
any part of the Collateral requires such Loan Party to bear any of the costs
relating to the Collateral greater than the costs associated with the leasehold
interest of such Loan Party in such portion of the Collateral, except in the
event such Loan Party is obligated under an operating agreement to assume a
portion of a defaulting party’s share of costs. Each Mortgage is and will remain
a valid and enforceable lien on the Collateral subject only to the Permitted
Liens. Each Loan Party will preserve its interest in and title to the Collateral

 

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subject to Permitted Liens, and subject to the transactions that are otherwise
permitted under this Agreement.

 

(b)               Status of Leases, Term Mineral Interests and Contracts. All of
the leases and term mineral interests in the Oil and Gas Properties evaluated in
the most recently delivered Engineering Report (other than any thereof Disposed
of in a Disposition permitted by this Agreement and noted to the Administrative
Agent at or prior to delivery of such Engineering Report pursuant to Section
2.02(b)(iv)) are valid, subsisting and in full force and effect, and no Loan
Party has knowledge that a default exists under any of the terms or provisions,
express or implied, of any of such leases or interests or under any agreement to
which the same are subject. All of the material Contracts to which any Loan
Party is a party that relate to the Oil and Gas Properties are in full force and
effect and constitute legal, valid and binding obligations of such Loan Party.
No Loan Party or, to the knowledge of any Loan Party, any other party to any
such material Contract (i) is in breach of or default, or with the lapse of time
or the giving of notice, or both, would be in breach or default, with respect to
any obligations thereunder, whether express or implied, or (ii) has given or
threatened in writing to give notice of any default under or inquiry into any
possible default under, or action to alter, terminate, rescind or procure a
judicial reformation of, any lease in the Oil and Gas Properties or any Contract
except, in each case, as could not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Change.

 

(c)                Production Burdens and Expenses and Revenues. Except for each
Loan Party’s interests in certain Oil and Gas Properties, and except as set
forth on Schedule 4.23, which such Loan Party represents do not constitute a
material portion (with 2% or more being deemed material) of the value of the
Collateral and all other Properties of such Loan Party securing the Secured
Obligations, all of the proceeds from the sale of Hydrocarbons produced from
Realty Collateral are being properly and timely paid to such Loan Party by the
purchasers or other remitters of production proceeds without suspense.

 

(d)               Pricing. The prices being received by each Loan Party for the
production of Hydrocarbons do not violate, in any material respect, any material
Contract or any law or regulation. Except as otherwise permitted herein, where
applicable, all of the wells located on the Oil and Gas Properties and
production of Hydrocarbons therefrom have been properly classified in all
material respects under appropriate governmental regulations.

 

(e)                Gas Regulatory Matters. All applicable Loan Parties have
filed with the appropriate state and federal agencies all necessary rate and
collection filings and all necessary applications for well determinations under
the Natural Gas Act of 1938, as amended, the Natural Gas Policy Act of 1978, as
amended, and the rules and regulations of the Federal Energy Regulatory
Commission (the “FERC”) thereunder, and each such application has been approved
by or is pending before the appropriate state or federal agency.

 

(f)                Drilling Obligations. Except as otherwise permitted
hereunder, there are no obligations under any Oil and Gas Property or Contract
which require the drilling of additional wells or operations to earn or to
continue to hold any of the Oil and Gas Properties covered in the most recently
delivered Engineering Report in force and effect, except those under (i)
immaterial drilling obligations in the ordinary course of business and (ii)
customary continuous operations provisions that may be found in one or more of
the oil and gas and/or oil, gas and mineral leases.

 

(g)                Refund Obligations. No Loan Party has collected any proceeds
from the sale of Hydrocarbons produced from the Oil and Gas Properties covered
in the most recently delivered Engineering Report which are subject to any
material refund obligations other than as previously disclosed in writing to the
Administrative Agent at or prior to the delivery of such Engineering Report.

 

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Section 4.24         Line of Business; Foreign Operations.

 

(a)                The Loan Parties and each Subsidiary thereof have not
conducted and are not conducting any business other than businesses relating to
the acquisition, exploration, development, financing, ownership, operation,
production, maintenance, storage, transportation, gathering, processing and
marketing of Hydrocarbons and the Oil and Gas Properties and related activities.

 

(b)               Each Loan Party and each Subsidiary of any Loan Party does not
own, and has not acquired or made any other expenditure (whether such
expenditure is capital, operating or otherwise) in or related to, any Oil and
Gas Properties located outside of the geographical boundaries of the United
States or in the offshore federal waters of the United States.

 

Section 4.25         [Reserved].

 

Section 4.26         Location of Business and Offices. Each Loan Party’s
principal place of business and chief executive office is located at its address
specified on Schedule 4.26 or at such other location as it may have, by proper
written notice hereunder, advised the Administrative Agent.

 

Section 4.27         Intellectual Property. Each Loan Party and each Subsidiary
thereof either owns or has valid licenses or other rights to use in all
necessary respects all material patents, patent rights, trademarks, trademark
rights, trade names, copyrights, databases, geological data, geophysical data,
engineering data, maps, interpretations and other technical information used in
their business as presently conducted, subject to the limitations contained in
the agreements governing the use of the same, except as could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Change.

 

Section 4.28         Senior Debt Status. The Obligations of each Loan Party and
each Subsidiary thereof under this Agreement and each of the other Loan
Documents ranks and shall continue to rank at least senior in priority of
payment to all subordinated Indebtedness and all senior unsecured Indebtedness
of each such Person and is designated as “senior indebtedness” under all
instruments and documents, now or in the future, relating to all subordinated
Indebtedness and all senior unsecured Indebtedness of such Person.

 

Section 4.29         Flood Hazard Insurance. With respect to each parcel of real
property subject to a Structure Mortgage, the Administrative Agent has received
(a) such flood hazard certifications, notices and confirmations thereof, and
effective flood hazard insurance policies as are described in Section 3.01(w)
with respect to real property collateral on the Closing Date, (b) all flood
hazard insurance policies required hereunder have been obtained and remain in
full force and effect, and the premiums thereon have been paid in full, and (c)
except as the Borrower has previously given written notice thereof to the
Administrative Agent, there has been no redesignation of any real property into
or out of a special flood hazard area.

 

ARTICLE V
AFFIRMATIVE COVENANTS

 

So long as any Note or any amount (other than contingent indemnity obligations
for which no claim has been made) under any Loan Document shall remain unpaid,
any Letter of Credit shall remain outstanding, or any Lender shall have any
Commitment hereunder, each Loan Party agrees, unless the Majority Lenders shall
otherwise consent in writing, to comply with the following covenants.

 

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Section 5.01         Compliance with Laws, Etc. Each Loan Party shall comply,
and cause each of its Subsidiaries to comply, in all respects with all
applicable Legal Requirements except where the failure to comply could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change. Without limiting the generality and coverage of the foregoing,
each Loan Party shall comply, and shall cause each of its Subsidiaries to
comply, with all Environmental Laws and all laws, regulations, or directives
with respect to equal employment opportunity and employee safety in all
jurisdictions in which any Loan Party or any Subsidiary thereof does business
except where the failure to comply could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change. Without
limitation of the foregoing, each Loan Party shall, and shall cause each of its
Subsidiaries to, (a) maintain and possess all authorizations, Permits, licenses,
trademark and copyright registrations owned by such Loan Party or any of its
Subsidiaries, trade names, and rights which are necessary to the conduct of its
business, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Change, and
(b) obtain, as soon as practicable, all consents or approvals required from any
states of the United States (or other Governmental Authorities) necessary to
grant the Administrative Agent an Acceptable Security Interest in its Oil and
Gas Properties and Original Mortgaged Properties to the extent required by
Section 5.08.

 

Section 5.02         Maintenance of Insurance.

 

(a)                Each Loan Party shall, and shall cause each of its
Subsidiaries to, procure and maintain or shall cause to be procured and
maintained continuously in effect policies of insurance issued by companies,
associations or organizations reasonably satisfactory to the Administrative
Agent and in at least such amounts and covering such casualties, risks, perils,
liabilities and other hazards that are usually insured against by companies
similarly situated and engaged in the same or a similar business for the assets
and operations of the Borrower and the Subsidiaries and otherwise reasonably
required by the Administrative Agent.

 

(b)               All certified copies of policies or certificates thereof, and
endorsements and renewals thereof shall be delivered to and retained by the
Administrative Agent each time such a policy of insurance is made effective,
renewed, amended, novated, or otherwise modified. All policies of insurance
shall either have attached thereto a “lender’s loss payable endorsement” for the
benefit of the Administrative Agent, as loss payee in form reasonably
satisfactory to the Administrative Agent or shall name the Administrative Agent
as an additional insured, as applicable. All policies or certificates of
insurance shall set forth the coverage, the limits of liability, the name of the
carrier, the policy number, and the period of coverage. All such policies shall
contain a provision that notwithstanding any contrary agreements between the
Loan Parties and the applicable insurance company, such policies will not be
canceled without at least 30 days’ prior written notice to the Administrative
Agent (or at least 10 days’ for non-payment of premium). In the event that,
notwithstanding the “lender’s loss payable endorsement” requirement of this
Section 5.02, the proceeds of any insurance policy described above are paid to
any Loan Party when an Event of Default has occurred and is continuing, the
Borrower shall deliver such proceeds to the Administrative Agent immediately
upon receipt. Waiver of subrogation shall apply in favor of the Administrative
Agent in connection with any general liability insurance policy of any Loan
Party.

 

(c)                Without limiting the foregoing, the Borrower shall and shall
cause each appropriate Loan Party to (i) maintain, if available, fully paid
flood hazard insurance on all real property that is improved by a Building or
Manufactured (Mobile) Home or a that is located in a special flood hazard area
and that is subject to a Structure Mortgage, on such terms and in such amounts
as required by The National Flood Insurance Reform Act of 1994 or as otherwise
required by the Administrative Agent, (ii) furnish to the Administrative Agent
evidence of renewal (and payment of renewal premiums therefor) of all such

 

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policies prior to the expiration or lapse thereof, and (iii) furnish to the
Administrative Agent prompt written notice of any redesignation of any such
improved real property into or out of a special flood hazard area.

 

Section 5.03         Preservation of Corporate Existence, Etc. Each Loan Party
shall preserve and maintain, and, except as otherwise permitted herein, cause
each of its Subsidiaries to preserve and maintain, its corporate, partnership,
or limited liability company existence, rights, franchises, and privileges, as
applicable, in the jurisdiction of its organization. Each Loan Party shall
qualify and remain qualified, and cause each such Subsidiary to qualify and
remain qualified, as a foreign corporation, partnership, or limited liability
company, as applicable, in each jurisdiction in which qualification is necessary
or desirable in view of its business and operations or the ownership of its
Properties except where the failure to be so qualified could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Change.

 

Section 5.04         Payment of Taxes, Etc. Each Loan Party shall pay and
discharge, and cause each of its Subsidiaries to pay and discharge, before the
same shall become delinquent, (a) all material Taxes, assessments, and
governmental charges or levies imposed upon it or upon its income, profits,
activities or Property, prior to the date on which penalties attach thereto and
(b) all lawful claims that are material which, if unpaid, might by Legal
Requirement become a Lien upon its Property; provided, however, that no Loan
Party and no such Subsidiary shall be required to pay or discharge any such Tax,
assessment, charge, levy, or claim which is being diligently contested in good
faith and by appropriate proceedings, and with respect to which adequate
reserves in conformity with GAAP have been provided.

 

Section 5.05         Visitation Rights; Periodic Meetings. At any reasonable
time and from time to time, upon reasonable prior notice, each Loan Party shall,
and shall cause its Subsidiaries to, permit (a) the Administrative Agent and any
Lender or any of their respective agents, advisors, or other representatives
thereof, acting together, to examine and make copies of and abstracts from the
records and books of account of, and visit and inspect at their reasonable
discretion the Properties of, each Loan Party and any such Subsidiary, and
(b) the Administrative Agent and any Lender or any of their respective agents,
advisors or other representatives thereof, acting together, to discuss the
affairs, finances and accounts of each Loan Party and any such Subsidiary with
any of their respective officers or directors; provided that, unless an Event of
Default has occurred and is continuing, (i) the Borrower shall bear the cost of
only one such inspection per year and (ii) no Loan Party shall be obligated to
reimburse the expenses of any Lender in connection with such inspections that is
not the Administrative Agent. Notwithstanding the foregoing, no Loan Party shall
be required to disclose to the Administrative Agent or any Lender, or any
agents, advisors or other representatives thereof, any written material, (x) the
disclosure of which would cause a breach of any confidentiality provision in the
written agreement governing such material applicable to such Person, (y) which
is the subject of attorney-client privilege or attorney’s work product privilege
asserted by the applicable Person to prevent the loss of such privilege in
connection with such information, or (z) which is a non-financial trade secret
or other proprietary information.

 

Section 5.06         Reporting Requirements. The Borrower shall furnish to the
Administrative Agent and each Lender (or, in the case of clause (w) below, the
Administrative Agent):

 

(a)                Annual Financials. (i) As soon as available and in any event
not later than 90 days after the end of each fiscal year of the Borrower and its
consolidated Subsidiaries, commencing with fiscal year ending December 31, 2017,
a copy of the annual audit report for such year for the Borrower and its
consolidated Subsidiaries, including therein the Borrower’s and its consolidated
Subsidiaries’ consolidated balance sheet as of the end of such fiscal year and
the Borrower’s and its consolidated Subsidiaries’ consolidated statement of
income, cash flows, and retained earnings, in each case certified

 

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by an Acceptable Accountant, and accompanied by a report and opinion thereon by
such Acceptable Accountant prepared in accordance with generally accepted
auditing standards that is not subject to any “going concern” or similar
qualification or exception or any qualification as to the scope of such audit or
with respect to accounting principles followed by the Borrower or any of its
Subsidiaries not in accordance with GAAP, (ii) concurrent with the delivery in
clause (a)(i), (x) any management letters delivered by such accountants to the
Borrower or any Subsidiary in connection with such audit or otherwise, and (y) a
Compliance Certificate executed by a Responsible Officer of the Borrower (the
deliverables described in the foregoing clauses (x) and (y) and clauses (c) and
(g) below, the “Annual Reporting Package”);

 

(b)               Quarterly Financials. (i) As soon as available and in any
event not later than 60 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower and its consolidated Subsidiaries,
(i) commencing with the fiscal quarter ending March 31, 2017, the unaudited
consolidated balance sheet and the statements of income, cash flows, and
retained earnings of the Borrower and its consolidated Subsidiaries for the
period commencing at the end of the previous year and ending with the end of
such fiscal quarter, all in reasonable detail and (ii) concurrent with the
delivery in clause (b)(i), (x) a certificate with respect to such consolidated
statements (subject to year-end audit adjustments) by a Responsible Officer of
the Borrower stating that such financial statements delivered under clause
(b)(i) have been prepared in accordance with GAAP, and (y) commencing with the
fiscal quarter ending September 30, 2017, a Compliance Certificate executed by
the Responsible Officer of the Borrower (the deliverables described in the
foregoing clauses (x) and (y) and clauses (c), (g), and (h) below, the
“Quarterly Reporting Package”);

 

(c)                [Reserved]

 

(d)               Weekly Consolidated Cash Balance Report. So long as any
Advances are outstanding, on each Consolidated Cash Sweep Date, a weekly report
in form reasonably satisfactory to the Administrative Agent detailing the
Consolidated Cash Balance as of the last Business Day of the immediately
preceding calendar week certified by a Responsible Officer of the Borrower.

 

(e)                Oil and Gas Engineering Reports.

 

(i)                 As soon as available but in any event on or before April 1,
2018, and April 1st of each year thereafter, an Independent Engineering Report
dated effective as of the immediately preceding January 1st;

 

(ii)               As soon as available but in any event on or before October 1,
2017, and October 1st of each year thereafter, an Internal Engineering Report or
an Independent Engineering Report dated effective as of the immediately
preceding July 1st;

 

(iii)             Such other information as may be reasonably requested by the
Administrative Agent or any Lender with respect to the Oil and Gas Properties
included or to be included in the Borrowing Base; and

 

(iv)             With the delivery of each Engineering Report, a certificate
from a Responsible Officer of the Borrower certifying that, to the best of his
knowledge and in all material respects: (A) the factual information contained in
the Engineering Report and any other factual information delivered in connection
therewith is true and correct, (B) the Borrower and its Subsidiaries, as
applicable, owns good and defensible title to the Oil and Gas Properties
evaluated in such Engineering Report except as set forth on an exhibit to the
certificate, such Properties are free of all Liens except for Permitted Liens
and such Properties are subject to an Acceptable Security Interest to the extent
required by Section 5.08, (C)

 

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except as set forth on an exhibit to the certificate, on a net basis there are
no gas imbalances, take or pay or other prepayments with respect to its Oil and
Gas Properties evaluated in such Engineering Report which would require the
Borrower or any Guarantor to deliver Hydrocarbons produced from such Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor, (D) none of its Oil and Gas Properties have been sold since the date
of the last Borrowing Base determination except as set forth on an exhibit to
the certificate, which certificate shall list all of its Oil and Gas Properties
sold and in such detail as reasonably required by the Administrative Agent, (E)
attached to the certificate is a list of its Oil and Gas Properties added to and
deleted from the immediately prior Engineering Report and a list showing any
change in working interest or net revenue interest in its Oil and Gas Properties
occurring and the reason for such change, (F) attached to the certificate is a
list of all Persons disbursing proceeds to the Borrower or to any Guarantor, as
applicable, from its Oil and Gas Properties, (G) except as set forth on a
schedule attached to the certificate, (x) at least 95% (by value) of the Proven
Reserves and the Oil and Gas Properties relating thereto and (y) 90% (by value)
of the Loan Parties’ other Oil and Gas Properties evaluated by such Engineering
Report are pledged as Collateral for the Secured Obligations, and (H) to the
extent required by the Administrative Agent or any Lender, attached to the
certificate is a monthly cash flow budget for the six months following the
delivery of such certificate setting forth the Borrower’s projections for
production volumes, revenues, expenses, taxes, budgeted capital expenditures and
working capital requirements during such period.

 

(f)                Hedging Reports. As soon as available and in any event within
60 days after the end of each fiscal quarter, commencing with the quarter ending
June 30, 2017, a report certified by a Responsible Officer of the Borrower in
form reasonably satisfactory to the Administrative Agent prepared by the
Borrower (i) covering each of the Oil and Gas Properties of the Borrower and the
Guarantors and detailing on a quarterly basis, any sales of the Borrower’s or
any Guarantors’ Oil and Gas Properties during each such quarter (other than
sales of Hydrocarbons in the ordinary course of business), (ii) setting forth a
true and complete list of all Hedge Contracts of the Borrower and the Guarantors
and detailing the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark to market
value thereof, all credit support agreements relating thereto (including any
margin required or supplied), and the counterparty to each such agreement;
provided that, such required listing shall, in no event, be construed as
permitting such credit supports which are not permitted under the terms of this
Agreement, and (iii) setting forth a calculation of the Borrower’s compliance or
non-compliance with the volume requirements of Section 6.15(b), including a
detailed description and calculation of the Engineering Report Volumes for the
Hedge Contracts then in effect.

 

(g)                Lease Operating Statements. Concurrently with each delivery
of financial statements under Section 5.06(a) and Section 5.06(b), a Lease
Operating Statement for the trailing 12-month period then ended detailed on a
monthly-basis.

 

(h)               Annual Budget. For each fiscal year, commencing with the
fiscal year ending December 31, 2018, within 60 days after the beginning of such
fiscal year, a copy of the Borrower and its Subsidiaries’ consolidated annual
budget for such fiscal year, including the Borrower’s consolidated cash flow
budget and operating budget, certified as such by a Responsible Officer of the
Borrower.

 

(i)                 Defaults. As soon as possible and in any event within three
Business Days after the occurrence of any Default known to any officer of each
Loan Party or any of its Subsidiaries which is continuing on the date of such
statement, a statement of a Responsible Officer of such Loan Party setting forth
the details of such Default and the actions which any Loan Party or any such
Subsidiary has taken and proposes to take with respect thereto;

 

(j)                 Termination Events. As soon as possible and in any event,
within ten days after any Loan Party obtains knowledge thereof (or such later
date acceptable to the Administrative Agent in its

 

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sole discretion), copies of: (i) any unfavorable determination letter from the
IRS regarding the qualification of an Employee Benefit Plan under Section 401(a)
of the Code, (ii) all notices received by any Loan Party or any ERISA Affiliate
of the PBGC’s intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan, (iii) all notices received by any Loan
Party or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the
imposition of withdrawal liability pursuant to Section 4202 of ERISA, (iv) any
notice of intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA, and (v) a written notice signed
by a Responsible Officer describing the occurrence of any Termination Event
that, in the case of each of clauses (i) through (v), could reasonably be
expected to result in any liability of any Loan Party in excess of $3,000,000.
As soon as practicable, but in no event later than 15 days after the Borrower
provides the written notice described in clause (v) above, the Borrower shall
furnish to the Administrative Agent and each Lender a written notice signed by a
Responsible Officer specifying what action the Borrower or the applicable ERISA
Affiliate is taking or proposes to take with respect to the Termination Event,
and, when known, any action taken or proposed by the Internal Revenue Service,
the Department of Labor or the PBGC with respect thereto;

 

(k)                 Environmental Notices. Promptly upon, and in any event no
later than 10 days after (or such longer period as the Administrative Agent may
agree in its sole discretion), the receipt thereof, or the acquisition of
knowledge thereof, by any Loan Party, a copy of any form of request, claim,
complaint, order, notice, summons or citation received from any Governmental
Authority or any other Person concerning (i) violations or alleged violations of
Environmental Laws, which, in each case, seeks to impose liability therefore in
excess of $5,000,000 or which could otherwise reasonably be expected to cause a
Material Adverse Change, (ii) any action or omission on the part of any of the
Loan Parties or any of their Subsidiaries in connection with Releases of
Hazardous Materials which could reasonably result in each case in the imposition
of liability in excess of $5,000,000 or that could otherwise reasonably be
expected to cause a Material Adverse Change or requiring that action be taken to
respond to or clean up a Release of Hazardous Materials into the Environment and
such action or clean up in each case could reasonably be expected to exceed
$5,000,000 or could reasonably be expected to cause a Material Adverse Change,
including without limitation any information request related to, or notice of,
potential responsibility under CERCLA, or (iii) the filing of a Lien in
connection with obligations arising under Environmental Laws upon, against or in
connection with the Loan Parties, any of their respective Subsidiaries, or any
of their currently leased or owned Property, wherever located, the value of
which Lien in each case could reasonably be expected to exceed $5,000,000;

 

(l)             Other Governmental Notices. Promptly and in any event within
five Business Days after receipt thereof by any Loan Party or Subsidiary thereof
(or by such later date as the Administrative Agent may agree to in its sole
discretion), a copy of any notice, summons, citation, or proceeding seeking to
modify in any material respect, revoke, or suspend any material contract,
license, permit or agreement with any Governmental Authority;

 

(m)               Material Changes. Prompt written notice and in any event
within five Business Days of any condition or event of which any Loan Party or
any Subsidiary thereof has knowledge, which condition or event has resulted or
could reasonably be expected to result in a Material Adverse Change;

 

(n)               Disputes, Etc. Prompt written notice of (i) any claims, legal
or arbitration proceedings, proceedings before any Governmental Authority, or
disputes pending, or to the knowledge of any Loan Party threatened in writing,
or affecting any Loan Party or Subsidiary which, if adversely determined, could
result in a liability to any Loan Party of Subsidiary in an amount in excess of
$5,000,000 or that could otherwise result in a cost, expense or loss to the Loan
Parties or any of their respective Subsidiaries in excess of $5,000,000, or any
material labor controversy of which any Loan Party or Subsidiary has

 

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knowledge resulting in or reasonably considered to be likely to result in a
strike against any Loan Party or Subsidiary thereof and (ii) any claim,
judgment, Lien or other encumbrance (other than a Permitted Lien) affecting any
Property of any Loan Party or Subsidiary thereof if the value of the claim,
judgment, Lien, or other encumbrance affecting such Property shall exceed
$5,000,000;

 

(o)               Other Accounting Reports. Promptly upon receipt thereof, a
copy of each other report or letter submitted to any Loan Party or Subsidiary
thereof by independent accountants in connection with any annual, interim or
special audit made by them of the books of any Loan Party or Subsidiary thereof,
and a copy of any response by any Loan Party or Subsidiary, or the board of
directors (or other applicable governing body) of any Loan Party or Subsidiary,
to such letter or report;

 

(p)               Notices Under Other Loan Agreements. Promptly after the
furnishing thereof, copies of any statement, report or notice furnished to any
Person pursuant to the terms of any indenture, loan or credit or other similar
agreement, with respect to Indebtedness in excess of $5,000,000 (other than this
Agreement) and not otherwise required to be furnished to the Lenders pursuant to
any other provision of this Section 5.06;

 

(q)                 Notice Regarding Early Termination of Hedge Contracts.
Promptly and in any event within one (1) Business Day after any Loan Party
learns of the impending occurrence of any Hedge Event of any Loan Party prior to
the end of its original, nominal term, a statement of a Responsible Officer of
the Borrower describing such Hedge Event;

 

(r)                Production Reports. As soon as available and in any event
within 60 days after the end of each calendar quarter, commencing with the
calendar quarter ended March 31, 2017, a report certified by a Responsible
Officer of the Borrower in form and substance reasonably satisfactory to the
Administrative Agent prepared by the Borrower covering each of the Oil and Gas
Properties of the Borrower and its Subsidiaries and detailing on a monthly basis
(i) the production, revenue, and price information and associated operating
expenses for each such month during such quarter, (ii) commencing with the
fiscal quarter ending June 30, 2017, any changes to any producing reservoir,
production equipment, or producing well during each such month during such
quarter, which changes could cause a Material Adverse Change, (iii) commencing
with the fiscal quarter ending June 30, 2017, any sales of the Borrower’s or any
Subsidiaries’ Oil and Gas Properties during such quarter, and (iv) commencing
with the fiscal quarter ending June 30, 2017, the forecasted production of crude
oil, natural gas, and natural gas liquids, calculated separately, for the 60
months following the end of such calendar quarter;

 

(2)                 USA Patriot Act. Promptly, following a request by any
Lender, all documentation and other information that such Lender reasonably
requests in order to comply with its ongoing obligations under applicable “know
your customer” and anti-money laundering rules and regulations, including the
Patriot Act;

 

(t)               Responsible Officers. Promptly thereafter, written notices to
the Administrative Agent of the departure or employment of any chief executive
officer, chief operating officer, chief financial officers, treasurer, or
president of the Borrower;

 

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

 

(v)              Total Present Value. During the Protected Period,
contemporaneous with the delivery of each Compliance Certificate for the fiscal
quarter periods ending September 30, 2017 and December 31,

 

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2017, the Borrower shall deliver to the Administrative Agent (i) a detailed
calculation, certified by a Responsible Officer of the Borrower, of the Total
Present Value as of the last day of the applicable fiscal quarter, which
calculation must be approved by the Administrative Agent in its sole discretion,
and (ii) such other information as may be requested by the Administrative Agent
with respect to the Oil and Gas Properties included in the Total Present Value
(including, without limitation, any information requested by the Administrative
Agent to reconcile such Total Present Value calculation with the most recently
delivered Engineering Report);

 

(w)               Firm Transportation Contracts. Promptly and in any event
within ten Business Days after receipt thereof by any Loan Party or Subsidiary
thereof (or by such later date as the Administrative Agent may agree to in its
sole discretion), copies of any amendment, modification or supplement to any
Firm Transportation Agreement; and

 

(x)               Other Information. Such other information respecting the
business or Properties, or the condition or operations, financial or otherwise,
of any Loan Party, as the Administrative Agent may from time to time reasonably
request.

 

Materials required to be delivered pursuant to Section 5.06(a)(i) or (b)(i) (to
the extent any such materials are included in materials otherwise filed with the
SEC) shall be deemed to have been delivered hereunder upon such filing with the
SEC on the date of such filing; provided that, the Borrower shall deliver
electronic copies of such materials to the Administrative Agent concurrently
with the delivery of the applicable Annual Reporting Package and Quarterly
Reporting Package with respect thereto. Materials required to be delivered
pursuant to Section 5.06(u) shall be deemed to have been delivered hereunder
when posted to the website of the Borrower or the website of the SEC. In any
event, the Administrative Agent shall have no obligation to request the delivery
or, other than the Compliance Certificates, to maintain copies of the materials
referred to above, and 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
materials.

 

Section 5.07         Maintenance of Property. Each Loan Party shall, and shall
cause each of its Subsidiaries to, maintain their owned, leased or operated
material Property in good condition and repair, normal wear and tear excepted
and other than where the failure to maintain its material Property could not
reasonably be expected to cause a Material Adverse Change. Each Loan Party shall
abstain, and cause each of its Subsidiaries to abstain from, knowingly or
willfully permitting the commission of waste or other injury, destruction, or
loss of natural resources, or the occurrence of pollution, contamination, or any
other condition in, on or about the currently owned, leased or operated Property
involving the Environment that could reasonably be expected to result in any
Response that could reasonably be expected to cause a Material Adverse Change.

 

Section 5.08         Agreement to Pledge; Guaranty.

 

(a)                In connection with each scheduled redetermination of the
Borrowing Base pursuant to Section 2.02(b)(i) or (ii) and each redetermination
of the Borrowing Base resulting in an increase to the Borrowing Base, each Loan
Party shall, and shall cause its Subsidiaries that is a Loan Party to, review
its respective Oil and Gas Properties to ascertain whether such Oil and Gas
Properties are subject to an Acceptable Security Interest. In the event that the
Oil and Gas Properties subject to an Acceptable Security Interest do not
represent (A) at least 95% (by value) of the Proven Reserves and the Oil and Gas
Properties relating thereto, (B) at least 90% (by value) of the Loan Parties’
other Oil and Gas Properties

 

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and (C) 100% (by value) of the Original Mortgaged Properties (other than such
Original Mortgaged Properties which are Disposed of as permitted under Section
6.04(c)), then each Loan Party shall, and shall cause each of its Subsidiaries
that is a Loan Party to, grant to the Administrative Agent within thirty (30)
days of the date the Engineering Report for such redetermination is required to
be delivered (subject to the last sentence of this clause (a)), as security for
the Secured Obligations an Acceptable Security Interest on such Oil and Gas
Properties not already subject to an Acceptable Security Interest such that
after giving effect thereto, the Oil and Gas Properties subject to an Acceptable
Security Interest will constitute (A) at least 95% (by value) of the Proven
Reserves and the Oil and Gas Properties relating thereto, (B) at least 90% (by
value) of the Loan Parties’ other Specified Properties and (C) 100% (by value)
of the Original Mortgaged Properties (other than such Original Mortgaged
Properties which are Disposed of as permitted under Section 6.04(c)).
Notwithstanding the foregoing, (x) the Administrative Agent in its sole
discretion may agree to a later date for the Loan Parties to comply with this
Section 5.08 so long as (i) such later date is no later than 30 days after the
otherwise required date and (ii) in order to be in compliance with this Section
5.08, the Loan Parties must not have to grant an Acceptable Security Interest in
more than 5% (by value) of the Proven Reserves and the Oil and Gas Properties
related thereto of the Loan Parties and no more than 5% (by value) of the Loan
Parties’ other Oil and Gas Properties, and (y) in any event, if the Borrowing
Base is to be redetermined on the date of an acquisition, the requirements of
this Section 5.08(a) shall be satisfied on the date of such acquisition.

 

(b)               Notwithstanding the generality of the foregoing but subject to
Section 5.08(a)(y), the Borrower shall, and shall cause each of its Subsidiaries
to, execute and deliver Mortgages with respect to Proven Reserves and associated
Oil and Gas Properties (other than Excluded Property) acquired by the Borrower
or any of its Subsidiaries (whether completed in one transaction or a series of
related transactions) whenever such acquisition(s) has a purchase price greater
than $5,000,000, in each case to the extent necessary to cause the
Administrative Agent to have an Acceptable Security Interest on Oil and Gas
Properties not already subject to an Acceptable Security Interest will
constitute (A) at least 95% (by value) of the Proven Reserves and the Oil and
Gas Properties relating thereto, (B) at least 90% (by value) of the Loan
Parties’ other Specified Properties and (C) 100% (by value) of the Original
Mortgaged Properties (other than such Original Mortgaged Properties which are
Disposed of as permitted under Section 6.04(c)), within thirty (30) days of such
acquisition (or such later date as the Administrative Agent may agree to in its
sole discretion).

 

(c)                Each Loan Party shall, and shall cause each Subsidiary
thereof to, grant to the Administrative Agent an Acceptable Security Interest in
all Property (other than Excluded Property) of any Loan Party or Subsidiary
thereof now owned or hereafter acquired, within the time frames required in
Section 6.16 (in the case of Specified Properties, to the extent necessary to
cause the Administrative Agent to have an Acceptable Security Interest on
Specified Properties not already subject to an Acceptable Security Interest such
that after giving effect thereto, the Specified Properties subject to an
Acceptable Security Interest will constitute (A) at least 95% (by value) of the
Proven Reserves and the Oil and Gas Properties relating thereto, (B) at least
90% (by value) of the Loan Parties’ other Specified Properties and (C) 100% (by
value) of the Original Mortgaged Properties (other than such Original Mortgaged
Properties which are Disposed of as permitted under Section 6.04(c))).

 

Section 5.09         Use of Proceeds. Each Loan Party shall use the proceeds of
the Advances (a) to pay the fees, costs and expenses incurred in connection with
this Agreement, (b) to pay the expenses in connection with the Loan Parties’
exit from chapter 11 bankruptcy proceedings and to refinance certain
Indebtedness in connection therewith and (c) provide ongoing working capital and
for other general corporate purposes of the Borrower and its Subsidiaries. The
Loan Parties shall use the Letters of Credit for general corporate purposes.

 

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Section 5.10         Title Evidence and Opinions. On or before May 29, 2017, (or
at such later time as determined by the Administrative Agent in its sole
discretion), the Loan Parties shall take such actions and execute and deliver
such documents and instruments as the Administrative Agent shall reasonably
require to ensure that the Administrative Agent shall have received satisfactory
title evidence, which title evidence shall be in form and substance acceptable
to the Administrative Agent in its reasonable discretion and shall include
information regarding the before payout and after payout ownership interests
held by the Loan Parties, for all wells located on the Oil and Gas Properties,
covering at least 80% of the present value of the Proven Reserves of the Loan
Parties as determined by the Administrative Agent. From and after May 29, 2017,
each Loan Party shall from time to time upon the reasonable request of the
Administrative Agent, take such actions and execute and deliver such documents
and instruments as the Administrative Agent shall reasonably require to ensure
that the Administrative Agent shall, at all times, have received satisfactory
title evidence, which title evidence shall be in form and substance acceptable
to the Administrative Agent in its reasonable discretion and shall include
information regarding the before payout and after payout ownership interests
held by the Loan Parties, for all wells located on the Oil and Gas Properties,
covering at least 80% of the present value of the Proven Reserves of the Loan
Parties as determined by the Administrative Agent.

 

Section 5.11         Further Assurances; Cure of Title Defects.

 

(a)                Each Loan Party shall, and shall cause each of its
Subsidiaries to, cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Security Instruments and this
Agreement. Each Loan Party hereby authorizes the Administrative Agent to file
any financing statements without the signature of the Borrower or such
Guarantor, as applicable, to the extent permitted by applicable Legal
Requirement in order to perfect or maintain the perfection of any security
interest granted under any of the Loan Documents. Each Loan Party at its expense
will, and will cause each of its Subsidiaries to, promptly execute and deliver
to the Administrative Agent upon its reasonable request all such other
documents, agreements and instruments to comply with or accomplish the covenants
and agreements of the Loan Parties, as the case may be, in the Security
Instruments and this Agreement, or to further evidence and more fully describe
the collateral intended as security for the Secured Obligations, or to correct
any omissions in the Security Instruments, or to state more fully the security
obligations set out herein or in any of the Security Instruments, or to perfect,
protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices or obtain any
consents, all as may be necessary or appropriate in connection therewith or to
enable the Administrative Agent to exercise and enforce its rights and remedies
with respect to any Collateral.

 

(b)               Within 60 days after (i) a request by the Administrative Agent
or the Lenders to cure title defects or exceptions which are not Permitted Liens
raised by such information with respect to the Oil and Gas Properties included
in the Borrowing Base or (ii) a notice by the Administrative Agent that any Loan
Party has failed to comply with Section 5.10 above, such Loan Party shall (i)
cure such title defects or exceptions which are not Permitted Liens or
substitute acceptable Oil and Gas Properties with no title defects or exceptions
except for Permitted Liens covering Collateral of an equivalent value and
(ii) deliver to the Administrative Agent satisfactory evidence of such cure or
as to any substitute Oil and Gas Properties satisfactory title evidence
(including supplemental or new title opinions meeting the foregoing
requirements) in form and substance acceptable to the Administrative Agent in
its reasonable business judgment as to the Loan Parties’ ownership of such Oil
and Gas Properties and the Administrative Agent’s Liens and security interests
therein as are required to maintain compliance with Section 5.10.

 

Section 5.12         Operation and Maintenance of Oil and Gas Properties.

 

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(a)                Further Assurances Related to Mortgages. Each Loan Party
covenants that such Loan Party shall execute and deliver such other and further
instruments, and shall do such other and further acts as in the reasonable
opinion of the Administrative Agent may be necessary or desirable to carry out
more effectively the purposes of the Mortgages, including without limiting the
generality of the foregoing, (i) prompt correction of any defect in the
execution or acknowledgment of such Mortgage, any written instrument comprising
part or all of the Obligations, or any other document used in connection
herewith; (ii) prompt correction of any defect (other than Permitted Liens)
which may hereafter be discovered in the title to the Collateral in accordance
with Section 5.11 herein; and (iii) subject to the provisions of each Mortgage,
prompt execution and delivery of all division or transfer orders or other
instruments, which in the Administrative Agent’s opinion are required to
transfer to Collateral, for its benefit and the ratable benefit of the other
Secured Parties, the assigned proceeds from the sale of Hydrocarbons from the
Oil and Gas Properties. Each Loan Party covenants that such Loan Party shall,
other than as permitted hereunder, pay when due and owing of all Taxes,
assessments and governmental charges imposed on such Mortgage to which such Loan
Party is a party or upon the interest of the Administrative Agent thereunder.

 

(b)               Preservation of Liens. Other than as permitted hereunder, each
Loan Party covenants that such Loan Party shall maintain and preserve the Lien
and security interest created under each Mortgage to which such Loan Party is a
party as an Acceptable Security Interest.

 

(c)                Insurance. To the extent that insurance is carried by a
third-party operator on behalf of any Loan Party, upon reasonable request by
Administrative Agent, such Loan Party shall use its reasonable efforts to obtain
and provide the Administrative Agent with copies of certificates of insurance
showing such Loan Party as an additional insured. Each such Loan Party hereby
assigns to the Administrative Agent for its benefit and the benefit of the other
Secured Parties any and all monies that may become payable to it under any such
policies of insurance by reason of damage, loss or destruction of any of the
Collateral.

 

(d)               Leases; Development and Maintenance. Each Loan Party shall,
and shall cause its Subsidiaries to, (a) pay and discharge promptly, or make
reasonable and customary efforts to cause to be paid and discharged promptly,
all rentals, delay rentals, royalties, overriding royalties, payments out of
production and other indebtedness or obligations accruing under, and perform or
make reasonable and customary efforts to cause to be performed each and every
act, matter or thing required by each and all of, the oil and gas leases and all
other agreements and contracts constituting or affecting the Oil and Gas
Properties of the Loan Parties except to the extent the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Change, (b) do all other things reasonably necessary to keep
unimpaired its rights thereunder and prevent any forfeiture thereof or default
thereunder, and operate or cause to be operated such Properties as a prudent
operator would in accordance with industry standard practices and in compliance
with all applicable proration and conservation Legal Requirements and any other
Legal Requirements of every Governmental Authority, whether state, federal,
municipal or other jurisdiction, from time to time constituted to regulate the
development and operations of oil and gas properties and the production and sale
of oil, gas and other Hydrocarbons therefrom, except to the extent the failure
to do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Change, and (c) maintain in all material respects
(or make reasonable and customary efforts to cause to be maintained in all
material respects) the Leases, wells, units and acreage to which the Oil and Gas
Properties of the Loan Parties pertain in a prudent manner consistent with
industry standard practices.

 

Section 5.13         Sanctions; FCPA. In the event the Borrower or any
Subsidiary thereof commences material business activities outside the United
States after the Closing Date, the Borrower shall have implemented and
maintained (or will implement and maintain) in effect policies and

 

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procedures reasonably designed to promote compliance by the Borrower, its
Subsidiaries and their respective directors, officers, employees and agents with
the FCPA and applicable Sanctions on or prior to the date that is 180 days after
the commencement of such activities.

 

Section 5.14         Reserved.

 

Section 5.15         Environmental Matters. The Borrower shall, and shall cause
each Subsidiary to, establish and implement commercially reasonable measures as
may be reasonably necessary to assure that, except as could not reasonably be
expected to cause a Material Adverse Change: (a) all Property of the Borrower
and its Subsidiaries and the operations conducted thereon and other activities
of the Borrower and its Subsidiaries are in compliance with and do not violate
the requirements of any Environmental Laws, (b) all oil, oil and gas production
or exploration wastes, Hazardous Materials or solid wastes generated in
connection with their operations are disposed of or otherwise handled in
compliance with Environmental Laws, (c) no Hazardous Materials will be Released
on, at or from any of their currently owned, leased or operated Property, other
than permitted Releases and Releases in a quantity which do not require
reporting pursuant to Section 103 of CERCLA, and (d) no oil, oil and gas
exploration and production wastes, Hazardous Materials or solid wastes are
Released on, at or from any such currently owned, leased or operated Property so
as to pose an imminent and substantial endangerment to public health, safety or
welfare or the Environment.

 

Section 5.16         ERISA Compliance. With respect to each Pension Plan, the
Borrower shall, and shall cause each other ERISA Affiliate to, in each case,
except as could not reasonably be expected to cause a Material Adverse Change,
(a) satisfy in full and in a timely manner, without incurring any material late
payment or underpayment charge or penalty and without giving rise to any Lien,
all of the contribution and funding requirements of section 412 of the Code
(determined without regard to subsections (d), (e), (f) and (k) thereof) and of
section 302 of ERISA (determined without regard to sections 303, 304 and 306 of
ERISA), and (b) pay, or cause to be paid, to the PBGC in a timely manner,
without incurring any material late payment or underpayment charge or penalty,
all premiums required pursuant to sections 4006 and 4007 of ERISA.

 

Section 5.17         Deposit Accounts. Each Loan Party shall, and shall cause
each of its Subsidiaries to, (i) maintain all deposit accounts and securities
accounts (other than Excluded Funds or any such accounts otherwise constituting
Excluded Collateral) with the Administrative Agent or a Lender or a financial
institution that was the Administrative Agent or a Lender at the time the
applicable deposit account was opened and (ii) cause all deposit accounts and
securities accounts (other than Excluded Funds or any such accounts otherwise
constituting Excluded Collateral) to be subject to Account Control Agreements
(such Account Control Agreements required be delivered on the Closing Date (or
such later date as agreed to by the Administrative Agent in its reasonable
discretion) with respect to such deposit accounts and securities accounts
maintained by each Loan Party as of the Closing Date).

 

Section 5.18         Post-Closing. On or before May 12, 2017, (or at such later
date acceptable to the Administrative Agent in its sole discretion), the
Borrower shall deliver a report in connection with the Initial Engineering
Report that contains an attendant reserve database capable of producing a match
of the reserves in all material respects.

 

ARTICLE VI
NEGATIVE COVENANTS

 

So long as any Note or any amount (other than contingent indemnity obligations
for which no claim has been made) under any Loan Document shall remain unpaid,
any Letter of Credit shall remain

 

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outstanding, or any Lender shall have any Commitment, each Loan Party agrees,
unless the Majority Lenders otherwise consent in writing, to comply with the
following covenants.

 

Section 6.01         Liens, Etc. No Loan Party shall create, assume, incur, or
suffer to exist, nor permit any of its Subsidiaries to create, assume, incur, or
suffer to exist, any Lien on or in respect of any of its Property (including any
right to receive income) whether now owned or hereafter acquired, except that
each Loan Party may create, incur, assume, or suffer to exist:

 

(a)                Liens granted pursuant to the Security Instruments and
securing the Secured Obligations;

 

(b)               Liens on equipment, fixtures and other personal Property
securing Indebtedness permitted under Section 6.02(b); provided that (i) such
Liens shall be created substantially simultaneously with the acquisition,
repair, improvement or lease, as applicable, of the related Property, (ii) such
Liens do not at any time encumber any property other than the Property financed
by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the principal amount of Indebtedness secured by any such Lien
shall at no time exceed one hundred percent (100%) of the original price for the
purchase, repair improvement or lease amount (as applicable) of such Property at
the time of purchase, repair, improvement or lease (as applicable) together with
any financing for interest thereon;

 

(c)                Liens for Taxes, assessments and other governmental charges
or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA
or Environmental Laws) (i) not yet due or as to which the period of grace (not
to exceed thirty (30) days), if any, related thereto has not expired or
(ii) which are being contested in good faith and by appropriate proceedings if
adequate reserves are maintained to the extent required by GAAP;

 

(d)               the claims of materialmen, mechanics, carriers, warehousemen,
processors, repairmen, suppliers, workers, or landlords for labor, materials,
supplies, rentals or other like claims incurred in the ordinary course of
business, which (i) are not overdue for a period of more than the longer of
thirty (30) days or the grace period therefor, or if overdue for more than such
period, no action has been taken to enforce such Liens, (ii) to the extent
overdue, such Liens are being contested in good faith and by appropriate
proceedings if adequate reserves are maintained to the extent required by GAAP
and (iii) do not, individually or in the aggregate, materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries;

 

(e)                royalties, overriding royalties, net profits interests,
production payments, reversionary interests, calls on production, preferential
purchase rights and other burdens on or deductions from the proceeds of
production, that do not secure Indebtedness and 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 in this Agreement;

 

(f)                deposits or pledges of cash or cash equivalents made in the
ordinary course of business in connection with, or to secure payment of,
obligations under workers’ compensation, unemployment insurance and other types
of social security or similar legislation, old age pension or public liability
obligations, statutory obligations, regulatory obligations, surety and appeal
bonds (other than bonds related to judgments or litigation), government
contracts, performance and return of money bonds, and bids and other obligations
of a like nature incurred in the ordinary course of business, in each case, so
long as no foreclosure sale or similar proceeding has been commenced with
respect to any portion of the Collateral on account thereof;

 

(g)                Liens arising under operating agreements, unitization and
pooling agreements and orders, farmout agreements, gas balancing or deferred
production agreements, joint venture agreements, oil and

 

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gas partnership agreements, oil and gas leases, division orders, contracts for
the sale, transportation or exchange of oil and natural gas, area and mutual
interest agreements, marketing agreements, processing agreements, net profit
agreements, development agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or other
geophysical permits or agreements, and other agreements, in each case, (i) that
are customary in the oil, gas and mineral production business, and (ii) that are
entered into by the Borrower or any Subsidiary in the ordinary course of
business; provided that, in any event, (w) if such Liens result in the reduction
of net revenue interests or the increase of working interests of the Borrower
without a corresponding increase in the net revenue interest in such Oil and Gas
Property or any of its Subsidiaries from such values set forth in the
Engineering Report delivered for the most recent Borrowing Base redetermination
(scheduled or otherwise), then the Borrower shall have provided to the
Administrative Agent written notice of such Liens within 30 days of the
incurrence of such Liens accompanied by a Responsible Officer’s certification
and calculation of the adjusted net revenue interests and working interests
after taking into account such Liens, (x) such Liens secure amounts that are not
yet due or are being diligently contested in good faith by appropriate
proceedings, if such reserve as may be required by GAAP shall have been made
therefor, (y) such Liens are limited to the assets that are the subject of such
agreements, and (z) such Liens shall not be in favor of any Person that is an
Affiliate of a Loan Party;

 

(h)               easements, servitudes, permits, conditions, covenants,
exceptions, rights-of-way, zoning restrictions, and other similar encumbrances,
and minor defects in the chain of title that are customarily accepted in the oil
and gas financing industry, none of which interfere with the ordinary conduct of
the business of the Borrower or any Subsidiary or materially detract from the
value or use of the Property to which they apply;

 

(i)                 with respect to Oil and Gas Properties, all rights reserved
to or vested in any Governmental Authority to control or regulate any of the Oil
and Gas Properties in any manner;

 

(j)                 Liens arising from the filing of precautionary UCC financing
statements relating solely to personal property leased pursuant to Operating
Leases entered into in the ordinary course of business of the Borrower and its
Subsidiaries;

 

(k)               (i) Liens of a collecting bank arising in the ordinary course
of business under Section 4-210 of the Uniform Commercial Code in effect in the
relevant jurisdiction and (ii) Liens of any depositary bank in connection with
statutory, common law and contractual rights of set-off and recoupment with
respect to any deposit account of the Borrower or any Subsidiary thereof;

 

(l)                 any interest or title of a licensor, sublicensor, lessor or
sublessor with respect to any assets under any license, lease, sublicense or
sublease agreement entered into in the ordinary course of business which do not
(i) interfere in any material respect with the business of the Borrower or its
Subsidiaries or materially detract from the value of the relevant assets of the
Borrower or its Subsidiaries or (ii) secure any Indebtedness;

 

(m)             Liens securing judgments for the payment of money not
constituting an Event of Default;

 

(n)               Liens on cash earnest money deposited pursuant to the terms of
an agreement to acquire assets used in, or Persons engaged in, the oil and gas
business, as permitted by this Agreement;

 

(o)               licenses of intellectual property, none of which, in the
aggregate, interfere in any material respect with the business of the Borrower
or its Subsidiaries or materially detract from the value of the relevant assets
of the Borrower or its Subsidiaries; and

 

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(p)               Liens not otherwise permitted under this Section 6.01;
provided that the aggregate principal amount of the Indebtedness secured by the
Liens shall not exceed $2,000,000 at any time.

 

Section 6.02         Indebtedness, Guarantees, and Other Obligations. No Loan
Party shall, nor shall any Loan Party permit any of its Subsidiaries to, create,
assume, suffer to exist, or in any manner become or be liable in respect of, any
Indebtedness except:

 

(a)                (i) the Obligations and (ii) the Banking Services
Obligations;

 

(b)               Capital Lease Obligations and Indebtedness incurred in
connection with purchase money indebtedness in an aggregate principal amount not
to exceed $5,000,000 at any time outstanding;

 

(c)                Indebtedness under performance bonds, surety bonds, release,
appeal and similar bonds, statutory obligations or with respect to workers’
compensation claims, in each case incurred in the ordinary course of business,
and reimbursement obligations in respect of any of the foregoing;

 

(d)               unsecured Indebtedness of any Loan Party owing to any other
Loan Party; provided that such Indebtedness is subordinated to the Obligations
on terms set forth in the Guaranty or otherwise acceptable to the Administrative
Agent in its reasonable discretion;

 

(e)                Indebtedness owing in connection with the financing of
insurance premiums;

 

(f)                Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or other similar instrument drawn
against insufficient funds in the ordinary course of business;

 

(g)                Indebtedness under Hedge Contracts which are not prohibited
by the terms of Section 6.15; provided (i) such Indebtedness shall not be
secured, other than such Indebtedness owing to Lender Swap Counterparties which
are secured under the Loan Documents, (ii) such Indebtedness shall not obligate
the Borrower or any Subsidiary to any margin call requirements, including any
requirement to post cash collateral, property collateral or a letter of credit,
and (iii) the deferred premium payments associated with such Hedge Contracts
shall be limited to the deferred premium payments for put option contracts which
are secured under the Loan Documents; provided that, the outstanding amount of
such deferred premium payments shall not exceed $1,000,000;

 

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

 

(i)                 Indebtedness incurred in the ordinary course of business in
connection with cash pooling arrangements, cash management and other similar
arrangements consisting of netting arrangements and overdraft protections
incurred in the ordinary course of business;

 

(j)                 unsecured Indebtedness not otherwise permitted under the
preceding provisions of this Section 6.02; provided that, the aggregate
principal amount of such unsecured Indebtedness shall not exceed $5,000,000 at
any time; and

 

(k)               any Guarantee by any Loan Party of any Indebtedness of any
other Loan Party so long as such underlying Indebtedness is otherwise permitted
by this Section 6.02 and the terms of such Guarantee would otherwise be
permitted by this Section 6.02 if such Guarantee was the primary obligation.

 

Section 6.03         Agreements Restricting Liens and Distributions. No Loan
Party shall, nor shall any Loan Party permit any of its Subsidiaries to, create,
incur, assume or permit to exist any contract, agreement or understanding which
in any way prohibits or restricts the granting, conveying, creation or

 

 -90-

 

imposition of any Lien on any of its Property, whether now owned or hereafter
acquired, to secure the Secured Obligations or restricts any Loan Party from
paying dividends to any other Loan Party, or which requires the consent of or
notice to other Persons in connection therewith; provided, that the foregoing
shall not apply to (a) restrictions in this Agreement or in any other Loan
Document, (b) customary restrictions imposed on the granting, conveying,
creation or imposition of any Lien on any Property of the Borrower or its
Subsidiaries imposed by any contract, agreement or understanding related to the
Liens permitted under clause (b) of Section 6.01 so long as such restriction
only applies to the Property permitted under such clause to be encumbered by
such Liens, (c) customary restrictions and conditions with respect to the sale
or disposition of Property or Equity Interests permitted hereunder pending the
consummation of such sale or disposition, (d) customary restrictions imposed on
the granting, conveying, creation or imposition of any Lien found in any lease,
license or similar contract as they affect any Property or Lien subject to such
lease, license or contract, (e) customary prohibitions on assignment of rights
contained in software license agreements, and (f) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
(other than any Oil and Gas Property) of any Loan Party.

 

Section 6.04         Merger or Consolidation; Asset Sales. No Loan Party shall,
nor shall any Loan Party permit any of its Subsidiaries to:

 

(a)                dissolve; provided that (i) any Loan Party (other than the
Borrower) may dissolve as long as assets thereof are transferred to or become
the Property of another Guarantor or Borrower and (ii) any Subsidiary that is
not a Guarantor may dissolve as long as the assets thereof are transferred to or
become the Property of a Guarantor or the Borrower;

 

(b)               merge or consolidate with or into any other Person; provided
that (i) the Borrower may merge or may be consolidated into any Guarantor if the
Borrower is the surviving entity, and (ii) any Loan Party (other than the
Borrower) may merge or may be consolidated into any other Guarantor; or

 

(c)                Dispose of any of its Property (including, without
limitation, any working interest, overriding royalty interest, production
payments, net profits interest, royalty interest, or mineral fee interest) or
consummate any Hedge Event, other than:

 

(i)                 the sale of Hydrocarbons or liquidation of Liquid
Investments in the ordinary course of business;

 

(ii)               the Disposition of equipment that is (A) obsolete or worn
out, depleted or uneconomic and Disposed of in the ordinary course of business,
(B) no longer necessary for the business of such Person or (C) contemporaneously
replaced by equipment of at least comparable value and use, provided that, so
long as a Borrowing Base Deficiency (without giving effect to the proviso in the
definition thereof) exists, the Borrower shall immediately prepay the Advances
or, if the Advances have been repaid in full, Cash Collateralize the Letter of
Credit Exposure, in an amount equal to the Net Cash Proceeds received by any
Loan Party from the Disposition of equipment pursuant to this Section
6.04(c)(ii);

 

(iii)             the Disposition of Property between or among Loan Parties;

 

(iv)             so long as no Event of Default has occurred and is continuing
or would be caused thereby, the Disposition of Specified Properties which are
not attributable to Proven Reserves so long as (A) such Specified Property is
not Collateral and is not otherwise required pursuant to the terms of this
Agreement to be Collateral, or (B) such Disposition is a Permitted Asset Swap;
provided that, the Specified Properties permitted to be Disposed of under this
clause (B) shall not exceed 500 acres in the

 

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aggregate between the Closing Date and the first scheduled Borrowing Base
redetermination, and thereafter shall not exceed 500 acres in the aggregate
between scheduled Borrowing Base redeterminations;

 

(v)               Casualty Events;

 

(vi)             licenses of intellectual property, none of which, in the
aggregate, materially impair the operation of the business of any Loan Party;

 

(vii)           the abandonment, lapse, failure to pursue, or discontinuation of
use or maintenance of intellectual property that is no longer material to the
operation of the business of any Loan Party;

 

(viii)         so long as no Event of Default has occurred and is continuing or
would be caused thereby, the Disposition of Oil and Gas Properties which are
attributable to Proven Reserves (and the Disposition of Equity Interests in any
Subsidiary that owns such Oil and Gas Properties) and the consummation of any
Hedge Event so long as:

 

(A)        as to any such Disposition, (1) either (x) if no Borrowing Base
Deficiency exists both before and after giving effect to such Disposition, at
least 80% of the consideration received in respect thereof is in cash or (y) if
a Borrowing Base Deficiency exists either before or after giving effect to such
Disposition, 100% of the consideration received in respect of such Disposition
is in cash, (2) the consideration received in respect of such Disposition is
equal to or greater than the fair market value of such Oil and Gas Properties,
interest therein or Subsidiary subject of such Disposition (as reasonably
determined by a Responsible Financial Officer of the Borrower for Dispositions
for consideration of less than $15,000,000 and as reasonably determined by the
board of directors or the equivalent governing body of the Borrower for all
other Dispositions and, if requested by the Administrative Agent, the Borrower
shall deliver a certificate of a Responsible Officer of the Borrower certifying
to that effect), and (3) if any such Disposition is of a Subsidiary owning Oil
and Gas Properties, such Disposition includes all the Equity Interests of such
Subsidiary; and

 

(B)       as to any such Disposition (including the Disposition of Equity
Interests in any Subsidiary that owns Oil and Gas Properties) or Hedge Event
which would have the effect of making the sum of (1) the BB Value of all
Dispositions of Oil and Gas Properties (including the Disposition of Equity
Interests in any Subsidiary that owns Oil and Gas Properties) made since either
the Closing Date or, after the end of the Protected Period, the date of the most
recent scheduled Borrowing Base redetermination, as applicable (including such
Disposition) plus (2) the BB Value of BB Hedges which have been the subject of
any Hedge Event since either the Closing Date or, after the end of the Protected
Period, the date of the most recent scheduled Borrowing Base redetermination, as
applicable (including such Hedge Event) exceed 5% of the Borrowing Base then in
effect, the Borrowing Base is automatically reduced as provided in Section
2.02(d).

 

Section 6.05         Restricted Payments. No Loan Party shall, nor shall any
Loan Party permit any of its Subsidiaries to, make any Restricted Payments
except:

 

(a)                that any Loan Party may make Restricted Payments to any other
Loan Party subject to any subordination terms thereof that may apply;

 

 -92-

 

(b)               (i) so long as no Event of Default shall exist immediately
prior to or after giving effect to such stock purchase or redemption, stock
purchases or redemptions (other than repurchases described in clause (ii) of
this Section 6.05(b)) in connection with the rights of employees or members of
the board of directors of the Borrower or any of its Subsidiaries of any capital
stock or equity interests issued pursuant to an employee or board of directors
equity subscription agreement, equity option agreement or equity ownership
arrangement or other compensation plan permitted to be issued hereunder,
provided that the aggregate amount of payments under this clause (i) in any
fiscal year of the Borrower shall not exceed $2,500,000; provided, further, that
any Restricted Payments permitted (but not made) pursuant to this clause (i) in
any prior fiscal year may be carried forward to any subsequent fiscal year
(subject to an annual cap of no greater than $5,000,000) and (ii) repurchases of
equity interests deemed to occur upon (A) the exercise of stock options if the
equity interests represent a portion of the exercise price thereof or (B) the
withholding of a portion of equity interests issued to employees and other
participants under an equity compensation program of the Borrower and its
Subsidiaries, in each case to cover withholding tax obligations of such persons
in respect of such issuance; and

 

(c)                Restricted Payments in respect of payments on subordinated
Debt to the extent permitted pursuant to Section 6.21.

 

Section 6.06         Investments. No Loan Party shall, nor shall any Loan Party
permit any of its Subsidiaries to, make or permit to exist any Investments or
purchase or commit to purchase any Equity Interests or other securities or
evidences of indebtedness of or interests in any Person or any assets or
business of any Person, including without limitation any Oil and Gas Properties
or assets related to Oil and Gas Properties, except:

 

(a)                Liquid Investments;

 

(b)               trade and customer accounts receivable arising in the ordinary
course of business;

 

(c)                creation of any additional Subsidiaries in compliance with
Section 6.16;

 

(d)               Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
provided that, the aggregate amount of such Investment shall not exceed
$250,000;

 

(e)                Investments consisting of any deferred portion of the sales
price received by the Borrower or any Subsidiary in connection with any sale of
assets permitted hereunder;

 

(f)                Investments in direct ownership interests in additional Oil
and Gas Properties and gas gathering systems related thereto or related to
farm-out, farm-in, joint operating, joint venture or area of mutual interest
agreements, gathering systems, pipelines or other similar arrangements which are
usual and customary in the oil and gas exploration and production business
located within the geographic boundaries of the United States of America, so
long as the Administrative Agent is granted an Acceptable Security Interest in
such Oil and Gas Properties to the extent required by Section 5.08;

 

(g)                Hedge Contracts to the extent permitted under Section 6.15;

 

(h)               Loans and advances to directors, officers and employees
permitted by applicable law not to exceed $100,000 in the aggregate;

 

(i)                 Investments made by any Loan Party in or to any other Loan
Party; and

 

 -93-

 

(j)                 any Investments not otherwise permitted under this Section
6.08 so long as the aggregate amount of the Investments permitted under this
clause (i) shall not exceed $1,000,000 in the aggregate outstanding at any time.

 

Section 6.07         [Reserved].

 

Section 6.08         Affiliate Transactions. No Loan Party shall, nor shall any
Loan Party permit any of its Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction or series of transactions (including, but not
limited to, the purchase, sale, lease or exchange of Property, the making of any
Investment, the giving of any guaranty, the assumption of any obligation or the
rendering of any service) with any of their Affiliates unless such transaction
or series of transactions is on terms no less favorable to the Loan Parties than
those that could be obtained in a comparable arm’s length transaction with a
Person that is not such an Affiliate; provided, however, the foregoing
provisions of this Section 6.08 shall not apply to: (a) transactions solely
among the Loan Parties, (b) the performance of employment, equity award, equity
option or equity appreciation agreements, plans or other similar compensation or
benefit plans or arrangements (including vacation plans, health and insurance
plans, deferred compensation plans and retirement or savings plans) entered into
by the Borrower or any Subsidiary in the ordinary course of its business with
its or for the benefit of is employees, officers and directors, (c) fees and
compensation to, and indemnity provided on behalf of, officers, directors, and
employees of the Borrower or any Subsidiary in their capacity as such, to the
extent such fees and compensation are customary and (d) Restricted Payments
permitted hereunder.

 

Section 6.09         Compliance with ERISA. To the extent it could reasonably be
expected to, individually or in the aggregate, result in liability of any Loan
Party in excess of $10,000,000, no Loan Party shall, nor shall any Loan Party
permit any of its Subsidiaries to, directly or indirectly, (a) engage in any
transaction in connection with which any Loan Party or any ERISA Affiliate could
reasonably be expected to be subjected to either a civil penalty assessed
pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43
of Subtitle D of the Code, in each case with respect to a Pension Plan or an
Employee Benefit Plan intended to be qualified under Section 401(a) of the Code;
(b) terminate, or permit any ERISA Affiliate to terminate, any Pension Plan in a
manner, or take any other action with respect to any Pension Plan, which could
reasonably be expected to result in any liability to any Loan Party or any ERISA
Affiliate to the PBGC; (c) fail to make, or permit any ERISA Affiliate to fail
to make, full payment when due of all amounts which, under the provisions of any
Pension Plan, agreement relating thereto or applicable law, any Loan Party or
any ERISA Affiliate is required to pay as contributions thereto; (d) permit to
exist, or allow any ERISA Affiliate to permit to exist, any unpaid minimum
required contribution within the meaning of Section 302 of ERISA or section 412
of the Code, whether or not waived, with respect to any Pension Plan; or (e)
incur, or permit any ERISA Affiliate to incur, a liability to or on account of a
Pension Plan or a Multiemployer Plan under sections 515, 4062, 4063, 4064, 4201
or 4204 of ERISA.

 

Section 6.10         Sale-and-Leaseback. No Loan Party shall, nor shall any Loan
Party permit any of its Subsidiaries to, sell or transfer to a Person any
Property, whether now owned or hereafter acquired, if at the time or thereafter
such Loan Party shall lease as lessee such Property or any part thereof or other
Property which such Loan Party or Subsidiary thereof intends to use for
substantially the same purpose as the Property sold or transferred.

 

Section 6.11         Change of Business; Foreign Operations or Subsidiaries. No
Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to,
(a) materially change the character of its business, taken as a whole, as an
independent oil and gas exploration and production company (including the
acquisition, exploration, development, financing, ownership, operation,
production, maintenance, storage, transportation, gathering, processing and
marketing of Hydrocarbons and the Oil and Gas

 

 -94-

 

Properties), (b) operate any business in any jurisdiction other than the United
States or in the offshore federal waters of the United States, or (c) create or
acquire any Subsidiary other than a Subsidiary organized under the laws of any
jurisdiction within the United States (including territories thereof).

 

Section 6.12         Name Change. No Loan Party shall, nor shall any Loan Party
permit any of its Subsidiaries that is a Loan Party to, (a) amend its name or
change its jurisdiction of incorporation, organization or formation without (i)
providing written notice to the Administrative Agent at least ten (10) Business
Days after such change and (ii) taking all actions reasonably required by the
Administrative Agent to maintain an Acceptable Security Interest in all of the
Collateral, or (b) amend, supplement, modify or restate their articles or
certificate of incorporation, bylaws, limited liability company agreements, or
other equivalent organizational documents in any manner which could reasonably
be expected to cause a Material Adverse Change without prior written notice to,
and prior consent of, the Administrative Agent.

 

Section 6.13         Use of Proceeds; Letters of Credit.

 

(a)                No Loan Party shall, nor shall any Loan Party permit any of
its Subsidiaries to, permit the proceeds of any Advance or Letters of Credit to
be used for any purpose other than those permitted by Section 5.09. No Loan
Party shall engage in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” (as each such term is defined or
used, directly or indirectly, in Regulation U). No Loan Party nor any Person
acting on behalf of a Loan Party has taken or shall take, nor permit any of the
Subsidiaries to take any action which might cause any of the Loan Documents to
violate Regulation T, U or X or any other regulation of the Board of Governors
of the Federal Reserve System or to violate Section 7 of the Securities Exchange
Act of 1934 or any rule or regulation thereunder, in each case as now in effect
or as the same may hereinafter be in effect, including without limitation, the
use of the proceeds of any Advance or Letters of Credit to purchase or carry any
margin stock in violation of Regulation T, U or X.

 

(b)               The Borrower shall not request any Credit Extension, and the
Borrower shall not use, directly or, to the knowledge of the Borrower,
indirectly, the proceeds of any Credit Extension (i) in furtherance of an offer,
payment, promise to pay, or authorization of the payment or giving of money, or
anything else of value, to any Person in violation of the FCPA, (ii) for the
purpose of funding, financing or facilitating any activities, business or
transaction of or with any Sanctioned Person, or in any Sanctioned Country,
except to the extent licensed or otherwise authorized under U.S. law.

 

Section 6.14         Gas Imbalances, Take-or-Pay or Other Prepayments. No Loan
Party shall, nor shall any Loan Party permit any of its Subsidiaries to, allow
gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties of any Loan Party or any Subsidiary thereof which would require any
Loan Party or any Subsidiary thereof to deliver their respective Hydrocarbons
produced on a monthly basis from such Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor other than those
which (a) occur in the ordinary course of business and (b) do not, in the
aggregate, exceed 1% of the value of the Proven Reserves of the Borrower and its
Subsidiaries.

 

Section 6.15         Hedging Limitations. No Loan Party shall enter into any
Hedge Contract (or any trade or transaction thereunder) except for the Hedge
Contracts:

 

(a)                Subject to Section 6.15(b), Hedge Contracts with an Approved
Counterparty (or trade or transactions thereunder) in respect of commodities
entered which (i) is not entered into for speculative purposes, (ii) is not
longer than 5 years in duration, (iii) does not require any Loan Party to put up
money, assets, or other security (including letters of credit) (other than Liens
granted pursuant to the Security

 

 -95-

 

Instruments and securing the Lender Hedge Obligations), and (iv) the notional
volumes for which (when aggregated with other commodity Hedge Contracts then in
effect, other than puts, floors and basis differential swaps on volumes already
hedged pursuant to other Hedge Contracts) do not exceed, as of the date the
latest hedging trade or transaction is entered into under a Hedge Contract,

 

(i)                 for the 12-month period from the date such hedging trade or
transaction is created, (x) 90% of the production of natural gas, (y) 90% of the
production of oil and (z) 90% of the production of natural gas liquids and
condensate, in each case, from the PDP Reserves as set forth on the most recent
Engineering Report, and

 

(ii)               for the 48-month period commencing with the first anniversary
of the date such hedging trade or transaction is created, (x) 80% of the
production of natural gas, (y) 80% of the production of oil and (z) 80% of the
production of natural gas liquids and condensate, in each case, from the PDP
Reserves as set forth on the most recent Engineering Report.

 

(b)               If, after the end of any calendar quarter, commencing with the
calendar quarter ending June 30, 2017, the Borrower determines that the
aggregate volume of all commodity hedging trades or transactions for which
settlement payments were calculated in such calendar quarter (other than puts,
floors and basis differential swaps on volumes already hedged pursuant to other
Hedge Contracts (or trades or transactions thereunder)) exceeded 90% of actual
production of Hydrocarbons in such calendar quarter, then the Borrower shall
promptly notify the Administrative Agent of such determination and shall, within
30 days of such determination, terminate, create off-setting positions, allocate
volumes to other production for which the Borrower or any of its Subsidiaries is
marketing, or otherwise unwind existing Hedge Contracts (or trades or
transactions thereunder) such that, at such time, future hedging volumes will
not exceed 100% of reasonably anticipated projected production for the
then-current and any succeeding calendar quarters.

 

(c)                For purposes of entering into or maintaining a Hedge Contract
(or trades or transactions thereunder) under Section 6.15(a)(i) and
Section 6.15(b), respectively, forecasts of reasonably anticipated production of
Hydrocarbons as set forth on the most recent Engineering Report shall be revised
to account for any increase or decrease therein anticipated because of
information obtained by the Borrower or any other Loan Party subsequent to the
publication of such Engineering Report including the Borrower’s or any other
Loan Party’s internal forecasts of production decline rates for existing wells
and additions to or deletions from anticipated future production from new wells
and acquisitions coming on stream or failing to come on stream.

 

Section 6.16         Additional Subsidiaries. No Loan Party shall, nor shall any
Loan Party permit any of its Subsidiaries to, create or acquire any additional
Subsidiaries unless, with respect to each such Subsidiary and within thirty (30)
days after the acquisition or formation thereof (or such later date acceptable
to the Administrative Agent in its sole discretion or such earlier date required
by the Administrative Agent in its sole discretion if a Borrowing Base increase
occurs in connection with such acquisition), the Borrower has delivered to the
Administrative Agent (a) a Guaranty or a supplement to an existing Guaranty
executed and delivered by such Subsidiary in form and substance reasonably
satisfactory to the Administrative Agent, (b)  a Security Agreement or a
supplement to an existing Security Agreement and Mortgages, and such other
Security Instruments executed and delivered by such Subsidiary and as the
Administrative Agent may reasonably request in order to grant to the
Administrative Agent an Acceptable Security Interest in the assets of each such
Subsidiary now owned or hereafter acquired as required under Section 5.08(a) –
(c), and (c) certificates, opinions of counsel, title opinions or other
documents as the Administrative Agent may reasonably request, including all
documentation and other information that any Lender may reasonably request in
order to comply with its

 

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ongoing obligations under applicable “know your customer” and anti-money
laundering rules and regulations, including the Patriot Act.

 

Section 6.17         Financial Covenants.

 

(a)                Leverage Ratio. The Borrower shall not permit, as of the last
day of each fiscal quarter, beginning with the fiscal quarter ending September
30, 2017, the Leverage Ratio as of the last day of any fiscal quarter end to be
greater than 3.50 to 1.00.

 

(b)               Interest Coverage Ratio. The Borrower shall not permit, as of
the last day of each fiscal quarter, beginning with the fiscal quarter ending
September 30, 2017, the Interest Coverage Ratio as of the last day of any fiscal
quarter end to be less than 2.50 to 1.00.

 

(c)                Current Ratio. The Borrower shall not permit, as of the last
day of each fiscal quarter, beginning with the fiscal quarter ending September
30, 2017, the Current Ratio as of the last day of any fiscal quarter end to be
less than 1.00 to 1.00.

 

Section 6.18         Asset Coverage Ratio. The Borrower shall not permit, as of
the last day of each of the fiscal quarters ending September 30, 2017 and
December 31, 2017, the Asset Coverage Ratio to be less than 1.35 to 1.00;
provided that this Section 6.18 shall not apply after the Protected Period ends.
Notwithstanding anything to the contrary contained herein, any violation of this
Section 6.18 shall not be an “Event of Default” hereunder, but shall instead
trigger the conclusion of the Protected Period and permit the Administrative
Agent and the Required Lenders to redetermine the Borrowing Base.

 

Section 6.19         Fiscal Year; Fiscal Quarter. The Borrower shall not, and
shall not permit any Subsidiaries to, change its fiscal year or any of its
fiscal quarters.

 

Section 6.20         Limitation on Operating Leases. No Loan Party shall, nor
shall any Loan Party permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any obligations for the payment of rent or hire of Property of
any kind whatsoever (real or personal but excluding Capital Leases, leases of
Hydrocarbons and other Oil and Gas Properties, and leases for field equipment in
the ordinary course of business), under Operating Leases which would cause the
aggregate amount of all payments made by the Loan Parties pursuant to all
Operating Leases, including any residual payments at the end of any lease, to
exceed $3,000,000 in any period of twelve consecutive calendar months during the
life of such leases.

 

Section 6.21         Prepayment of Certain Debt and Other Obligations. No Loan
Party shall, nor shall it permit any of its Subsidiaries to, prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled maturity thereof
in any manner, or make any payment in violation of the subordination terms of,
the principal amount of any subordinated Indebtedness, except (a) [reserved],
(b) regularly scheduled or required repayments, redemptions or purchases of
subordinated Indebtedness permitted hereunder and refinancings and refundings of
such subordinated Indebtedness so long as such refinancings and refundings would
otherwise comply with Section 6.02, and (c) so long as no Event of Default
exists or would result therefrom, other prepayments, redemptions, purchases,
defeasances or other satisfaction of subordinated Indebtedness permitted
hereunder not described in the immediately preceding clauses (a) and (b) subject
to any applicable subordination or intercreditor agreements with respect
thereto.

 

Section 6.22         [Reserved].

 

Section 6.23         Environmental Matters. No Loan Party shall cause or permit
any of its currently owned, leased or operated Property to be in violation of,
or cause or permit a Release of Hazardous

 

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Materials which will subject any such currently owned, leased or operated
Property to any Response or remedial obligations required under, any
Environmental Laws where such violations or Response or remedial obligations
could (a) individually reasonably be expected to result in an Environmental
Claim against any Loan Party in excess of $5,000,000, or (b) in the aggregate
reasonably be expected to result in a Material Adverse Change.

 

Section 6.24         Marketing Activities. No Loan Party shall engage in
marketing activities for any Hydrocarbons or enter into any contracts related
thereto other than (a) contracts for the sale of Hydrocarbons scheduled or
reasonably estimated to be produced from their proved Oil and Gas Properties
during the period of such contract, (b) contracts for the sale of Hydrocarbons
scheduled or reasonably estimated to be produced from proved Oil and Gas
Properties of third parties during the period of such contract associated with
the Oil and Gas Properties of any Loan Party that such Loan Party has the right
to market pursuant to joint operating agreements, unitization agreements or
other similar contracts that are usual and customary in the oil and gas business
and (c) other contracts for the purchase and/or sale of Hydrocarbons of third
parties (i) that have generally offsetting provisions (i.e. corresponding
pricing mechanics, delivery dates and points and volumes) such that no
“position” is taken and (ii) for which appropriate credit support has been taken
to alleviate the material credit risks of the counterparty thereto.

 

Section 6.25         Sale or Discount of Receivables. Except for receivables
obtained by any Loan Party out of the ordinary course of business or the
settlement of joint interest billing accounts in the ordinary course of business
or discounts granted to settle collection of accounts receivable or the sale of
defaulted accounts arising in the ordinary course of business in connection with
the compromise or collection thereof and not in connection with any financing
transaction or any Investments permitted under Section 6.06(d), the Borrower
shall not, and shall not permit any Subsidiary to, discount or sell (with or
without recourse) any of its notes receivable or accounts receivable.

 

ARTICLE VII
EVENTS OF DEFAULT; REMEDIES

 

Section 7.01         Events of Default. The occurrence of any of the following
events shall constitute an “Event of Default” under any Loan Document:

 

(a)                Payment. The Borrower shall (i) fail to pay when due any
principal payable hereunder or under the Notes (including any requirement to
Cash Collateralize and Reimbursement Obligations) or (ii) fail to pay, within 3
Business Days of when due, any interest or other amounts (including fees,
reimbursements (other than Reimbursement Obligations), and indemnifications)
payable hereunder, under the Notes, or under any other Loan Document;

 

(b)               Representation and Warranties. Any representation or warranty
made or deemed to be made by any Loan Party (or any of their respective
officers) in this Agreement or in any other Loan Document shall prove to have
been incorrect in any material respect (unless already qualified by materiality
or Material Adverse Change in the text thereof, in which case, such
representation or warranty shall prove to have been incorrect in any respect)
when made or deemed to be made;

 

(c)                Covenant Breaches. Any Loan Party shall fail to (i) perform
or observe any covenant contained in Section 5.02(a), Section 5.03 (with respect
to the Borrower’s existence), Section 5.06(i), Section 5.09, Section 5.17, or
Article VI of this Agreement (other than Section 6.18) or (ii) fail to perform
or observe any other term or covenant set forth in this Agreement (other than
Section 6.18) or in any other Loan Document which is not covered by clause (i)
above or any other provision of this Section 7.01 if such failure shall remain
unremedied for 30 days after the earlier of the knowledge of any Responsible

 

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Officer of any Loan Party of the occurrence of such breach or failure and the
date notice thereof is given to the Borrower by the Administrative Agent or any
Lender;

 

(d)               Cross-Defaults. (i) Any Loan Party shall fail to pay any
principal of or premium or interest on its Indebtedness that is outstanding in a
principal amount of at least $5,000,000 individually or when aggregated with all
such Indebtedness of any Loan Party so in default (but excluding Indebtedness
under the Loan Documents) when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness; (ii) any other
event shall occur or condition shall exist under any agreement or instrument
relating to Indebtedness (including, without limitation, any event of default or
termination event under any Hedge Contract) that is outstanding in a principal
amount (or termination payment amount or similar amount) of at least $5,000,000
individually or when aggregated with all such Indebtedness of any Loan Party so
in default, and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Indebtedness; or (iii) any such Indebtedness in a principal amount of at
least $5,000,000 individually or when aggregated with all such Indebtedness of
any Loan Party shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof; provided that, for purposes of this subsection 7.01(d),
the “principal amount” of the obligations in respect of any Hedge Contract at
any time shall be Hedge Termination Value thereof;

 

(e)                Insolvency. Any Loan Party shall generally not pay its debts
as such debts become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against any Loan Party
seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or other similar official for
it or for any substantial part of its Property and, in the case of any such
proceeding instituted against any such Loan Party either such proceeding shall
remain undismissed for a period of 60 days or any of the actions sought in such
proceeding shall occur; or any such Loan Party shall take any corporate, limited
liability company, or partnership, as applicable, action to authorize any of the
actions set forth above in this paragraph (e);

 

(f)                Judgments. Any judgment or order for the payment of money in
excess of $5,000,000 shall be rendered against any Loan Party and either
(i) enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;

 

(g)                Termination Events. The occurrence of any of the following
events: (i) any Loan Party fails to make full payment when due of all amounts
which, under the provisions of any Pension Plan or Sections 412 or 430 of the
Code, any Loan Party is required to pay as contributions thereto and such unpaid
amounts are in excess of $5,000,000, (ii) a Termination Event that results in,
or could reasonably be expected to result in, liability to any Loan Party in
excess of $5,000,000 or (iii) any Loan Party as employers under one or more
Multiemployer Plans makes a complete or partial withdrawal from any such
Multiemployer Plan and the plan sponsor of such Multiemployer Plan notifies such
withdrawing employer that such employer has incurred a withdrawal liability
requiring payments in an amount exceeding $5,000,000;

 

(h)               Change in Control. A Change in Control shall have occurred;

 

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(i)                 Security Instruments. (i) The Administrative Agent shall
fail to have an Acceptable Security Interest in any portion of the Collateral
(other than Collateral Disposed of in accordance with this Agreement or any
other Loan Document) or (ii) any Security Instrument shall at any time and for
any reason cease to create the Lien on the Property purported to be subject to
such agreement in accordance with the terms of such agreement, or cease to be in
full force and effect, or shall be contested by any Loan Party; provided that,
for title defects and exceptions that are not Permitted Liens, the Borrower will
have 60 days to cure as provided for by Section 5.11; and

 

(j)                 Loan Documents. Any material provision of any Loan Document
shall for any reason cease to be in full force and effect or valid, binding, or
enforceable on any Loan Party or any such Person shall so state in writing;

 

Section 7.02         Optional Acceleration of Maturity. If any Event of Default
(excluding an Event of Default pursuant to Section 7.01(e)) shall have occurred
and be continuing, then, and in any such event,

 

(a)                the Administrative Agent (i) may, and shall at the request of
the Majority Lenders, by notice to the Borrower, declare the obligation of each
Lender and the Issuing Lender to make extensions of credit hereunder, including
making Advances and issuing, increasing or extending Letters of Credit, to be
terminated, whereupon the same shall forthwith terminate, and (ii) may, and
shall at the request of the Majority Lenders, by notice to the Borrower, declare
all principal, interest, fees, reimbursements, indemnifications, and all other
amounts payable under this Agreement, the Notes, and the other Loan Documents to
be forthwith due and payable, whereupon all such amounts shall become and be
forthwith due and payable in full, without notice of intent to demand, demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
grace, notice of dishonor, notice of intent to accelerate, notice of
acceleration, and all other notices, all of which are hereby expressly waived by
the Borrower;

 

(b)               the Borrower shall, on demand of the Administrative Agent
(which demand shall be made at the request of the Majority Lenders), deposit
into the Cash Collateral Account an amount of cash equal to the Minimum
Collateral Amount as security for the Secured Obligations; and

 

(c)                the Administrative Agent may, and shall at the request of the
Majority Lenders, proceed to enforce its rights and remedies under the Security
Instruments, the Guaranty, and any other Loan Documents for the ratable benefit
of the Secured Parties by appropriate proceedings.

 

Section 7.03         Automatic Acceleration of Maturity. If any Event of Default
pursuant to Section 7.01(e) shall occur,

 

(a)                (i) the obligation of each Lender and the Issuing Lender to
make extensions of credit hereunder, including making Advances and issuing,
increasing or extending Letters of Credit, shall terminate, and (ii) all
principal, interest, fees, reimbursements, indemnifications, and all other
amounts payable under this Agreement, the Notes, and the other Loan Documents
shall become and be forthwith due and payable in full, without notice of intent
to demand, demand, presentment for payment, notice of nonpayment, protest,
notice of protest, grace, notice of dishonor, notice of intent to accelerate,
notice of acceleration, and all other notices, all of which are hereby expressly
waived by the Borrower;

 

(b)               the Borrower shall deposit into the Cash Collateral Account an
amount of cash equal to the Minimum Collateral Amount as security for the
Secured Obligations; and

 

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(c)                the Administrative Agent may, and shall at the request of the
Majority Lenders, proceed to enforce its rights and remedies under the Security
Instruments, the Guaranty, and any other Loan Document for the ratable benefit
of the Secured Parties by appropriate proceedings.

 

Section 7.04         Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Administrative Agent, the Issuing
Lender, each Lender and each of their respective Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by applicable
Legal Requirement, 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 the Administrative Agent, the Issuing Lender,
such Lender or such Affiliate to or for the credit or the account of any Loan
Party against any and all of the obligations of any Loan Party now or hereafter
existing under this Agreement or any other Loan Document and owing to the
Administrative Agent, such Lender, such Issuing Lender or such Affiliate,
irrespective of whether or not the Administrative Agent, such Lender, the
Issuing Lender or such Affiliate shall have made any demand under this Agreement
or any other Loan Document and although such obligations of any Loan Party may
be contingent or unmatured or are owed to a branch or office of the
Administrative Agent, such Lender, such Issuing Lender or such Affiliate
different from the branch or office holding such deposit or obligated on such
obligations; provided that in the event that any Defaulting Lender shall
exercise any such right of setoff, (x) all amounts so set off shall be paid over
immediately to the Administrative Agent for further application in accordance
with the provisions of Section 2.16 and, pending such payment, shall be
segregated by such Defaulting Lender from its other funds and deemed held in
trust for the benefit of the Administrative Agent, the Issuing Lender and the
Lenders, and (y) the Defaulting Lender shall provide promptly to the
Administrative Agent a statement describing in reasonable detail the Obligations
owing to such Defaulting Lender as to which it exercised such right of setoff.
Each of the Lender Parties agrees to notify the Borrower and the Administrative
Agent promptly after any such setoff and application, provided that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of the Administrative Agent, each Lender, the Issuing
Lender and their respective Affiliates under this Section 7.04 are in addition
to other rights and remedies (including other rights of setoff) that the
Administrative Agent, such Lender, the Issuing Lender or their respective
Affiliates may have.

 

Section 7.05         Non-exclusivity of Remedies. No right, power, or remedy
conferred to any Lender Party in this Agreement or the Loan Documents, or now or
hereafter existing at law, in equity, by statute, or otherwise shall be
exclusive, and each such right, power, or remedy shall to the full extent
permitted by law be cumulative and in addition to every other such right, power
or remedy. No course of dealing and no delay in exercising any right, power, or
remedy conferred to any Lender Party in this Agreement and the Loan Documents or
now or hereafter existing at law, in equity, by statute, or otherwise shall
operate as a waiver of or otherwise prejudice any such right, power, or remedy.
Any Lender Party may cure any Event of Default without waiving the Event of
Default. No notice to or demand upon the Borrower or any other Loan Party shall
entitle the Borrower or any other Loan Party to similar notices or demands in
the future.

 

Section 7.06         Application of Proceeds.

 

(a)                Prior to an Event of Default, all payments made hereunder
shall be applied by the Administrative Agent as directed by the Borrower, but
subject to the terms of this Agreement, including the application of prepayments
according to Section 2.05 and Section 2.13. From and during the continuance of
any Event of Default, any monies or Property actually received by the
Administrative Agent pursuant to this Agreement or any other Loan Document
(other than as a result of the exercise of any rights or remedies under any
Security Instrument or any other agreement with the Borrower or any Guarantor
which secures any of the Secured Obligations), shall be applied as determined by
the

 

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Administrative Agent, but subject to the terms of this Agreement, including the
application of prepayments according to Section 2.05 and Section 2.13.

 

(b)               Notwithstanding the foregoing, in the event that the
Obligations have been accelerated pursuant to Section 7.02 or 7.03 or the
Administrative Agent or any Lender has exercised any remedy set forth in this
Agreement or in any other Loan Document, all monies or Property actually
received by the Administrative Agent pursuant to this Agreement or any other
Loan Document as a result of the exercise of any rights or remedies under any
Security Instrument or any other agreement with the Borrower or any Guarantor
which secures any of the Secured Obligations, shall be applied in accordance
with Section 2.13 and otherwise in the following order:

 

First, to payment of that portion of the Secured Obligations constituting fees,
indemnities, expenses and other amounts, including attorney fees, payable to the
Administrative Agent in its capacity as such and the Issuing Lender in its
capacity as such, ratably among the Administrative Agent and Issuing Lender in
proportion to the respective amounts described in this clause First payable to
them;

 

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

 

Third, to payment of that portion of the Secured Obligations constituting
accrued and unpaid interest on the Advances and Letter of Credit Obligations,
ratably among the Lenders in proportion to the respective amounts described in
this clause Third payable to them;

 

Fourth, to payment of that portion of the Secured Obligations constituting
unpaid principal of the Advances, Letter of Credit Obligations and all other
payment obligations constituting Secured Obligations (other than Obligations
entitled to priority under clauses First, Second and Third clauses above),
ratably among the Secured Parties in proportion to the respective amounts
described in this clause Fourth payable to them;

 

Fifth, to the Administrative Agent for the account of the Issuing Lender, to
cash collateralize any Letters of Credit then outstanding; and

 

Last, the balance, if any, after all of the Secured Obligations have been
indefeasibly paid in full, to the Borrower or as otherwise required by Legal
Requirements.

 

Notwithstanding the foregoing, (a) payments and collections received by the
Administrative Agent from any Loan Party that is not a Qualified ECP Guarantor
(and any proceeds received in respect of such Loan Party’s Collateral) shall not
be applied to Excluded Swap Obligations with respect to any Loan Party,
provided, however, that the Administrative Agent shall make such adjustments as
it determines is appropriate with respect to payments and collections received
from the other Loan Parties (or proceeds received in respect of such other Loan
Parties’ Collateral) to preserve, as nearly as possible, the allocation to
Secured Obligations otherwise set forth above in this Section 7.06 (assuming
that, solely for purposes of such adjustments, Secured Obligations includes
Excluded Swap Obligations), and (b) Banking Services Obligations and Lender
Hedge Obligations may be excluded from the application described above if the
Administrative Agent has not received written notice thereof, together with such
supporting documentation as the Administrative Agent may request, from the
applicable Secured Party as the case may be. Each Secured Party not a party to
this Agreement that has given the notice contemplated by the preceding sentence
shall, by such notice, be deemed to have acknowledged and accepted the
appointment

 

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of the Administrative Agent pursuant to the terms of Article VIII for itself and
its Affiliates as if a “Lender” party hereto.

 

ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER

 

Section 8.01         Appointment and Authority. Each Lender and the Issuing
Lender hereby irrevocably (a) appoints KeyBank to act on its behalf as the
Administrative Agent hereunder and under the other Loan Documents, and (b)
authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
hereof or thereof, together with such actions and powers as are reasonably
incidental thereto. The provisions of this Article VIII are solely for the
benefit of the Lender Parties, and neither the Borrower nor any other Loan Party
shall have rights as a third party beneficiary of any of such provisions, other
than the rights expressly provided to the Borrower under Section 8.06(a) and
Section 8.11(b). It is understood and agreed that the use of the term “agent”
herein or in any other Loan Document (or any other similar term) with reference
to the Administrative Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any applicable
Legal Requirement. Instead such term is used as a matter of market custom, and
is intended to create or reflect only an administrative relationship between
contracting parties.

 

Section 8.02         Rights as a Lender. The Person 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 the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated or unless the context otherwise requires,
include the Person serving as the Administrative Agent hereunder in its
individual capacity. Such Person and its Affiliates may accept deposits from,
lend money to, own securities, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the
Borrower or any other Subsidiary or other Affiliate thereof as if such Person
were not the Administrative Agent hereunder and without any duty to account
therefor to the Lenders. KeyBank (and any successor acting as Administrative
Agent) and its Affiliates may accept fees and other consideration from the
Borrower or any Affiliate of the Borrower for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders or
the Issuing Lender.

 

Section 8.03         Exculpatory Provisions. The Administrative Agent (which
term as used in this Section 8.03 shall include its Related Parties) shall not
have any duties or obligations except those expressly set forth herein and in
the other Loan Documents, and its duties hereunder shall be administrative in
nature. Without limiting the generality of the foregoing, the Administrative
Agent:

 

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

 

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

 

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(c)                shall not, except as expressly set forth herein and in the
other Loan Documents, have any duty to disclose, nor shall it be liable for the
failure to disclose, any information relating to the Borrower, any other Loan
Party or any of their respective Affiliates that is communicated to or obtained
by the Person serving as the 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 (i) with the consent or at the request of the Majority Lenders (or such
other number or percentage of the Lenders or Secured Parties as shall be
necessary, or as the Administrative Agent shall believe in good faith shall be
necessary, under the circumstances as provided in Sections 9.03 and 7.01) or
(ii) in the absence of its own gross negligence or willful misconduct as
determined by a court of competent jurisdiction by final and nonappealable
judgment. The Administrative Agent shall be deemed not to have knowledge of any
Default unless and until notice describing such Default is given to the
Administrative Agent in writing by the Borrower, a Lender or the Issuing Lender.
In the event that the Administrative Agent receives such a notice of the
occurrence of a Default, the Administrative Agent shall (subject to Section
9.03) take such action with respect to such Default or Event of Default as shall
reasonably be directed by the Majority Lenders, provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action) with respect to such Default as it shall deem advisable in
the best interest of the Lender Parties.

 

The Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any recital, statement, warranty or representation
(whether written or oral) made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the value, validity, enforceability,
effectiveness, sufficiency or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the inspection of,
or to inspect, the Property (including the books and records) of any Loan Party
or any Affiliate thereof, (vi) the satisfaction of any condition set forth in
Article III or elsewhere herein, other than to confirm receipt of items
expressly required to be delivered to the Administrative Agent, or (vii) any
litigation or collection proceedings (or to initiate or conduct any such
litigation or proceedings) under any Loan Document unless requested by the
Majority Lenders in writing and its receives indemnification satisfactory to it
from the Lenders.

 

Section 8.04         Reliance by Administrative Agent and Issuing Lender. 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, writing or other communication (including any
electronic message, Internet or intranet website posting or other distribution)
believed by it to be genuine and to have been signed, sent or otherwise
authenticated by the proper Person. The Administrative Agent also may rely upon
any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying
thereon. In determining compliance with any condition hereunder to the making of
a Credit Extension or any Conversion or continuance of an Advance that by its
terms must be fulfilled to the satisfaction of a Lender or the Issuing Lender,
the Administrative Agent may presume that such condition is satisfactory to such
Lender or Issuing Lender unless the Administrative Agent shall have received
notice to the contrary from such Lender or Issuing Lender prior to the making of
such Credit Extension or Conversion or continuance of an Advance. The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and the
Administrative Agent 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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Section 8.05         Delegation of Duties. The Administrative Agent may perform
any and all of its duties and exercise its rights and powers hereunder or under
any other Loan Document by or through any one or more sub-agents appointed by
it. The Administrative Agent and any such sub-agent may perform any and all of
its duties and exercise its rights and powers by or through their respective
Related Parties. The exculpatory provisions of this Article VIII 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. The Administrative Agent shall not be
responsible for the negligence or misconduct of any sub-agents except to the
extent that a court of competent jurisdiction determines in a final and
non-appealable judgment that the Administrative Agent acted with gross
negligence or willful misconduct in the selection of such sub-agents.

 

Section 8.06         Resignation of Agent or Issuing Lender.

 

(a)                The Administrative Agent and the Issuing Lender may at any
time give notice of its resignation to the other Lender Parties and the
Borrower. Upon receipt of any such notice of resignation, (i) the Majority
Lenders shall have the right, with the prior written consent of the Borrower
(which consent is not required if an Event of Default has occurred and is
continuing and which consent shall not be unreasonably withheld or delayed), to
appoint, as applicable, a successor Administrative Agent (which shall be a
Lender or such other Person appointed by the Majority Lenders) or a successor
Issuing Lender (which shall be a Lender). If no such successor Administrative
Agent or Issuing Lender shall have been so appointed and shall have accepted
such appointment within 30 days after the retiring Administrative Agent or
Issuing Lender gives notice of its resignation (or such earlier day as shall be
agreed by the applicable Majority Lenders) (the “Resignation Effective Date”),
then the retiring Administrative Agent or Issuing Lender, as applicable, may on
behalf of the Lenders and Issuing Lender, appoint a successor Administrative
Agent or Issuing Lender meeting the qualifications set forth above. Whether or
not a successor has been appointed, such resignation by the Administrative Agent
or the Issuing Lender shall become effective in accordance with such notice on
the Resignation Effective Date.

 

(b)               If the Person serving as Administrative Agent is a Defaulting
Lender pursuant to clause (d) of the definition thereof, the Majority Lenders
may, to the extent permitted by applicable Legal Requirement, by notice in
writing to the Borrower and such Person remove such Person as Administrative
Agent and, in consultation with the Borrower, appoint a successor. If no such
successor shall have been so appointed by applicable Majority Lenders and shall
have accepted such appointment within 30 days (or such earlier day as shall be
agreed by the applicable Majority Lenders) (the “Removal Effective Date”), then
such removal shall nonetheless become effective in accordance with such notice
on the Removal Effective Date.

 

(c)                With effect from the Resignation Effective Date or the
Removal Effective Date (as applicable) (i) the retiring or removed
Administrative Agent or Issuing Lender, as applicable, shall be discharged from
its duties and obligations as the Administrative Agent and Issuing Lender
hereunder and under the other Loan Documents (except that (v) in the case of any
collateral security held by the Administrative Agent on behalf of the Lenders or
the Issuing Lender under any of the Loan Documents, the retiring Administrative
Agent shall continue to hold such collateral security until such time as a
successor Administrative Agent is appointed and (z) the retiring Issuing Lender
shall remain the Issuing Lender with respect to any Letters of Credit
outstanding on the effective date of its resignation and the provisions
affecting the Issuing Lender with respect to such Letters of Credit shall inure
to the benefit of the retiring Issuing Lender until the termination of all such
Letters of Credit) and (ii) all payments, communications and determinations
provided to be made by, to or through the retiring or removed Administrative
Agent or Issuing Lender, as applicable, shall instead be made by or to each
applicable

 

 -105-

 

class of Lenders, until such time as the Majority Lenders appoint a successor
Administrative Agent or Issuing Lender as provided for above in this paragraph.
Upon the acceptance of a successor’s appointment as Administrative Agent or
Issuing Lender, as applicable, hereunder, such successor shall succeed to and
become vested with all of the rights, powers, privileges and duties of the
retiring or removed Administrative Agent or Issuing Lender, as applicable, and
the retiring or removed Administrative Agent or Issuing Lender, as applicable,
shall be discharged from all of its duties and obligations hereunder or under
the other Loan Documents. The fees payable by the Borrower to a successor
Administrative Agent or Issuing Lender, as applicable, shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After the retiring or removed Administrative Agent’s or
Issuing Lender’s resignation or removal hereunder and under the other Loan
Documents, the provisions of this Article VIII and Sections 9.02(a) and (b),
Section 8.09 and Section 2.14(d) shall continue in effect for the benefit of
such retiring or removed Administrative Agent and Issuing Lender, as applicable,
their respective sub-agents and their respective Related Parties in respect of
any actions taken or omitted to be taken by any of them while the retiring or
removed Administrative Agent or Issuing Lender, as applicable, was acting as
Administrative Agent or Issuing Lender, as applicable.

 

Section 8.07         Non-Reliance on Administrative Agent and Other Lenders.
Each Lender Party acknowledges and agrees that it has, independently and without
reliance upon the Administrative Agent or any other Lender Party or any of their
Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender Party also acknowledges and agrees that it will,
independently and without reliance upon the Administrative Agent or any other
Lender Party or any of their Related Parties, and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder. Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders or the Issuing
Lender by the Administrative Agent hereunder and for other information in the
Administrative Agent’s possession which has been requested by a Lender and for
which such Lender pays the Administrative Agent’s expenses in connection
therewith, the Administrative Agent shall not have any duty or responsibility to
provide any Lender or any Issuing Lender with any credit or other information
concerning the affairs, financial condition, or business of any Loan Party or
Affiliates that may come into the possession of the Administrative Agent or any
of its Affiliates.

 

Section 8.08         No Other Duties, etc. Anything herein to the contrary
notwithstanding, none of the lead arranger, documentation agent, syndication
agent or other titles to Lenders or Affiliates of a Lender which may be listed
on the cover page hereof shall have any powers, duties or responsibilities under
this Agreement or any of the other Loan Documents, except in its capacity, as
applicable, as the Administrative Agent a Lender or the Issuing Lender
hereunder.

 

Section 8.09         Indemnification.

 

(a)                INDEMNITY OF ADMINISTRATIVE AGENT. THE LENDERS SEVERALLY
AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH OF ITS AFFILIATES AND THEIR
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS (TO THE EXTENT NOT
REIMBURSED BY THE BORROWER), ratably according to the respective principal
amounts of the Advances then held by each of them (or if no principal of the
Advances is at the time outstanding, ratably according to the respective
Commitments held by each of them immediately prior to the termination,
expiration or full

 

 -106-

 

reduction of each such Commitment), FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST such indemnified person IN ANY WAY RELATING
TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE
ADMINISTRATIVE AGENT UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (in all
cases, whether or not caused by or arising, in whole or in part, out of the
comparative, contributory or sole negligence of SUCH indemnified person), AND
INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL CLAIMS, PROVIDED THAT NO LENDER
SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS
RESULTING FROM such indemnified person’s GROSS NEGLIGENCE OR WILLFUL MISCONDUCT,
IN EACH CASE, as determined by a final non-appealable judgment of a court of
competent jurisdiction. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES
TO REIMBURSE THE ADMINISTRATIVE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE
(DETERMINED AS SET FORTH ABOVE IN THIS PARAGRAPH) OF ANY OUT-OF-POCKET EXPENSES
(INCLUDING COUNSEL FEES) INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH
THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT,
OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE)
OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, TO THE EXTENT THAT THE ADMINISTRATIVE
AGENT IS NOT REIMBURSED FOR SUCH BY THE BORROWER.

 

(b)               THE LENDERS SEVERALLY AGREE TO INDEMNIFY THE ISSUING LENDER
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), ratably according to
the respective principal amounts of the Advances then held by each of them (or
if no principal of the Advances is at the time outstanding, ratably according to
the respective amounts of the Commitments then held by each of them, or, if no
such principal amounts are then outstanding and no Commitments are then
existing, ratably according to the Commitments held by each of them immediately
prior to the termination or expiration thereof), FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNIFIED PERSON IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY
THE ISSUING LENDER UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (in all
cases, whether or not caused by or arising, in whole or in part, out of the
comparative, contributory or sole negligence of SUCH INDEMNIFIED PERSON), AND
INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL CLAIMS, PROVIDED THAT NO LENDER
SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS
RESULTING FROM SUCH INDEMNIFIED PERSON’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT,
IN EACH

 

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CASE, as determined by a final non-appealable judgment of a court of competent
jurisdiction. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO
REIMBURSE THE ISSUING LENDER PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE
(DETERMINED AS SET FORTH ABOVE IN THIS PARAGRAPH) OF ANY OUT-OF-POCKET EXPENSES
(INCLUDING COUNSEL FEES) INCURRED BY THE ISSUING LENDER IN CONNECTION WITH THE
PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR
ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF,
OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, TO THE EXTENT THAT THE ISSUING LENDER IS NOT
REIMBURSED FOR SUCH BY THE BORROWER.

 

Section 8.10         Administrative Agent May File Proofs of Claim. In case of
the pendency of any proceeding under any Debtor Relief Law or any other judicial
proceeding relative to any Loan Party, the Administrative Agent (irrespective of
whether the principal of any Advance or Letter of Credit Obligation shall then
be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered (but not obligated) by
intervention in such proceeding or otherwise:

 

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

 

(b)               to collect and receive any monies or other Property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender and Issuing
Lender to make such payments to the Administrative Agent and, in the event that
the Administrative Agent shall consent to the making of such payments directly
to the Lenders and the Issuing Lender, to pay to the Administrative Agent any
amount due for the reasonable compensation, expenses, disbursements and advances
of the Administrative Agent and its respective agents and counsel, and any other
amounts due to the Administrative Agent under Section 2.08.

 

Section 8.11         Collateral and Guaranty Matters.

 

(a)                The Administrative Agent is authorized on behalf of the
Secured Parties, without the necessity of any notice to or further consent from
such Secured Parties, from time to time, to take any actions with respect to any
Collateral or Security Instruments which may be necessary to perfect and
maintain the Liens upon the Collateral granted pursuant to the Security
Instruments. The Administrative Agent is further authorized (but not obligated)
on behalf of the Secured Parties, without the necessity of any notice to or
further consent from the Secured Parties, from time to time, to take any action
in exigent circumstances as may be reasonably necessary to preserve any rights
or privileges of the Secured Parties under the Loan Documents or applicable
Legal Requirements. By accepting the benefit of the Liens granted pursuant to
the Security Instruments, each Secured Party hereby agrees to the terms of this
paragraph (a).

 

(b)               The Lenders hereby, and any other Secured Party by accepting
the benefit of the Liens granted pursuant to the Security Instruments,
irrevocably authorize the Administrative Agent to (i) release

 

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any Lien granted to or held by the Administrative Agent upon any Collateral
(a) upon termination of this Agreement, termination of all Hedge Contracts with
such Persons (other than Hedge Contracts as to which arrangements satisfactory
to the applicable counterparty in its sole discretion have been made),
termination of all Letters of Credit (other than Letters of Credit as to which
arrangements satisfactory to the Issuing Lender in its sole discretion have been
made), and the payment in full of all outstanding Advances, Letter of Credit
Obligations and all other Secured Obligations (other than contingent indemnity
obligations for which no claims have been made); (b) constituting Property sold
or to be sold or Disposed of as part of or in connection with any Disposition
permitted under this Agreement or any other Loan Document; (c) constituting
Property in which no Loan Party owned an interest at the time the Lien was
granted or at any time thereafter other than as a result of a transaction
prohibited hereunder; or (d) constituting Property leased to any Loan Party
under a lease which has expired or has been terminated in a transaction
permitted under this Agreement or is about to expire and which has not been, and
is not intended by such Loan Party to be, renewed or extended; and (ii) release
a Guarantor from its obligations under a Guaranty and any other applicable Loan
Document and release the Lien granted to or held by the Administrative Agent
upon any Collateral of such Person if such Person ceases to be a Subsidiary as a
result of a transaction permitted under this Agreement. Upon the request of the
Administrative Agent at any time, the Secured Parties will confirm in writing
the Administrative Agent’s authority to release particular types or items of
Collateral or Guarantors pursuant to this Section 8.11. At the written request
and sole expense of the Borrower, which written request shall also include a
certification from a Responsible Officer certifying to the Administrative Agent
that such release is permitted under this Section 8.11 and that such transaction
is in compliance with this Agreement and the other Loan Documents (which
certification the Administrative Agent may, but is not obligated to, rely on),
the Administrative Agent shall promptly provide the releases of Collateral or
Guarantors permitted to be released under this Section 8.11 subject to evidence
of such transaction and release documentation reasonably satisfactory to the
Administrative Agent except that the Administrative Agent may, but shall not be
obligated, to provide such releases for such Property to be sold but not yet
sold or such Property subject to a lease that is about to expire but not yet
expired. Upon any of the Collateral constituting personal property being
Disposed of as permitted under this Agreement, then such Collateral shall be
automatically released from the Liens created under the applicable Security
Instrument and the Administrative Agent.

 

(c)                Notwithstanding anything contained in any of the Loan
Documents to the contrary, the Loan Parties, the Administrative Agent, and each
Secured Party hereby agree that no Secured Party shall have any right
individually to realize upon any of the Collateral or to enforce the Guaranty,
it being understood and agreed that all powers, rights and remedies hereunder,
under the Guaranty and under the Security Instruments may be exercised solely by
the Administrative Agent, as applicable, on behalf of the Secured Parties in
accordance with the terms hereof and the other Loan Documents. By accepting the
benefit of the Liens granted pursuant to the Security Instruments, each Secured
Party not party hereto hereby agrees to the terms of this paragraph (c).

 

Section 8.12         Credit Bidding.

 

(a)                The Secured Parties hereby authorize the Administrative
Agent, on behalf of itself and the Secured Parties, at the direction of the
Majority Lenders, to credit bid all or any portion of the Secured Obligations
and in such manner purchase for the benefit of the Administrative Agent and the
Secured Parties all or any portion of Collateral at any sale thereof conducted
by the Administrative Agent under the provisions of the UCC, including pursuant
to Sections 9-610 or 9-620 of the UCC, at any sale thereof conducted under any
applicable provisions of the Bankruptcy Code, including Sections 363, 1123 or
1129 thereof, or at any other sale or foreclosure conducted by the
Administrative Agent (whether by judicial action or otherwise) in accordance
with Legal Requirements.

 

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(b)               Each Secured Party hereby agrees that, except as otherwise
provided in any Loan Documents or with the written consent of the Administrative
Agent and the Majority Lenders, it will not take any enforcement action,
accelerate obligations under any Loan Documents, or exercise any right that it
might otherwise have under Legal Requirements to credit bid at foreclosure
sales, UCC sales, sales conducted under any applicable provision of the
Bankruptcy Code or other similar Dispositions of Collateral; provided that, for
the avoidance of doubt, this subsection (b) shall not limit the rights of (i)
any Lender Swap Counterparty to terminate any Hedge Contract or net out any
resulting termination values, or (ii) any Banking Service Provider to terminate
any Banking Services or set off against any deposit accounts.

 

ARTICLE IX
MISCELLANEOUS

 

Section 9.01         Costs and Expenses. The Borrower agrees to pay promptly,
upon written demand:

 

(a)                all reasonable and documented out-of-pocket costs and
expenses of the Administrative Agent in connection with the syndication,
preparation, execution, delivery, administration, modification, and amendment of
this Agreement, the Notes, and the other Loan Documents, including, without
limitation, the reasonable and documented fees, expenses, charges and
disbursements of outside counsels for the Administrative Agent, and

 

(b)               all documented out-of-pocket costs and expenses, if any, of
the Administrative Agent and each Lender (including, without limitation,
documented outside counsel fees, expenses, charges and disbursements of each
Lender and the Administrative Agent but excluding amounts that Borrower and/or
any Guarantor are not required to indemnify the indemnified persons for pursuant
to Section 9.02) in connection with the enforcement of or protection of rights
under (whether through negotiations, legal proceedings, or otherwise) this
Agreement, the Notes and the other Loan Documents (including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of the Credit Extensions).

 

Section 9.02         Indemnification; Waiver of Damages.

 

(a)                INDEMNIFICATION. EACH LOAN PARTY THAT IS A PARTY HERETO
AGREES TO, AND DOES HEREBY, JOINTLY AND SEVERALLY, INDEMNIFY AND HOLD HARMLESS
THE ADMINISTRATIVE AGENT, THE ISSUING LENDER, EACH LENDER, EACH LENDER SWAP
COUNTERPARTY, AND EACH OF THEIR RESPECTIVE RELATED PARTIES (EACH, AN
“INDEMNITEE”) FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES,
LIABILITIES AND EXPENSES OF ANY KIND OR NATURE (INCLUDING FEES, CHARGES, AND
DISBURSEMENTS OF COUNSEL AND ANY CONSULTANT FOR ANY INDEMNITEE), TO WHICH SUCH
INDEMNITEE MAY BECOME SUBJECT OR THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED
AGAINST SUCH INDEMNITEE BY ANY PERSON (INCLUDING THE BORROWER, ANY SUBSIDIARY OR
ANY AFFILIATE THEREOF), IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY
REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION,
LITIGATION, OR PROCEEDING OR PREPARATION OF A DEFENSE IN CONNECTION THEREWITH)
(I) THE EXECUTION OR DELIVERY OF ANY LOAN DOCUMENT, ANY HEDGE CONTRACT WITH ANY
LENDER SWAP COUNTERPARTY, OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED THEREBY,
THE PERFORMANCE BY THE PARTIES HERETO OR THERETO OF THEIR RESPECTIVE OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE CONSUMMATION

 

 -110-

 

OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (II) ANY ADVANCE OR LETTER
OF CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING ANY
REFUSAL BY THE ISSUING LENDER 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 OR THREATENED RELEASE OF HAZARDOUS MATERIALS ON, AT, UNDER
OR FROM ANY PROPERTY OWNED, LEASED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY
OR AFFILIATE THEREOF, OR ANY ENVIRONMENTAL CLAIM RELATED IN ANY WAY TO THE
BORROWER OR ANY SUBSIDIARY OR AFFILIATE THEREOF AT ANY TIME, (IV) ANY ACTUAL OR
PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF
THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER
BROUGHT BY A THIRD PARTY OR BY THE BORROWER OR ANY SUBSIDIARY OR AFFILIATE
THEREOF, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, OR (V) ANY
CLAIM (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL CLAIMS), INVESTIGATION,
LITIGATION OR OTHER PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT, ANY
LENDER OR ANY LENDER SWAP COUNTERPARTY IS A PARTY THERETO) AND THE PROSECUTION
AND DEFENSE THEREOF, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE ADVANCES,
ANY LOAN DOCUMENT, ANY HEDGE CONTRACT WITH ANY LENDER SWAP COUNTERPARTIES OR ANY
DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (AND IN ALL CASES, WHETHER OR NOT CAUSED BY OR
ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE
NEGLIGENCE OF SUCH INDEMNITEE); 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 NON-APPEALABLE JUDGMENT (A) TO HAVE RESULTED FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE, (B) TO HAVE RESULTED
FROM A CLAIM BROUGHT BY THE BORROWER AGAINST ANY INDEMNITEE OF ANY MATERIAL
BREACH IN BAD FAITH OF SUCH INDEMNITEE’S FUNDING OBLIGATIONS UNDER THIS
AGREEMENT OR WITH RESPECT TO THE HEDGE CONTRACT WITH ANY LENDER SWAP
COUNTERPARTIES, OR (C) ARE ON ACCOUNT OF A DISPUTE ARISING SOLELY AMONG
INDEMNITEES (OTHER THAN THE ADMINISTRATIVE AGENT IN ITS ROLE AS SUCH) TO THE
EXTENT SUCH DISPUTE DOES NOT INVOLVE AND IS NOT RELATED TO ANY ACT, OMISSION OR
REPRESENTATION ON THE PART OF, OR ANY INFORMATION PROVIDED BY OR ON BEHALF OF,
THE BORROWER, ANY GUARANTOR OR AFFILIATES THEREOF. THIS INDEMNITY SHALL NOT
APPLY WITH RESPECT TO TAXES OTHER THAN ANY TAXES THAT REPRESENT LOSSES, CLAIMS,
DAMAGES, ETC. ARISING FROM ANY NON-TAX CLAIM. No Loan Party shall, without the
prior written consent of each Indemnitee affected thereby, settle any threatened
or pending claim or action that would give rise to the right of any Indemnitee
to claim indemnification hereunder unless such settlement (x) includes a full
and unconditional release of all liabilities arising out of such claim or action
against such Indemnitee, (y) does not include any statement as to or an
admission of fault, culpability or failure to act by or on behalf of any
Indemnitee and (z) does not require any actions to be taken or refrained from
being taken by any Indemnitee other than the execution of the related settlement
agreement, if any.

 

 -111-

 

(b)               Waiver of Consequential Damages, Etc. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LEGAL REQUIREMENT THE PARTIES HERETO SHALL NOT ASSERT,
AND HEREBY WAIVE, 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, ANY THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY AGREEMENT OR INSTRUMENT
CONTEMPLATED HEREBY OR THEREBY, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
ANY ADVANCE OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREOF; PROVIDED
THAT, THIS WAIVER AND AGREEMENT SHALL NOT LIMIT THE LOAN PARTIES’
INDEMNIFICATION OBLIGATIONS TO THE EXTENT SET FORTH IN THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS TO THE EXTENT SUCH SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES ARE INCLUDED IN ANY THIRD PARTY CLAIM IN CONNECTION WITH WHICH
SUCH INDEMNIFIED PERSON IS OTHERWISE ENTITLED TO INDEMNIFICATION HEREUNDER OR
THEREUNDER. NO INDEMNITEE SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE
BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS DISTRIBUTED BY IT
THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION SYSTEMS
IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

(c)                Payments. All amounts due under this Section shall be payable
promptly after demand therefor.

 

(d)               Survival. Without prejudice to the survival of any other
agreement of the Loan Parties hereunder, the agreements and obligations of the
Loan Parties contained in this Section 9.02 shall survive the termination of
this Agreement, the termination of all Commitments, and the payment in full of
the Advances and all other amounts payable under this Agreement.

 

Section 9.03         Waivers and Amendments. No amendment or waiver of any
provision of this Agreement, the Notes, or any other Loan Document (other than
the Fee Letter), nor consent to any departure by any Loan Party therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Lenders and the Borrower, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided that:

 

(a)                no amendment, waiver or consent shall, without the consent of
each Lender directly and adversely affected thereby, (i) reduce the amount of,
or rate of interest on, the Advances (other than the Default Rate of interest on
the Advances which may be reduced or waived by the Majority Lenders),
(ii) reduce the amount of any fees or other amounts payable hereunder or under
any other Loan Document (other than those specifically addressed above in this
Section 9.03), (iii) amend, waive or consent to depart from any of the
conditions specified in Section 3.01 (other than such conditions which are
expressly noted to be subject to Majority Lenders’ approval), (iv) increase the
Maximum Credit Amount or any obligations of any Lender, (v) postpone or extend
any date fixed for any payment of any fees or other amounts payable hereunder
(other than those otherwise specifically addressed in this Section 9.03),
including an extension of the Maturity Date or the Commitment Termination Date,
or (vi) amend, waive or consent to depart from Section 2.13(e) or Section 7.06;

 

(b)               no amendment, waiver or consent shall, unless the same shall
be in writing and signed by each Lender, (i) except as permitted under Section
8.11(b), release all or substantially all of the Guarantors from their
obligations under any Guaranty or, except as specifically provided in the Loan

 

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Documents and as a result of transactions permitted by the terms of this
Agreement, release all or substantially all of the Collateral; (ii) increase the
Borrowing Base, or (iii) amend the definitions of “Majority Lenders”, “Required
Lenders” or “Credit Exposure”, this Section 9.03 or any other provision in any
Loan Document specifying the number or percentage of Lenders required to waive,
amend or modify any rights thereunder (other than as provided in clause (c)
below);

 

(c)                no amendment, waiver or consent shall, without the consent of
the Required Lenders, (i) decrease or maintain the same amount of the Borrowing
Base or (ii) amend, waive or consent to depart from any other provision in this
Agreement which expressly requires the consent of, or action or waiver by, the
Required Lenders, including, without limitation, Section 2.02 (except for such
provisions in Section 2.02 which expressly require consent of all the Lenders);

 

(d)               no amendment, waiver, or consent shall, unless in writing and
signed by each Lender Swap Counterparty directly affected thereby in addition to
the Lenders required above to take such action, materially, adversely and
disproportionately affect (i) such Lender Swap Counterparty as compared to the
other Secured Parties or (ii) the Lender Swap Counterparties as compared to the
Lenders;

 

(e)                no amendment, waiver, or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Administrative Agent under
this Agreement or any other Loan Document; and

 

(f)                no amendment, waiver or consent shall, unless in writing and
signed by the Issuing Lender in addition to the Lenders required above to take
such action, affect the rights or duties of the Issuing Lender under this
Agreement or any other Loan Document.

 

Section 9.04         Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

Section 9.05         Survival of Representations and Obligations.

 

(a)                All representations and warranties set forth in Article IV
and all representations and warranties contained in any certificate, or any of
the Loan Documents (including, but not limited to, any such representation or
warranty made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date (except those that are expressly made as of a
specific date), shall survive the Closing Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing hereunder.

 

(b)               Notwithstanding any termination of this Agreement, the
indemnities to which the Administrative Agent and the Lenders are entitled under
the provisions of Article VIII or Article IX and any other provision of this
Agreement and the other Loan Documents shall continue in full force and effect
and shall protect the Administrative Agent and the Lenders against events
arising after such termination as well as before. Without limiting the
foregoing, all obligations of the Loan Parties provided for in Sections 2.11,
2.12, 2.14(d), 9.01 and 9.02 and all of the obligations of the Lenders in
Section 8.09 shall survive any termination of this Agreement and repayment in
full of the Obligations. No termination of this Agreement shall affect the
rights and obligations of the parties hereto arising prior to such termination
or in respect of any provision of this Agreement which survives such
termination.

 

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Section 9.06         Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrower and the Administrative Agent, and
when the Administrative Agent shall have, as to each Lender, either received a
counterpart hereof executed by such Lender or been notified by such Lender that
such Lender has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent, and each Lender and their
respective permitted successors and assigns, except that neither the Borrower
nor any other Loan Party shall have the right to assign its rights or delegate
its duties under this Agreement or any other Loan Document or any interest in
this Agreement or any other Loan Document without the prior written consent of
each Lender, except as otherwise permitted by Section 6.04. Each Loan Party
agrees that no Affiliate, equityholder or creditor of such Loan Party is
intended to be, and none of such Persons shall be, third party beneficiaries of
this Agreement or any other Loan Document, and therefore no Indemnitee will have
any liability (whether direct or indirect, in contract or tort, or otherwise) to
any Loan Party’s respective Affiliate that is not a party hereto or to any Loan
Party’s equityholders or creditors arising out of, related to or in connection
with any aspect of the transactions contemplated hereby.

 

Section 9.07         Successors and Assigns.

 

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

 

(b)               Assignment by Lenders. Any Lender may at any time assign to
one or more assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Advances at the
time owing to it); provided that any such assignment shall be subject to the
following conditions:

 

(i)                 Minimum Amounts. The aggregate amount of the Commitment
(which for this purpose includes Advances outstanding thereunder) or, if the
applicable Commitment is not then in effect, the principal outstanding balance
of the Advances of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent or, if “Trade Date” is
specified in the Assignment and Acceptance, as of the Trade Date) shall not be
less than $5,000,000, unless (A) such assignment is to a Lender, and Affiliate
of a Lender, or an Approved Fund or (B) each of the Administrative Agent and, so
long as no Event of Default has occurred and is continuing, the Borrower
otherwise consents (each such consent not to be unreasonably withheld or
delayed).

 

(ii)               Proportionate Amounts. Each partial assignment shall be made
as an assignment of a proportionate part of all the assigning Lender’s rights
and obligations under this Agreement with respect to the Advance or the
Commitment assigned.

 

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(iii)             Required Consents. No consent shall be required for any
assignment except to the extent required by paragraph (b)(i) of this Section
and, in addition:

 

(A)             the consent of the Borrower (such consent not to be unreasonably
withheld or delayed) shall be required unless (x) an Event of Default has
occurred and is continuing at the time of such assignment or (y) such assignment
is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the
Borrower shall be deemed to have consented to any such assignment unless it
shall object thereto by written notice to the Administrative Agent within 7
Business Days after having received notice thereof;

 

(B)              the consent of the Administrative Agent (such consent not to be
unreasonably withheld or delayed) shall be required for assignments to a Person
that is not a Lender; and

 

(C)              the consent of the Issuing Lender shall be required for any
such assignment to a Person that is not a Lender.

 

(iv)             Assignment and Acceptance. The parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Acceptance,
together with a processing and recordation fee of $5,000; provided that the
Administrative Agent may, in its sole discretion, elect to waive such processing
and recordation fee in the case of any assignment. The assignee, if it is not a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.

 

(v)               Limitations on Assignment to Certain Persons.  No such
assignment shall be made to (A) the Borrower or any of the Borrower’s Affiliates
or Subsidiaries or (B) any Defaulting Lender or any of its Subsidiaries, or any
Person who, upon becoming a Lender hereunder, would constitute any of the
foregoing Persons described in this clause (B).

 

(vi)             No Assignment to Natural Persons. No such assignment shall be
made to a natural Person.

 

(vii)           Certain Additional Payments. In connection with any assignment
of rights and obligations of any Defaulting Lender hereunder, no such assignment
shall be effective unless and until, in addition to the other conditions thereto
set forth herein, the parties to the assignment shall make such additional
payments to the Administrative Agent in an aggregate amount sufficient, upon
distribution thereof as appropriate (which may be outright payment, purchases by
the assignee of participations or subparticipations, or other compensating
actions, including funding, with the consent of the Borrower and the
Administrative Agent, the applicable pro rata share of Advances previously
requested but not funded by the Defaulting Lender, to each of which the
applicable assignee and assignor hereby irrevocably consent), to (x) pay and
satisfy in full all payment liabilities then owed by such Defaulting Lender to
the Administrative Agent, the Issuing Lender and each other Lender hereunder
(and interest accrued and unpaid thereon), and (y) acquire (and fund as
appropriate) its full pro rata share of all Advances and participations in
Letters of Credit in accordance with its Pro Rata Share. Notwithstanding the
foregoing, in the event that any assignment of rights and obligations of any
Defaulting Lender hereunder shall become effective under applicable Legal
Requirement without compliance with the provisions of this paragraph, then the
assignee of such interest shall be deemed to be a Defaulting Lender for all
purposes of this Agreement until such compliance occurs.

 

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to paragraph (c) of this Section, from and after the effective date specified in
each Assignment and Acceptance, the assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such

 

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Assignment and Acceptance, 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 Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance 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 Sections 2.12, 2.14, 9.01, 9.02 and 9.03 with
respect to facts and circumstances occurring prior to the effective date of such
assignment; provided, that except to the extent otherwise expressly agreed by
the affected parties, no assignment by a Defaulting Lender will constitute a
waiver or release of any claim of any party hereunder arising from that Lender’s
having been a Defaulting Lender. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
paragraph 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 (d) of this Section.

 

(c)                Register. The Administrative Agent, acting solely for this
purpose as a non-fiduciary agent of the Borrower, shall maintain at its address
referred to in Section 9.09 a copy of each Assignment and Acceptance delivered
to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts (and stated interest) of
the Advances owing to, each Lender pursuant to the terms hereof from time to
time (the “Register”). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower and any Lender, at any reasonable time and from time to time
upon reasonable prior notice. The Borrower hereby agrees that the Administrative
Agent acting as its agent solely for the purpose set forth above in this clause
(c), shall not subject the Administrative Agent to any fiduciary or other
implied duties, all of which are hereby waived by the Borrower.

 

(d)               Participations. Any Lender may at any time, without the
consent of, or notice to, the Borrower or the Administrative Agent, sell
participations to any Person (other than a natural Person or the Borrower or any
of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or
a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Advances owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and (iii) the Borrower, the
Administrative Agent, the Issuing Lender and Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. For the avoidance of doubt, each Lender shall
be responsible for the indemnity under Section 9.02(a) with respect to any
payments made by such Lender to its Participant(s).

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in clauses (a), (b), (c) or
(d) of Section 9.03 (that adversely affects such Participant). The Borrower
agrees that each Participant shall be entitled to the benefits of Sections 2.11,
2.12 and 2.14 (subject to the requirements and limitations therein, including
the requirements under Section 2.14(g) (it being understood that the
documentation required under Section 2.14(g) shall be delivered to the
participating Lender)) to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section;
provided that such Participant (A) agrees to be subject to the provisions of
Section 2.15 as if it were an assignee under paragraph (b) of this Section; and
(B) shall not be entitled to receive any greater payment under Sections 2.12 or
2.14, with

 

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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 2.15 with respect to any
Participant. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 7.04 as though it were a Lender; provided
that such Participant agrees to be subject to Section 2.13(e) 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 Advances 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. The Borrower
hereby agrees that each Lender acting as its agent solely for the purpose set
forth above in this clause (d), shall not subject such Lender to any fiduciary
or other implied duties, all of which are hereby waived by the Borrower.

 

(e)                Certain Pledges. Any Lender may at any time pledge or assign
a security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

 

(f)                Cashless Settlement. Notwithstanding anything to the contrary
contained in this Agreement, any Lender may exchange, continue or rollover all
or a portion of its Advances in connection with any refinancing, extension, loan
modification or similar transaction permitted by the terms of this Agreement,
pursuant to a cashless settlement mechanism approved by the Borrower, the
Administrative Agent and such Lender.

 

Section 9.08         Confidentiality. Each Lender Party agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its Affiliates and to its and its Related Parties (it
being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent required or requested by, or
required to be disclosed to, any regulatory or similar authority purporting to
have jurisdiction over such Person or its Related Parties (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) as to the extent required by Legal Requirements or
regulations or in any legal, judicial, administrative or other compulsory
proceeding, (d) to any other party hereto, (e) in connection with the exercise
of any remedies under this Agreement, under any other Loan Document or under any
agreement related to any Secured Obligation, or any action or proceeding
relating to this Agreement, any other Loan Document or any agreement related to
any Secured Obligation, or the enforcement of rights hereunder or thereunder,
(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 and obligations
under this Agreement, (ii) any actual or prospective party (or its Related
Parties) to any swap,

 

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derivative or other transaction under which payments are to be made by reference
to any Loan Party and its obligations, this Agreement or payments hereunder,
(iii) to an investor or prospective investor in an Approved Fund that also
agrees that Information shall be used solely for the purpose of evaluating an
investment in such Approved Fund, (iv) to a trustee, collateral manager,
servicer, backup servicer, noteholder or secured party in an Approved Fund in
connection with the administration, servicing and reporting on the assets
serving as collateral for an Approved Fund, or (v) to a nationally recognized
rating agency that requires access to information regarding the Borrower and its
Subsidiaries, the Advances and the Loan Documents in connection with ratings
issued with respect to an Approved Fund, (g) on a confidential basis to the
CUSIP Service Bureau or any similar agency in connection with the issuance and
monitoring of CUSIP numbers with respect to the credit facility, (h) with the
consent of the Borrower, (i) to Gold Sheets and other similar bank trade
publications, such information to consist of deal terms and other information
customarily found in such publications, (j) to the extent such Information (i)
becomes publicly available other than as a result of a breach of this Section by
the disclosing party or (ii) becomes available to any Secured Party or affiliate
thereof from a third party that is not, to such Person’s actual knowledge,
subject to confidentiality obligations to the Borrower, (k) to governmental
regulatory authorities in connection with any regulatory examination of any
Lender Party or, if such Lender Party deems necessary for the mitigation of
claims by those authorities against such Lender Party or any of its subsidiaries
or affiliates, in accordance with such Lender Party’s regulatory compliance
policy, (l) to the extent that such information is independently developed by
such Lender Party, or (m) for purposes of establishing a “due diligence”
defense. For purposes of this Section, “Information” means all information
received from any Loan Party relating to any such Loan Party or any of their
respective businesses, other than any such information that is available to the
Administrative Agent, any Lender or the Issuing Lender on a nonconfidential
basis prior to disclosure by any Loan Party or any Subsidiary thereof; provided
that, in the case of information received from a Loan Party or any Subsidiary
thereof 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. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, nothing in this Agreement shall (a)
restrict any Lender Party from providing information to any bank or other
regulatory or governmental authorities, including the Federal Reserve Board and
its supervisory staff; (b) require or permit any Lender Party to disclose to any
Loan Party that any information will be or was provided to the Federal Reserve
Board or any of its supervisory staff; or (c) require or permit any Lender Party
to inform any Loan Party of a current or upcoming Federal Reserve Board
examination or any nonpublic Federal Reserve Board supervisory initiative or
action.

 

Section 9.09         Notices, Etc.

 

(a)                All notices and other communications (other than Notices of
Borrowing and Notices of Conversion or Continuation, which are governed by
Article II of this Agreement) shall be in writing and hand delivered with
written receipt, telecopied, sent by facsimile, sent by electronic mail as
permitted under paragraph (b) below (with, in the case of electronic mail, a
hard copy sent as otherwise permitted in this Section 9.09), sent by a
nationally recognized overnight courier, or sent by certified mail, return
receipt requested as follows: if to a Loan Party, as specified on Schedule II,
if to the Administrative Agent or the Issuing Lender, at its credit contact
specified under its name on Schedule II, and if to any Lender at its credit
contact specified in its Administrative Questionnaire. Each party may change its
notice address by written notification to the other parties. All such notices
and communications shall be effective when delivered, except that (i) notices
and communications to the Administrative Agent, any Lender or the Issuing Lender
pursuant to Article II shall not be effective until received and, in the case of
facsimile delivered under Article II, such receipt is confirmed by the
Administrative Agent, such Lender or Issuing

 

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Lender, as applicable, verbally or in writing and (ii) notices delivered through
electronic communications to the extent provided in paragraph (b) below, shall
be effective as provided in said paragraph (b).

 

(b)               Electronic Communications. Notices and other communications to
the Lenders and the Issuing Lender hereunder may be delivered or furnished by
electronic communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by the Administrative Agent, provided that the
foregoing shall not apply to notices to any Lender or the Issuing Lender
pursuant to Article II if such Lender or the Issuing Lender, as applicable, has
notified the Administrative Agent that is incapable of receiving notices under
such Article by electronic communication. The Administrative Agent or the
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may be
limited to particular notices or communications. Unless the Administrative Agent
otherwise prescribes, (i) notices and other communications sent to an e-mail
address shall be deemed received upon the sender’s receipt of an acknowledgement
from the intended recipient (such as by the “return receipt requested” function,
as available, return e-mail or other written acknowledgement), and (ii) notices
or communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail address
as described in the foregoing clause (i) of notification that such notice or
communication is available and identifying the website address therefor;
provided that, for both clauses (i) and (ii) above, if such notice, email or
other communication is not sent during the normal business hours of the
recipient, such notice, email or other communication shall be deemed to have
been sent at the opening of business on the next business day for the recipient.

 

(c)                Platform.

 

(i)                 Each Loan Party agrees that the Administrative Agent may,
but shall not be obligated to, make the Communications (as defined below)
available to the Issuing Lender and the other Lenders by posting the
Communications on Debt Domain, Intralinks, Syndtrak or a substantially similar
electronic transmission system (the “Platform”).

 

(ii)               The Platform is provided “as is” and “as available.” The
Agent Parties (as defined below) do not warrant the adequacy of the Platform and
expressly disclaim liability for errors or omissions in the Communications. No
warranty of any kind, express, implied or statutory, including, without
limitation, any warranty of merchantability, fitness for a particular purpose,
non-infringement of third-party rights or freedom from viruses or other code
defects, is made by any Agent Party in connection with the Communications or the
Platform. In no event shall the Administrative Agent or any of its Related
Parties (collectively, the “Agent Parties”) have any liability to the Borrower
or the other Loan Parties, any Lender or any other Person or entity for damages
of any kind, including, without limitation, direct or indirect, special,
incidental or consequential damages, losses or expenses (whether in tort,
contract or otherwise) arising out of the Borrower’s, any Loan Party’s or the
Administrative Agent’s transmission of communications through the Platform.
“Communications” means, collectively, any notice, demand, communication,
information, document or other material provided by or on behalf of any Loan
Party pursuant to any Loan Document or the transactions contemplated therein
which is distributed to the Administrative Agent, any Lender or any Issuing
Lender by means of electronic communications pursuant to this Section, including
through the Platform.

 

Section 9.10         Usury Not Intended. It is the intent of each Loan Party and
each Lender Party in the execution and performance of this Agreement and the
other Loan Documents to contract in strict compliance with applicable usury
laws, including conflicts of law concepts, governing the Advances of each Lender
including such applicable Legal Requirements of the State of New York, if any,
and the United States of America from time to time in effect, and any other
jurisdiction whose laws

 

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may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement. In furtherance thereof, the Lender Parties and the
Loan Parties stipulate and agree that none of the terms and provisions contained
in this Agreement or the other Loan Documents shall ever be construed to create
a contract to pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the Maximum Rate and that for purposes of
this Agreement “interest” shall include the aggregate of all charges which
constitute interest under such laws that are contracted for, charged or received
under this Agreement; and in the event that, notwithstanding the foregoing,
under any circumstances the aggregate amounts taken, reserved, charged, received
or paid on the Advances, include amounts which by applicable Legal Requirement
are deemed interest which would exceed the Maximum Rate, then such excess shall
be deemed to be a mistake and each Lender receiving same shall credit the same
on the principal of its Advances (or if such Advances shall have been paid in
full, refund said excess to the Borrower). In the event that the maturity of the
Advances are accelerated by reason of any election of the holder thereof
resulting from any Event of Default under this Agreement or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the Maximum Rate, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on the applicable Advances (or, if the
applicable Advances shall have been paid in full, refunded to the Borrower of
such interest). In determining whether or not the interest paid or payable under
any specific contingencies exceeds the Maximum Rate, the Loan Parties and the
Lenders shall to the maximum extent permitted under applicable Legal Requirement
amortize, prorate, allocate and spread in equal parts during the period of the
full stated term of the Obligations all amounts considered to be interest under
applicable Legal Requirement at any time contracted for, charged, received or
reserved in connection with the Obligations. The provisions of this Section
shall control over all other provisions of this Agreement or the other Loan
Documents which may be in apparent conflict herewith.

 

Section 9.11         Usury Recapture. In the event the rate of interest
chargeable under this Agreement or any other Loan Document at any time is
greater than the Maximum Rate, the unpaid principal amount of the Advances shall
bear interest at the Maximum Rate until the total amount of interest paid or
accrued on the Advances equals the amount of interest which would have been paid
or accrued on the Advances if the stated rates of interest set forth in this
Agreement or applicable Loan Document had at all times been in effect. In the
event, upon payment in full of the Advances, the total amount of interest paid
or accrued under the terms of this Agreement and the Advances is less than the
total amount of interest which would have been paid or accrued if the rates of
interest set forth in this Agreement had, at all times, been in effect, then the
Borrower shall, to the extent permitted by applicable Legal Requirement, pay the
Administrative Agent for the account of the Lenders an amount equal to the
difference between (i) the lesser of (A) the amount of interest which would have
been charged on its Advances if the Maximum Rate had, at all times, been in
effect and (B) the amount of interest which would have accrued on its Advances
if the rates of interest set forth in this Agreement had at all times been in
effect and (ii) the amount of interest actually paid under this Agreement on its
Advances. In the event the Lenders ever receive, collect or apply as interest
any sum in excess of the Maximum Rate, such excess amount shall, to the extent
permitted by law, be applied to the reduction of the principal balance of the
Advances, and if no such principal is then outstanding, such excess or part
thereof remaining shall be paid to the Borrower.

 

 -120-

 

Section 9.12         Payments Set Aside. To the extent that any payment by or on
behalf of the Borrower is made to any Lender Party, or any Lender Party
exercises its right of setoff, and such payment or the proceeds of such setoff
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by any Lender Party in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any proceeding under any Debtor
Relief Law or otherwise, then (a) to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
setoff had not occurred, and (b) each Lender Party severally agrees to pay to
the Administrative Agent upon demand its applicable share (without duplication)
of any amount so recovered from or repaid by the Administrative Agent, plus
interest thereon from the date of such demand to the date such payment is made
at a rate per annum equal to the Federal Funds Rate in effect from time to time,
in the applicable currency of such recovery or payment. The obligations of the
Lenders and the Issuing Lender under clause (b) of the preceding sentence shall
survive the payment in full of the Obligations and the termination of this
Agreement.

 

Section 9.13         Performance of Duties. Each of the Loan Party’s obligations
under this Agreement and each of the other Loan Documents shall be performed by
such Loan Party at its sole cost and expense.

 

Section 9.14         All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Lenders, the Administrative Agent and
any Persons designated by the Administrative Agent or any Lender pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied, any of the Commitments remain in
effect or the credit facility evidenced hereby has not been terminated.

 

Section 9.15         Governing Law. This Agreement and the other Loan Documents
and any claim, controversy, dispute or cause of action (whether in contract or
tort or otherwise) based upon, arising out of or relating to this Agreement or
any other Loan Document (except, as to any other Loan Document, as expressly set
forth therein) and the transactions contemplated hereby and thereby shall be
governed by, and construed in accordance with, the law of the State of New York
(including Section 5-1401 and Section 5-1402 of the General Obligations Law of
the State of New York), without reference to any other conflicts or choice of
law principles thereof. Each Letter of Credit shall be governed by either (i)
the Uniform Customs and Practice for Documentary Credits (2007 Revision),
International Chamber of Commerce Publication No. 600, or (ii) the International
Standby Practices (ISP98), International Chamber of Commerce Publication No.
590, in either case, including any subsequent revisions thereof approved by a
Congress of the International Chamber of Commerce and adhered to by the Issuing
Lender.

 

 -121-

 

Section 9.16         Submission to Jurisdiction; Service of Process. The
Borrower and each other Loan Party irrevocably and unconditionally agrees that
it will not commence any action, litigation or proceeding of any kind or
description, whether in law or equity, whether in contract or in tort or
otherwise, against any Secured Party or any Related Party of any Secured Party
in any way relating to this Agreement or any other Loan Document or the
transactions relating hereto or thereto, in any forum other than the courts of
the State of New York sitting in New York County, and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, and each of the parties hereto irrevocably and unconditionally
submits to the jurisdiction of such courts and agrees that all claims in respect
of any such action, litigation or proceeding may be heard and determined in such
New York State court or, to the fullest extent permitted by applicable Legal
Requirement, in such federal court. Each of the parties hereto agrees that a
final judgment in any such action, litigation or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by Legal Requirement. Nothing in this Agreement or in any
other Loan Document shall affect any right that any Secured Party may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Loan Document against the Borrower or any other Loan Party or its Properties in
the courts of any jurisdiction. Each party hereto irrevocably consents to
service of process in the manner provided for notices in Section 9.09. Nothing
in this Agreement will affect the right of any party hereto to serve process in
any other manner permitted by applicable Legal Requirement.

 

Section 9.17         Waiver of Venue. The Borrower and each other Loan Party
irrevocably and unconditionally waives, to the fullest extent permitted by
applicable Legal Requirement, any objection that it may now or hereafter have to
the laying of venue of any action or proceeding arising out of or relating to
this Agreement or any other Loan Document in any court referred to in Section
9.16. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by applicable Legal Requirement, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

 

Section 9.18         Execution in Counterparts; Electronic Execution.

 

(a)                Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page of this Agreement by facsimile or in electronic
(i.e., “pdf” or “tif”) format shall be effective as delivery of a manually
executed counterpart of this Agreement.

 

(b)               Electronic Execution of Assignments. The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and Acceptance
shall be deemed to include electronic signatures 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 or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable Legal Requirement, 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.

 

Section 9.19         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 Loan
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 9.19 for the maximum amount of such liability that can
be hereby incurred without rendering its obligations under this Section 9.19, or
otherwise under this Agreement, voidable under

 

 -122-

 

applicable Legal Requirement 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
termination of all Commitments and payment in full of all Obligations (other
than contingent indemnification obligations) and the expiration or termination
of all Letters of Credit (other than Letters of Credit as to which other
arrangements satisfactory to the Administrative Agent and the Issuing Lender
have been made). Each Qualified ECP Guarantor intends that this Section 9.19
constitute, and this Section 9.19 shall be deemed to constitute, a “keepwell,
support, or other agreement” for the benefit of each other Loan Party for all
purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Section 9.20         Independent Effect of Covenants. The Borrower expressly
acknowledges and agrees that each covenant contained in Articles V or VI hereof
shall be given independent effect. Accordingly, no Loan Party shall engage in
any transaction or other act otherwise permitted under any covenant contained in
Articles V or VI, before or after giving effect to such transaction or act, the
Borrower shall or would be in breach of any other covenant contained in Articles
V or VI.

 

Section 9.21         USA Patriot Act. Each Lender that is subject to the Patriot
Act and the Administrative Agent (for itself and not on behalf of any Lender)
hereby notifies each Loan Party that pursuant to the requirements of the Patriot
Act it is required to obtain, verify and record information that identifies such
Loan Party, which information includes the name and address of such Loan Party
and other information that will allow such Lender or the Administrative Agent,
as applicable, to identify such Loan Party in accordance with the Patriot Act.

 

Section 9.22         Flood Insurance Regulations. KeyBank has adopted internal
policies and procedures that address requirements placed on federally regulated
lenders under the Flood Insurance Regulations. If applicable, KeyBank, as
administrative agent, will post on the applicable electronic platform (or
otherwise distribute to each Lender) documents that it receives in connection
with the Flood Insurance Regulations; however, KeyBank reminds each Lender and
Participant that, pursuant to the 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 Regulations.

 

Section 9.23         NON-RELIANCE. IN EXECUTING THIS AGREEMENT, EACH LOAN PARTY
HEREBY WARRANTS AND REPRESENTS IT IS NOT RELYING ON ANY STATEMENT OR
REPRESENTATION OTHER THAN THOSE IN THIS AGREEMENT AND IS RELYING UPON ITS OWN
JUDGMENT AND ADVICE OF ITS ATTORNEYS.

 

Section 9.24         WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

 

 -123-

 

Section 9.25         Reversal of Payments. To the extent any Loan Party makes a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
Collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any Debtor
Relief Law, other applicable Legal Requirement or equitable cause, then, to the
extent of such payment or proceeds repaid, the Secured Obligations or part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if such payment or proceeds had not been received by the
Administrative Agent.

 

Section 9.26         Injunctive Relief. Each Loan Party hereto recognizes that,
in the event such Loan Party fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy of law may prove to
be inadequate relief to the Lenders. Therefore, each Loan Party hereto agrees
that the Lenders, at the Lenders’ option, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.

 

Section 9.27         No Advisory or Fiduciary Responsibility.

 

(a)                In connection with all aspects of each transaction
contemplated hereby, each Loan Party acknowledges and agrees, and acknowledges
its Affiliates’ understanding, that (i) the facilities provided for hereunder
and any related arranging or other services in connection therewith (including
in connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the
Borrower and its Affiliates, on the one hand, and the Administrative Agent, the
Issuing Lender and the Lenders, on the other hand, and each Loan Party is
capable of evaluating and understanding and understands and accepts the terms,
risks and conditions of the transactions contemplated hereby and by the other
Loan Documents (including any amendment, waiver or other modification hereof or
thereof), (ii) in connection with the process leading to such transaction, each
of the Administrative Agent, the Issuing Lender and the Lenders is and has been
acting solely as a principal and is not the financial advisor, agent or
fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or
employees or any other Person, (iii) none of the Administrative Agent, the
Issuing Lender or the Lenders has assumed or will assume an advisory, agency or
fiduciary responsibility in favor of any Loan Party with respect to any of the
transactions contemplated hereby or the process leading thereto, including with
respect to any amendment, waiver or other modification hereof or of any other
Loan Document (irrespective of whether any Lender Party has advised or is
currently advising the Borrower or any of its Affiliates on other matters) and
none of the Administrative Agent, the Issuing Lender or the Lenders has any
obligation to the Borrower or any of its Affiliates with respect to the
financing transactions contemplated hereby except those obligations expressly
set forth herein and in the other Loan Documents, (iv) the Issuing Lender, the
Administrative Agent, the Lenders and their respective Affiliates may be engaged
in a broad range of transactions that involve interests that differ from, and
may conflict with, those of the Borrower and its Affiliates, and none of the
Administrative Agent, the Issuing Lender or the Lenders has any obligation to
disclose any of such interests by virtue of any advisory, agency or fiduciary
relationship and (v) the Administrative Agent, the Issuing Lender and the
Lenders have not provided and will not provide any legal, accounting, regulatory
or tax advice with respect to any of the transactions contemplated hereby
(including any amendment, waiver or other modification hereof or of any other
Loan Document) and the Loan Parties have consulted their own legal, accounting,
regulatory and tax advisors to the extent they have deemed appropriate.

 

(b)               Each Loan Party acknowledges and agrees that each Lender, the
Issuing Lender, the Administrative Agent and any Affiliate thereof may lend
money to, invest in, and generally engage in any kind of business with, any of
the Borrower, any Affiliate thereof or any other person or entity that may do
business with or own securities of any of the foregoing, all as if such Lender,
Issuing Lender, the

 

 -124-

 

Administrative Agent or Affiliate thereof were not a Lender, Issuing Lender,
Administrative Agent or an Affiliate thereof (or an agent or any other Person
with any similar role under the credit facilities evidenced hereby) and without
any duty to account therefor to any other Lender, the Issuing Lender, the
Administrative Agent, the Borrower or any Affiliate of the foregoing.  Each
Lender, the Issuing Lender, the Administrative Agent and any Affiliate thereof
may accept fees and other consideration from the Borrower or any Affiliate
thereof for services in connection with this Agreement, the credit facilities
evidenced hereby or otherwise without having to account for the same to any
other Lender, the Issuing Lender, the Administrative Agent, the Borrower or any
Affiliate of the foregoing.

 

Section 9.28         Inconsistencies with Other Documents. In the event there is
a conflict or inconsistency between this Agreement and any other Loan Document,
the terms of this Agreement shall control; provided that any provision of the
Security Instruments which imposes additional burdens on the Borrower or any of
its Subsidiaries or further restricts the rights of the Borrower or any of its
Subsidiaries or gives the Administrative Agent, the Issuing Lender or Lenders
additional rights shall not be deemed to be in conflict or inconsistent with
this Agreement and shall be given full force and effect.

 

Section 9.29         Acknowledgement and Consent to Bail-In of EEA Financial
Institutions. Notwithstanding anything to the contrary in any Loan Document or
in any other agreement, arrangement or understanding among any such parties,
each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Loan Document, to the extent such liability is
unsecured, may be subject to the Write-Down and Conversion Powers of an EEA
Resolution Authority and agrees and consents to, and acknowledges and agrees to
be bound by:

 

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

 

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

 

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

 

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

 

(iii)             the variation of the terms of such liability in connection
with the exercise of the Write-Down and Conversion Powers of any EEA Resolution
Authority.

 

Section 9.30         Restatement. This Agreement amends and restates the
Existing Credit Agreement in its entirety. The Borrower hereby agrees that (a)
the Indebtedness outstanding under the Existing Credit Agreement and the Loan
Documents (as defined in the Existing Credit Agreement; together with the
Existing Credit Agreement, the “Existing Loan Documents”) and all accrued and
unpaid interest thereon and (b) all accrued and unpaid fees under the Existing
Loan Documents shall be deemed to be outstanding under and governed by this
Agreement. Each Borrower hereby acknowledges, warrants, represents and agrees
that this Agreement is not intended to be, and shall not be deemed or construed
to be, a novation or release of the Existing Loan Documents. Each Lender (which
is a Lender under the Existing Loan Documents) hereby waives any requirements
for notice of prepayment, minimum amounts of prepayments of the loans
thereunder, ratable reductions of the commitments of Lenders under the Existing
Loan Documents and ratable payments on account of the principal or interest of
any loan

 

 -125-

 

under the Existing Loan Documents to the extent that any such prepayment,
reductions or payments are required to ensure that, upon the effectiveness of
this Agreement, the loans of the Lenders shall be outstanding on a ratable basis
in accordance with their respective Pro Rata Share. Each Lender hereby
authorizes Administrative Agent and each Borrower to request Borrowings from the
Lenders, to make prepayment of the loans under the Existing Loan Documents and
to reduce the commitments under the Existing Loan Documents among Lenders in
order to ensure that, upon the effectiveness of this Agreement, the Advances of
the Lenders shall be outstanding on a ratable basis in accordance with their
respective Pro Rata Share.

 

Section 9.31         ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS DEFINED IN THIS AGREEMENT, 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.

 

[Remainder of this page intentionally left blank. Signature page follows.]

 

 

 

 -126-

 

EXECUTED as of the date first above written.

 

 

  BORROWER:         Bonanza Creek Energy, inc.               By: /s/ RICHARD J.
CARTY   Name: Richard J. Carty   Title: President and Chief Executive Officer  
            GUARANTORS:           BONANZA CREEK ENERGY OPERATING COMPANY, LLC  
            By: /s/ RICHARD J. CARTY   Name: Richard J. Carty   Title: President
and Chief Executive Officer               BONANZA CREEK ENERGY RESOURCES,   LLC
                By: /s/ RICHARD J. CARTY   Name: Richard J. Carty   Title:
President and Chief Executive Officer               BONANZA CREEK ENERGY
MIDSTREAM,   LLC                 By: /s/ RICHARD J. CARTY   Name: Richard J.
Carty   Title: President and Chief Executive Officer               BONANZA CREEK
ENERGY UPSTREAM   LLC                 By: /s/ RICHARD J. CARTY   Name: Richard
J. Carty   Title: President and Chief Executive Officer            

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

  HOLMES EASTERN COMPANY, LLC         By: /s/ RICHARD J. CARTY   Name: Richard
J. Carty   Title: President and Chief Executive Officer                    
ROCKY MOUNTAIN INFRASTRUCTURE, LLC               By: /s/ RICHARD J. CARTY  
Name: Richard J. Carty   Title: President and Chief Executive Officer 

 

 

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

ADMINISTRATIVE AGENT/ 

ISSUING LENDER/LENDER:

KEYBANK NATIONAL ASSOCIATION, as Administrative Agent, Issuing Lender, and a
Lender

              By: /s/ John Dravenstott   Name: John Dravenstott   Title: Vice
President 

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

LENDER:

COMPASS BANK, as a Lender

              By: /s/ RACHEL FESTERVAND   Name: Rachel Festervand   Title: Sr.
Vice President

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

LENDER:

SOCIÉTÉ GÉNÉRALE, as a Lender

              By: /s/ MAX SONNONSTINE   Name: Max Sonnonstine   Title: Director

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

LENDER:

BMO HARRIS FINANCING, INC., as a Lender

              By: /s/ MELISSA GUZMANN   Name: Melissa Guzmann   Title: Director

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

LENDER:

Wells Fargo Bank. N.A., as a Lender

              By: /s/ JONATHAN HERRICK   Name: Jonathan Herrick   Title: Vice
President

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

LENDER:

JPMORGAN CHASE BANK, N.A., as a Lender

              By: /s/ DARREN VANEK   Name: Darren Vanek   Title: Executive
Director

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

 

LENDER:

ROYAL BANK OF CANADA, as a Lender

              By: /s/ MARK LUMPKIN, JR.   Name: Mark Lumpkin, Jr.   Title:
Authorized Signatory

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

 

LENDER:

CADENCE BANK, N.A., as a Lender

              By: /s/ KYLE GRUEN   Name: Kyle Gruen   Title: Assistant Vice
President

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

LENDER:

IBERIABANK, as a Lender

              By: /s/ TYLER S. THOEM   Name: Tyler S. Thoem   Title: Senior Vice
President

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

LENDER:

THE BANK OF NOVA SCOTIA, as a Lender

              By: /s/ TERRY DONOVAN   Name: Terry Donovan   Title: Managing
Director

 

 

 

Signature page to Credit Agreement

(Bonanza Creek Energy, Inc.)

 

 

 

 

 

SCHEDULE I

 

PRICING GRID

 

Applicable Margins**

 

  Utilization Level Reference Rate Advances Eurodollar Rate Advances Commitment
Fee Rate Level I Less than or equal to 25% 2.00% 3.00% .50% Level II Greater
than 25% but less than or equal to 50% 2.25% 3.25% .50% Level III Greater than
50% but less than or equal to 75%. 2.50% 3.50% .50% Level IV Greater than 75%
but less than or equal to 90% 2.75% 3.75% .50% Level V Greater than 90% 3.00%
4.00% .50%

 

 

 

 

** Subject to increase during the existence of a Borrowing Base Deficiency as
provided in the definition of “Applicable Margin”.

 

 

 Schedule I
Page 1 of 1