Exhibit 10.1

 

EXECUTION VERSION

 

JPMORGAN CHASE BANK, N.A.
270 Park Avenue
New York, New York 10017

 

August 23, 2016

 

PDC Energy, Inc.

1775 Sherman St., Suite 3000

Denver, CO 80203

Attention: Barton R. Brookman, Jr.,

President and Chief Executive Officer

 

Project A-Basin
Commitment Letter

 

Ladies and Gentlemen:

 

You have advised JPMorgan Chase Bank, N.A. (“JPMorgan”, the “Commitment Party”,
“us” or “we”) that PDC Energy, Inc., a Delaware corporation (“you” or the
“Borrower”), intends to acquire the Target and the Target Assets pursuant to the
Acquisition and consummate the other transactions described on Exhibit A hereto
(together with the Acquisition, the “Transactions”).  Capitalized terms used but
not defined herein are used with the meanings assigned to them in the Exhibits
attached hereto (such Exhibits, together with this letter, collectively, the
“Commitment Letter”).

 

To facilitate the Transactions, you have requested that JPMorgan structure,
arrange and syndicate:

 

(a)                                 an amendment containing such waivers or
amendments necessary to permit the Transactions under the Existing Credit
Agreement and containing such additional terms and conditions set forth in
Exhibit B to this Commitment Letter;

 

(b)                                 a $250.0 million increase of the commitments
under the Existing Credit Facility; and

 

(c)                                  a $600.0 million Bridge Facility as
described in Exhibit C.

 

1.              Commitments

 

In connection with the Transactions, JPMorgan is pleased to advise you of
(a) its commitment (the “Backstop Commitment”) to acquire the Commitments (as
defined in the Existing Credit Agreement) of each lender under the Existing
Credit Facility which does not approve the Amendment in such amount as is
necessary to approve the Amendment in an aggregate amount up to $256.5 million,
(b) its commitment to provide 100% of the aggregate amount of the Incremental
Facility (the “Incremental Commitment”), and (c) its commitment to provide 100%
of the aggregate amount of the Bridge Facility, in each case upon the terms and
conditions set forth in this letter and Exhibits B, C and D hereto
(collectively, the “Term Sheets”).

 

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2.              Titles and Roles

 

It is agreed that:

 

(a) (i) JPMorgan will act as sole lead arranger and sole bookrunner for the
Amendment and the Incremental Facility (acting in such capacities, the “Senior
Lead Arranger”); provided that the Borrower agrees that JPMorgan may perform its
responsibilities hereunder through its affiliate, J.P. Morgan Securities LLC
(“JPMS”) and (ii) JPMorgan will continue to act as sole administrative agent for
the Revolving Facility; and

 

(b) (i) JPMorgan will act as sole lead arranger and sole bookrunner for the
Bridge Facility (acting in such capacities, the “Bridge Lead Arranger” and,
together with the Senior Lead Arranger, the “Lead Arrangers”); provided that the
Borrower agrees that JPMorgan may perform its responsibilities hereunder through
JPMS and (ii) JPMorgan will act as sole administrative agent for the Bridge
Facility.

 

You agree that no other agents, co-agents, arrangers, co-arrangers, bookrunners,
co-bookrunners, managers or co-managers will be appointed, no other titles will
be awarded and no compensation (other than that expressly contemplated by the
Term Sheets and Fee Letter referred to below) will be paid in connection with
the Credit Facilities unless you and we shall so reasonably agree (it being
understood and agreed that no other agent, co-agent, arranger, co-arranger,
bookrunner, co-bookrunner, manager or co-manager shall be entitled to greater
economics in respect of the Credit Facilities than the Commitment Party).

 

3.              Syndication

 

We intend to syndicate the Credit Facilities to a group of lenders identified by
us in consultation with you and reasonably acceptable to you (together with
JPMorgan, the “Lenders”).  The Commitment Party intends to commence syndication
efforts promptly upon your acceptance of this Commitment Letter and the Fee
Letter, and you agree actively to assist (and to use your commercially
reasonable efforts to cause Target and Asset Sellers to actively assist) the
Commitment Party in completing a syndication reasonably satisfactory to the
Commitment Party until the earlier of (i) the occurrence of a Successful
Syndication and (ii) the date that is 60 days following the Closing Date.  Such
assistance shall include (A) your using commercially reasonable efforts to
ensure that the syndication efforts benefit from your and your affiliates’
existing banking relationships, (B) using commercially reasonable efforts to
make your senior management and advisors available to the proposed Lenders (and
using your commercially reasonable efforts to make senior management of Target
and the Asset Sellers available to the proposed Lenders), (C) your preparing and
providing to the Commitment Party (and using commercially reasonable efforts to
cause Target and the Asset Sellers to prepare and provide) all information with
respect to you and the Acquisition and information in your possession regarding
Target, Asset Sellers and their respective subsidiaries and the Target Assets,
including all financial information (with respect to Target, Asset Sellers and
the Target Assets, to the extent in your possession) and Projections (as defined
below), as the Commitment Party may reasonably request in connection with the
arrangement and syndication of the Credit Facilities and your assistance (and
using your commercially reasonable efforts to cause Target and the Asset Sellers
to assist) in the preparation of one or more confidential information memoranda
(each, a “Confidential Information Memorandum”) and other customary marketing
materials to be used in connection with the syndication of the Credit Facilities
(all such information, memoranda and material, “Information Materials”),
(D) your hosting, with the Commitment Party, of one or more meetings of
prospective Lenders at times and locations to be mutually agreed (and using your
commercially reasonable efforts to cause the officers of Target and Asset
Sellers to be available for such meetings), (E) your using your commercially
reasonable efforts to obtain (x) corporate credit and/or corporate family
ratings for the Borrower and (y) ratings for the Bridge Facility and the Senior
Notes, in each case from

 

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each of Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s
Financial Services LLC (“S&P”) as soon as practicable, and (F) your ensuring
that, until the date that is 60 days following the Closing Date, there is no
competing offering, placement, arrangement or syndication of any debt securities
or common equity (other than the Securities) or bank financing (other than the
Credit Facilities) or announcement thereof by or on behalf of you or your
subsidiaries.  Upon the request of the Commitment Party, you will use your
commercially reasonable efforts to cause Target and Asset Sellers to furnish,
for no fee, to the Commitment Party an electronic version of Target’s and Asset
Sellers’ trademarks, service marks and corporate logo for use in marketing
materials for the purpose of facilitating the syndication of the Credit
Facilities (the “License”); provided, however, that the License shall be used
solely for the purpose described above and may not be assigned or transferred. 
You also understand and acknowledge that we may provide to market data
collectors, such as league table providers, or other service providers to the
lending industry, information regarding the closing date, size, type, purpose
of, and parties to, the Credit Facilities.  To the extent that you have agreed
herein to use “commercially reasonable efforts” to cause Target and Asset
Sellers to take certain actions, it is understood and agreed that your
obligations are limited to those involved in enforcing the obligations of Target
and Asset Sellers under the M&A Agreements between you and each of Target and
Asset Sellers governing the Transactions.  Without limiting your obligations to
assist with syndication efforts as set forth in this paragraph, we agree that we
will not be released from our commitment hereunder in connection with any
syndication or assignment to any Lender unless (A) (i) you have consented to
such syndication or assignment in writing (such consent not to be unreasonably
withheld or delayed) and (ii) any such Lender has entered into an amendment or
joinder with respect to this Commitment Letter committing to provide a portion
of the Credit Facilities (in which case our commitments hereunder shall be
reduced at such time by an amount equal to the commitment assumed by such
Lender) or (B) such Lender shall have entered into the applicable Credit
Facilities Documentation and funded the portion of the Credit Facilities
required to be funded by it on the Closing Date.

 

The Commitment Party will manage, in consultation with you, all aspects of the
syndication, including decisions as to the selection of institutions to be
approached and when they will be approached, when commitments will be accepted,
which institutions will participate, the allocation of the commitments among the
Lenders and the amount and distribution of fees among the Lenders.  You hereby
acknowledge and agree that the Lead Arrangers will have no responsibility other
than to arrange the syndication as set forth herein and each Lead Arranger is
acting solely in the capacity of an arm’s length contractual counterparty to the
Borrower with respect to the arrangement of the Credit Facilities (including in
connection with negotiating the terms of the Credit Facilities) and not as a
financial advisor or a fiduciary to, or an agent of, the Borrower or any other
person. The Borrower agrees that it will not assert any claim against any Lead
Arranger based on an alleged breach of fiduciary duty by such Lead Arranger in
connection with this Commitment Letter and the transactions contemplated
hereby.  Additionally, the Borrower acknowledges and agrees that, as a Lead
Arranger, JPMorgan is not advising the Borrower as to any legal, tax,
investment, accounting, regulatory or any other matters in any jurisdiction. 
The Borrower shall consult with its own advisors concerning such matters and
shall be responsible for making its own independent investigation and appraisal
of the transactions contemplated hereby, and JPMorgan shall have no
responsibility or liability to the Borrower with respect thereto.  Any review by
JPMorgan of the Borrower, the transactions contemplated hereby or other matters
relating to such transactions will be performed solely for the benefit of
JPMorgan and shall not be on behalf of the Borrower.

 

At the request of the Commitment Party, you agree to assist in the preparation
of a version of each Confidential Information Memorandum or other Information
Material (a “Public Version”) consisting exclusively of information with respect
to you and your affiliates, Target, Asset Sellers and their respective
subsidiaries, the Target Assets, and the Acquisition that is either publicly
available or not material with respect to you and your affiliates, Target, Asset
Sellers and their respective subsidiaries, the

 

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Target Assets, any of your or their respective securities or the Acquisition for
purposes of United States federal and state securities laws or that would
reasonably be expected to be included in an offering memorandum for an offering
of high yield debt securities under Rule 144A concurrent with the syndication of
the Credit Facilities (such information, “Non-MNPI”).  Such Public Versions,
together with any other information prepared by you, Target, Asset Sellers or
their respective affiliates or representatives and conspicuously marked “Public”
(collectively, the “Public Information”), which at a minimum means that the word
“Public” will appear prominently on the first page of any such information, may
be distributed by us to prospective Lenders who have advised us that they wish
to receive only Non-MNPI (“Public Side Lenders”).  You acknowledge and agree
that, in addition to Public Information and unless you promptly notify us
otherwise, (a) drafts and final definitive documentation with respect to the
Credit Facilities, (b) administrative materials prepared by the Commitment Party
for prospective Lenders (such as a lender meeting invitation, allocations and
funding and closing memoranda) and (c) notifications of changes in the terms of
the Credit Facilities may be distributed to Public Side Lenders.  You
acknowledge that Commitment Party public-side employees and representatives who
are publishing debt analysts may participate in any meetings held pursuant to
clause (D) of the second preceding paragraph; provided that such analysts shall
not publish any information obtained from such meetings (i) until the
syndication of the Credit Facilities has been completed upon the making of
allocations by the Lead Arrangers and the Lead Arrangers freeing the Credit
Facilities to trade or (ii) in violation of any confidentiality agreement
between you and the Commitment Party.

 

In connection with our distribution to prospective Lenders of any Confidential
Information Memorandum and, upon our request, any other Information Materials,
you will execute and deliver to us a customary authorization letter authorizing
such distribution and, in the case of any Public Version thereof or other Public
Information, representing that it only contains Non-MNPI.  Each Confidential
Information Memorandum will be accompanied by a disclaimer exculpating you and
us with respect to any use thereof and of any related Information Materials by
the recipients thereof.

 

The term “Successful Syndication” shall mean that the Commitment Party and its
affiliates shall hold commitments with respect to, or loans under, (i) the
Revolving Facility of not more than $100.0 million and (ii) the Bridge Facility
of not more than $0.00.

 

4.              Information

 

You hereby represent and warrant that (with respect to any information relating
to Target, Asset Sellers and their respective subsidiaries or the Target Assets,
to your knowledge) (a) all information (including all Information Materials),
other than the Projections, information of a general economic or industry
specific nature, and information and data prepared by a third party that is not
one of your representatives (the “Information”), that has been or will be made
available to us by you or any of your representatives in connection with the
transactions contemplated hereby, when taken as a whole, does not or will not,
when furnished to us, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which such
statements are made (giving effect to all supplements and updates thereto) and
(b) the financial projections, financial estimates, forecasts and other
forward-looking information (the “Projections”) that have been or will be made
available to us by you or any of your representatives in connection with the
transactions contemplated hereby have been or will be prepared in good faith
based upon assumptions believed by you to be reasonable at the time furnished to
us (it being understood and agreed by the Commitment Party that such Projections
are not to be viewed as facts and that actual results during the period or
periods covered by any such Projections may differ from the projected results,
and such differences may be material).  You agree that if, at any time prior to
the Closing Date and thereafter until completion of our syndication efforts (but
not later than 60 days after the Closing Date), you become aware that any of the
representations in the preceding sentence would be

 

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incorrect if such Information or Projections were furnished at such time and
such representations were remade, in any material respect, then you will (or,
with respect to the Information and Projections relating to Target, Asset
Sellers, their respective subsidiaries or the Target Assets, will use
commercially reasonable efforts to) promptly supplement the Information and the
Projections so that (with respect to Information and Projections relating to
Target, Asset Sellers, their respective subsidiaries or the Target Assets, to
your knowledge) such representations when remade would be correct, in all
material respects, under those circumstances.  You understand that in arranging
and syndicating the Credit Facilities we may use and rely on the Information and
Projections without independent verification thereof.

 

5.              Fees

 

As consideration for the commitments and agreements of the Commitment Party
hereunder, you agree to pay or cause to be paid the nonrefundable fees described
in the Fee Letter dated the date hereof and delivered herewith (the “Fee
Letter”) on the terms and subject to the conditions set forth therein.

 

6.              Conditions

 

The Commitment Party’s commitments and agreements hereunder are solely subject
to the satisfaction or waiver of the conditions expressly set forth in this
Section 6, in Exhibit D and in Exhibit C under the heading “CERTAIN CONDITIONS —
Conditions Precedent” (as applicable).

 

The Commitment Party’s commitments and agreements hereunder are subject to
(a) between the date of the M&A Agreements and the Closing Date, there not
having occurred any Company Material Adverse Effect (as defined in the Stock
Purchase Agreement as in effect on the date hereof) or any Seller Material
Adverse Effect (as defined in the Asset Purchase Agreement as in effect on the
date hereof), and (b) your performance of all your obligations to pay fees and
expenses hereunder and under the Fee Letter.

 

Notwithstanding anything in this Commitment Letter, the Fee Letter or the Credit
Facilities Documentation (as defined in Exhibit D) to the contrary, (a) the only
representations relating to the Target Assets, you, Target and its subsidiaries
and their respective businesses the accuracy of which shall be a condition to
availability of the Credit Facilities on the Closing Date shall be (i) such of
the representations made by Target in the Stock Purchase Agreement (as in effect
on the date hereof) and made by the Asset Sellers in the Asset Purchase
Agreement (as in effect on the date hereof) as are material to the interests of
the Lenders, but only to the extent that the accuracy of any such representation
is a condition to the obligations of the Borrower (or an affiliate thereof) to
close under the Stock Purchase Agreement or the Asset Purchase Agreement, as
applicable, or the Borrower (or an affiliate thereof) has the right to terminate
its obligations under the applicable M&A Agreement as a result of a breach of
such representations in such M&A Agreement (the “M&A Agreements
Representations”) and (ii) the Specified Representations (as defined below), and
(b) the terms of the Credit Facilities Documentation shall be in a form such
that they do not impair availability of the Credit Facilities on the Closing
Date if the conditions set forth in this Commitment Letter are satisfied (it
being understood that, to the extent any collateral (including the grant or
perfection of any security interest) referred to in the Term Sheets is not or
cannot be provided on the Closing Date (other than the grant and perfection of
liens (i) in assets with respect to which a lien may be perfected solely by the
filing of a financing statement under the Uniform Commercial Code (“UCC”),
(ii) in capital stock with respect to which a lien may be perfected by the
delivery of a stock certificate or (iii) in oil and gas properties with
mortgages representing 85% of the Engineered Value (as defined in the Existing
Credit Agreement) of the Direct Interests (as defined in the Existing Credit
Agreement) of the Borrower (prior to giving effect to the Acquisition);
provided, that the Borrower shall use commercially reasonable efforts to grant
and perfect liens in oil and gas properties with mortgages representing 50% of
the Engineered Value of the Direct Interests of the Target and the Target Assets
and shall, in any case, grant and perfect such liens with mortgages representing
85% of the

 

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Engineered Value of the Direct Interests of the Borrower after giving effect to
the Acquisition no later than January 15, 2017) after your use of commercially
reasonable efforts to do so without undue burden or expense, then the provision
of such collateral shall not constitute a condition precedent to the
availability of the Credit Facilities on the Closing Date, but may instead be
provided after the Closing Date pursuant to arrangements to be mutually
agreed).  For purposes hereof, “Specified Representations” means the
representations and warranties referred to in the Term Sheets relating to
corporate existence and qualification, power and authority, due authorization,
execution and delivery of, and enforceability of, the Credit Facilities
Documentation, effectiveness, validity and perfection of first priority liens
under the security documents (subject to the limitations set forth in the
preceding sentence), no conflicts with organizational documents or, except to
the extent such conflict has not resulted in a Company Material Adverse Effect
(as defined in the Stock Purchase Agreement as in effect on the date hereof) or
a Seller Material Adverse Effect (as defined in the Asset Purchase Agreement as
in effect on the date hereof), with applicable laws, governmental approvals, use
of proceeds, compliance with laws, solvency, financial statements, Patriot Act,
OFAC, FCPA, Federal Reserve margin regulations and the Investment Company Act. 
Notwithstanding anything in this Commitment Letter or the Fee Letter or the
Credit Facilities Documentation to the contrary, the only conditions to
availability of the Credit Facilities on the Closing Date are expressly set
forth in this Section 6, under the heading “CERTAIN CONDITIONS — Conditions
Precedent” in Exhibit C, and in Exhibit D.  This paragraph, and the provisions
herein, shall be referred to as the “Limited Conditionality Provision”.

 

7.              Indemnification and Expenses

 

You agree (a) to indemnify and hold harmless the Commitment Party, its
affiliates and its and their respective directors, officers, employees,
advisors, agents and other representatives (each, an “indemnified person”) from
and against any and all losses, claims, damages and liabilities that are
actually incurred by or awarded against any such indemnified person and that
arise out of or in connection with this Commitment Letter, the Fee Letter, the
Credit Facilities, the use of the proceeds thereof or the Acquisition and the
Transactions or any claim, litigation, investigation or proceeding (a
“Proceeding”) relating to any of the foregoing, regardless of whether any
indemnified person is a party thereto, whether or not such Proceedings are
brought by you, your equity holders, affiliates, creditors or any other person,
and to reimburse each indemnified person upon demand for any reasonable and
documented legal or other out-of-pocket expenses incurred in connection with
investigating or defending any of the foregoing, provided that the foregoing
indemnity will not, as to any indemnified person, apply to losses, claims,
damages, liabilities or related expenses to the extent they are found by a
final, nonappealable judgment of a court of competent jurisdiction to arise from
(i) the bad faith, willful misconduct or gross negligence of such indemnified
person or its control affiliates, directors, officers or employees
(collectively, the “Related Parties”), (ii) the material breach by such
indemnified party of its obligations under this Commitment Letter, or (iii) any
proceeding that does not involve an act or omission by you or any of your
affiliates and that is brought by an indemnified person against any other
indemnified person and (b) regardless of whether the Closing Date occurs, to
reimburse the Commitment Party and its affiliates for all reasonable and
documented out-of-pocket expenses that have been invoiced prior to the Closing
Date or following termination or expiration of the commitments hereunder
(including reasonable and documented due diligence expenses, syndication
expenses, travel expenses, and the fees, charges and disbursements of counsel)
incurred in connection with each of the Credit Facilities and any related
documentation (including this Commitment Letter and the definitive financing
documentation) or the administration, amendment, modification or waiver
thereof.  It is further agreed that the Commitment Party shall only have
liability to you (as opposed to any other person) and that the Commitment Party
shall be liable solely in respect of its own commitment to the Credit Facilities
on a several, and not joint, basis with any other party committing to the Credit
Facilities.  No indemnified person shall be liable for any damages arising from
the use by others of Information or other materials obtained through electronic,
telecommunications or other information transmission systems except to the
extent such damages are

 

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found by a final, nonappealable judgment of a court of competent jurisdiction to
have arisen from the bad faith, willful misconduct or gross negligence of such
indemnified person or its control affiliates, directors, officers or employees. 
None of the indemnified persons or you or any of your or their respective
affiliates or the respective directors, officers, employees, advisors, and
agents of the foregoing shall be liable for any indirect, special, punitive or
consequential damages in connection with this Commitment Letter, the Fee Letter,
the Credit Facilities or the transactions contemplated hereby; provided that
nothing contained in this sentence shall limit your indemnity obligations to the
extent set forth in this Section 7.

 

8.              Sharing of Information, Affiliate Activities

 

You acknowledge that the Commitment Party and its affiliates may be providing
debt financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise.  The
Commitment Party will not use confidential information obtained from you by
virtue of the transactions contemplated by this Commitment Letter or its other
relationships with you in connection with the performance by the Commitment
Party of services for other companies, and the Commitment Party will not furnish
any such information to other companies.  You also acknowledge that the
Commitment Party has no obligation to use in connection with the transactions
contemplated by this Commitment Letter, or to furnish to you, confidential
information obtained from other companies.

 

You further acknowledge that the Commitment Party is a full service securities
or banking firm engaged in securities trading and brokerage activities as well
as providing investment banking and other financial services.  In the ordinary
course of business, the Commitment Party may provide investment banking and
other financial services to, and/or acquire, hold or sell, for its own accounts
and the accounts of customers, equity, debt and other securities and financial
instruments (including bank loans and other obligations) of, you and other
companies with which you may have commercial or other relationships.  With
respect to any securities and/or financial instruments so held by the Commitment
Party or any of its customers, all rights in respect of such securities and
financial instruments, including any voting rights, will be exercised by the
holder of the rights, in its sole discretion.

 

9.              Confidentiality

 

This Commitment Letter is delivered to you on the understanding that neither
this Commitment Letter nor the Fee Letter nor any of their terms or substance
shall be disclosed by you, directly or indirectly, to any other person except
(a) you and your officers, directors, employees, affiliates, members, managers,
partners, stockholders, attorneys, accountants, agents and advisors and those of
Target and its subsidiaries and Target itself and those of the Asset Sellers and
the Asset Sellers themselves, in each case on a confidential and need-to-know
basis, (provided that any disclosure of the Fee Letter or its terms or substance
to Target or Asset Sellers or their respective officers, directors, employees,
attorneys, accountants, agents or advisors shall be redacted in a manner
reasonably satisfactory to the Commitment Party), (b) in any legal, judicial or
administrative proceeding or as otherwise required by law or regulation or as
requested by a governmental authority (in which case you agree, to the extent
permitted by law, to inform us promptly in advance thereof), (c) upon notice to
the Commitment Party, this Commitment Letter and the existence and contents
hereof (but not the Fee Letter or the contents thereof other than the existence
thereof and the contents thereof as part of projections, pro forma information
and a generic disclosure of aggregate sources and uses to the extent customary
in marketing materials and other required filings) may be disclosed in any
prospectus or offering memoranda relating to the Securities, in any syndication
or other marketing material in connection with the Credit Facilities or in
connection with any public filing requirement, (d) the Term Sheets may be
disclosed to potential Lenders and to any rating agency in connection with the
Acquisition, the Credit Facilities and the Securities and (e) the Term Sheets

 

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may be disclosed to any rating agency in connection with obtaining ratings for
the Borrower and/or the Credit Facilities.

 

The Commitment Party shall use all nonpublic information received by it in
connection with the Acquisition and the related transactions solely for the
purposes of providing the services that are the subject of this Commitment
Letter and shall treat confidentially all such information; provided, however,
that nothing herein shall prevent the Commitment Party from disclosing any such
information (a) to rating agencies in connection with obtaining ratings for the
Bridge Facility or the Senior Notes, (b) to any Lenders or participants or
prospective Lenders or participants who are not Public Side Lenders, (c) to the
extent required by any legal, judicial, administrative proceeding or other
compulsory process or as required by applicable law or regulations (in which
case the Commitment Party shall promptly notify you, in advance, to the extent
permitted by law), (d) upon the request or demand of any regulatory authority
having jurisdiction over the Commitment Party or its affiliates, (e) to the
employees, legal counsel, independent auditors, professionals and other experts
or agents of the Commitment Party (collectively, “Representatives”) who are
informed of the confidential nature of such information and are or have been
advised of their obligation to keep information of this type confidential,
(f) to any of its respective affiliates (provided that any such affiliate is
advised of its obligation to retain such information as confidential, and the
Commitment Party shall be responsible for its affiliates’ compliance with this
paragraph) solely in connection with the Acquisition and any related
transactions, (g) to the extent any such information becomes publicly available
other than by reason of disclosure by the Commitment Party, its affiliates or
Representatives in breach of this Commitment Letter, (h) for purposes of
establishing a “due diligence” defense and (i) pursuant to customary disclosure
of information regarding the closing date, size, type, purpose of, and parties
to, the Credit Facilities, in the ordinary course of business to market data
collectors and similar service providers to the loan industry for league table
purposes; provided that the disclosure of any such information to any Lenders or
prospective Lenders or participants or prospective participants referred to
above shall be made subject to the acknowledgment and acceptance by such Lender
or prospective Lender or participant or prospective participant that such
information is being disseminated on a confidential basis (on substantially the
terms set forth in this paragraph or as is otherwise reasonably acceptable to
the Borrower and the Commitment Party) in accordance with the standard
syndication processes of the Commitment Party or customary market standards for
dissemination of such type of information.  The provisions of this paragraph
shall automatically terminate one year following the date of this Commitment
Letter.

 

10.       Miscellaneous

 

This Commitment Letter shall not be assignable by you (except to one or more of
your subsidiaries immediately prior to or otherwise substantially concurrently
with the consummation of the Acquisition) without the prior written consent of
the Commitment Party (and any purported assignment without such consent shall be
null and void), is intended to be solely for the benefit of the parties hereto
and the indemnified persons and is not intended to and does not confer any
benefits upon, or create any rights in favor of, any person other than the
parties hereto and the indemnified persons to the extent expressly set forth
herein.  The Commitment Party reserves the right to employ the services of its
affiliates in providing services contemplated hereby and to allocate, in whole
or in part, to its affiliates certain fees payable to the Commitment Party in
such manner as the Commitment Party and its affiliates may agree in their sole
discretion.  This Commitment Letter may not be amended or waived except by an
instrument in writing signed by you and the Commitment Party.  This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one
agreement.  Delivery of an executed signature page of this Commitment Letter by
facsimile or electronic transmission (e.g., “pdf” or “tif”) shall be effective
as delivery of a manually executed counterpart hereof.  This Commitment Letter
and the Fee Letter are the only agreements that have been entered into among us
and you with respect to the Credit Facilities and set

 

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forth the entire understanding of the parties with respect thereto.  This
Commitment Letter and any claim or controversy arising hereunder or related
hereto shall be governed by, and construed and interpreted in accordance with,
the laws of the State of New York.

 

You and we hereby irrevocably and unconditionally submit to the exclusive
jurisdiction of any state or Federal court sitting in the Borough of Manhattan
in the City of New York over any suit, action or proceeding arising out of or
relating to the Transactions or the other transactions contemplated hereby, this
Commitment Letter or the Fee Letter or the performance of services hereunder or
thereunder.  You and we agree that service of any process, summons, notice or
document by registered mail addressed to you or us shall be effective service of
process for any suit, action or proceeding brought in any such court.  You and
we hereby irrevocably and unconditionally waive any objection to the laying of
venue of any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding has been brought in any
inconvenient forum.  You and we hereby irrevocably agree to waive trial by jury
in any suit, action, proceeding, claim or counterclaim brought by or on behalf
of any party related to or arising out of the Transactions, this Commitment
Letter or the Fee Letter or the performance of services hereunder or thereunder.

 

The Commitment Party hereby notifies you that, pursuant to the requirements of
the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law on October 26,
2001) (the “PATRIOT Act”), it is required to obtain, verify and record
information that identifies the Borrower and each Guarantor, which information
includes names, addresses, tax identification numbers and other information that
will allow such Lender to identify the Borrower and each Guarantor in accordance
with the PATRIOT Act.  This notice is given in accordance with the requirements
of the PATRIOT Act and is effective for the Commitment Party and each Lender.

 

The indemnification, fee, expense, jurisdiction, syndication and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or the commitments hereunder; provided that your obligations under this
Commitment Letter (other than your obligations with respect to (a) assistance to
be provided in connection with the syndication thereof (including as to the
provision of information and representations with respect thereto) and
(b) confidentiality) shall automatically terminate and be superseded, to the
extent comparable, by the provisions of the Credit Facilities Documentation upon
Closing Date, and you shall automatically be released from all liability in
connection therewith at such time, in each case to the extent the Credit
Facilities Documentation has comparable provisions with comparable coverage.

 

If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms of this Commitment Letter and the Fee Letter by
returning to us executed counterparts of this Commitment Letter and the Fee
Letter not later than 5:00 p.m., New York City time, on August 23, 2016.  This
offer will automatically expire at such time if we have not received such
executed counterparts in accordance with the preceding sentence.  In the event
that the initial borrowing under one or both of the Credit Facilities does not
occur on or before the Expiration Date, then this Commitment Letter and the
commitments hereunder shall automatically terminate as to such facility unless
we shall, in our discretion, agree to an extension.  “Expiration Date” means the
earliest of (i) December 31, 2016 (provided that, if the M&A Agreements are
amended solely to extend their respective termination dates, this date may be
extended to the termination date set forth in such amendments, but in no case
shall this date be extended beyond January 15, 2017), (ii) the closing of the
Acquisition (x) in the case of the Incremental Facility, without the use of the
Incremental Facility, or (y) in the case of the Bridge Facility, without the use
of the Bridge Facility and (iii) the termination (in accordance with the terms
thereof) of the M&A Agreements prior to closing of the Acquisition.

 

9

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

 

We are pleased to have been given the opportunity to assist you in connection
with this important financing.

 

 

Very truly yours,

 

 

 

 

 

JPMORGAN CHASE BANK, N.A.

 

 

 

 

 

By:

/s/ Ryan A. Fuessel

 

 

Name:

Ryan A. Fuessel

 

 

Title:

Authorized Signor

 

Commitment Letter Signature Page

 

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

 

Accepted and agreed to as of the date first written above:

 

PDC ENERGY, INC.

 

By:

/s/ Barton R. Brookman, Jr.

 

 

Name:

Barton R. Brookman, Jr.

 

 

Title:

President and Chief Executive Officer

 

 

Commitment Letter Signature Page

 

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

 

EXHIBIT A

 

PROJECT A-BASIN
TRANSACTION SUMMARY

 

Capitalized terms used but not defined in this Exhibit A shall have the meanings
set forth in the Commitment Letter to which this Exhibit A is attached and in
Exhibits B, C and D thereto.

 

PDC Energy, Inc. (the “Borrower”) intends to acquire (x) certain assets (the
“Target Assets”) of the Asset Sellers (as defined below) pursuant to the Asset
Purchase and Sale Agreement (together with all exhibits, schedules and
disclosure letters thereto, the “Asset Purchase Agreement”) dated as of
August 23, 2016 by and between 299 Resources, LLC, 299 Production, LLC, 299
Pipeline, LLC (collectively,  the “Asset Sellers”) and the Borrower and (y) all
of the outstanding capital stock of Arris Petroleum Corporation (the “Target”)
pursuant to the Stock Purchase and Sale Agreement (together with all exhibits,
schedules and disclosure letters thereto, the “Stock Purchase Agreement” and,
together with the Asset Purchase Agreement, the “M&A Agreements”) dated as of
August 23, 2016 by and among the sellers party thereto, Target and the Borrower
(the acquisition of (x) and (y) collectively, the “Acquisition”).  As part of
the consideration for the Acquisition, the Borrower intends to issue certain
equity interests in Borrower to the Asset Sellers and the sellers under the
Stock Purchase Agreement pursuant to an Investment Agreement or Investment
Agreements (collectively, and together with all exhibits, schedules and
disclosure letters thereto, the “Investment Agreement” and, together with the
M&A Agreements, the “Purchase Agreements”) by and between the Borrower and each
of the Investors (as defined therein), the form of which will be attached to the
Stock Purchase Agreement and the Asset Purchase Agreement as an exhibit, and
which is expected to be executed on or about the Closing Date.  In connection
therewith, it is intended that:

 

(a)                                 The Borrower will amend certain terms of its
existing senior secured revolving credit facility (the “Existing Credit
Facility”) under that certain Third Amended and Restated Credit Agreement, dated
as of May 21, 2013 (as amended by that certain First Amendment to Third Amended
and Restated Credit Agreement dated as of May 14, 2014, as further amended by
that certain Second Amendment to Third Amended and Restated Credit Agreement
dated as of September 30, 2015, as may have been further amended, restated,
supplemented or otherwise modified through the date hereof, the “Existing Credit
Agreement”), among the Borrower, the subsidiaries of the Borrower party thereto
as guarantors, JPMorgan, as administrative agent, and the other parties and
financial institutions party thereto, which amendments shall include an increase
of the commitments thereunder by $250.0 million (the “Incremental Facility”)
such that the total commitments thereunder, after giving effect to the
Incremental Facility, shall be $700.0 million (the “Revolving Facility”), as
further described in Exhibit B.

 

(b)                                 The Borrower will either (i) issue and sell
senior unsecured notes (the “Senior Notes”), convertible debt securities (the
“Convertible Notes”) and/or common equity (the “Common Equity” and, together
with the Senior Notes and Convertible Notes, the “Securities”), in each case, in
a public offering or in a Rule 144A private placement on or prior to the Closing
Date yielding at least $600.0 million in gross cash proceeds on or prior to the
Closing Date, or (ii) if and to the extent the Borrower does not, or it is
unable to, issue Securities yielding at least $600.0 million in gross cash
proceeds on or prior to the Closing Date, obtain at least $600.0 million, less
the amount of the Securities, if any, issued on or prior to the Closing Date, in
loans under a new senior unsecured bridge facility as described in Exhibit C
(the “Bridge Facility” and, together with the Incremental Facility, the “Credit
Facilities”).

 

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

 

(c)                                  The proceeds of the Credit Facilities and
the Securities on the Closing Date will be applied (i) to pay the cash
consideration for the Acquisition and (ii) to pay the fees and expenses incurred
in connection with the Transactions (such fees and expenses, the “Transaction
Costs”).

 

The transactions described above are collectively referred to herein as the
“Transactions”.  For purposes of this Commitment Letter and the Fee Letter,
“Closing Date” shall mean the date of the satisfaction or waiver of the
conditions set forth in Exhibit D.

 

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

 

EXHIBIT B

 

PROJECT A-BASIN
$700.0 million
Revolving Facility

Amendment
Summary of Terms and Conditions

 

The Borrower intends to amend certain provisions of the Existing Credit
Agreement (the “Amendment”; and the Existing Credit Agreement as so amended, the
“Amended Credit Agreement”). Set forth below are the principal terms of the
Amendment.  Capitalized terms used but not defined shall have the meanings set
forth in the Existing Credit Agreement or the Commitment Letter to which this
Exhibit B is attached and in Exhibits A, C and D attached thereto, as the case
may be.

 

1.              The Existing Credit Agreement will be amended to increase the
Aggregate Commitments from $450.0 million to $700.0 million effective as of the
Closing Date (and for the avoidance of doubt, the Borrowing Base will remain at
$700.0 million).

 

2.              The definition of “Applicable Rate” in the Existing Credit
Agreement shall be amended to reflect the following pricing grid, which shall
become effective as of the Closing Date:

 

Borrowing Base Usage:

 

ABR
Spread

 

Eurodollar
Spread

 

Unused
Commitment Fee
Rate

 

Equal to or greater than 90%

 

2.250

%

3.250

%

0.500

%

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

 

2.000

%

3.000

%

0.500

%

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

 

1.750

%

2.750

%

0.500

%

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

 

1.500

%

2.500

%

0.500

%

Less than 25%

 

1.250

%

2.250

%

0.500

%

 

3.              Section 2.03 of the Existing Credit Agreement will be amended to
allow the Borrower to increase Commitments without offering to allocate such new
Commitments to the existing Lenders on a pro-rata basis;

 

4.              Section 2.17 of the Existing Credit Agreement will be amended to
add a new subsection (j) substantially as follows: “FATCA Grandfathering.  For
purposes of determining withholding Taxes imposed under FATCA, from and after
the Closing Date, the Borrower and the Administrative Agent shall treat (and the
Lenders hereby authorize the Administrative Agent to treat) the Credit Agreement
as not qualifying as a “grandfathered obligation” within the meaning of Treasury
Regulation Section 1.1471-2(b)(2)(i).”

 

5.              Article VI of the Existing Credit Agreement will be amended,
effective as of the Closing Date, to add a new Section 6.20 consistent with
Sections 4.5 and 4.8 of the Security Agreement that requires Borrower to enter
into account control agreements for deposit and securities accounts if requested
by the Administrative Agent.

 

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

 

6.              Sections 6.11 and 6.12(a) of the Existing Credit Agreement will
be amended to replace all references to mortgage and title requirements of “80%”
with “85%”, effective as of the Closing Date with respect to oil and gas
properties owned prior to giving effect to the Acquisition, and effective as of
January 15, 2017 with respect to oil and gas properties owned after giving
effect to the Acquisition;

 

7.              Sections 6.09 and 7.04 of the Existing Credit Agreement will be
amended, effective as of the date of the execution of the Amendment, to allow
for the Acquisition and to clarify that deposits made in connection with
permitted acquisitions are permitted;

 

8.              Section 7.01 of the Existing Credit Agreement and related
defined terms will be amended, effective as of the date of the execution of the
Amendment, to the extent necessary to permit the incurrence of the Bridge
Facility, the Extended Term Loans, the Exchange Notes, the Senior Notes and the
Convertible Notes;

 

9.              Section 7.11(b) of the Existing Credit Agreement will be amended
to replace the cap on the Consolidated Leverage Ratio of “4.25 to 1.00” with
“4.00 to 1.00” effective as of the Closing Date;

 

10.       The appropriate articles of the Existing Credit Agreement will be
amended to include customary E.U. “bail-in” provisions, effective as of the date
of the execution of the Amendment;

 

11.       The 25% automatic borrowing base reduction for the issuance of new
senior notes set forth in Section 3.06 of the Existing Credit Agreement will be
waived, effective as of the date of the execution of the Amendment, for the
issuance of Senior Notes, Convertible Notes and Exchange Notes in connection
with the Transactions; and

 

12.       other changes as agreed by us and you.

 

Governing Law and Forum:

New York.

 

 

Counsel to the Administrative

 

Agent and the Commitment Party:

Simpson Thacher & Bartlett LLP.

 

B-I-2

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

 

EXHIBIT C

 

PROJECT A-BASIN

Bridge Facility

$600.0 million

Summary of Terms and Conditions

 

Set forth below is a summary of the principal terms and conditions for the
Bridge Facility.  Capitalized terms used but not defined herein shall have the
meanings set forth in the Commitment Letter to which this Exhibit C is attached
and Exhibits A, B and D attached thereto.

 

1.                                      PARTIES

 

Borrower:

 

PDC Energy, Inc., a Delaware corporation.

 

 

 

Guarantors:

 

The same as those under the Revolving Facility.

 

 

 

 

 

The guarantees of the Initial Bridge Loans and the Extended Term Loans shall
rank pari passu with all senior unsecured indebtedness and shall rank senior to
all subordinated unsecured indebtedness of such Guarantors and shall rank junior
to all secured indebtedness of such Guarantors.

 

 

 

Sole Lead Arranger and Sole Bookrunner:

 

JPMorgan Chase Bank, N.A. (in such capacity, the “Bridge Lead Arranger”).

 

 

 

Administrative Agent:

 

JPMorgan Chase Bank, N.A. (in such capacity, the “Administrative Agent”) will
act as the Administrative Agent for the Lenders holding the Initial Bridge Loans
(as defined below) from time to time.

 

 

 

Lenders:

 

A syndicate of banks, financial institutions and other entities arranged by the
Commitment Party and reasonably acceptable to the Borrower (collectively, the
“Lenders”).

 

2.                                      TYPE AND AMOUNT OF BRIDGE FACILITY

 

Initial Bridge Loans:

 

The Lenders will make senior unsecured loans (the “Initial Bridge Loans”) to the
Borrower on the Closing Date in an aggregate principal amount not to exceed
$600.0 million minus the amount of gross proceeds from the Securities available
on the Closing Date and any asset sales for cash between the date of signing the
Commitment Letter and the Closing Date exceeding, individually or in the
aggregate, $5.0 million during such period.

 

 

 

Availability:

 

The Lenders will make the Initial Bridge Loans on the Closing Date.

 

 

 

Use of Proceeds:

 

The proceeds of the Initial Bridge Loans will be used to finance in part the
Acquisition and the Transaction Costs.

 

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

 

Maturity/Exchange:

 

The Initial Bridge Loans will initially mature on the first anniversary of the
Closing Date (the “Initial Bridge Loan Maturity Date”), with such maturity to be
extended as provided below. If any of the Initial Bridge Loans have not been
previously repaid in full on or prior to the Initial Bridge Loan Maturity Date
and no bankruptcy (with respect to the Borrower) event of default then exists,
such Initial Bridge Loans shall automatically be extended to the eighth
anniversary of the Closing Date (the “Extended Term Loans”). The Lenders in
respect of such Extended Term Loans will have the option at any time or from
time to time after the Initial Bridge Loan Maturity Date to receive Exchange
Notes (the “Exchange Notes”) in exchange for such Extended Term Loans having the
terms set forth in the term sheet attached hereto as Annex I; provided that a
Lender may not elect to exchange its outstanding Extended Term Loans for
Exchange Notes unless the conditions set forth in Annex I under “Principal
Amount” have been satisfied.

 

 

 

 

 

The Initial Bridge Loans, the Extended Term Loans and the Exchange Notes shall
be pari passu for all purposes.

 

 

 

Interest:

 

Prior to the Initial Bridge Loan Maturity Date, the Initial Bridge Loans will
accrue interest at a rate per annum equal to the Adjusted LIBOR (as defined
below) plus 650 basis points (the “Initial Margin”). Such spread over Adjusted
LIBOR will increase by 50 basis points at the end of each three-month period
after the Closing Date. Notwithstanding the foregoing, the interest rate in
effect on the Initial Bridge Loans at any time prior to the Initial Bridge Loan
Maturity Date shall not exceed an amount that causes the weighted average per
annum yield to maturity payable by the Borrower with respect to the Bridge
Facility and the Securities (as defined in the Fee Letter) (calculated in
accordance with the Fee Letter) to exceed the Weighted Average Bridge Cap (as
defined in the Fee Letter). At any time when the Borrower is in default in the
payment of any amount under the Bridge Facility, such overdue amount shall bear
interest at 2.00% per annum above the rate otherwise applicable thereto.

 

 

 

 

 

Following the Initial Bridge Loan Maturity Date, all outstanding Extended Term
Loans will accrue interest at the rate provided for Exchange Notes in Annex I
hereto.

 

 

 

 

 

Calculation of interest shall be on the basis of actual days elapsed in a year
of 360 days.

 

 

 

 

 

“Adjusted LIBOR” for each three-month period after the Closing Date, means the
greater of (i) 1.00% and (ii) the rate (adjusted for statutory reserve
requirements for eurocurrency liabilities) for Eurodollar deposits for such
three-month period appearing on

 

C-2

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

 

 

 

the LIBOR01 Page published by Reuters two business days prior to the
commencement of such period.

 

 

 

 

 

Interest will be payable (or shall accrue) in arrears, (a) for the Initial
Bridge Loans, at the end of each three-month period after the Closing Date and
on the Initial Bridge Loan Maturity Date, and (b) for the Extended Term Loans,
semi-annually, commencing on the date that is six months after the Initial
Bridge Loan Maturity Date and on the final maturity date.

 

3.                                      CERTAIN PAYMENT PROVISIONS

 

Optional Prepayment:

 

The Initial Bridge Loans may be prepaid, in whole or in part in minimum amounts
to be agreed, at the option of the Borrower, at any time upon three business
days’ prior notice (or such shorter period as the Administrative Agent may agree
to), without premium or penalty (other than breakage) at par plus accrued and
unpaid interest.

 

 

 

Mandatory Redemption:

 

The Borrower will be required to prepay Initial Bridge Loans on a pro rata
basis, at par plus accrued and unpaid interest, in each case subject to
exceptions and baskets to be agreed that are not less favorable than those
applicable to the Revolving Facility, from 100% of (i) net cash proceeds of the
issuance of the Securities (less the amount required, if any, to repay the
Revolving Facility) and any other indebtedness, (ii) net cash proceeds from any
issuance of equity, and (iii) net cash proceeds of all non-ordinary course asset
sales or dispositions (including as a result of casualty or condemnation) by the
Borrower or any of its subsidiaries in excess of amounts either reinvested in
accordance with the Revolving Facility or required to repay the Revolving
Facility.

 

 

 

 

 

The Borrower will also be required to make a mandatory offer to prepay Initial
Bridge Loans following the occurrence of a change of control (to be defined) at
100% of the outstanding principal amount thereof plus accrued and unpaid
interest.

 

4.                                      CERTAIN CONDITIONS

 

Conditions Precedent:

 

The availability of the Bridge Facility on the Closing Date will be subject only
to the conditions precedent expressly set forth in Section 6 of the Commitment
Letter and on Exhibit D. For the avoidance of doubt, it is agreed that
conditions set forth herein are subject, in all respects, to the Limited
Conditionality Provision.

 

C-3

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

 

5.                                      DOCUMENTATION

 

Bridge Credit Documentation:

 

The definitive documentation for the Bridge Facility (the “Bridge Credit
Documentation”) will be negotiated in good faith and shall contain those terms
and conditions usual for recently committed, similarly sized, unsecured
facilities and transactions of this type as may be reasonably agreed by the
Bridge Lead Arranger and the Borrower.

 

 

 

Representations and Warranties:

 

Usual for facilities and transactions of this type, and others as reasonably
agreed by the Bridge Lead Arranger and the Borrower and consistent, to the
extent applicable, with those in the Existing Credit Agreement.

 

 

 

Covenants:

 

The Bridge Credit Documentation will contain (a) affirmative covenants
substantially consistent with the affirmative covenants included in the Existing
Credit Agreement and (b) negative covenants that are substantially consistent
with those of the Borrower’s existing 7.75% Senior Notes due 2022 (the “Existing
Notes”) with such changes to be agreed to take account of the Acquisition, it
being understood and agreed that the covenants of the Initial Bridge Loans (and
the Extended Term Loans and the Exchange Notes) shall in no event contain
restrictions that would violate the terms of (x) if the Amendment has not
occurred, the Existing Credit Agreement or (y) if the Amendment has occurred,
the Amended Credit Agreement.

 

 

 

Events of Default:

 

Usual for facilities and transactions of this type, and others as reasonably
agreed by the Bridge Lead Arranger and the Borrower. Following the Initial
Bridge Loan Maturity Date, the events of default relevant to the Initial Bridge
Loans will automatically be modified so as to be consistent with the Exchange
Notes.

 

 

 

Voting:

 

Amendments and waivers of the Bridge Credit Documentation will require the
approval of Lenders holding more than 50% of the outstanding Initial Bridge
Loans, except that (a) the consent of each affected Lender will be required for
(i) reductions of principal, interest rate or spreads, (ii) except as provided
under “Maturity/Exchange” above, extensions of the Initial Bridge Loan Maturity
Date and (iii) additional restrictions on the right to exchange Extended Term
Loans for Exchange Notes or any amendment of the rate of such exchange and
(b) the consent of 100% of the Lenders shall be required with respect to
(i) reductions of any of the voting percentages set forth in the definition of
“required lenders” or any similar defined term, (ii) modifications to the
mandatory prepayment provisions and (iii) releases of any material Guarantor.

 

C-4

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

 

Assignment and Participation:

 

Subject to the prior approval of the Administrative Agent, the Lenders will have
the right to assign Initial Bridge Loans and commitments without the consent of
the Borrower; provided that the consent of the Borrower shall be required with
respect to any assignment (such consent not to be unreasonably withheld or
delayed) if, subsequent thereto, the Initial Bridge Lenders (together with their
affiliates) would hold, in the aggregate, less than 51% of the outstanding
Bridge Loans. Assignments will be by novation that will release the obligation
of the assigning Lender.

 

 

 

 

 

The Lenders will have the right to participate their Initial Bridge Loans to
other financial institutions without restriction, other than customary voting
limitations. Participants will have the same benefits as the selling Lenders
would have (and will be limited to the amount of such benefits) with regard to
yield protection and increased costs, subject to customary limitations and
restrictions.

 

 

 

Yield Protection:

 

Substantially similar to those contained in the Revolving Facility.

 

 

 

Bail-in Provisions:

 

Substantially similar to those contained in the Revolving Facility.

 

 

 

Expenses and Indemnification:

 

Regardless of whether the Closing Date occurs, the Borrower shall pay (a) all
reasonable and documented out-of-pocket expenses of the Administrative Agent and
the Bridge Lead Arranger associated with the syndication of the Bridge Facility
and the preparation, execution, delivery and administration of the Bridge Credit
Documentation and any amendment or waiver with respect thereto (including the
reasonable and documented fees, disbursements and other charges of counsel) and
(b) all reasonable and documented out-of-pocket expenses of the Administrative
Agent and the Lenders (including the reasonable and documented fees,
disbursements and other charges of counsel) in connection with the enforcement
of the Bridge Credit Documentation.

 

 

 

 

 

The Administrative Agent, the Bridge Lead Arranger and the Lenders (and their
affiliates and their respective officers, directors, employees, advisors and
agents) will have no liability for, and will be indemnified and held harmless
against, any losses, claims, damages, liabilities or expenses (including the
reasonable and documented fees, disbursements and other charges of counsel)
incurred in respect of the financing contemplated hereby or the use or the
proposed use of proceeds thereof, except (i) to the extent they arise from the
bad faith, gross negligence or willful misconduct of the relevant indemnified
person (or its related parties), in each case as determined by a final,
nonappealable judgment by a court of

 

C-5

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

 

 

 

competent jurisdiction and (ii) to the extent they arise out of, or in
connection with, any proceeding that does not involve any act or omission by the
Borrower or any of its affiliates and that is brought by an indemnified person
against any other indemnified person.

 

 

 

Governing Law and Forum:

 

New York.

 

 

 

Counsel to the Administrative Agent and the Commitment Party:

 

Simpson Thacher & Bartlett LLP.

 

C-6

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

 

Annex I to Exhibit C

 

Summary of Terms and Conditions

of Exchange Notes and Extended Term Loans

 

Capitalized terms used but not defined herein have the meanings set forth or
referred to in the Exhibit C to which this Annex I is attached.

 

Issuer:

 

The Borrower (in its capacity as issuer, the “Issuer”) will issue Exchange Notes
under an indenture that complies with the Trust Indenture Act (the “Indenture”).

 

 

 

Guarantors:

 

Same as the Initial Bridge Loans.

 

 

 

 

 

The guarantees of the Exchange Notes shall rank pari passu with all senior
unsecured indebtedness and shall rank senior to all subordinated unsecured
indebtedness of such Guarantors, and shall rank junior to all secured
indebtedness of such Guarantors.

 

 

 

Principal Amount:

 

The Exchange Notes will be available only in exchange for the Extended Term
Loans on or after the Initial Bridge Loan Maturity Date. The principal amount of
any Exchange Note will equal 100% of the aggregate principal amount of the
Extended Term Loan for which it is exchanged, and any accrued interest then not
due will be carried over. In the case of the initial exchange by Lenders, the
minimum amount of Extended Term Loans to be exchanged for Exchange Notes shall
not be less than $25.0 million.

 

 

 

Maturity:

 

The Exchange Notes and the Extended Term Loans will mature on the
8th anniversary of the Closing Date.

 

 

 

Interest Rate:

 

The Exchange Notes and the Extended Term Loans will bear interest at the
Weighted Average Bridge Cap (as defined in the Fee Letter).

 

 

 

 

 

At any time when the Borrower is in default in the payment of any amount under
the Exchange Notes or Extended Term Loans, such overdue amount shall bear
interest at 2.00% per annum above the rate otherwise applicable thereto.

 

 

 

 

 

Interest will be payable in arrears semi-annually commencing on the date that is
six months following the Initial Bridge Loan Maturity Date and on the final
maturity date.

 

 

 

Optional Redemption:

 

The Extended Term Loans may be prepaid, in whole or in part, at the option of
the Issuer, without premium or penalty, at any time at par plus accrued and
unpaid interest to the prepayment date.

 

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

 

 

 

The Exchange Notes will be (a) non-callable for the first three years from the
Closing Date (subject to a 35% equity clawback within the first three years
after the Initial Bridge Loan Maturity Date and make-whole provisions); and
(b) thereafter, callable or prepayable at par plus accrued interest plus a
premium equal to 75% of the coupon in effect on the Exchange Notes, which
premium shall decline ratably on each yearly anniversary of the date of such
sale to zero two years prior to the maturity of the Exchange Notes.

 

 

 

Mandatory Offer to Purchase:

 

The Issuer will be required to offer to repurchase the Exchange Notes and repay
the Extended Term Loans upon the occurrence of a change of control (which offer
shall be at (x) 101% of the principal amount of such Exchange Notes (or, so long
as no Demand Failure Event (as defined in the Fee Letter) has occurred and is
continuing, 100% in the case of Exchange Notes held by the Commitment Party or
is affiliates (for so long as held by the Commitment Party or its affiliates but
other than bona fide investment funds and asset management affiliates and
Exchange Notes purchased in open market transactions from third parties or in
connection with market making activities) or (y) 100% of the principal amount of
the Extended Term Loans, as applicable, in each case plus accrued and unpaid
interest).

 

 

 

Registration Rights:

 

The Issuer will use commercially reasonable efforts to file within 30 days after
the date of the first issuance of the Exchange Notes (the “Issue Date”), and
will use its commercially reasonable efforts to cause to become effective as
soon thereafter as practicable, a shelf registration statement with respect to
the Exchange Notes (a “Shelf Registration Statement”) and/or a registration
statement relating to a Registered Exchange Offer (as described below). If a
Shelf Registration Statement is filed, the Issuer will keep such registration
statement effective and available (subject to customary exceptions) until it is
no longer needed to permit unrestricted resales of Exchange Notes but in no
event longer than 1 year from the issuance of any Exchange Note.

 

 

 

 

 

If within 180 days from the Issue Date, a Shelf Registration Statement for the
Exchange Notes has not been declared effective or the Issuer has not effected an
exchange offer (a “Registered Exchange Offer”) whereby the Issuer has offered
registered notes having terms identical to the Exchange Notes (the “Substitute
Notes”) in exchange for all outstanding Exchange Notes (it being understood that
a Shelf Registration Statement is required to be made available in respect of
Exchange Notes the holders of which could not receive Substitute Notes through
the Registered Exchange Offer that, in the opinion of counsel, would be freely
saleable by such holders without registration or requirement for delivery of a
current prospectus under the Securities Act of 1933, as amended (other

 

C-I-2

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than a prospectus delivery requirement imposed on a broker-dealer who is
exchanging Exchange Notes acquired for its own account as a result of a market
making or other trading activities)), then the Issuer will pay liquidated
damages of 0.25% per annum on the principal amount of Exchange Notes and
Extended Term Loans outstanding to holders thereof who are, or would be, unable
freely to transfer Exchange Notes from and including the 181st day after the
Issue Date (the “Default Registration Date”) to but excluding the earlier of the
effective date of such Shelf Registration Statement or the date of consummation
of such Registered Exchange Offer (such damages may be payable, at the option of
the Borrower, in the form of additional Exchange Notes). Such liquidated damages
shall increase by 0.25% per annum on the date that is 3 months after the Default
Registration Date to a maximum of 1.00% per annum. The Issuer will also pay such
liquidated damages for any period of time (subject to customary exceptions)
following the effectiveness of a Shelf Registration Statement that such Shelf
Registration Statement is not available for resales thereunder. In addition,
unless and until the Issuer has consummated the Registered Exchange Offer and,
if required, caused the Shelf Registration Statement to become effective, the
holders of the Exchange Notes will have the right to “piggy-back” the Exchange
Notes in the registration of any debt securities (subject to customary
scale-back provisions) that are registered by the Issuer (other than on a
Form S-4) unless all the Exchange Notes and Extended Term Loans will be redeemed
or repaid from the proceeds of such securities.

 

 

 

Right to Transfer Exchange Notes:

 

The holders of the Exchange Notes shall have the absolute and unconditional
right to transfer such Exchange Notes in compliance with applicable law to any
third parties.

 

 

 

Covenants:

 

Substantially consistent with those of the Borrower’s Existing Notes with such
changes to be agreed to take account of the Acquisition, but in no event
containing restrictions that would violate the terms of (x) if the Amendment has
not occurred, the Existing Credit Agreement or (y) if the Amendment has
occurred, the Amended Credit Agreement.

 

 

 

Events of Default:

 

Substantially consistent with those of the Borrower’s Existing Notes with such
changes to be agreed to take account of the Acquisition.

 

 

 

Governing Law and Forum:

 

New York.

 

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EXHIBIT D

 

PROJECT A-BASIN

Conditions

 

The availability of the Credit Facilities shall be subject solely to the
satisfaction of the following conditions (subject to the Limited Conditionality
Provision) and the conditions expressly set forth in Section 6 of the Commitment
Letter.  Capitalized terms used but not defined herein have the meanings set
forth in the Commitment Letter to which this Exhibit D is attached and in
Exhibits A, B and C thereto.

 

1.                                      Each party thereto shall have executed
and delivered the Amendment and, if applicable, the Bridge Credit Documentation
(collectively, the “Credit Facilities Documentation”) on terms consistent with
the Commitment Letter and otherwise reasonably satisfactory to both the Borrower
and the Commitment Party, and the Commitment Party shall have received:

 

a.                                      customary closing certificates and legal
opinions; and

 

b.                                      a certificate from the principal
financial officer of the Borrower, in form and substance reasonably acceptable
to the Commitment Party, certifying that the Borrower and its subsidiaries, on a
consolidated basis after giving effect to the Transactions and the other
transactions contemplated hereby, are solvent.

 

2.                                      As a condition to any funding under the
Revolving Facility (other than any such funding that would be available
thereunder in the absence of the Amendment), the Borrower shall have received
$600.0 million in aggregate gross cash proceeds from (i) the issuance of the
Securities, (ii) the borrowing of the Initial Bridge Loans under the Bridge
Facility and (iii) any asset sales for cash between the date of signing the
Commitment Letter and the Closing Date exceeding, individually or in the
aggregate, $5.0 million.

 

3.                                      As partial consideration for the
Acquisition, the Borrower shall have issued the amount of equity contemplated to
be issued by it under the Purchase Agreements to the Investors (as defined in
the Investment Agreement).

 

4.                                      On the Closing Date, after giving effect
to the Transactions, neither the Borrower nor any of its subsidiaries shall have
any material indebtedness for borrowed money other than (i) the Revolving
Facility and the Bridge Facility (or the Securities issued in lieu of the Bridge
Facility), (ii) indebtedness permitted under the Amended Credit Agreement and
(iii) the Existing Senior Notes.

 

5.                                      The terms of the Purchase Agreements
(including all exhibits, schedules, annexes and other attachments thereto and
other agreements related thereto) shall be reasonably satisfactory to the Lead
Arrangers, it being agreed that the draft Asset Purchase Agreement dated
August 23, 2016, the draft Stock Purchase Agreement dated August 23, 2016, and
the draft Investment Agreement dated August 23, 2016 (in each case including all
exhibits, schedules, annexes and other attachments thereto), in each case are
reasonably satisfactory to the Lead Arrangers.  The Acquisition shall be
consummated pursuant to the Purchase Agreements, substantially concurrently with
the initial funding of the Credit Facilities, and no provision thereof shall
have been amended or waived, and no consent shall have been given thereunder by
the Borrower or its affiliates in any manner materially adverse to the interests
of the Commitment Party or the Lenders without the prior written consent of the
Commitment Party, not to be unreasonably withheld, conditioned or delayed (it
being understood that (a) any amendment to the definition of “Company Material
Adverse Effect” in the Stock Purchase Agreement (as in effect on the date
hereof) or “Seller Material Adverse Effect” in the Asset Purchase Agreement (as
in effect on the date hereof) shall be

 

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deemed material and adverse to the interests of the Commitment Party and
Lenders, (b)  any increase or decrease in the purchase price in respect of the
Acquisition pursuant to any purchase price or similar adjustment provisions
(including with respect to New Leases (as defined in each M&A Agreement), title
defects, environmental defects, required consents, preferential purchase rights,
and uncured casualty losses) set forth in the M&A Agreements (as in effect on
the date hereof) shall not constitute an alteration, amendment, change,
supplement, waiver, consent or other modification to the Purchase Agreements,
and shall not be deemed to be materially adverse to the interests of the
Commitment Party and Lenders, unless and until the aggregate value of such
adjustments would cause Borrower’s closing condition set forth in
Section 7.2(f) of the Asset Purchase Agreement and Section 7.2(g) of the Stock
Purchase Agreement not to be satisfied).

 

6.                                      The Commitment Party shall have received
such production and accounting monthly LOS statements with respect to the Target
Assets that are received by the Borrower pursuant to the Asset Purchase
Agreement.

 

7.                                      The Expiration Date shall not have
occurred.

 

8.                                      The Commitment Party shall have received
(a) audited consolidated balance sheets and related statements of income,
stockholders’ equity and cash flows of the Borrower and its subsidiaries, for
the three most recently completed fiscal years ended at least 90 days before the
Closing Date, (b) unaudited consolidated balance sheets and related statements
of income, stockholders’ equity and cash flows of the Borrower and its
subsidiaries, for each subsequent fiscal quarter (other than the fourth fiscal
quarter of any fiscal year) ended at least 45 days before the Closing Date (in
each case, together with the corresponding comparative period from the prior
fiscal year), (c) audited consolidated balance sheets and related statements of
income, stockholders’ equity and cash flows of the Target for the two most
recently completed fiscal years ended at least 90 days before the Closing Date,
(d) unaudited consolidated balance sheets and related statements of income,
stockholders’ equity and cash flows of the Target, for each subsequent fiscal
quarter (other than the fourth fiscal quarter of any fiscal year) ended at least
45 days before the Closing Date (in each case, together with the corresponding
comparative period from the prior fiscal year), (e) with respect to the Target
Assets, such financial statements to the extent required for a shelf takedown
from Borrower’s existing registration statement on Form S-3 under the Securities
Act, and (f) the reserve reports for the proved oil and gas properties of the
Borrower and its subsidiaries and, to the extent required for a shelf takedown
from Borrower’s existing registration statement on Form S-3 under the Securities
Act, the Target and the Target Assets, in each case for the most recently
completed fiscal year ended at least 90 days before the Closing Date (which
reports shall be prepared according to SEC guidelines by one or more reputable
third party engineers); provided that filing of the required financial
statements in clauses (a) and (b) above on form 10-K and form 10-Q by the
Borrower with the Securities and Exchange Commission through the “Electronic
Data Gathering, Analysis and Retrieval” system will satisfy the foregoing
requirements.

 

9.                                      The Commitment Party shall have received
a pro forma consolidated balance sheet and related pro forma consolidated
statement of income of the Borrower and its subsidiaries as of and for the
twelve-month period ending on the last day of the most recently completed
four-fiscal quarter period ended at least 45 days prior to the Closing Date, in
each case, prepared in accordance with Regulation S-X after giving effect to the
Transactions as if the Transactions had occurred as of such date (in the case of
such balance sheet) or at the beginning of such period (in the case of such
statement of income), in each case to the extent necessary for a shelf takedown
from Borrower’s existing registration statement on Form S-3 under the Securities
Act.

 

10.                               As a condition to the availability of the
Bridge Facility, (a) the Investment Bank (as defined in the Fee Letter referred
to in the Commitment Letter) shall have received, (i) prior to the

 

D-2

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Marketing Period Commencement Date (as defined below), a completed preliminary
prospectus, preliminary offering memorandum or similar document (a “Notes
Offering Document”) suitable for use in a customary offering registered under
the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to
Rule 144A thereunder, as applicable, including audited and unaudited financial
statements of the Borrower, the Target and the Target Assets to the extent
necessary for a shelf takedown from Borrower’s existing registration statement
on Form S-3 under the Securities Act (and all other recent, probable pending
acquisitions and dispositions to the extent required under Regulation S-X), as
applicable, pro forma financial statements, business and other financial data
and all other information of the type and form customarily included in a Notes
Offering Document of such type, prepared in accordance with Regulation S-X and
Regulation S-K under the Securities Act for the offering of the Senior Notes
(including summary reserve data prepared according to SEC guidelines including
Rule 4-10 of Regulation S-X and Item 302(b) of Regulation S-K except in the case
of an offering pursuant to Rule 144A where such preparation is not customary)
and (ii) drafts of customary comfort letters (including customary “negative
assurances”) by the auditors and independent reserve engineers of the Borrower,
the Target and the Target Assets, in each case with respect to the Target and
Target Assets to the extent the financial statements of the Target and Target
Assets and/or reserve reports for the proved oil and gas properties of the
Target and Target Assets are required for a shelf takedown from Borrower’s
existing registration statement on Form S-3 under the Securities Act, that such
auditors and independent reserve engineers are prepared to issue upon completion
of customary procedures in connection with the offering of the Senior Notes, in
each case to the extent necessary for a shelf takedown from Borrower’s existing
registration statement on Form S-3 under the Securities Act, (b) the Investment
Bank shall have received, prior to the Marketing Period Commencement Date, (i) a
completed customary preliminary prospectus, prospectus supplement, preliminary
offering memorandum or similar document (an “Equity Offering Document”) suitable
for use in a customary common equity offering registered under the Securities
Act and/or a convertible notes offering registered under the Securities Act or
pursuant to Rule 144A thereunder, as applicable, in each case (as applicable)
including audited and unaudited financial statements of the Borrower and the
Target Assets (and all other recent, probable pending acquisitions and
dispositions to the extent required under Regulation S-X), as applicable, pro
forma financial statements, business and other financial data, in each case to
the extent necessary for a shelf takedown from Borrower’s existing registration
statement on Form S-3 under the Securities Act, and all other information of the
type and form customarily included in an Equity Offering Document of such type,
prepared in accordance with Regulation S-X and Regulation S-K under the
Securities Act for the offering of the Common Equity (including summary reserve
data prepared according to SEC guidelines including Rule 4-10 of Regulation S-X
and Item 302(b) of Regulation S-K except in the case of an offering pursuant to
Rule 144A where such preparation is not customary) and (ii) drafts of customary
comfort letters (including customary “negative assurances”) by the auditors and
independent reserve engineer letters of the independent reserve engineers of the
Borrower, the Target and the Target Assets, in each case with respect to the
Target and Target Assets to the extent the financial statements of the Target
and Target Assets and/or reserve reports for the proved oil and gas properties
of the Target and Target Assets are required for a shelf takedown from
Borrower’s existing registration statement on Form S-3 under the Securities Act,
that such auditors and independent reserve engineers are prepared to issue upon
completion of customary procedures in connection with the offering of the common
equity or convertible notes, in each case to the extent necessary for a shelf
takedown from Borrower’s existing registration statement on Form S-3 under the
Securities Act, and (c) such Investment Bank shall have been afforded a period
(the “Marketing Period”) of at least 20 consecutive business days following the
receipt of the information described in clauses (a) and (b), to seek to place
the Securities with qualified purchasers thereof, provided that (a) if the
Marketing Period has not ended on or prior to November 22, 2016 and would
otherwise include November 23, 2015, November 24, 2015 or November 25, 2015, it
shall not be required to be consecutive solely to the extent it would include
November 23, 2015, November 24, 2015 or November 25, 2015 and the Marketing
Period will be extended by the number of days in such period that would
otherwise be included in the Marketing Period and (b) the Marketing Period shall
commence

 

D-3

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on a date such that, after taking into account the foregoing, the Marketing
Period does not end later than December 20, 2016 (the first day of such period,
the “Marketing Period Commencement Date”).

 

11.                               The Administrative Agent shall have received,
at least 3 days prior to the Closing Date, to the extent requested by the
Administrative Agent or its counsel at least 10 days prior to the Closing Date,
all documentation and other information required by regulatory authorities under
applicable “know your customer” and anti-money laundering rules and regulations,
including the PATRIOT Act.

 

12.                               The Borrower and the Senior Notes shall have
received a rating from Moody’s Investors Service, Inc. and Standard & Poor’s
Financial Services LLC no later than the Marketing Period Commencement Date.

 

13.                               All fees and expenses due to the Commitment
Party and the Lenders shall have been paid or shall have been authorized to be
deducted from the proceeds of the initial fundings under the Credit Facilities.

 

14.                               With respect to the Incremental Facility,
(a) all actions necessary to establish that the Administrative Agent will have a
perfected first priority lien (subject to liens permitted under the Amended
Credit Agreement) in the Collateral under the Revolving Facility shall have been
taken, including, without limitation, a mortgage lien (and receipt of title
information) on 85% of the Engineered Value (as defined in the Existing Credit
Agreement) of the Direct Interests (as defined in the Existing Credit Agreement)
of the Borrower (prior to giving effect to the Acquisition), provided, that the
Borrower shall use commercially reasonable efforts to grant and perfect liens in
oil and gas properties with mortgages representing 50% of the Engineered Value
of the Direct Interests of the Target and the Target Assets and shall, in any
case, grant and perfect such liens with mortgages representing 85% of the
Engineered Value of the Direct Interests of the Borrower after giving effect to
the Acquisition no later than January 15, 2017, and (b) (i) all prior material
indebtedness for borrowed money secured by a lien in the Target Assets (other
than indebtedness permitted under the Amended Credit Agreement) shall have been
paid, redeemed, defeased and discharged in full, (ii) the Administrative Agent
shall have received a customary payoff letter in connection with the same, and
(iii) all prior liens in the Target Assets (other than liens permitted under the
Amended Credit Agreement) shall have been released.

 

15.                               As a condition to the availability of the
Credit Facilities, the Lead Arrangers (a) shall have received one or more
customary confidential information memoranda and other marketing material
customarily used for the syndication of the Credit Facilities and (b) shall have
been afforded a reasonable period of time to syndicate the Credit Facilities,
which in no event shall be less than 20 consecutive business days from the date
of delivery of the confidential information memorandum to the Lenders, which
period shall exclude certain market holiday related “blackout” periods as
reasonably determined by the Lead Arrangers (including Friday, November 25,
2016, and the period from December 19, 2016, through December 31, 2016).

 

D-4

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