Exhibit 10.1

 

EXECUTION VERSION

 

SECOND LIEN CREDIT AGREEMENT

 

DATED AS OF OCTOBER 22, 2015

 

AMONG

 

WARREN RESOURCES, INC.,

 

CORTLAND PRODUCTS CORP.,
as Administrative Agent

 

AND

 

THE LENDERS
FROM TIME TO TIME PARTY HERETO

 

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

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE 1 DEFINITIONS

1

 

 

 

Section 1.1

Certain Defined Terms

1

Section 1.2

Accounting Terms and Determinations

31

Section 1.3

Other Definitional Provisions and References

31

 

 

 

ARTICLE 2 LOANS

32

 

 

 

Section 2.1

Loans and Borrowings; Commitments

32

Section 2.2

Advancing Loans

32

Section 2.3

Mandatory Prepayments

33

Section 2.4

All Prepayments

37

Section 2.5

Optional Prepayments of Loans

37

Section 2.6

Termination of New Term Loan Commitments

37

Section 2.7

Interest, Interest Calculations and Certain Fees

37

Section 2.8

Notes; Commitments Several

39

Section 2.9

[Reserved]

40

Section 2.10

General Provisions Regarding Payment

40

Section 2.11

Loan Account

40

Section 2.12

Maximum Interest

41

Section 2.13

Taxes

41

Section 2.14

Capital Adequacy

45

Section 2.15

Mitigation Obligations

46

 

 

 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES

46

 

 

 

Section 3.1

Existence and Power

46

Section 3.2

Organization and Governmental Authorization; No Contravention

47

Section 3.3

Binding Effect

47

Section 3.4

Capitalization

47

Section 3.5

Financial Information

47

Section 3.6

Litigation

48

Section 3.7

Ownership of Property

48

Section 3.8

No Default

48

Section 3.9

Labor Matters

48

Section 3.10

Regulated Entities

49

Section 3.11

Margin Regulations

49

Section 3.12

Compliance With Laws; Anti-Terrorism Laws

49

Section 3.13

Taxes

49

Section 3.14

Compliance with ERISA

50

Section 3.15

Brokers

50

Section 3.16

Environmental Compliance

50

Section 3.17

Intellectual Property

51

Section 3.18

[Reserved]

51

Section 3.19

Full Disclosure

51

Section 3.20

Reserve Reports, Imbalances and Marketing Matters

51

 

i

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

 

TABLE OF CONTENTS (CONT’D)

 

 

 

Page

 

 

 

Section 3.21

Maintenance and Development of Properties

52

Section 3.22

Security Documents

53

 

 

 

ARTICLE 4 AFFIRMATIVE COVENANTS

53

 

 

 

Section 4.1

Financial Statements and Other Reports

53

Section 4.2

Payment and Performance of Obligations

57

Section 4.3

Maintenance of Existence

58

Section 4.4

Maintenance of Property; Insurance

58

Section 4.5

Compliance with Laws

59

Section 4.6

Inspection of Property, Books and Records

59

Section 4.7

Use of Proceeds

60

Section 4.8

Lenders’ Meetings

60

Section 4.9

Hazardous Materials; Remediation

60

Section 4.10

Further Assurances

60

Section 4.11

Reserved

63

Section 4.12

Maintenance of Exchange Listing

63

 

 

 

ARTICLE 5 NEGATIVE COVENANTS

63

 

 

 

Section 5.1

Debt

63

Section 5.2

Liens

66

Section 5.3

Contingent Obligations

67

Section 5.4

Restricted Payments

67

Section 5.5

Restrictive Agreements

68

Section 5.6

Swap Contracts

69

Section 5.7

Consolidations, Mergers and Sales of Assets

70

Section 5.8

Investments

70

Section 5.9

Transactions with Affiliates

72

Section 5.10

Modification of Certain Documents

72

Section 5.11

Fiscal Year

73

Section 5.12

Conduct of Business

73

Section 5.13

Capital Stock

73

Section 5.14

Limitation on Sale and Leaseback Transactions

73

Section 5.15

Bank Accounts

73

Section 5.16

Compliance with Anti-Corruption Laws

74

Section 5.17

Compliance with Anti-Terrorism Laws

74

Section 5.18

Anti-layering Covenant

75

 

 

 

ARTICLE 6 [RESERVED]

75

 

 

ARTICLE 7 CONDITIONS

75

 

 

 

Section 7.1

Conditions to Closing

75

 

 

 

ARTICLE 8 EVENTS OF DEFAULT

77

 

 

 

Section 8.1

Events of Default

77

 

ii

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

 

TABLE OF CONTENTS (CONT’D)

 

 

 

Page

 

 

 

Section 8.2

Acceleration and Suspension or Termination of Loans and Commitments

79

Section 8.3

[Reserved]

80

Section 8.4

Default Rate of Interest

80

Section 8.5

Setoff Rights

80

Section 8.6

Application of Proceeds

80

 

 

 

ARTICLE 9 EXPENSES AND INDEMNITY

81

 

 

 

Section 9.1

Expenses

81

Section 9.2

Indemnity

82

 

 

 

ARTICLE 10 ADMINISTRATIVE AGENT

83

 

 

 

Section 10.1

Appointment and Authorization

83

Section 10.2

Administrative Agent and Affiliates

84

Section 10.3

Action by Administrative Agent

84

Section 10.4

Consultation with Experts; Delegation of Duties

85

Section 10.5

Liability of Administrative Agent

85

Section 10.6

Indemnification

86

Section 10.7

Right to Request and Act on Instructions

86

Section 10.8

Credit Decision

87

Section 10.9

Collateral Matters

87

Section 10.10

Agency for Perfection

88

Section 10.11

Notice of Default

89

Section 10.12

Successor Administrative Agent

89

Section 10.13

Payment and Sharing of Payment

90

Section 10.14

Right to Perform, Preserve and Protect

91

Section 10.15

Additional Titled Agents

91

Section 10.16

Administrative Agent May File Proof of Claim

91

 

 

 

ARTICLE 11 MISCELLANEOUS

92

 

 

 

Section 11.1

Survival

92

Section 11.2

No Waivers

92

Section 11.3

Notices

92

Section 11.4

Severability

94

Section 11.5

Amendments and Waivers

94

Section 11.6

Assignments; Participations; Replacement of Lenders

95

Section 11.7

Headings

98

Section 11.8

Confidentiality

98

Section 11.9

Waiver of Consequential and Other Damages

98

Section 11.10

Marshaling; Payments Set Aside

99

Section 11.11

GOVERNING LAW; SUBMISSION TO JURISDICTION

99

Section 11.12

WAIVER OF JURY TRIAL

99

Section 11.13

[Reserved]

100

Section 11.14

Counterparts; Integration

100

 

iii

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

 

TABLE OF CONTENTS (CONT’D)

 

 

 

Page

 

 

 

Section 11.15

No Strict Construction

100

Section 11.16

USA PATRIOT Act Notification

100

Section 11.17

First/Second Lien Intercreditor Agreement

100

Section 11.18

No Personal Liability of Directors, Officers, Employees and Stockholders With
Respect to Financial Conditional Representations

101

 

iv

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

 

ANNEXES, EXHIBITS AND SCHEDULES

 

ANNEXES

 

Annex A

-

Commitment Annex

Annex B

-

Closing Checklist

 

EXHIBITS

 

Exhibit A

-

Assignment Agreement

Exhibit B-1

-

Compliance Certificate

Exhibit B-2

-

Definition of EBITDAX

Exhibit C

-

Notice of Borrowing

Exhibit D

-

[Reserved]

Exhibit E-1

-

U.S. Tax Compliance Certificates for Non-U.S. Lenders that are not Partnerships

Exhibit E-2

-

U.S. Tax Compliance Certificates for Non-U.S. Lenders that are Partnerships

Exhibit E-3

-

U.S. Tax Compliance Certificates for Foreign Participants that are not
Partnerships

Exhibit E-4

-

U.S. Tax Compliance Certificates for Foreign Participants that are Partnerships

Exhibit F

-

Note

 

SCHEDULES

 

Schedule 3.1

-

Existence, Organizational Identification Numbers, Foreign Qualification, Prior
Names

Schedule 3.4

-

Capitalization

Schedule 3.6

-

Litigation

Schedule 3.15

-

Brokers

Schedule 3.16

-

Environmental Compliance

Schedule 3.20

-

Reserve Reports

Schedule 3.21

-

Maintenance; Permits

Schedule 5.1

-

Debt

Schedule 5.2

-

Liens

Schedule 5.3

-

Contingent Obligations

Schedule 5.5

-

Restrictive Agreements

Schedule 5.8

-

Investments in Unrestricted Subsidiaries

Schedule 5.9

-

Affiliate Transactions

Schedule 5.12

-

Business Description

Schedule 7.1(i)

-

Local Counsels

 

v

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

 

CREDIT AGREEMENT

 

SECOND LIEN CREDIT AGREEMENT dated as of October 22, 2015 among Warren
Resources, Inc., a Maryland corporation, as Borrower, the financial institutions
or other entities from time to time parties hereto, each as a lender
(collectively, the “Lenders” and individually, a “Lender”), and Cortland
Products Corp., a Delaware corporation, as Administrative Agent.

 

RECITALS:

 

WHEREAS, Borrower desires that (i) Conversion Lenders convert their Conversion
Notes into Converted Loans on the Closing Date and (ii) New Term Loan Lenders
extend credit in the form of New Term Loans on the Closing Date, in each case to
Borrower to provide funds for the purposes described herein; and

 

WHEREAS, Borrower desires to secure all of the Obligations by granting to
Administrative Agent, for the benefit of the Secured Parties, a second priority
perfected Lien upon substantially all of its personal and real property (subject
to Permitted Liens), including without limitation all outstanding Capital Stock
of each Restricted Subsidiary; and

 

WHEREAS, subject to the limitations set forth herein, each Restricted Subsidiary
is willing to guaranty all of the Obligations, and to grant to Administrative
Agent, for the benefit of the Secured Parties, a second priority perfected Lien
upon substantially all of its personal and real property (subject to Permitted
Liens);

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Borrower, Lenders and Administrative Agent agree
as follows:

 

ARTICLE 1
DEFINITIONS

 

Section 1.1                                    Certain Defined Terms.

 

(a)                                 The following terms have the following
meanings:

 

“Acceptable Junior Lien Intercreditor Agreement” means an intercreditor
agreement that:

 

(a)                     (i)                         provides, and with respect
to which the instruments evidencing the Junior Lien Debt governed thereby
provide, that such intercreditor agreement is legally binding on the holders,
from time to time, of such Junior Lien Debt and their representatives, trustees
and/or agents (collectively, “Junior Lien Holders”);

 

(ii)                      subordinates and limits the Liens, rights and remedies
of the Junior Lien Holders to the Liens, rights and remedies of the
Administrative Agent and the Lenders and the First Lien Agent and the lenders
under the First Lien Credit Agreement, to the same extent the Liens, rights and
remedies of the

 

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

 

Administrative Agent and the Lenders are subordinated and limited with respect
to the Liens, rights and remedies of the First Lien Agent and the lenders under
the First Lien Credit Agreement by the First/Second Lien Intercreditor
Agreement;

 

(iii)                   provides to the Administrative Agent and the Lenders,
and the First Lien Agent and the lenders under the First Lien Credit Agreement
substantially the same rights and benefits with respect to the Junior Lien
Holders as are provided to the First Lien Agent and the lenders under the First
Lien Credit Agreement with respect to the Administrative Agent and the Lenders
pursuant to the First/Second Lien Intercreditor Agreement;

 

(iv)                  imposes on the Junior Lien Holders substantially the same
duties and obligations towards the Administrative Agent and the Lenders, and the
First Lien Agent and the lenders under the First Lien Credit Agreement, as are
imposed on the Administrative Agent and the Lenders towards the First Lien Agent
and the lenders under the First Lien Credit Agreement pursuant to the
First/Second Lien Intercreditor Agreement;

 

(v)                     in the event of a discharge and release of the Liens on
the Collateral in favor of the First Lien Agent and the lenders under the First
Lien Credit Agreement, provides for similar rights, remedies and benefits of the
Administrative Agent and the Lenders as the rights, remedies and benefits of the
First Lien Agent and the lenders under the First Lien Credit Agreement pursuant
to the First/Second Lien Intercreditor Agreement (prior to such discharge and
release); and

 

(vi)                  that does not alter the Liens, rights, remedies, benefits
duties or obligations as between the First Lien Agent and the lenders under the
First Lien Credit Agreement and the Administrative Agent and the Lenders
pursuant to the First/Second Lien Intercreditor Agreement; and

 

(b)                     the board of directors of Borrower, acting in good
faith, shall have determined the foregoing statements to be accurate, and a
certificate of the Chief Financial Officer of Borrower certifying as to such
determination, which shall include a copy of the board of directors’ resolutions
as to such determination, shall have been delivered to Administrative Agent.

 

“Accepting Lender” has the meaning set forth in Section 2.3(e).

 

“Additional Titled Agents” has the meaning set forth in Section 10.15.

 

“Administrative Agent” means Cortland in its capacity as administrative agent
for itself and for Lenders hereunder, as such capacity is established in, and
subject to the provisions of, Article 10, and the successors of Cortland in such
capacity.

 

“Affiliate” means with respect to any Person (i) any Person that directly or
indirectly controls such Person, (ii) any Person which is controlled by or is
under common

 

2

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

 

control with such controlling Person and (iii) each of such Person’s (other
than, with respect to any Lender, any Lender’s) officers or directors (or
Persons functioning in substantially similar roles) and the spouses, parents,
descendants and siblings of such officers, directors or other Persons.  As used
in this definition, the term “control” of a Person means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ability to exercise
majority voting power, by contract or otherwise.

 

“Agreement” means this Second Lien Credit Agreement, as the same may be amended,
supplemented, restated, amended and restated, refinanced, replaced or otherwise
modified from time to time.

 

“All-in Yield” shall mean, as to any Debt, the effective interest rate with
respect thereto as reasonably determined by the Lead Lenders taking into account
the interest rate margin, original issue discount, upfront fees and LIBOR rate
floor or alternate base rate floor; provided that original issue discount and
upfront fees shall be equated to interest rate assuming a four (4) year life to
maturity of such Debt (or, if less, the stated life to maturity at the time of
the incurrence of such Debt); provided further that “All-in Yield” shall not
include amendment, arrangement, commitment, underwriting, structuring or similar
fees paid to arrangers (or their affiliates) or any other fees, in each case
that are not generally paid or shared ratably to lenders with respect to such
Debt.

 

“Anti-Corruption Laws” has the meaning set forth in Section 5.16(a).

 

“Anti-Terrorism Laws” means any economic sanctions Laws, including Executive
Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the Laws
comprising or implementing the Bank Secrecy Act, and the Laws administered by
OFAC and the U.S. Department of State.

 

“Approved Fund” means any (i) investment company, fund, trust, securitization
vehicle or conduit 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 business or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered, managed, advised or sub-advised
by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a
natural person) or an Affiliate of a Person (other than a natural person) that
administers, manages, advises or sub-advises a Lender.

 

“Asset Disposition” means any sale, lease, license, transfer, assignment or
other consensual disposition by any Credit Party of any asset, but excluding
(i) dispositions of inventory or used, obsolete, worn-out or surplus equipment,
all in the Ordinary Course of Business; (ii) dispositions of Permitted
Investments; (iii) sales, transfers and other dispositions of accounts
receivable in connection with the compromise, settlement or collection thereof
in the Ordinary Course of Business, but, in any event, not in connection with
any receivables financing or factoring arrangement; (iv) the lease, assignment,
license, sub-license or sub-lease of any real or personal property in the
Ordinary Course of Business to the extent the same does not materially interfere
with the business of Borrower or any Subsidiary; (v) any disposition of

 

3

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

 

property or issuance of Capital Stock by Borrower or any Domestic Subsidiary to
Borrower or any other Domestic Subsidiary that is a Guarantor; (vi) dispositions
of equipment to the extent that (a) such equipment is exchanged for credit
against the purchase price of similar replacement equipment or (b) within
180 days after such disposition the proceeds of such disposition are applied to
the purchase price of such replacement equipment; (vii) the sale in the Ordinary
Course of Business of Hydrocarbons produced from the Credit Parties’ Hydrocarbon
Interests; (viii) dispositions of Capital Stock in Unrestricted Subsidiaries;
(ix) the creation of a Permitted Lien; (x) the surrender or waiver of contract
rights or the disposition, settlement, release or surrender of contract, tort or
other claims of any kind; (xi) a Restricted Payment permitted by Section 5.4;
(xii) dispositions permitted by Section 5.7(a); (xiii) an Investment permitted
by Section 5.8 (other than clause (s) of Section 5.8); and (xiv) any disposition
of Warren Drilling Rig No. 1 (and related or incidental inventory, trailers,
equipment, vehicles, accounts, general intangibles and personal property) or
real estate that does not constitute nor are related to the operation of Oil and
Gas Properties (and related or incidental fixtures and equipment (including the
land and structure at 1002 Lecouvreur Avenue, Wilmington, California) in an
aggregate amount during the term of this Agreement not to exceed $15,000,000.

 

“Asset Disposition or Recovery Event Proceeds Pledged Account” shall mean an
account subject to the sole dominion and control of the First Lien Agent and,
after the Discharge of First Lien Obligations, the Administrative Agent in which
Casualty Proceeds or proceeds from any Asset Disposition are held pending
reinvestment pursuant to Section 2.3(c).

 

“Assignment Agreement” means an assignment and assumption agreement entered into
by a Lender and an Eligible Assignee (with the consent of any party whose
consent is required by Section 11.6), and accepted by the Administrative Agent,
in substantially the form of Exhibit A, or any other form reasonably acceptable
to the Administrative Agent.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”.

 

“Blocked Person” means any Person:  (i) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (ii) owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (iii) with which any Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law, (iv) that commits,
threatens or conspires to commit or supports “terrorism” as defined in Executive
Order No. 13224; or (v) that is named a “specially designated national,”
“foreign sanctions evader” or “blocked person” on the most current list
published by OFAC or other similar list.

 

“Bond” means any completion bond, performance bond, bid bond, appeal bond,
surety bond, insurance obligation or bond or any similar bond or obligation, or
any letter of credit or guarantee functioning as or supporting any of the
foregoing bonds or obligations, incurred by Borrower or any Subsidiary in the
Ordinary Course of Business.

 

“Borrower” means Warren Resources, Inc., a Maryland corporation.

 

“Borrower Materials” has the meaning set forth in Section 11.3(c).

 

4

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

 

“Borrower Representative” has the meaning set forth in Section 5.16(a).

 

“Business Day” means any day except a Saturday, Sunday or other day on which
either the New York Stock Exchange is closed, or on which commercial banks in
New York City are authorized by Law to close.

 

“Capital Lease” of any Person means any lease of any property by such Person as
lessee which would, in accordance with GAAP, be required to be accounted for as
a capital lease on the balance sheet of such Person.

 

“Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.

 

“Casualty Proceeds” means (i) the aggregate insurance proceeds received in
connection with one or more related events under any insurance policy with
respect to Oil and Gas Properties or (ii) any award or other compensation with
respect to any eminent domain, condemnation of property or similar proceedings
(or any transfer or disposition of property in lieu of condemnation).

 

“CBM Properties” means the Oil and Gas Properties located in the Rocky Mountain
region (including, for the avoidance of doubt, those Oil and Gas Properties
located in the Greater Green River Basin in Wyoming and the Washakie Basin in
Wyoming).

 

“CFC” means a “controlled foreign corporation” within the meaning of Section 957
of the Code.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, including all amendments thereto and all regulations
thereunder.

 

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of Capital
Stock representing more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of Borrower;
(b) occupation of a majority of the seats (other than vacant seats) on the board
of directors of Borrower by Persons who were neither (i) nominated by the board
of directors of Borrower, nor (ii) appointed by directors so nominated; (c) the
occurrence of a “Change in Control” (or any other defined term having a similar
purpose) as defined in the documentation governing the Senior Notes; (d) the
occurrence of a “Change in Control” (or any other defined term having a similar
purpose) as defined in the documentation governing the First Lien Credit
Agreement; (e) a change of control or similar event shall occur as provided in
any other credit agreement, indenture or other agreement governing Debt issued
by any Credit Party or any Permitted Pari Debt, in each case (other than in the
case of any Permitted Pari Debt) to the extent the aggregate principal amount of
the Debt evidenced thereby equals or exceeds $10,000,000 or (f) an Asset
Disposition by Borrower or a Subsidiary pursuant to which Borrower or any
Subsidiary sells, leases, licenses, transfers, assigns or by other consensual
disposition, in one or a series of related

 

5

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

 

transactions, more than 50% of the properties or assets of Borrower and its
Subsidiaries as determined by reference to the Borrower’s and its Subsidiaries’
financial statements on the last day of the most recently ended fiscal quarter,
determined on a consolidated basis in accordance with GAAP.

 

“Closing Checklist” means Annex B to this Agreement.

 

“Closing Date” means the date of this Agreement.

 

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

 

“Collateral” means all property, now existing or hereafter acquired, mortgaged
or pledged to, or purported to be subjected to a Lien in favor of,
Administrative Agent, for the benefit of the Secured Parties, pursuant to the
Security Documents, except for the Excluded Property.

 

“Collateral Documents” means, collectively, the Mortgages, the Security
Agreement, the Guaranty, the Pledge Agreement and any other Security Document,
in each case executed pursuant to this Agreement, and all financing statements
filed in connection therewith.

 

“Commitment Annex” means Annex A to this Agreement.

 

“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 U.S. Commodity Futures Trading Commission (or the
application or official interpretation of any thereof).

 

“Compliance Certificate” means a certificate, duly executed by a Responsible
Officer, appropriately completed and substantially in the form of Exhibit B-1
hereto.

 

“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 Secured Total Debt” means, as of any date of determination,
(a) Consolidated Total Debt as of such date, minus (b) the sum of (without
duplication) the portion of Debt of Borrower or any Restricted Subsidiary
included in Consolidated Total Debt that is not secured by any Lien on property
or assets of Borrower or any Restricted Subsidiary.

 

“Consolidated Secured Total Leverage Ratio” means, as of any date of
determination, the ratio of (a) Consolidated Secured Total Debt as of such date
to (b) EBITDAX for the applicable Defined Period.

 

“Consolidated Subsidiary” means at any date any Subsidiary the accounts of which
would be consolidated with those of Borrower (or any other Person, as the
context may require hereunder) in its consolidated financial statements if such
statements were prepared as of such date.

 

6

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

 

“Consolidated Total Debt” shall mean, as of any date of determination, the sum
of (without duplication) the aggregate principal amount of Debt of Borrower and
its Restricted Subsidiaries outstanding on such date, in an amount that would be
reflected on a consolidated balance sheet (excluding the notes thereto) prepared
as of such date on a consolidated basis in accordance with GAAP, consisting only
of Debt for borrowed money, Debt constituting purchase money indebtedness, Debt
in respect of any Capital Lease, and debt obligations evidenced by promissory
notes, bonds, debentures, loan agreements or similar instruments; provided that
Consolidated Total Debt shall not include Debt (i) in respect of Swap
Obligations (but shall include net unpaid termination payments under Swap
Contracts), (ii) in respect of letters of credit, bank guarantees and
performance or similar bonds except to the extent of unreimbursed amounts
thereunder and (iii) of Unrestricted Subsidiaries.

 

“Contingent Obligation” means, with respect to any Person, any direct or
indirect liability of such Person:  (i) with respect to any debt, lease,
dividend or other obligation of another Person if the purpose or intent of such
Person incurring such liability, or the effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreement relating thereto will be complied with, or that any holder
of such liability will be protected, in whole or in part, against loss with
respect thereto; (ii) [reserved]; (iii) [reserved]; (iv) [reserved]; or (v) for
any obligations of another Person pursuant to any agreement to purchase,
repurchase or otherwise acquire any obligation or any property constituting
security therefor, to provide funds for the payment or discharge of such
obligation or to preserve the solvency, financial condition or level of income
of another Person; provided that “Contingent Obligations” shall not include
liabilities arising in the Ordinary Course of Business under joint operating
agreements, oil and gas leases, division orders, contracts for the sale,
transportation or exchange of produced oil or natural gas, unitization or
pooling declarations and agreements, area of mutual interest agreements,
marketing agreements, processing agreements, development agreements, gas
balancing agreements, and other similar agreements, in each case which is usual
and customary in the oil and gas business.  The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if not a fixed and determinable amount, the maximum
amount so guaranteed or otherwise supported.  Contingent Obligation shall
exclude any obligation arising pursuant to an Excluded Property Leaseback.

 

“Conversion Lenders” means, (a) on the Closing Date, each of the Lenders listed
on the Commitment Annex under the column “Conversion Lender” and (b) after the
Closing Date, any existing Conversion Lender pursuant to clause (a) above and an
Eligible Assignee to whom an existing Conversion Lender assigns all or a portion
of its Converted Loans pursuant to the terms of an effective Assignment
Agreement.

 

“Conversion Notes” means Senior Notes held by Conversion Lenders immediately
prior to the Closing Date.

 

“Conversion Value” means, as to any Lender, the dollar amount set forth opposite
such Lender’s name on the Commitment Annex under the column “Conversion Value.”

 

7

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

 

“Converted Loans” means the loans incurred pursuant to Section 2.1(c) vis-a-vis
the exchange of a portion of the Senior Notes for Loans under this Agreement on
the Closing Date pursuant to the Exchange Agreement.

 

“Cortland” means Cortland Products Corp., a Delaware corporation.

 

“Credit Exposure” means any period of time during which any Loan or other
Obligation remains unpaid; provided, that no Credit Exposure shall be deemed to
exist solely due to the existence of contingent indemnification liability,
absent the assertion of a claim, or the known existence of a claim reasonably
likely to be asserted, with respect thereto.

 

“Credit Party” means any of Borrower and each Restricted Subsidiary of Borrower,
whether now existing or hereafter acquired or formed; and “Credit Parties” means
all such Persons, collectively.

 

“Debt” of a Person means at any date, without duplication, (i) all obligations
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all obligations
of such Person to pay the deferred purchase price of property or services,
except trade accounts payable, accrued expenses and deferred compensation and
other pension benefit and welfare expenses, in each case arising in the Ordinary
Course of Business and not overdue by more than 60 days, (iv) all Capital Leases
of such Person, (v) all non-contingent obligations of such Person to reimburse
any bank or other Person in respect of amounts paid under a letter of credit,
banker’s acceptance or similar instrument, (vi) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (vii) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise Debt of such Person (other than a
Lien described in clause (g) of Section 5.2), and (viii) all Debt of others
Guaranteed by such Person.   Without duplication of any of the foregoing, Debt
of Borrower shall include (x) any and all Loans and (y) any and all Senior
Notes, Permitted Pari Debt and Permitted First Lien Debt.

 

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

 

“Declined First Lien Prepayment” has the meaning set forth in Section 2.3(j).

 

“Declining Lender” has the meaning set forth in Section 2.3(e).

 

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

 

“Defensible Title” means, with respect to the assets of Borrower or any
Restricted Subsidiary (a) the title of Borrower or such Restricted Subsidiary to
such assets is free and clear of all Liens of any kind whatsoever (except
Permitted Liens), (b) with respect to the Mortgaged Properties, the title of
Borrower or such Restricted Subsidiary as is deducible from applicable public
records, and (c) with respect to the Mortgaged Properties, the representations
and warranties set forth in Section 3.20(a) are true and correct.

 

8

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

 

“Defined Period” has the meaning provided in Exhibit B-2.

 

“Designated Title Exceptions” has the meaning assigned to such term in
Section 3.20(a).

 

“Discharge of First Lien Obligations” shall have the meaning assigned thereto in
the First /Second Lien Intercreditor Agreement.

 

“Domestic Subsidiary” means a Restricted Subsidiary organized, incorporated or
otherwise formed under the laws of the United States or any state thereof.

 

“EBITDAX” has the meaning provided in Exhibit B-2 .

 

“Eligible Assignee” means (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund, and (iv) any other Person (other than a natural person) approved
by (A) Administrative Agent (at the direction of the Lead Lenders) and
(B) unless an Event of Default pursuant to Section 8.1(a), (f) or (g) has
occurred and is continuing, Borrower (such approval not to be unreasonably
withheld, and shall be deemed provided unless expressly withheld by Borrower
within five (5) Business Days of request therefor); provided that
notwithstanding the foregoing, Eligible Assignee shall not include Borrower or
any of Borrower’s Affiliates or Subsidiaries.

 

“Eligible Secured Swap Counterparty” means a counterparty to a Swap Contract
that is an “Eligible Swap Counterparty” (as defined in the First Lien Credit
Agreement).

 

“Eligible Swap Counterparties” means, collectively, Eligible Secured Swap
Counterparties and Eligible Unsecured Swap Counterparties.

 

“Eligible Unsecured Swap Counterparty” means in the case of any Swap Contract
the obligations under which are unsecured, any counterparty with an Investment
Grade Rating at the time such Swap Contract is entered into.

 

“Environmental Laws” means any and all Laws relating to the environment or the
effect of the environment on human health or to emissions, discharges or
releases of pollutants, contaminants, Hazardous Materials or wastes into the
environment, including ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, Hazardous
Materials or wastes or the clean up or other remediation thereof.

 

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

 

9

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

 

“Equity Offering” means, (i) any underwritten public offering of common stock of
the Borrower registered under the Securities Act of 1933 (other than on Form S-8
or any successor thereto) other than any issuance of securities under any
benefit plan of Borrower and (ii) any unregistered offering of common stock of
Borrower, so long as, at the time of the consummation thereof, the Borrower has
a class of common equity securities registered pursuant to Section 12(b) or
12(g) under the Securities Exchange Act of 1934, as amended.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with Borrower is under common control within the meaning of
Section 4001(a)(1) of ERISA or subsections (b), (c), (m), or (o) of Section 414
of the Code.  Any former ERISA Affiliate of Borrower shall continue to be
considered an ERISA Affiliate of Borrower within the meaning of this definition
with respect to the period such entity was an ERISA Affiliate of the Borrower
and with respect to liabilities arising after such period for which the Borrower
could be liable under the Code or ERISA.

 

“ERISA Event” means (a) any “reportable event” as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the thirty (30) day notice period is waived); (b) the failure by
the Borrower or any of its ERISA Affiliates to make any required contribution to
a Multiemployer Plan pursuant to Sections 431 or 432 of the Code; (c) the filing
pursuant to Section 412(c) of the Code or Section 303(c) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate or reorganize
any Plan or Plans or to appoint a trustee to administer any Plan; (f) the
incurrence by Borrower or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal of the Borrower or any ERISA
Affiliate from any Plan or Multiemployer Plan; (g) a lien has been imposed under
the Code or ERISA on the assets of the Borrower or any ERISA Affiliate under
Section 303(k) or 4068 of ERISA or 430(k) of the Code with respect to any Plan
maintained by Borrower or any ERISA Affiliate; (h) the receipt by Borrower or
any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from
Borrower or any ERISA Affiliate of any notice, concerning the imposition upon
Borrower or any ERISA Affiliate of Withdrawal Liability or a determination that
a Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
in “endangered” or “critical” status, or terminated within the meaning of
Section 431 or 432 of the Code or Sections 304 and 305 of ERISA; (i) the
occurrence of a non-exempt prohibited transaction with respect to any Plan
maintained or contributed to by any Borrower (within the meaning of Section 4975
of the Code or Section 406 of ERISA) which could reasonably be expected to
result in material liability to the Borrower; (j) the imposition of liability on
Borrower or any ERISA Affiliate pursuant to Section 4062(e) or 4069 of ERISA or
by reason of the application of Section 4212(c) of ERISA; (k) the occurrence of
an act or omission which could reasonably be expected to give rise to the
imposition on Borrower or any ERISA Affiliate of fines, penalties, taxes or
related charges under Chapter 43 of the Code or under Section 409,
Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Plan; or
(l) receipt from the IRS of notice of the failure of any Plan intended to be
qualified

 

10

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

 

under Section 401(a) of the Code to qualify under Section 401(a) of the Code, or
the failure of any trust forming part of any Plan to qualify for exemption from
taxation under Section 501(a) of the Code.

 

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

 

“Exchange Agreement” means the Exchange Agreement, dated as of October 22, 2015,
among the Lenders, the Borrower and the other parties thereto.

 

“Excluded Property” collectively, as defined in the Security Documents and
Collateral Documents.

 

“Excluded Property Leaseback” means any sale-leaseback of Excluded Property.

 

“Excluded Subsidiary” means (a) each Immaterial Subsidiary, for so long as any
such Subsidiary constitutes an Immaterial Subsidiary pursuant to the terms
hereof, (b) each Domestic Subsidiary that is prohibited by any applicable
contractual requirement (not entered into in contemplation of such Subsidiary
becoming a Restricted Subsidiary and not involving a contractual arrangement
with any Credit Party, Subsidiary or Affiliate thereof) or Requirement of Law
from guaranteeing or granting Liens to secure the Obligations on the Closing
Date or at the time such Subsidiary becomes a Restricted Subsidiary (and for so
long as such restriction or any replacement or renewal thereof is in effect and
was not entered into in contemplation of such Subsidiary becoming a Restricted
Subsidiary) or that would require consent, approval, license or authorization of
a Governmental Authority to guarantee or grant Liens to secure the Obligations
on the Closing Date or at the time such Subsidiary becomes a Restricted
Subsidiary (unless such consent, approval, license or authorization has been
received), (c) any Foreign Subsidiary, (d) any Domestic Subsidiary that is (i) a
FSHCO or (ii) owned directly or indirectly by a CFC, (e) any other Domestic
Subsidiary with respect to which, (x) in the reasonable judgment of the Lead
Lenders and Borrower, the cost or other consequences of providing a Guarantee of
or granting Liens to secure the Obligations shall be excessive in view of the
benefits to be obtained by the Lenders therefrom or (y) providing such a
Guarantee or granting such Liens would result in material adverse tax
consequences to Borrower or any of the Borrower’s Subsidiaries as reasonably
determined by Borrower in consultation with the Lead Lenders (such consultation
limited to the tax consequences of such Guarantee or Liens) and (g) each
Unrestricted Subsidiary.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient, (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in a Loan pursuant to a law in
effect on the date on which (i) such Lender acquires such interest in the Loan
or (ii) such Lender changes its lending office, except in each case to the
extent that,

 

11

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

 

pursuant to Section 2.13(a), amounts with respect to such Taxes were payable
either to such Lender’s assignor immediately before such Lender became a party
hereto or to such Lender immediately before it changed its lending office,
(c) Taxes attributable to such Recipient’s failure to comply with
Section 2.13(f), and (d) any U.S. withholding Taxes imposed under FATCA.

 

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

 

“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) 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 and (ii) if no such rate is so published on such
next preceding Business Day, the Federal Funds Rate for such day shall be the
average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
quoted to U.S. national banks selected by Administrative Agent on such day on
such transactions as determined by Administrative Agent.

 

“Fee Letter” means the fee letter, dated as of October 22, 2015, between
Borrower and Cortland, as amended from time to time.

 

“Financing Documents” means this Agreement, any Notes, the Security Documents,
the Collateral Documents, the Fee Letter, the Intercreditor Agreements and any
subordination or intercreditor agreement pursuant to which any Debt and/or any
Liens securing such Debt is subordinated to all or any portion of the
Obligations, and all other documents, instruments and agreements (other than any
Swap Contract) contemplated herein or thereby and heretofore executed, executed
concurrently herewith or executed at any time and from time to time hereafter,
as any or all of the same may be amended, supplemented, restated or otherwise
modified from time to time.

 

“First Call Date” has the meaning set forth in Section 2.3(g).

 

“First Lien Agent” means Wilmington Trust, National Association, as
administrative agent under the First Lien Credit Agreement and any successor
administrative agent under the First Lien Credit Agreement.

 

“First Lien Credit Agreement” means that certain Credit Agreement dated as of
May 22, 2015, among the Borrower, as borrower, the lenders party thereto and the
First Lien Agent, as amended, restated, amended and restated, supplemented or
otherwise modified,

 

12

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

 

refinanced or replaced from time to time to the extent permitted by the
First/Second Lien Intercreditor Agreement.

 

“First Lien Credit Agreement Debt” means the “Obligations” (as defined in the
First Lien Credit Agreement).

 

“First Lien Credit Agreement Loan Documents” means the “Financing Documents” (as
defined in the First Lien Credit Agreement).

 

“First Lien Debt Cap” means, at any time, an amount equal to the sum of:

 

(a)                     $250,000,000; plus

 

(b)                     [reserved]

 

(c)                      an additional amount, the sum of which, plus the
amounts described in clause (d) hereof (solely in respect of interest that is
capitalized as principal and any additional make-whole amount under the First
Lien Credit Agreement Loan Documents that is otherwise in excess of the
make-whole amount under the First Lien Credit Agreement Loan Documents in effect
as of the date hereof), does not exceed as of the date of incurrence thereof
$25,000,000, provided that after giving effect to the incurrence of such amount,
(i) the ratio of PDP PV-10 Value to Consolidated Secured Total Debt as of such
date shall be greater than 1.0:1.0 and (ii) the Consolidated Secured Total
Leverage Ratio shall be less than 4.0:1.0 and Borrower shall have delivered a
certificate executed by a Responsible Officer to the Administrative Agent to
such effect; plus

 

(d)                     all accrued and unpaid interest (including interest that
is capitalized as principal) and repayment premiums, expenses, fees and other
similar amounts arising under the relevant First Lien Credit Agreement Loan
Documents and all accrued and unpaid make-whole amounts in the amounts under the
First Lien Credit Agreement in effect as of the date hereof; minus

 

(e)                      the sum of (i) the amount of all actual prepayments and
repayments applied to any term loans constituting Debt incurred under the First
Lien Credit Agreement (except to the extent that such prepayment or repayment
results in a corresponding increase in the Delayed Draw Commitment (as defined
in the First Lien Credit Agreement) in accordance with the terms of the First
Lien Credit Agreement) or made in connection with any Permitted Additional First
Lien Debt and (ii) the amount of all repayment and prepayments of any revolving
loans or letters of credit constituting Debt incurred in connection with any
Permitted Additional First Lien Debt or Delayed Draw Commitment (as defined in
the First Lien Credit Agreement), in each case as to this clause (ii) to the
extent accompanied by a corresponding reduction in the applicable commitment
amount (excluding reductions in sub-facility commitments not accompanied by a
corresponding reduction in the facility commitment amount and any such repayment
or reduction occurring by reason of a refinancing in accordance with this
Agreement of the Permitted Additional First Lien Debt or

 

13

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

 

the Delayed Draw Commitment (as defined in the First Lien Credit Agreement) in
an amount up to the aggregate principal amount of term loans, notes and/or
revolving commitments existing prior to such refinancing); provided, no
prepayment or repayment obligations under the First Lien Credit Agreement or any
document governing Permitted Additional First Lien Debt shall be imputed by this
definition or otherwise.

 

“First-tier Foreign Subsidiary” means a Foreign Subsidiary the Capital Stock of
which is owned directly by the Borrower or by a Domestic Subsidiary of the
Borrower (other than a Domestic Subsidiary that is owned, directly or
indirectly, by a CFC).

 

“First/Second Lien Intercreditor Agreement” means the Intercreditor Agreement,
dated as of the date hereof, among the Administrative Agent, the First Lien
Agent, the Borrower and the other Credit Parties party thereto, as the same may
be amended, modified or supplemented from time to time.

 

“Fiscal Year” means a fiscal year of Borrower, ending on December 31 of each
calendar year.

 

“Foreign Lender” means any Lender that is not a “United States person” within
the meaning of Section 7701(a)(30) of the Code.

 

“Foreign Subsidiary” means any Restricted Subsidiary other than a Domestic
Subsidiary.

 

“FSHCO” means any Domestic Subsidiary (including a disregarded entity for U.S.
federal income tax purposes) that owns no material assets (directly or through
Subsidiaries) other than Capital Stock or Debt of one or more Foreign
Subsidiaries that are CFCs.

 

“GAAP” means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the date
of determination.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation or other Person owned or controlled
(through stock or capital ownership or otherwise) by any of the foregoing,
whether domestic or foreign.

 

“Government Official” has the meaning set forth in Section 5.16(b).

 

“Guarantee” by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase

 

14

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

 

or payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take or pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include (i) endorsements for
collection or deposit in the Ordinary Course of Business or (ii) any Lien
described in item (m) of the definition of “Permitted Encumbrances”.  The term
“Guarantee” used as a verb has a corresponding meaning.

 

“Guarantor” means (i) initially, Warren Resources of California, Inc., a
California corporation, Warren E&P, Inc., a New Mexico corporation, and Warren
Marcellus LLC, a Delaware limited liability company, which as of the date hereof
are the only Material Subsidiaries of the Borrower other than any Unrestricted
Subsidiaries as of the date hereof and (ii) each other Restricted Subsidiary
that hereafter executes and delivers to Administrative Agent and the Lenders a
Guaranty, in each case until such Person ceases to be a Guarantor in accordance
with the terms hereof.

 

“Guaranty” means the Guaranty, dated as of the date hereof, among the Guarantors
and the Administrative Agent or, as the context otherwise requires, a joinder to
such Guaranty executed and delivered after the Closing Date.

 

“Hazardous Materials” means (i) any “hazardous substance” as defined in CERCLA,
(ii) any “hazardous waste” as defined by the Resource Conservation and Recovery
Act, including all amendments thereto and all regulations thereunder,
(iii) asbestos, (iv) polychlorinated biphenyls, (v) petroleum, its derivatives,
by products and other hydrocarbons, (vi) mold and (vii) any other pollutant,
toxic, radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.

 

“Hazardous Materials Contamination” means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,
soil, groundwater, air or other elements on or of the relevant property by
Hazardous Materials, or any derivatives thereof, or on or of any other property
as a result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.

 

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

 

“Hydrocarbon Interests” means all of Borrower’s and each Guarantor’s rights,
titles, interests and estates in and to oil and gas leases, oil, gas and mineral
leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests,
overriding royalty and royalty interests, net profit interests and production
payment interests, including any reserved or residual interest of similar
nature, in and under the Oil and Gas Properties that are subject to Lenders
Liens.

 

“Immaterial Subsidiary” means any Subsidiary that is not a Material Subsidiary.

 

15

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

 

“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 the
Borrower under any Loan or Financing Document and (b) to the extent not
otherwise described in clause (a), Other Taxes.

 

“Indemnitees” has the meaning set forth in Section 9.2.

 

“Initial Lenders” means the Lenders party hereto on the Closing Date.

 

“Initial Reserve Report” means the reserve report dated as of December 31, 2014
prepared by Netherland Sewell & Associates Inc., an independent petroleum
engineer, concerning the Oil and Gas Properties, a copy of which has been
delivered to the Administrative Agent for delivery to each Public Lender.

 

“Insolvency Event” shall mean any circumstance described in Sections 8.1(f) or
(g).

 

“Intellectual Property” means, with respect to any Person, all patents,
trademarks, trade names, trade styles, trade dress, service marks, logos and
other business identifiers, copyrights, technology, know-how and processes,
computer hardware and software and all applications and licenses therefor, used
in or necessary for the conduct of business by such Person.

 

“Intercreditor Agreements” means, as applicable, (a) the Intercreditor Agreement
in effect from time to time among the First Lien Agent and one or more of the
Eligible Secured Swap Counterparties substantially in the form of Exhibit D of
the First Lien Credit Agreement, (b) the Pari Passu Intercreditor Agreement and
(c) the First/Second Lien Intercreditor Agreement.

 

“Interest Rate” has the meaning set forth in Section 2.7(a).

 

“Investment” means any investment in any Person, whether by means of acquiring
(whether for cash, property, services, Capital Stock or otherwise), making or
holding Debt securities, Capital Stock, capital contributions, loans, time
deposits, advances, Guarantees or otherwise.  The amount of any Investment shall
be the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect thereto.

 

“Investment Grade Rating” means a rating equal to or higher than:

 

(a)           Baa3 (or the equivalent) with a stable or better outlook by
Moody’s; and

 

(b)           BBB- (or the equivalent) with a stable or better outlook by S&P,

 

or, if either such entity ceases to make a rating publicly available, the
equivalent investment grade credit rating from any other rating agency.

 

16

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

 

“Junior Lien” means a Lien, junior to the Liens incurred pursuant to
Sections 5.2(a), 5.2(h)(i) and 5.2(h)(ii), granted by the Borrower or any
Guarantor in favor of holders of Junior Lien Debt (or any collateral trustee or
representative in connection therewith), at any time, upon any property of
Borrower or any Guarantor to secure Junior Lien Obligations.

 

“Junior Lien Collateral Agent” means the collateral trustee or other
representative of lenders or holders of Junior Lien Obligations designated
pursuant to the terms of the Junior Lien Documents.

 

“Junior Lien Debt” means any Debt (other than intercompany Debt owing to
Borrower or its Subsidiaries) of Borrower or any Guarantor that is permitted to
be incurred pursuant to Section 5.1(q) that is secured by a Junior Lien and so
secured under each applicable security document; provided that, in the case of
any Debt referred to in this definition:

 

(a)           on or before the date on which such Debt is incurred by Borrower
or any Guarantor, such Debt is designated by Borrower, in an officers’
certificate delivered to the Junior Lien Collateral Agent, the Administrative
Agent and Lead Lenders as “Junior Lien Debt”; and

 

(b)           the collateral agent or other representative with respect to such
Debt, the First Lien Agent, the Administrative Agent and the Junior Lien
Collateral Agent have duly executed and delivered an intercreditor agreement
(which may be a new intercreditor agreement or an amendment to, or an amendment
and restatement of, the First/Second Lien Intercreditor Agreement), which
intercreditor agreement either is (i) in form and substance reasonably
acceptable to the Lead Lenders or (ii) an Acceptable Junior Lien Intercreditor
Agreement.

 

“Junior Lien Documents” means, collectively, any indenture, credit agreement or
other agreement or instrument pursuant to which Junior Lien Debt is incurred and
the documents pursuant to which the Junior Liens securing the Junior Lien
Obligations are granted.

 

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

 

“Laws” means any and all federal, state, local and foreign statutes, laws,
judicial decisions, regulations, guidances, guidelines, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, governmental agreements and governmental restrictions,
whether now or hereafter in effect.

 

“Lead Lenders” means the Required Lenders.

 

“Lender” has the meaning specified in the introductory paragraph hereto
(including, for the avoidance of doubt, any Conversion Lender and any New Term
Loan Lender) and including each Eligible Assignee that becomes a party hereto
pursuant to Section 11.6 and the respective successors of all of the foregoing,
and “Lenders” means all of the foregoing.

 

17

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

 

“Lenders Liens” means the Liens purported to be granted in the Collateral in
favor of Administrative Agent for the ratable benefit of the Secured Parties or
directly for the benefit of any Secured Party pursuant to the Financing
Documents.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest, in
respect of such asset.  For the purposes of this Agreement and the other
Financing Documents, Borrower or any Subsidiary shall be deemed to own subject
to a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset (other than an asset leased
pursuant to an Excluded Property Leaseback).

 

“Litigation” means any action, suit or proceeding before any court, mediator,
arbitrator or Governmental Authority.

 

“Loan Exposure” means, with respect to any Lender on any date of determination,
the percentage equal to the aggregate outstanding principal amount of such
Lender’s Loans on such date divided by the aggregate Loans on such date.

 

“Loans” means the Converted Loans and the New Term Loans.

 

“Make-Whole Amount” has the meaning set forth in Section 2.3(g).

 

“Margin Stock” has the meaning assigned thereto in Regulation U of the Federal
Reserve Board.

 

“Material Adverse Effect” means, with respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (i) the business,
assets, properties, liabilities (actual or contingent), operations, or financial
condition of Borrower and its Subsidiaries taken as a whole, (ii) the rights and
remedies of Administrative Agent or Lenders under any Financing Document, or the
ability of any Credit Party to perform any of its obligations under any
Financing Document to which it is a party, (iii) the legality, validity or
enforceability of any Financing Document, or (iv) the existence, perfection or
priority of any security interest granted in any Financing Document.

 

“Material Subsidiary” means, at any date of determination, each Restricted
Subsidiary of Borrower (a) whose assets (when combined with the assets of such
Restricted Subsidiary’s Subsidiaries, after eliminating intercompany
obligations) at the last day of the most recently ended for fiscal quarter
period for which financial statements are available were equal to or greater
than 2.5% of the consolidated assets of Borrower and the Restricted Subsidiaries
at such date or (b) whose revenues (when combined with the revenues of such
Subsidiary’s Subsidiaries, after eliminating intercompany obligations) during
such period were equal to or greater than 2.5% of the consolidated revenues of
Borrower and the Restricted Subsidiaries for such period, in each case
determined in accordance with GAAP; provided that if, at any time and

 

18

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

 

from time to time after the Closing Date, Restricted Subsidiaries that are not
Material Subsidiaries have, in the aggregate, (i) (when combined with the assets
of such Restricted Subsidiary’s Subsidiaries, after eliminating intercompany
obligations) at the last day of the most recently ended for fiscal quarter
period for which financial statements are available equal to or greater than
5.0% of the consolidated assets of Borrower and the Restricted Subsidiaries at
such date or (ii) revenues (when combined with the revenues of such Subsidiary’s
Subsidiaries, after eliminating intercompany obligations) during such period
equal to or greater than 5.0% of the consolidated revenues of Borrower and the
Restricted Subsidiaries for such period, in each case determined in accordance
with GAAP, then Borrower shall, on the date on which financial statements for
such fiscal period are delivered pursuant to this Agreement, designate in
writing to the Administrative Agent one or more of such Restricted Subsidiaries
as “Material Subsidiaries”.

 

“Maturity Date” means November 1, 2020 (or if such day is not a Business Day,
the next preceding Business Day).

 

“Maximum Lawful Rate” has the meaning set forth in Section 2.12(b).

 

“Minority Interest Restriction” has the meaning set forth in Section 2.3(f).

 

“Mortgage Properties” means the Oil and Gas Properties described in one or more
duly executed, delivered and filed Mortgages evidencing a second Lien in favor
of Administrative Agent for the benefit of the Secured Parties and subject only
to the Permitted Liens.

 

“Mortgages” means each Second Lien Deed of Trust, Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement and Second Lien Open-End
Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement
executed by Borrower or any Guarantor, which by grant or assignment, create in
favor of Administrative Agent, for the ratable benefit of the Secured Parties,
as it may be amended or modified and in effect from time to time.

 

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

 

“Net Cash Proceeds” means, with respect to any transaction or event, an amount
equal to the cash proceeds received by Borrower or any Subsidiary from or in
respect of such transaction or event (including proceeds of any non-cash
proceeds of such transaction), less (i) any underwriting discounts and
out-of-pocket expenses paid to a Person that are reasonably incurred by Borrower
or such Subsidiary in connection therewith and (ii) in the case of an Asset
Disposition, the amount of any Debt secured by a Lien on the related asset and
discharged from the proceeds of such Asset Disposition and any taxes paid or
reasonably estimated by Borrower or the applicable Subsidiary to be payable by
such Person in respect of such Asset Disposition (provided, that if the actual
amount of taxes paid is less than the estimated amount, the difference shall
immediately constitute Net Cash Proceeds).

 

“New Term Loan Commitment” means, as to any Lender, the dollar amount set forth
opposite such Lender’s name on the Commitment Annex under the column “New Term
Loan Commitment.”

 

19

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

 

“New Term Loan Lenders” means, (a) on the Closing Date, each of the Lenders
listed on the Commitment Annex under the column “New Term Loan Lender” and
(b) after the Closing Date, any existing New Term Loan Lender pursuant to
clause (a) above and an Eligible Assignee to whom an existing New Term Loan
Lender assigns all or a portion of its New Term Loans pursuant to the terms of
an effective Assignment Agreement.

 

“New Term Loans” means the loans made pursuant to Section 2.1(b) in accordance
with this Agreement.

 

“Non-Recourse Debt” means Debt of an Unrestricted Subsidiary at any time
outstanding for which no Credit Party is liable for payment, and which is not
secured by any property of any Credit Party, other than the Capital Stock of
such Unrestricted Subsidiary.

 

“Note” means a promissory note made by Borrower in favor of a Lender evidencing
Loans, as the case may be, made by such Lender, substantially in the form of
Exhibit F.

 

“Notice of Borrowing” means a notice of a Responsible Officer, appropriately
completed and substantially in the form of Exhibit C hereto.

 

“Notice of Prepayment” has the meaning set forth in Section 2.3(d).

 

“Obligations” means all obligations, liabilities and indebtedness (monetary
(including post-petition interest, whether or not allowed) or otherwise) of each
Credit Party under this Agreement and any other Financing Document, including
any make-whole amounts (including the Make-Whole Amount), any repayment or
prepayment premiums (including the Repayment Premium) and any accrued and unpaid
interest (including PIK Interest), in each case howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due.

 

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

 

“Oil and Gas Properties” means all oil, gas and/or mineral leases, oil, gas or
mineral properties, mineral servitudes and/or mineral rights of any kind
(including, without limitation, mineral fee interests, lease interests, farmout
interests, overriding royalty and royalty interests, net profits interests, oil
payment interests, production payment interests and other types of mineral
interests), and all oil and gas gathering, treating, storage, processing and
handling assets.

 

“Ordinary Course of Business” means, in respect of any transaction involving any
Credit Party, the ordinary course of such Credit Party’s business, as conducted
by such Credit Party in accordance with past practices or which is customary in
the oil and gas business.

 

“Organizational Documents” means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity)

 

20

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

 

and which relate to the internal governance of such Person (such as by-laws, a
partnership agreement or an operating, limited liability company or members
agreement).

 

“Other Connection Taxes” means, with respect to any Lender, Taxes imposed as a
result of a present or former connection between such Lender and the
jurisdiction imposing such Tax (other than connections arising from such Lender
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 Financing Document,
or sold or assigned an interest in any Loan or Financing Document).

 

“Other Taxes” means all present or future stamp, documentary, intangible,
recording, filing taxes or any other similar taxes arising from any payment made
hereunder or under any other Financing Document or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Financing Document, except any such Taxes that are Other Connection Taxes
imposed with respect to an assignment.

 

“Pari Passu Intercreditor Agreement” means any intercreditor agreement and/or
collateral trust agreement among the Credit Parties, the Administrative Agent
and an agent or a trustee (acting on behalf of the holders of any Debt that is
secured by the Collateral on a pari passu basis with the Liens securing the
Obligations) reflecting the pari passu status of the Liens securing such Debt,
in each case in form and substance reasonably satisfactory to the Administrative
Agent and the Lead Lenders.

 

“Participant” has the meaning set forth in Section 11.6(b).

 

“Participant Register” has the meaning set forth in Section 11.6(b).

 

“Payment Account” means the account designated in writing by Administrative
Agent to Borrower from time to time hereof into which all payments by or on
behalf of Borrower to Administrative Agent under the Financing Documents shall
be made.

 

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

 

“PDP PV-10 Value” means, as of any date of determination, the PV-10 Value of the
Borrower’s and its Subsidiaries collective interests in Proved Developed
Producing Reserves described in the most recent Reserve Report delivered
hereunder.

 

“Permits” has the meaning set forth in Section 3.1.

 

“Permitted Additional First Lien Debt” means the “Permitted Pari Debt” as
defined in the First Lien Credit Agreement.

 

“Permitted Contest” means a contest maintained in good faith by appropriate
proceedings promptly instituted and diligently conducted and with respect to
which such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; provided that compliance with the
obligation that is the subject of such contest is effectively stayed during such
challenge.

 

21

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

 

“Permitted Encumbrances” means any or all of the following:

 

(a)                                 Liens imposed by law for taxes, assessments
or other governmental charges that are not yet due or are being contested in
compliance with Section 4.2;

 

(b)                                 Liens of landlords, vendors, carriers,
warehousemen, mechanics, materialmen, repairmen and other like Liens or charges
imposed by law, or otherwise, arising in the Ordinary Course of Business for
amounts not yet delinquent (including any amounts being withheld) or securing
obligations that are not overdue by more than ninety (90) days or are being
contested in compliance with Section 4.2;

 

(c)                                  pledges and deposits made in the Ordinary
Course of Business in compliance with workers’ compensation, unemployment
insurance and other social security laws or regulations;

 

(d)                                 deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
Ordinary Course of Business;

 

(e)                                  judgment liens in respect of judgments that
do not constitute an Event of Default under clause (i) of Section 8.1;

 

(f)                                   easements, zoning or other restrictions,
rights-of-way, covenants, conditions, servitudes, permits, authorizations,
surface and use leases and agreements, rights, obligations and similar
encumbrances on real or personal property imposed by law or arising in the
Ordinary Course of Business that:  (i) are of record, (ii) are apparent from a
physical inspection of the affected properties, (iii) Borrower took subject to,
(iv) do not secure any monetary obligations, (v) do not materially detract from
the value of the affected property, and (vi) do not interfere with the ordinary
conduct of business of Borrower or any Subsidiary;

 

(g)                                  liens in favor of co-owner working interest
owners under joint operating agreements;

 

(h)                                 inchoate liens arising under ERISA to secure
the contingent liabilities, if any, permitted by this Agreement (other than any
lien imposed pursuant to Section 430(k) of the Code or Sections 303(k) or 4068
of ERISA);

 

(i)                                     deposits, encumbrances or pledges to
secure payments of workers compensation insurance and related payments, public
liability, unemployment and other insurance, old-age pensions of other social
security obligations, or the performance of bids, tenders, leases, contracts
(other than contracts for the payment of money), public or statutory
obligations, surety, stay or appeal bonds, or other similar obligations arising
in the Ordinary Course of Business;

 

(j)                                    any Designated Title Exceptions which are
incurred in the Ordinary Course of Business; and

 

22

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

 

(k)                                 encumbrances arising out of judgments or
awards in respect of which Borrower shall in good faith be prosecuting an appeal
or proceedings for review; provided that Borrower shall have set aside on its
books adequate reserves, in accordance with GAAP, with respect to such judgment
or award;

 

provided that the term “Permitted Encumbrances” shall not include any Lien
securing Debt (other than Bonds).

 

“Permitted First Lien Debt” shall mean debt incurred by the Credit Parties
pursuant to Section 5.1(p).

 

“Permitted Investments” means:

 

(a)                                 direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in each
case maturing within one year from the date of acquisition thereof;

 

(b)                                 investments in commercial paper maturing
within 180 days after the date of acquisition thereof and having, at such date
of acquisition, one (1) of the two (2) highest credit rating obtainable from S&P
or from Moody’s;

 

(c)                                  investments in certificates of deposit,
banker’s acceptances and time deposits maturing within 365 days after the date
of acquisition thereof that are issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of any
commercial bank organized under the laws of the United States of America or any
State thereof which has a combined capital and surplus and undivided profits of
not less than $250,000,000;

 

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

 

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

 

“Permitted Liens” means Liens permitted pursuant to Section 5.2.

 

“Permitted Pari Debt” shall mean any Debt incurred by the Borrower in the form
of one or more tranches of secured loans; provided that (a) the final maturity
date of any such Debt shall be no earlier than the Maturity Date, (b) the
Weighted Average Life to Maturity of such Debt shall be no shorter than the
Weighted Average Life to Maturity of the Loans, (c)(i) such Debt shall be
secured by the Collateral on a pari passu basis (but without regard to the
control of remedies) with the Obligations and shall not be secured by any
property or assets of the Borrower or any Subsidiary other than Collateral, and
a “senior representative” acting on

 

23

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

 

behalf of the holders of such Debt shall have become party to, or otherwise
subject to, the provisions of the Pari Passu Intercreditor Agreement, (ii) such
Debt shall be subject to the same Collateral Documents and Security Documents as
used in connection with this Agreement and (iii) such Debt shall be pari passu
in right of payment with the Obligations, (d) all of the obligors or guarantors
with respect to such Debt shall be a Person that is a Credit Party, (e) the
proceeds of such Debt shall not be used to refinance, refund or replace any
other Debt except as permitted by Section 5.4, and (f)(i) the terms and
conditions of such Debt, taken as a whole, (A) shall be substantially the same
as the terms and conditions of this Agreement or (B) are not more restrictive to
Borrower and the Restricted Subsidiaries than those set forth in this Agreement
as determined in good faith by the board of directors of Borrower and certified
in good faith to the Administrative Agent and Lead Lenders in a certificate of
the Chief Financial Officer of Borrower prior to or at the time of the
incurrence of such Debt, which certificate shall include a copy of the board of
directors’ resolutions as to such determination and a reasonably detailed
description of the material terms and conditions of such Debt or drafts of the
documentation relating thereto or (C) shall be reasonably acceptable to the
Administrative Agent and the Lead Lenders, except for covenants or other
provisions applicable only to periods after the Maturity Date, and (ii) such
Debt shall not (A) contain any maintenance or financial covenants that are not
in this Agreement, (B) have any maintenance or financial covenant commencing
earlier than the date that is eighteen (18) months after the Closing Date, or
(C) be entitled to share on a greater than pro rata basis in any mandatory
prepayments required hereunder; provided, however, if the All-in Yield on such
Debt exceeds the initial All-in Yield for the Loans then outstanding by more
than 50 basis points (the amount of such excess above 50 basis points being
referred to herein as the “Yield Differential”), then the Interest Rate for the
Loans shall each automatically be increased by the Yield Differential, effective
upon the incurrence of such Debt (provided that if the Debt includes an interest
rate floor greater than the applicable interest rate floor under the Loans then
outstanding, such differential between interest rate floors shall only be
included in the calculation of All-in Yield to the extent such increase in
interest rate floors would cause an increase in the interest rate then in
effect.

 

“Person” means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any Governmental Authority.

 

“PIK Election” has the meaning set forth in Section 2.7(a).

 

“PIK Interest” has the meaning set forth in Section 2.7(a).

 

“PIK Payment” has the meaning set forth in Section 2.7(a).

 

“Plan” means any employee pension benefit plan (as defined in Section 3(2) of
ERISA, but excluding any Multiemployer Plan) subject to Title IV of ERISA in
respect of which the Borrower or any ERISA Affiliate is (or, if such Plan were
terminated, would under Section 4062 or Section 4069 of ERISA be deemed to be)
an “employer” as defined in Section 3(5) of ERISA.

 

“Platform” has the meaning set forth in Section 11.3(c).

 

24

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

 

“Pledge Agreement” means the Pledge Agreement, dated as of the date hereof,
among the Credit Parties and the Administrative Agent or, as the context
otherwise requires, a joinder to such Pledge Agreement executed and delivered
after the Closing Date.

 

“Production Proceeds” has the meaning set forth in Section 4.10(f).

 

“Projected Oil and Gas Production” means the projected production of oil or gas
(measured by volume unit or BTU equivalent, not sales price) for the term of any
Swap Contract or for a particular month, as applicable, from the interests in
Oil and Gas Properties owned by any Credit Party which are located in or
offshore of the United States to the extent then categorized as Proved Developed
Producing Reserves, as such production is projected in the most recent report
delivered pursuant to Section 4.1(i) or (j), after deducting projected
production from any properties or interests sold or under contract for sale 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 reports meeting the requirements of such
Section 4.1(i) or (j) and otherwise are reasonably satisfactory to Lead Lenders.

 

“Pro Rata Share” means with respect to any Lender, such Lender’s Loan Exposure;
provided that if the Loans have been paid in full, the Pro Rata Share of a
Lender shall be such Lender’s Loan Exposure immediately before such Loans were
paid in full.

 

“Proved Reserves” means Proved Reserves as defined in definitions for Oil and
Gas Reserves promulgated by the Society of Petroleum Engineers (or any generally
recognized successor) as in effect from time to time and “Proved Developed
Producing Reserves” means Proved Reserves, which are categorized as both
“Developed” and “Producing” in such definitions.

 

“Public Lender” has the meaning set forth in Section 11.3(c).

 

“Publicly Disclosed” means disclosed by the Borrower in a filing with the United
States Securities and Exchange Commission.

 

“PV-10 Value” means the net present value, discounted at 10% per annum, of the
future net revenues expected to accrue to Borrower and its Subsidiaries’
collective interests in Proved Developed Producing Reserves expected to be
produced from Oil and Gas Properties during the remaining expected economic
lives of such reserves.  Each calculation of such expected future net revenues
shall be made in accordance with the then existing standards of the Society of
Petroleum Engineers (or any generally recognized successor), provided that in
any event (a) 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, (b) appropriate adjustments shall
be made for hedging operations, provided that Swap Contracts with non-Investment
Grade counterparties shall not be taken into account to the extent that such
Swap Contracts improve the position of or otherwise benefit Borrower or any of
its Subsidiaries and (c) the pricing assumptions used in determining PV-10 Value
for any particular reserves shall be:  (i) for natural gas, the quotation for
deliveries of natural gas for each such year from the New York Mercantile
Exchange for Henry Hub, provided that with respect to

 

25

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

 

quotations for calendar years after the third (3rd) calendar year, the quotation
for the third (3rd) calendar year shall be applied, (ii) for crude oil, the
quotation for deliveries of West Texas Intermediate crude oil for each such
calendar year from the New York Mercantile Exchange for Cushing, Oklahoma,
provided that with respect to quotations for calendar years after the
third (3rd) calendar year, the quotation for the third (3rd) calendar year shall
be applied and (iii) for natural gas liquids, the quotation for deliveries of
natural gas liquids for each such calendar year, provided that with respect to
quotations for calendar years after the third (3rd) calendar year, the quotation
for the third (3rd) calendar year shall be applied; provided that future net
revenues calculated using the pricing assumptions set forth in this
clause (c) shall be further adjusted to account for the projected average basis
differential for the periods utilized for such pricing assumptions based upon
market based quotations reasonably determined by Borrower, with such supporting
quotations or data as may be reasonably acceptable to the Lead Lenders.

 

“Qualified Properties” means with reference to any transaction involving the
amount of the Net Cash Proceeds from an Asset Disposition of any property or
assets, investments (including capital expenditures) made by Borrower or a
Restricted Subsidiary which (a) qualify under the First Lien Credit Agreement as
a reinvestment so as to not require a prepayment of Permitted First Lien Debt or
Permitted Additional First Lien Debt with reference to such Net Cash Proceeds
and (b) qualify as “Additional Asset” under the Senior Notes Indenture so as to
not require an offer to purchase Senior Notes.

 

“Recipient” means (a) the Administrative Agent, (b) any Lender, and (c) any
other recipient of any payment to be made by or on account of any obligation of
the Borrower hereunder or under any other Financing Document.

 

“Refinancing Indebtedness” means, with respect to any Person, any replacement,
refinancing, refunding, renewal or extension of any Debt of such Person;
provided that:

 

(a)           the principal amount (or accreted value, if applicable) thereof
does not exceed the principal amount (or accreted value, if applicable) of the
Debt so replaced, refinanced, refunded, renewed or extended except by an amount
equal to unpaid accrued interest thereon in connection with such replacement,
refinancing, refunding, renewal or extension and by an amount equal to any
existing commitments unutilized thereunder;

 

(b)           such replacement, refinancing, refunding, renewal or extension has
at the time incurred a final maturity date equal to or later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Debt being modified,
replaced, refinanced, refunded, renewed or extended; and

 

(c)           if such Debt being replaced, refinanced, refunded, renewed or
extended is junior or otherwise subordinated or pari passu in right of payment
or security to the Obligations, such replacement, refinancing, refunding,
renewal or extension is junior or otherwise subordinated or pari passu in right
of payment or security to the Obligations on terms not materially less favorable
to the Lenders (taken as a whole) than those contained

 

26

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

 

in the documentation governing the Debt being replaced, refinanced, refunded,
renewed or extended.

 

“Register” has the meaning set forth in Section 2.11.

 

“Rejection Notice” has the meaning set forth in Section 2.3(e).

 

“Related Indemnified Person” has the meaning set forth in Section 9.2.

 

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

 

“Repayment Premium” has the meaning set forth in Section 2.3(h).

 

“Required Lenders” means at any time Lenders holding greater than fifty percent
(50%) of the then aggregate outstanding principal balance of the Loans.

 

“Requirement of Law” means, as to any Person, any law, treaty, rule, regulation,
statute, order, ordinance, decree, judgment, consent decree, writ, injunction,
settlement agreement or governmental requirement enacted, promulgated or imposed
or entered into or agreed by any Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or assets or to which such
Person or any of its property or assets is subject.

 

“Reserve Report” means the report regarding the Proved Reserves of the Credit
Parties provided pursuant to Section 4.1(i) or (j); provided, however, in
connection with any acquisition of Oil and Gas Properties to be included by
Borrower in the determination of PDP PV-10 Value effective upon such
acquisition, “Reserve Report” shall also include a reserve report with respect
to such Oil and Gas Properties delivered by Borrower to Administrative Agent not
less than 30 days prior to such acquisition, meeting the requirements of
Section 4.1(i) with an effective date no earlier than 150 days prior to the date
proposed for the consummation of such acquisition (with adjustments reflected in
a report by Borrower reflecting the same effective date as the effective date of
such acquisition), which shall be treated, upon the consummation of the
acquisition, as an addition to the most recent Reserve Report provided pursuant
to Section 4.1(i) or (j), as applicable.

 

“Reserve Documents” has the meaning given in Section 4.1(k).

 

“Responsible Officer” means any of the Chairman of the Board, Chief Executive
Officer, President, Chief Financial Officer, Treasurer, or any other officer of
Borrower or the Guarantor acceptable to Lead Lenders, notice of which has been
received by the Administrative Agent.

 

“Restricted Payment” means as to any Person (i) any dividend or other
distribution (whether in cash, Capital Stock or other property) on any equity
interest in such Person (except those payable solely in Capital Stock of the
same class), (ii) any payment by such Person on account of (A) the purchase,
redemption, retirement, defeasance, surrender, cancellation, termination or
acquisition of any Capital Stock in such Person or any claim

 

27

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

 

respecting the purchase or sale of any equity interest in such Person or (B) any
option, warrant or other right to acquire any Capital Stock in such Person or
(iii) any optional or voluntary payment, purchase, redemption, retirement,
defeasance, surrender, cancellation, termination or acquisition of the Senior
Notes or any other unsecured Debt (including any Refinancing Indebtedness in
respect thereof), any Permitted Pari Debt (including any Refinancing
Indebtedness in respect thereof) or any Junior Lien Debt (including any
Refinancing Indebtedness in respect thereof).

 

“Restricted Proceeds” has the meaning set forth in Section 2.3(f).

 

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

 

“Second Offer” has the meaning set forth in Section 2.3(e).

 

“Secured Parties” means, collectively, Administrative Agent, the Lenders, each
co-agent or sub-agent appointed by Administrative Agent from time to time
pursuant to Section 10.1, the Indemnitees and the other Persons the Obligations
owing to which are or are purported to be secured by the Collateral under the
terms of the Security Documents.

 

“Securitization” has the meaning set forth in Section 11.8.

 

“Security Agreement” means that certain Security Agreement dated as of the date
hereof, among the Borrower, the Guarantors and the Administrative Agent.

 

“Security Documents” means any agreement, document or instrument executed
concurrently herewith or at any time hereafter pursuant to which one or more
Credit Parties or any other Person either (i) Guarantees payment or performance
of all or any portion of the Obligations and/or (ii) provides, as security for
all or any portion of the Obligations, a Lien on any of its assets in favor of
Administrative Agent for its own benefit and the benefit of Secured Parties, as
any or all of the same may be amended, supplemented, restated or otherwise
modified from time to time.

 

“Semi-Annual Payment Date” has the meaning set forth in Section 2.7(a).

 

“Senior Notes” means the Borrower’s 9.0% senior unsecured notes due August 1,
2022 issued pursuant to that certain Indenture, dated as of August 11, 2014 (the
“Senior Notes Indenture”), among Borrower, the subsidiary guarantors party
thereto and U.S. Bank National Association, as Trustee.

 

“Settlement Service” has the meaning set forth in Section 11.6(a).

 

“Stated Rate” has the meaning set forth in Section 2.12(b).

 

“Subsidiary” means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Capital Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Capital Stock of any other class or
classes of such corporation shall have or might have voting

 

28

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

 

power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of more than 50% of such Capital Stock
whether by proxy, agreement, operation of Law or otherwise, and (ii) any
partnership or limited liability company in which such Person and/or one (1) or
more Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or may exercise the powers of a
general partner.  Unless the context otherwise requires, each reference to a
Subsidiary shall be a reference to a Subsidiary of Borrower.

 

“Swap” means any “swap” within the meaning of section 1a(47) of the Commodity
Exchange Act.

 

“Swap Contract” means any “swap agreement”, as defined in Section 101 of the
Bankruptcy Code.

 

“Swap Obligation” means any obligation to pay or perform under any Swap, whether
as a party to such Swap or by providing any guarantee of or provision of support
for such Swap (and whether or not such obligation is pursuant to a Swap Contract
entered into with any Eligible Secured Swap Counterparty).

 

“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 Date” means the earliest to occur of (i) the Maturity Date and
(ii) any date on which Administrative Agent or Lead Lenders elect to declare all
or any portion of the Obligations to be, or all of the Obligations automatically
become, immediately due and payable pursuant to Section 8.2.

 

“Trade Date” has the meaning set forth in Section 11.6(a).

 

“Transactions” means the transactions contemplated by this Agreement to occur on
the Closing Date, the debt-for-debt and equity exchange contemplated by the
Exchange Agreement and the payment of fees and expenses incurred in connection
with the foregoing.

 

“Treasury Rate” means the yield to maturity at a time of computation of United
States Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Statistical Release H.15 (519) which has
become publicly available at least two (2) Business Days prior to the prepayment
date (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the period from
the applicable prepayment date to the First Call Date, provided, however, that
if the period from the applicable prepayment date to the First Call Date is not
equal to the constant maturity of a United States Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth (1/12th) of a year) from
the weekly average yields of United States Treasury securities for which such
yields are given having maturities as close as possible to the First Call Date,
except that if the period from the applicable prepayment date to the First Call
Date is less than one (1) year, the weekly

 

29

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

 

average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one (1) year shall be used.

 

“UCC” means the Uniform Commercial Code of the State of New York or of any other
state the Laws of which are required to be applied in connection with the
perfection of security interests in any Collateral.

 

“United States” means the United States of America.

 

“Unrestricted Subsidiary” means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of Borrower in the manner provided below, and (ii) any Subsidiary of
an Unrestricted Subsidiary.  As of the Closing Date, Warren Energy Services, LLC
is an Unrestricted Subsidiary.  The Board of Directors of Borrower may, at any
time and from time to time, designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary provided
that (1) no Default or Event of Default has occurred or is continuing at the
time of such designation and after giving effect to such designation and
(2) immediately after such designation, neither Borrower nor any Guarantor has
any obligation to pay any Debt of such Subsidiary (excluding any contingent
liability arising solely by virtue of such Person’s general partnership interest
so long as (A) such Unrestricted Subsidiary’s charter documents prohibit it from
incurring Debt, (B) such Unrestricted Subsidiary has not incurred any Debt, has
not in any way guaranteed any Debt of such Subsidiary, nor has any assets or
properties (excluding a pledge of the Capital Stock in such Subsidiary) which
are subject to any Lien securing any Debt of such Subsidiary, and (C) notice of
any such designation is promptly given to Administrative Agent in writing), and
(3) any Subsidiary is designated as an Unrestricted Subsidiary under all
Permitted First Lien Debt and the Senior Notes (if outstanding).  The Board of
Directors of Borrower may, at any time and from time to time, designate any
Unrestricted Subsidiary to be a Restricted Subsidiary provided that (x) no
Default or Event of Default has occurred or is continuing at the time of such
designation and after giving effect to such designation, and (y) notice of any
such designation is promptly given to Administrative Agent in writing.

 

“U.S. Tax Compliance Certificate” has the meaning set forth in
Section 2.13(f)(ii)B(3).

 

“Weighted Average Life to Maturity” means, when applied to Debt, at any date,
the quotient obtained by dividing:

 

(a)           the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment or
scheduled commitment reduction or termination of such Debt or redemption
multiplied by the amount of the payment or reduction or termination; by

 

(b)           the sum of all such payments (or reduction or termination).

 

“Wholly-Owned Subsidiary” means, with respect to any Person, any Subsidiary of
such Person of which all of the Capital Stock (other than, in the case of a
corporation, directors’ qualifying shares, to the extent legally required) are
directly or indirectly owned and controlled by such Person or one or more
Wholly-Owned Subsidiaries of such Person.

 

30

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

 

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

 

“Yield Differential” shall have the meaning assigned to such term in the
definition of “Permitted Pari Debt”.

 

(b)           With respect to any defined term used in this Agreement whose
definition is as defined in the First Lien Credit Agreement, any amendment,
restatement, supplement or modification with respect to such defined term
therein shall be ineffective with respect to this Agreement if made in order to
evade the commercial terms of this Agreement, including to adversely modify the
Collateral or the economic terms applicable to the Lenders; provided that, for
the avoidance of doubt, it is understood that the foregoing is not intended to
be a limitation on amendment, restatement, supplement or modification of defined
terms used in (i) the definition of First Lien Credit Agreement Debt or
Permitted Additional First Lien Debt so long as Debt incurred pursuant to
Section 5.1(p) does not exceed the First Lien Debt Cap at any one time
outstanding or (ii) clause (a) of the definition of Qualified Properties.

 

Section 1.2            Accounting Terms and Determinations.

 

Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder (including without
limitation determinations made pursuant to the exhibits hereto) shall be made,
and all financial statements required to be delivered hereunder shall be
prepared on a consolidated basis in accordance with GAAP applied on a basis
consistent with the most recent audited consolidated financial statements of
Borrower and its Consolidated Subsidiaries delivered to Administrative Agent and
Lenders.  If at any time any change in GAAP would affect the computation of any
financial ratio or financial requirement set forth in any Financing Document,
and either Borrower or Required Lenders shall so request, Administrative Agent,
Lenders and 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 Required Lenders); provided that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) Borrower shall
provide to Administrative Agent and Lenders financial statements and other
documents required under this Agreement which include a reconciliation between
calculations of such ratio or requirement made before and after giving effect to
such change in GAAP.

 

Section 1.3            Other Definitional Provisions and References.

 

References in this Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits” or
“Schedules” shall be to Articles, Sections, Annexes, Exhibits or Schedules of or
to this Agreement unless otherwise specifically provided.  Any term defined
herein may be used in the singular or plural.  “Include”, “includes” and
“including” shall be deemed to be followed by “without limitation”.  Except as
otherwise specified or limited herein, references to any Person include the
successors and assigns of such Person.  References “from” or “through” any date
mean, unless otherwise specified, “from and including” or “through and
including”, respectively.  The words “assets” and “property” shall be construed
to have the same meaning and to refer to

 

31

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

 

any and all tangible and intangible asset and properties any type.  Unless
otherwise specified herein, the settlement of all payments and fundings
hereunder between or among the parties hereto shall be made in lawful money of
the United States and in immediately available funds.  Time is of the essence in
Borrower’s and each other Credit Party’s performance under this Agreement and
all other Financing Documents.  All amounts used for purposes of financial
calculations required to be made herein shall be without duplication. 
References to any statute or act shall include all related current regulations
and all amendments and any successor statutes, acts and regulations.  References
to any statute or act, without additional reference, shall be deemed to refer to
federal statutes and acts of the United States.  References to any agreement,
instrument or document shall include all schedules, exhibits, annexes and other
attachments thereto.

 

ARTICLE 2
LOANS

 

Section 2.1            Loans and Borrowings; Commitments.

 

(a)           Commitments.  On the terms and subject to the conditions set forth
herein, (i) each Conversion Lender severally agrees to make a Converted Loan to
Borrower on the Closing Date in a principal amount not to exceed the Conversion
Value of its Conversion Notes and (ii) each New Term Loan Lender severally
agrees to make a New Term Loan to Borrower on the Closing Date in a principal
amount not to exceed its New Term Loan Commitment.

 

(b)           New Term Loans.  Each New Term Loan Lender shall make each New
Term Loan to be made by it hereunder on the Closing Date by wire transfer of
immediately available funds to such account in the United States as the
Administrative Agent may designate not later than 12:00 (noon) New York City
time.  Upon receipt of all funds required to fully fund the New Term Loans, the
Administrative Agent shall make such funds available to Borrower in like funds
as received by the Administrative Agent by wire transfer of such funds, in each
case in accordance with written instructions provided to (and reasonably
acceptable to) the Administrative Agent by Borrower.  For the avoidance of
doubt, if Administrative Agent does not receive all funds required to completely
fund the New Term Loans or if any condition precedent herein specified shall not
have been met, then the Administrative Agent shall have no obligation to fund
the amounts actually received to the Borrower, and the Administrative Agent may,
at the written direction of the New Term Loan Lenders that have funded their
respective New Term Loans, return said amounts to said New Term Loan Lenders.

 

(c)           Converted Loans.  Each Conversion Lender shall make each Converted
Loan to be made by it hereunder on the Closing Date by automatically converting
its holdings of Senior Notes into a Converted Loan under this Agreement.

 

Section 2.2            Advancing Loans.  Notice of Borrowing.  Borrower shall
deliver to Administrative Agent a Notice of Borrowing with respect to the
proposed borrowing on the Closing Date, with such Notice of Borrowing to be
delivered one (1) Business Day prior to such proposed borrowing.  Once given,
the Notice of Borrowing shall be irrevocable and Borrower shall be bound
thereby. The request for the borrowing of the New Term Loans on the Closing Date
shall be equal to the full amount of the New Term Loan Commitments.

 

32

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

 

Section 2.3            Mandatory Prepayments.

 

(a)           Termination Date.  On the Termination Date, there shall become
due, and Borrower shall pay the entire outstanding principal amount of each
Loan, together with accrued and unpaid Obligations pertaining thereto.

 

(b)           [Reserved].

 

(c)           Asset Dispositions and Casualty Proceeds.  In addition to any
other mandatory prepayment pursuant to this Section 2.3, within ten (10) days
after each date on or after the Closing Date upon which Borrower or any
Subsidiary receives any Casualty Proceeds or proceeds from any Asset
Disposition, an amount equal to 100% of the Net Cash Proceeds therefrom shall be
applied on such date as a mandatory repayment of the Permitted First Lien Debt
and the Permitted Additional First Lien Debt and a reduction of the First Lien
Debt Cap and, if there occurs a Declined First Lien Prepayment or after the
Discharge of First Lien Obligations, as a mandatory prepayment of the Loans in
accordance with the requirements of Sections 2.3(d), 2.3(e), 2.3(j), 2.4 and
8.6; provided however, that (i) such Net Cash Proceeds from an Asset Disposition
other than in respect of Asset Disposition of CBM Properties shall not be
required to be so applied on such date so long as such Net Cash Proceeds are
permitted to be held for reinvestment in Qualified Properties pursuant to the
terms of the First Lien Credit Agreement as in effect on the date hereof,
provided further that any determinations made under the First Lien Credit
Agreement as to compliance with such terms of the First Lien Credit Agreement
shall be conclusive for purposes of this Agreement; (ii) such Net Cash Proceeds
in respect of Asset Disposition of CBM Properties shall not be required to be so
applied on such date so long as they are permitted to be held for reinvestment
in Qualified Properties pursuant to the terms of the First Lien Credit
Agreement, provided further that any determinations made under the First Lien
Credit Agreement as to compliance with such terms of the First Lien Credit
Agreement shall be conclusive for purposes of this Agreement; (iii) in the case
of either (i) and (ii), to the extent such Net Cash Proceeds are permitted to be
held for reinvestment in Qualified Properties, Borrower or the applicable
Subsidiary shall deposit such Net Cash Proceeds into the Asset Disposition or
Recovery Event Proceeds Pledged Account pursuant to the terms of the First Lien
Credit Agreement and such Net Cash Proceeds shall remain in the Asset
Disposition or Recovery Event Proceeds Pledged Account until reinvested or
applied to prepay Permitted First Lien Debt and the Permitted Additional First
Lien Debt or the Loans, in each case in accordance with the First Lien Credit
Agreement or this Section 2.3(c); and (iv) if all or any portion of such Net
Cash Proceeds are not so reinvested within the time period indicated (or such
earlier date, if any, as Borrower or the applicable Subsidiary determines not to
reinvest such Net Cash Proceeds as set forth above), such remaining portion
shall be applied on the last day of such period (or such earlier date, as the
case may be) as provided above in this Section 2.3(c) without regard to
clauses (i), (ii) and (iii) above; provided further, it is understood that Net
Cash Proceeds in connection with any Asset Disposition of CBM Properties may be
used to make a mandatory prepayment of the Permitted First Lien Debt with a
corresponding increase in the Delayed Draw Commitments under the First Lien
Credit Agreement and such mandatory prepayment shall not result in a reduction
of the First Lien Debt Cap.  Except as otherwise provided in Sections 2.3(g) and
(h), any mandatory repayment of the Loans pursuant to this Section 2.3(c) on
account of Asset Dispositions shall be accompanied by the Make-Whole Amount
and/or Repayment Premium, as applicable.

 

33

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

 

(d)           Certificates and Notices.  Borrower shall deliver to the
Administrative Agent, (i) at the time of each prepayment required under this
Section 2.3, a certificate signed by a Responsible Officer of Borrower setting
forth in reasonable detail the calculation of the amount of such prepayment and
(ii) not later than 11:00 a.m. (New York City time), four (4) Business Days
before the date of such prepayment, prior written notice of such prepayment
(which such notice shall be delivered by the Administrative Agent to each Lender
on the Business Day of receipt (or the immediately following Business Day if
received after 11:00 a.m. (New York City time), on any Business Day)) (a “Notice
of Prepayment”).  Each Notice of Prepayment shall specify the prepayment date
and the principal amount of each Loan (or portion thereof) to be prepaid, and,
if applicable, the amount of any Declined First Lien Prepayments.  All
prepayments of the Loans under this Section 2.3 shall be subject, to the extent
applicable, to Section 2.3(g) and Section 2.3(h), but shall otherwise be without
premium or penalty, and shall be accompanied by accrued and unpaid interest on
the principal amount to be prepaid to but excluding the date of payment.

 

(e)           Declining Lenders.  Each Lender may reject all or part of its
applicable share of any mandatory prepayment of Loans required to be made
pursuant to this Section 2.3 by providing written notice (each, a “Rejection
Notice”) to the Administrative Agent no later than noon (New York City time)
two (2) Business Days prior to the proposed prepayment date contained in the
relevant Notice of Prepayment (any such Lender, a “Declining Lender”); provided,
that, if a Lender fails to deliver a Rejection Notice to the Administrative
Agent within the time frame specified above, such failure will be deemed an
acceptance by such Lender of the total amount of such mandatory prepayment of
Loans.  On such date, the Administrative Agent shall then provide written notice
(the “Second Offer”) to Lenders other than the Declining Lenders (such Lenders,
the “Accepting Lenders”) of the additional amount available (due to such
Declining Lenders’ declining such prepayment) to prepay Loans owing to such
Accepting Lenders, with such available amount to be allocated on a pro rata
basis among the Accepting Lenders that accept the Second Offer.  Any Lenders
declining prepayment pursuant to such Second Offer shall give written notice
thereof to the Administrative Agent by 4:00 p.m. (New York City time) no later
than one (1) Business Day prior to the proposed prepayment date contained in the
relevant Notice of Prepayment; provided, that, if a Lender fails to deliver a
Rejection Notice to the Administrative Agent within the time frame specified
above, such failure will be deemed an acceptance of such Lender’s pro rata share
of the Second Offer.  Borrower shall prepay the applicable Loans within
one (1) Business Day after its receipt of notice from the Administrative Agent
of the aggregate amount of such prepayment.  Amounts remaining after the
allocation to Accepting Lenders as set forth above shall be retained by
Borrower, subject to the terms of the Intercreditor Agreements.

 

(f)            Repatriation.  Notwithstanding any other provisions of this
Section 2.3, (i) to the extent that any Casualty Proceeds or proceeds from any
Asset Disposition by any Foreign Subsidiary would be prohibited or delayed by
(x) the applicable local law or (y) the applicable certificate or articles of
incorporation (or comparable organizational document) due to a third-party
minority ownership of any Person in such Foreign Subsidiary from being
repatriated to the United States (a “Minority Interest Restriction”), an amount
equal to the portion of such Casualty Proceeds or proceeds from any Asset
Disposition that would be so affected (any such portion, “Restricted Proceeds”)
will not be required to be applied to prepay Loans at the times provided in
Section 2.3(c), but may be retained by the applicable Foreign Subsidiary so
long, but

 

34

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

 

only so long, as the applicable local law or applicable document would not
permit repatriation to the United States (it being understood that Borrower
hereby agrees to cause the applicable Foreign Subsidiary to promptly take all
actions required by or necessary under the applicable local law or applicable
document to permit or minimize the delay of such repatriation), and once such
repatriation of any of such Restricted Proceeds is permitted or no longer
delayed under the applicable local law, such repatriation will be immediately
effected and such repatriated Restricted Proceeds will be promptly (and in any
event not later than two (2) Business Days after such repatriation) applied (net
of costs, expenses or additional taxes payable or reserved against as required
in accordance with GAAP as a result thereof) to the prepayment of Loans pursuant
to this Section 2.3; provided, however, that Restricted Proceeds with respect to
a Minority Interest Restriction, when measured as a percentage of the total
Casualty Proceeds or proceeds from any Asset Disposition by such Foreign
Subsidiary, shall not be greater than the percentage of the Capital Stock in
such Foreign Subsidiary that are owned directly by the minority investors
therein and (ii) to the extent that Borrower has determined in its reasonable
business judgment and the Lead Lenders (acting reasonably) have agreed that
repatriation of any of or all such Net Cash Proceeds would have material adverse
tax consequences, then after Borrower’s and the Subsidiaries’ use of
commercially reasonable efforts to (A) eliminate such tax consequences and
(B) apply amounts under other cash resources that are available to Borrower and
the Subsidiaries to make such prepayments, the amount of such Net Cash Proceeds
so affected may be retained by the applicable Foreign Subsidiary.

 

(g)           Make-Whole Amount.  If on or prior to May 22, 2016 (the “First
Call Date”), Borrower repays, for any reason (whether by mandatory or optional
prepayment, at maturity or following acceleration of the maturity thereof, in
connection with an Event of Default (including, without limitation, a Change in
Control) and/or in or in connection with a voluntary or involuntary Insolvency
Event or otherwise) (other than as a result of (i) a mandatory prepayment
pursuant to Section 2.3(c) (solely to the extent on account of any Casualty
Proceeds) or (ii) a mandatory prepayment in respect of Net Cash Proceeds
received in connection with any Asset Disposition of the CBM Properties), all or
any part of the principal balance of any Loan, or if the maturity of the Loans
shall be accelerated under any provisions of Section 8.2, then Borrower shall
pay to the Administrative Agent, for the benefit of all Lenders in addition to
the amount so repaid, due or assigned, an amount equal to the present value at
such time, computed on such repayment or assignment date using a discount rate
equal to the Treasury Rate plus 50 basis points, of the amount of interest and
the Repayment Premium which would have accrued on the principal balance of the
applicable Loan being repaid (or so due or assigned) from the date of repayment,
acceleration or assignment, as applicable, through the first anniversary of the
First Call Date had such Loan remained outstanding and been repaid on the first
anniversary of the First Call Date, such amount to be paid to be calculated by
the Administrative Agent and shall be conclusive absent manifest error.

 

The amount described in this Section 2.3(g) shall be referred to as the
“Make-Whole Amount”.

 

(h)           Repayment Premium.  Following the First Call Date, together with
any repayment made pursuant to the terms of this Agreement (whether by mandatory
or optional prepayment, at maturity or following acceleration of the maturity
thereof, in connection with an Event of Default (including, without limitation,
a Change in Control) and/or in or in connection with a

 

35

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

 

voluntary or involuntary Insolvency Event or otherwise) with respect to the
Loans (other than (i) any repayment pursuant to Section 2.3(c) (solely to the
extent on account of any Casualty Proceeds) or (ii) any repayment in respect of
Net Cash Proceeds received in connection with any Asset Disposition of the CBM
Properties), or if the maturity of the Loans shall be accelerated under any
provision of Section 8.2, Borrower shall pay to Administrative Agent, for the
benefit of all Lenders in addition to the amount so repaid or due, an amount
equal to the applicable percentage (herein referred to as the “Repayment
Premium”) set forth in the following chart, of the principal amount so repaid,
due or assigned, together with unpaid interest on the amount so repaid, due or
assigned.

 

Date of Repayment, Acceleration or Assignment

 

Repayment or Assignment
Percentage of Loans

 

From (but excluding) the First Call Date to (and including) the first
anniversary of the First Call Date

 

4

%

From (but excluding) the first anniversary of the First Call Date to (and
including) the second anniversary of the First Call Date

 

2

%

From (but excluding) the second anniversary of the First Call Date to (and
including) the third anniversary of the First Call Date

 

1

%

From (but excluding) the third anniversary of the First Call Date and thereafter

 

0

%

 

Any payment required pursuant to this Section 2.3(h) is in addition to, and not
a replacement of any amount paid pursuant to any other provision of this
Agreement.  For the avoidance of doubt, this Section 2.3(h) is for the benefit
of the Lenders only and is not intended to be the sole remedy for Borrower’s
breach under Section 8.1.

 

(i)            Redemption Price in respect of Asset Dispositions of CBM
Properties.  Notwithstanding anything to the contrary contained in this
Section 2.3, to the extent that Net Cash Proceeds received in connection with
any Asset Disposition of the CBM Properties are not used for the prepayment of
First Lien Credit Agreement Debt, (a) any mandatory prepayment made up to the
amount of $25,000,000 shall be made at a redemption price of 101% of the
principal amount of the Loans and (b) any mandatory prepayment made in excess of
the amount of $25,000,000 shall be made at a redemption price of 100%.

 

(j)            First Lien Mandatory Prepayments.  Notwithstanding the foregoing
provisions of this Section 2.3, no mandatory prepayment of Loans shall be made
pursuant to any provision of this Section 2.3 until the Discharge of First Lien
Obligations, or to the extent prepayments of the Obligations are otherwise
permitted under the First/Second Lien Intercreditor Agreement; provided that if
any lender of any Permitted First Lien Debt declines a mandatory prepayment
under such Debt’s documentation, including a decline of any second offer of any
amount declined after an initial offer (a “Declined First Lien Prepayment”), the
amount of any such Declined First Lien Prepayment shall, subject to the terms of
the First/Second Lien Intercreditor Agreement, be applied within
five (5) Business Days of the date received by the Administrative Agent toward
the prepayment of the Loans pursuant to this Section 2.3.

 

(k)           Permitted Pari Debt Prepayment.  In the event that any outstanding
Permitted Pari Debt is not a Loan hereunder, any mandatory prepayment of Loans
otherwise required to be

 

36

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

 

made pursuant to this Section 2.3 shall be shared on a ratable basis with such
Permitted Pari Debt in accordance with the requirements of Sections 2.3(d) and
2.3(e) as if the references in this Section 2.3 to “Loans” included both Loans
and Permitted Pari Debt.

 

Section 2.4            All Prepayments.

 

Any prepayment of a Loan on a day other than the Semi-Annual Payment Date shall
include interest on the principal amount being repaid.

 

Section 2.5            Optional Prepayments of Loans.

 

(a)           (i) Borrower may from time to time prepay any borrowing in whole
or in part; provided that any such partial prepayment of the Loans shall be in
an amount equal to $5,000,000 or a higher integral multiple of $1,000,000;
provided further that such prepayments shall require written notice to
Administrative Agent not later than noon (New York City time) three (3) Business
Days prior to the date of prepayment.

 

(ii)           Notwithstanding anything to the contrary in Section 2.3, prior to
the First Call Date, the Borrower may on any one or more occasions prepay up to
$25,000,000 of the outstanding Loans with the proceeds of one or more Equity
Offerings (except in connection with the Transactions), at a redemption price of
101.0% of the principal amount of the Loans, so long as such redemption occurs
prior to the First Call Date; provided that, such prepayment must be received by
the Administrative Agent for the benefit of the Lenders prior to the First Call
Date.

 

(b)           Optional prepayments of Loans shall be applied in accordance with
this Section 2.5 and Section 8.6.

 

(c)           Each notice of prepayment shall specify the prepayment date and
the principal amount of the Loans (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay the Loans by the amount
stated therein, together with interest then accrued and unpaid on such principal
amount and any Make-Whole Amount and Repayment Premium with respect thereto on
the date stated therein (and all such amounts shall become due and payable for
all purposes hereunder on such date).  All prepayments under this Section 2.5
shall be subject to the Make-Whole Amount and the Repayment Premium but
otherwise without premium or penalty.  All prepayments under this Section 2.5
shall be accompanied by accrued and unpaid interest on the principal amount to
be prepaid to but excluding the date of payment together with any Make-Whole
Amount and Repayment Premium with respect thereto.

 

Section 2.6            Termination of New Term Loan Commitments.

 

The New Term Loan Commitments shall automatically terminate upon the making of
the New Term Loans on the Closing Date.

 

Section 2.7            Interest, Interest Calculations and Certain Fees.

 

(a)           Interest.  From and following the Closing Date, the Loans and the
other Obligations shall bear interest at a rate of 12.00% per annum (the
“Interest Rate”).  Borrower shall pay interest semi-annually in arrears on each
date set forth in the table below in the column

 

37

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

 

titled “Interest Payment Date” (or if such day is not a Business Day, the next
preceding Business Day) (each, a “Semi-Annual Payment Date”).  Interest on the
Loans will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the Closing Date.  During the period from the
Closing Date until October 20, 2018, interest on the Loans shall be paid as set
forth in the table below (which such percentages are for each semi-annual period
and not per annum) in cash and/or, at the election of Borrower (a “PIK
Election”) up to, but not exceeding, the amount of interest specified in the
column titled “Maximum PIK Interest,” by capitalizing accrued and unpaid
interest on each Semi-Annual Payment Date (“PIK Interest”) and adding the same
to the principal amount of the Loans then outstanding (“PIK Payment”):

 

Interest Payment Date
(month/day/year)

 

Maximum PIK Interest

 

Minimum Cash Interest

 

4/20/2016

 

6.00

%

0.00

%

10/20/2016

 

6.00

%

0.00

%

4/20/2017

 

6.00

%

0.00

%

10/20/2017

 

1.50

%

4.50

%

4/20/2018

 

1.50

%

4.50

%

10/20/2018

 

1.50

%

4.50

%

4/20/2019

 

0.00

%

6.00

%

10/20/2019

 

0.00

%

6.00

%

4/20/2020

 

0.00

%

6.00

%

11/1/2020

 

0.00

%

6.00

%

 

Following an increase in the principal amount of the outstanding Loans as a
result of a PIK Payment, the Loans will bear interest on such increased
principal amount from and after the date of such PIK Payment.  All references to
the “principal” of the Loans shall include all interest accrued and capitalized
as a result of a PIK Payment.  In addition, on the day on which the outstanding
principal of the Loans are paid in full, Borrower shall concurrently pay in cash
all unpaid interest accrued on the Loans to the date of such payment; provided
that (i) interest accrued pursuant to Section 8.4 shall be payable in cash on
demand and (ii) in the event of any prepayment of any Loan pursuant to
Section 2.3 or Section 2.5, accrued interest on the principal amount prepaid
shall be due and payable in cash on the date of such prepayment.  Borrower shall
provide written notice to the Administrative Agent of any PIK Election at least
ten (10) Business Days prior to each Semi-Annual Payment Date, and in the
absence of any such timely notice, shall be deemed to have elected to pay all
interest in cash.  For the avoidance of doubt, after October 20, 2018, all
interest shall be payable in cash and no PIK Election shall be available.

 

(b)           Agent’s Fees.  Borrower shall pay to Administrative Agent fees in
such amounts and at such times as set forth in the Fee Letter.

 

(c)           Computation of Interest and Related Fees.  Interest shall be
computed on the basis of a year of 360 days, in each case for the actual number
of days elapsed in the period during which it accrues. In computing interest on
any Loan, the date of the making of such Loan shall be included, and the date of
payment of such Loan shall be excluded.

 

(d)           [Reserved.]

 

38

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

 

(e)           Yield Protection.

 

(i)            [Reserved].

 

(ii)           [Reserved].

 

(iii)          [Reserved].

 

(iv)          [Reserved].

 

(v)           Increased Costs.  If, after the Closing Date, the adoption or
taking effect of, or any change in, any Law, or any change in the
interpretation, administration or application of any Law by any Governmental
Authority, central bank or comparable agency charged with the interpretation,
administration or application thereof, or compliance by any Lender with any
request, guideline or directive (whether or not having the force of Law) of any
such authority, central bank or comparable agency:  (A) shall impose, modify or
deem applicable any reserve (including any reserve imposed by the Board of
Governors of the Federal Reserve System, or any successor thereto), 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 (B) shall subject any Lender or the Administrative Agent to any
Taxes (other than (i) Indemnified Taxes, (ii) Taxes described in
clauses (b) through (d) of the definition of Excluded Taxes, and
(iii) Connection Income Taxes) on its loans, loan principal, letters of credit,
commitments, or other obligations, or its deposits, reserves, other liabilities
or capital attributable thereto; and the result of anything described in
clauses (A) and (B) above is to reduce the amount of any sum received or
receivable by such Lender under this Agreement or under any of its Notes (if
any) with respect thereto, then within fifteen (15) days after demand by such
Lender (which demand shall be accompanied by a statement setting forth the basis
for such demand and a calculation of the amount thereof in reasonable detail, a
copy of which shall be furnished to Administrative Agent), Borrower shall
promptly pay directly to such Lender such additional amount as will compensate
such Lender for such increased cost or such reduction, so long as such amounts
have accrued on or after the day which is 180 days prior to the date on which
such Lender first made demand therefore; provided that, if such adoption, taking
effect, or change is given retroactive effect, then the 180-day period referred
to above shall be extended to include the retroactive effect thereof. 
Notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street
Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a “change in law”,
regardless of the date enacted, adopted or issued.

 

Section 2.8            Notes; Commitments Several.

 

(a)           The portion of the Loans made by each Lender shall be evidenced,
if so requested by such Lender, by a Note executed by Borrower in an original
principal amount equal to the sum of such Lender’s Loans.

 

39

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

 

(b)           The obligations of the Lenders hereunder to make Loans and to make
payments pursuant to Section 10.6 are several and not joint.  The failure of any
Lender to make any Loan, to fund any such participation or to make any payment
under Section 10.6 on any date required hereunder shall not relieve any other
Lender of its corresponding obligation to do so on such date, and no Lender
shall be responsible for the failure of any other Lender to so make its Loan, to
purchase its participation or to make its payment under Section 10.6.

 

(c)           Nothing in this Agreement shall be deemed to obligate any Lender
to obtain the funds for any Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.

 

Section 2.9            [Reserved].

 

Section 2.10          General Provisions Regarding Payment.

 

All payments to be made by Borrower under any Financing Document, including
payments of principal and interest made hereunder and pursuant to any other
Financing Document, and all fees, expenses, indemnities and reimbursements,
shall be paid into the Payment Account and shall be made without set off,
deduction or counterclaim.  If any payment hereunder becomes due and payable on
a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension (it
being understood and agreed that, solely for purposes of calculating financial
covenants and computations contained herein and determining compliance
therewith, if payment is made, in full, on any such extended due date, such
payment shall be deemed to have been paid on the original due date without
giving effect to any extension thereto).  Any payments received in the Payment
Account before noon (New York City time) on any date shall be deemed received by
Administrative Agent on such date, and any payments received in the Payment
Account after noon (New York City time) on any date shall be deemed received by
Administrative Agent on the next succeeding Business Day.

 

Section 2.11          Loan Account.

 

Administrative Agent shall maintain a register and loan account (the “Register”)
on its books to record Loans and other extensions of credit made by Lenders
hereunder or under any other Financing Document, and all payments thereon made
by Borrower.  All entries in the Register shall be made in accordance with
Administrative Agent’s customary accounting practices as in effect from time to
time.  The balance in the Register, as recorded on Administrative Agent’s most
recent printout or other written statement delivered to Borrower, shall be
conclusive and binding evidence of the amounts due and owing to Administrative
Agent by Borrower absent clear and convincing evidence to the contrary; provided
that any failure to so record or any error in so recording shall not limit or
otherwise affect Borrower’s duty to pay all amounts owing hereunder or under any
other Financing Document.

 

40

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

 

Section 2.12          Maximum Interest.

 

(a)           Applicable Limit.  In no event shall the interest charged with
respect to the Notes (if any) or any other obligations of Borrower under any
Financing Document exceed the maximum amount permitted under the laws of the
State of New York or of any other applicable jurisdiction.

 

(b)           Maximum Lawful Rate.  Notwithstanding anything to the contrary
herein or elsewhere, if at any time the rate of interest payable hereunder or
under any Note or other Financing Document (the “Stated Rate”) would exceed the
highest rate of interest permitted under any applicable Law to be charged (the
“Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so
exceeded, the rate of interest payable shall be equal to the Maximum Lawful
Rate; provided, that if at any time thereafter the Stated Rate is less than the
Maximum Lawful Rate, Borrower shall, to the extent permitted by Law, continue to
pay interest at the Maximum Lawful Rate until such time as the total interest
received is equal to the total interest which would have been received had the
Stated Rate been (but for the operation of this provision) the interest rate
payable.  Thereafter, the interest rate payable shall be the Stated Rate unless
and until the Stated Rate again would exceed the Maximum Lawful Rate, in which
event this provision shall again apply.

 

(c)           Application of Excess Interest.  In no event shall the total
interest received by any Lender exceed the amount which it could lawfully have
received had the interest been calculated for the full term hereof at the
Maximum Lawful Rate.  If, notwithstanding the prior sentence, any Lender has
received interest hereunder in excess of the Maximum Lawful Rate, such excess
amount shall be applied to the reduction of the principal balance of the Loans
or to other amounts (other than interest) payable hereunder, and if no such
principal or other amounts are then outstanding, such excess or part thereof
remaining shall be paid to Borrower.  In computing interest payable with
reference to the Maximum Lawful Rate applicable to any Lender, such interest
shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by
the number of days in the year in which such calculation is made.

 

Section 2.13          Taxes.

 

(a)           Gross Up for Taxes.  All payments of principal and interest on the
Loans and all other amounts payable hereunder or under any Financing Document
shall be made without deduction or withholding for any Taxes, except as required
by applicable law.  If any applicable law requires the deduction or withholding
of any Tax from any payment to be made by a Credit Party hereunder, then such
Credit Party shall be entitled to make such deduction or withholding and shall
timely pay the full amount deducted or withheld to the relevant Governmental
Authority in accordance with applicable law and, if such Tax is an Indemnified
Tax, then the sum payable by the applicable Credit Party shall be increased as
necessary so that after such deduction or withholding has been made (including
such deductions and withholdings of Indemnified Taxes 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.

 

41

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

 

(b)           Payment of Other Taxes by the Borrower.  Without limiting the
provisions of subsection (a) above, the Borrower shall timely pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable Law,
or at the option of the Administrative Agent timely reimburse it for the payment
of, any Other Taxes.

 

(c)           Indemnification by the Borrower.  Without limiting (or duplication
of) the provisions of subsection (a) or (b) above, the Borrower shall, and does
hereby, indemnify each Recipient, and shall make payment in respect thereof
within ten (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 penalties, interest and 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 any such payment or liability delivered to the
Borrower by a Lender (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

 

(d)           Lender Indemnity.  Each Lender shall severally indemnify the
Administrative Agent, within ten (10) days after demand therefor, for (i) any
Taxes attributable to such Lender (but only to the extent that any Credit Party
has not already indemnified the Administrative Agent for such Taxes and without
limiting the obligation of the Credit Parties to do so) and (ii) any Taxes
attributable to such Lender’s failure to comply with the provisions of
Section 11.6 relating to the maintenance of a Participant Register, in either
case, that are payable or paid by the Administrative Agent in connection with
any Financing 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 Financing 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 (d).

 

(e)           Evidence of Payments.  After any payment of Taxes by any Credit
Party to a Governmental Authority as provided in this Section 2.13, such Credit
Party shall deliver to the Administrative Agent the original or a certified copy
of a receipt issued by such Governmental Authority evidencing such payment or
other evidence of such payment reasonably satisfactory to the Administrative
Agent.

 

(f)            Status of Lenders / Administrative Agent.

 

(i)            Any Lender that is entitled to an exemption from or reduction of
withholding Tax with respect to payments made under any Financing Document shall
deliver to Borrower and 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 Borrower or 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 Borrower or Administrative Agent, shall deliver such other documentation

 

42

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

 

prescribed by applicable law or reasonably requested by Borrower or
Administrative Agent as will enable Borrower or 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 the documentation described in Section 2.13(f)(ii)A,
(ii)B and (ii)C, below) shall not be required if in the Lender’s reasonable
judgment the completion, execution or delivery of such documentation would
subject such Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of such Lender.

 

(ii)           Without limiting the generality of the foregoing,

 

A.            any Lender that is a “United States person” within the meaning of
Section 7701(a)(30) of the Code shall deliver to the Borrower and the
Administrative Agent (in such number of copies as shall be reasonably requested
by the recipient) on or prior to the date on which such Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrower or the Administrative Agent) executed originals of
Internal Revenue Service Form W-9 certifying that such Lender is exempt from
United States federal backup withholding tax; and

 

B.            each Foreign Lender that is entitled under the Code or any
applicable treaty to an exemption from or reduction of withholding Tax with
respect to payments hereunder or under any other Financing Document shall
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 request of the Borrower or the Administrative Agent, but
only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:

 

(1)           executed originals of Internal Revenue Service Form W-8BEN or
W-8BEN-E (as applicable) claiming eligibility for benefits of an income Tax
treaty to which the United States is a party,

 

(2)           executed originals of Internal Revenue Service Form W-8ECI,

 

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

 

(4)           to the extent a Foreign Lender is not the beneficial owner,
executed originals of Internal Revenue Service Form W-8IMY and accompanied by
Internal Revenue Service Form W-8ECI, Internal Revenue Service Form W-8BEN or
W-8BEN-E (as applicable), a U.S. Tax Compliance Certificate substantially in the
form of Exhibit E-2 or

 

43

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

 

Exhibit E-3, Internal Revenue Service 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 E-4 on behalf of each such direct and indirect partner.

 

C.            If a payment made to a Lender or Administrative Agent under any
Financing Document would be subject to United States federal withholding Tax
imposed by FATCA if such Lender or Administrative Agent were to fail or were
unable 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 Borrower and Administrative Agent or Administrative
Agent shall deliver to Borrower at the time or times prescribed by law and at
such time or times reasonably requested by Borrower or Administrative Agent such
documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by Borrower or Administrative Agent as may be necessary for
Borrower and Administrative Agent to comply with their obligations under FATCA
and to determine that such Lender or Administrative Agent has complied with such
Lender’s or Administrative Agent’s obligations under FATCA or to determine the
amount to deduct and withhold from such payment.  Solely for purposes of this
clause (C), “FATCA” shall include any amendments made to FATCA after the date of
this Agreement.

 

Each Lender agrees that if any form of 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.

 

(iii)          On or before the date of this Agreement (or, in the case of any
successor or replacement Administrative Agent, the date on which such person
becomes the Administrative Agent hereunder), Cortland (or such successor or
replacement Administrative Agent) shall deliver to the Borrower two duly
executed originals of either (A) Internal Revenue Service Form W-9, or (B)(1) an
Internal Revenue Service Form W-8ECI with respect to amounts it receives on its
own account, and (2) an Internal Revenue Service Form W-8IMY, as revised
April 2014 (or successor form) certifying that it is a “U.S. branch” and that
the payments it receives for the account of others are not effectively connected
with the conduct of a trade or business in the United States and that it is
using such form as evidence of its agreement with the Borrower to be treated as
a “United States person” within the meaning of Section 7701(a)(30) of the Code
(including for purposes of Chapter 4 of the Code) with respect to such payments
(and the Borrower and the Administrative Agent agree to so treat the
Administrative Agent as a “United States person” within the meaning of
Section 7701(a)(30) of the Code with respect to such payments as contemplated by
Treasury Regulation Section 1.1441-1T(b)(2)(iv)(A)), with the effect that the
Borrower can make payments to the Administrative Agent without deduction or
withholding of any Taxes imposed by the United States.

 

(g)           Refunds.  If Administrative Agent or a Lender determines, in its
sole discretion, exercised in good faith, that it has received a refund of any
Taxes as to which it has been indemnified by Borrower or with respect to which
Borrower has paid additional amounts

 

44

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

 

pursuant to this Section 2.13, it shall pay over such refund to Borrower (but
only to the extent of indemnity payments made, or additional amounts paid, by
Borrower under this Section 2.13 with respect to the Taxes giving rise to such
refund), net of all out-of-pocket expenses of Administrative Agent or such
Lender and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided, that Borrower,
upon the request of Administrative Agent or such Lender, agrees to repay the
amount paid over to Borrower (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to Administrative Agent or such
Lender in the event Administrative Agent or such Lender is required to repay
such refund to such Governmental Authority.  Notwithstanding anything to the
contrary in this paragraph (g), in no event will the indemnified party be
required to pay any amount to an indemnifying party pursuant to this
paragraph (g) the payment of which would place the indemnified party in a less
favorable net after-Tax position than the indemnified party would have been in
if the Tax subject to indemnification and giving rise to such refund had not
been deducted, withheld or otherwise imposed and the indemnification payments or
additional amounts with respect to such Tax had never been paid.  This
paragraph (g) shall not be construed to require Administrative Agent or any
Lender to make available its tax returns (or any other information relating to
its Taxes which it deems confidential) to Borrower or any other Person.

 

(h)           For purposes of this Section 2.13, the term “applicable law”
includes FATCA.

 

Section 2.14          Capital Adequacy.

 

If any Lender shall reasonably determine that the adoption or taking effect of,
or any change in, any applicable Law regarding capital or liquidity
requirements, in each instance, after the Closing Date, or any change after the
Closing Date in the interpretation, administration or application thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation, administration or application thereof, or the compliance by any
Lender or any Person controlling such Lender with any request, guideline or
directive regarding capital or liquidity requirements (whether or not having the
force of Law) of any such Governmental Authority, central bank or comparable
agency adopted or otherwise taking effect after the Closing Date, has or would
have the effect of reducing the rate of return on such Lender’s or such
controlling Person’s capital as a consequence of such Lender’s obligations
hereunder to a level below that which such Lender or such controlling Person
could have achieved but for such adoption, taking effect, change,
interpretation, administration, application or compliance (taking into
consideration such Lender’s or such controlling Person’s policies with respect
to capital adequacy or liquidity) then from time to time, within fifteen (15)
days after demand by such Lender (which demand shall be accompanied by a
statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to
Administrative Agent), Borrower shall promptly pay to such Lender such
additional amount as will compensate such Lender or such controlling Person for
such reduction, so long as such amounts have accrued on or after the day which
is 180 days prior to the date on which such Lender first made demand therefor;
provided that, if such adoption, taking effect or change is given retroactive
effect, then the 180-day period referred to above shall be extended to include
the retroactive effect thereof.  Notwithstanding anything herein to the
contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests,

 

45

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

 

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 regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a “change in law”,
regardless of the date enacted, adopted or issued.

 

Section 2.15          Mitigation Obligations.

 

If any Lender requests compensation under either Section 2.7(e)(v) or
Section 2.14, or requires Borrower to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to
Section 2.13, then, upon the written request of Borrower, such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder
(subject to the provisions of Section 11.6) to another of its offices, branches
or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or materially reduce amounts payable pursuant to
any such Section, as the case may be, in the future, (ii) would not subject such
Lender to any unreimbursed cost or expense and (iii) would not otherwise be
disadvantageous to such Lender (as determined in its sole discretion).  Without
limitation of the provisions of Section 9.1, Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

 

To induce Administrative Agent and Lenders to enter into this Agreement and to
make the Loans and other credit accommodations contemplated hereby, Borrower
hereby represents and warrants to Administrative Agent and each Lender that:

 

Section 3.1            Existence and Power.

 

Each Credit Party (i) is an entity as specified on Schedule 3.1, (ii) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction specified on Schedule 3.1, and (iii) has the same legal name as it
appears in such Credit Party’s Organizational Documents and an organizational
identification number (if any), in each case as specified on Schedule 3.1
(except, in each case, (i) as to those Persons becoming a Credit Party after the
Closing Date, as notified to Administrative Agent and (ii) for such changes
occurring after the Closing Date resulting from transactions permitted by
Section 5.7(a)).  Each Credit Party has all powers and all governmental
licenses, authorizations, registrations, permits, consents and approvals
required under all applicable Laws and required in order to carry on its
business as now conducted (collectively, “Permits”), except where the failure to
have such Permits could not reasonably be expected to have a Material Adverse
Effect.  Each Credit Party is qualified to do business as a foreign entity in
each jurisdiction in which it is required to be so qualified, which
jurisdictions as of the Closing Date are specified on Schedule 3.1, except where
the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect.  Except as set forth on Schedule 3.1 (or, as to those
Persons becoming a Credit Party after the Closing Date, as notified to
Administrative Agent), no Credit Party has had, over the five (5) year period
preceding the Closing Date, any name other than its current name or was

 

46

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

 

incorporated or organized under the laws of any jurisdiction other than its
current jurisdiction of incorporation or organization.

 

Section 3.2            Organization and Governmental Authorization; No
Contravention.

 

The execution, delivery and performance by each Credit Party of the Financing
Documents to which it is a party are within its powers, have been duly
authorized by all necessary action pursuant to its Organizational Documents,
require no further action by or in respect of, or filing with, any Governmental
Authority (except the filing of the Mortgages and financing statements) and do
not violate, conflict with or cause a breach or a default under (i) any Law or
any of the Organizational Documents of any Credit Party or (ii) any agreement or
instrument binding upon it, except for such violations, conflicts, breaches or
defaults as could not, with respect to this clause (ii) reasonably be expected
to have a Material Adverse Effect.

 

Section 3.3            Binding Effect.

 

Each of the Financing Documents to which any Credit Party is a party constitutes
a valid and binding agreement or instrument of such Credit Party, enforceable
against such Credit Party in accordance with its respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws relating to the enforcement of creditors’ rights generally and by general
equitable principles.

 

Section 3.4            Capitalization.

 

The authorized Capital Stock of each of the Credit Parties as of the Closing
Date is as set forth on Schedule 3.4.  All issued and outstanding Capital Stock
of each of the Credit Parties are duly authorized and validly issued, fully
paid, non-assessable, free and clear of all Liens other than Permitted Liens and
those in favor of Administrative Agent for the benefit of the Secured Parties,
and such Capital Stock were issued in compliance with all applicable Laws.  The
identity of the holders of the Capital Stock of each of the Credit Parties
(other than Borrower) and the percentage of their fully diluted ownership of the
Capital Stock of each of the Credit Parties (other than Borrower) as of the
Closing Date is set forth on Schedule 3.4.  No shares of the Capital Stock of
any Credit Party (other than Borrower), other than those described above, are
issued and outstanding as of the Closing Date.  Except as set forth on
Schedule 3.4, as of the Closing Date there are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition from any Credit Party of any
Capital Stock of any such entity.

 

Section 3.5            Financial Information.

 

(a)           Audited Statements.  The consolidated balance sheet of Borrower
and its Consolidated Subsidiaries as of December 31, 2014, and the related
consolidated statements of operations, stockholders’ equity (or comparable
calculation, if such Person is not a corporation) and cash flows for the fiscal
year then ended, reported on by Grant Thornton LLP, copies of which have been
delivered to the Initial Lenders, fairly present in all material respects, in
conformity with GAAP, the consolidated financial position of Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations, changes in stockholders’ equity (or comparable calculation) and cash
flows for such period.

 

47

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

 

(b)                                 Unaudited Statements. The unaudited
consolidated balance sheet of Borrower and its Consolidated Subsidiaries as of
June 30, 2015 and the related unaudited consolidated statements of operations
and cash flows for the six (6) months then ended, copies of which have been
delivered to the Initial Lenders, fairly present in all material respects, in
conformity with GAAP applied on a basis consistent with the financial statements
referred to in Section 3.5(a), the consolidated financial position of Borrower
and its Consolidated Subsidiaries as of such date and their consolidated results
of operations and cash flows for the six (6) months then ended (subject to
normal year-end adjustments and the absence of footnote disclosures).

 

(c)                                  No Material Adverse Change.  Since
December 31, 2014, other than has been Publicly Disclosed, there has been no
Material Adverse Effect.  As of the date of delivery of each financial statement
required by Section 4.1(b), since December 31, 2014, other than has been
Publicly Disclosed, there has been no Material Adverse Effect.

 

Section 3.6                                    Litigation.

 

Except as set forth on Schedule 3.6, there is no Litigation pending or to the
knowledge of Borrower threatened against or affecting Borrower or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
decision and that, if adversely decided, could reasonably be expected to have a
Material Adverse Effect or (ii) which in any manner draws into question the
validity of any of the Financing Documents.

 

Section 3.7                                    Ownership of Property.

 

Each Credit Party is the lawful owner of, has Defensible Title to and is in
lawful possession of, or has valid leasehold interests in, all material
properties and other assets (real or personal, tangible, intangible or mixed)
purported or reported to be owned or leased (as the case may be) by such Person,
except as may have been disposed of in the Ordinary Course of Business or
otherwise in compliance with the terms hereof.

 

Section 3.8                                    No Default.

 

No Default or Event of Default has occurred and is continuing.  No Credit Party
is in breach or default under or with respect to any contract, agreement, lease
or other instrument to which it is a party or by which its property is bound or
affected, which breach or default could reasonably be expected to have a
Material Adverse Effect.

 

Section 3.9                                    Labor Matters.

 

As of the Closing Date, there are no strikes or other labor disputes pending or,
to Borrower’s knowledge, threatened against any Credit Party.  Hours worked and
payments made to the employees of the Credit Parties have not been in violation
of the Fair Labor Standards Act or any other applicable Law dealing with such
matters, except as could not reasonably be expected to have a Material Adverse
Effect.  All payments due from the Credit Parties, or for which any claim may be
made against any of them, on account of wages and employee and retiree health
and welfare insurance and other benefits have been paid or accrued as a
liability on their books, as the case may be.  The consummation of the
transactions contemplated by the Financing Documents and the other Financing
Documents will not give rise to a right of

 

48

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

 

termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which it is a party or by which it is bound.

 

Section 3.10                             Regulated Entities.

 

No Credit Party is an “investment company” or a company “controlled” by an
“investment company” or a “subsidiary” of an “investment company,” all within
the meaning of the Investment Company Act of 1940.

 

Section 3.11                             Margin Regulations.

 

None of the proceeds from the Loans have been or will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock, for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any Margin Stock, in either case in violation of
Regulation T, U or X of the Federal Reserve Board, or for any other purpose
which might cause any of the Loans to be considered a “purpose credit” within
the meaning of and in violation of Regulation T, U or X of the Federal Reserve
Board.

 

Section 3.12                             Compliance With Laws; Anti-Terrorism
Laws.

 

(a)                                 Laws Generally.  Each Credit Party is in
compliance with the requirements of all applicable Laws, except for such Laws
the noncompliance with which could not reasonably be expected to have a Material
Adverse Effect.

 

(b)                                 Anti-Terrorism Laws.  None of Borrower nor
the other Credit Parties and, to the knowledge of the Credit Parties, none of
their Affiliates nor agents acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement (i) is in violation of or
has engaged in any conduct that would be sanctionable under any Anti-Terrorism
Law, (ii) engages in or conspires to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in any Anti-Terrorism Law, (iii) is a Blocked
Person, or is controlled by a Blocked Person, (iv) is acting or will act for or
on behalf of a Blocked Person, (v) is associated with, or will become associated
with, a Blocked Person or (vi) is providing, or will provide, material,
financial or technical support or other services to or in support of acts of
terrorism of a Blocked Person.  No Credit Party nor, to the knowledge of any
Credit Party, any of its Affiliates or agents acting or benefiting in any
capacity in connection with the transactions contemplated by this Agreement,
(A) conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person, or
(B) deals in, or otherwise engages in any transaction relating to, any property
or interest in property blocked pursuant to Executive Order No. 13224, any
similar executive order or other Anti-Terrorism Law.  Borrower and each of the
Credit Parties has adopted, maintains and enforces policies, procedures and
controls designed to ensure compliance with Anti-Terrorism Laws and intended to
ensure no dealings or transactions with any Blocked Person.

 

Section 3.13                             Taxes.

 

Except subject to a Permitted Contest or where the failure to do so could not
reasonably be expected to have a Material Adverse Effect:  (i) all Federal,
state and local tax

 

49

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

 

returns, reports and statements required to be filed by or on behalf of each
Credit Party have been filed with the appropriate Governmental Authorities in
all jurisdictions in which such returns, reports and statements are required to
be filed and, all Taxes (including real property Taxes and state and local sales
and use Taxes) and other charges (whether or not shown to be due and payable in
respect thereof) have been timely paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for nonpayment
thereof and (ii) all Federal and state returns have been filed by each Credit
Party for all periods for which returns were due with respect to employee income
tax withholding, social security and unemployment taxes, and the amounts shown
thereon to be due and payable have been paid in full or adequate provisions
therefor have been made.

 

Section 3.14                             Compliance with ERISA.

 

No ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse
Effect.  Each Plan is in material compliance with ERISA, the Code and any
applicable law.  Except as could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect:  (1) no liability
to the PBGC (other than required premium payments) or to the IRS has been or is
expected to be incurred by Borrower or any ERISA Affiliates with respect to any
Plan; (2) all amounts required by applicable law with respect to, or by the
terms of, any retiree welfare benefit arrangement maintained by Borrower or any
ERISA Affiliate or to which Borrower or any ERISA Affiliate has an obligation to
contribute have been accrued in accordance with Accounting Standards
Codification Topic 715-60; and (3) the present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of
Accounting Standards Codification Topic No. 715-30) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Accounting Standards Codification Topic
No. 715-30) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed the fair market value of the assets of all such
underfunded Plans.

 

Section 3.15                             Brokers.

 

Except as set forth on Schedule 3.15, and except for fees payable to
Administrative Agent and/or Lenders, no broker, finder or other intermediary has
brought about the obtaining, making or closing of the transactions contemplated
by the Financing Documents, and no Credit Party has or will have any obligation
to any Person in respect of any finder’s or brokerage fees in connection
herewith or therewith.

 

Section 3.16                             Environmental Compliance.

 

Except as set forth in Schedule 3.16, and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, neither Borrower nor any of its
Subsidiaries (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability,

 

50

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

 

(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.

 

Section 3.17                             Intellectual Property.

 

Each Credit Party owns, is licensed to use or otherwise has the right to use,
all Intellectual Property that is material to the condition (financial or
other), business or operations of such Credit Party.  To Borrower’s knowledge,
each Credit Party conducts its business without infringement or claim of
infringement of any Intellectual Property rights of others and there is no
infringement or claim of infringement by others of any Intellectual Property
rights of any Credit Party, which infringement or claim of infringement could
reasonably be expected to have a Material Adverse Effect.

 

Section 3.18                             [Reserved].

 

Section 3.19                             Full Disclosure.

 

None of the written information (financial or otherwise) furnished by or on
behalf of any Credit Party to Administrative Agent or any Lender in connection
with the consummation of the transactions contemplated by the Financing
Documents (excluding projections, estimates, and engineering reports), taken as
a whole, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading on the date such information is dated or certified in light of the
circumstances under which such statements were made.  To the best knowledge of
Borrower, the engineering reports delivered to Administrative Agent and/or the
Lenders in connection with this Agreement do not contain any material
inaccuracies and/or omissions.  The said engineering reports, however, are based
upon professional opinions, estimates and projections and Borrower does not
warrant that such opinions, estimates and projections will ultimately prove to
have been accurate.  All other financial projections and estimates delivered to
Administrative Agent and Lenders have been prepared on the basis of the
assumptions stated therein.  Such projections and estimates represent as of such
time Borrower’s best estimate of Borrower’s future financial performance and
such assumptions were as of such time believed by Borrower to be fair and
reasonable in light of then current business conditions; provided that Borrower
can give no assurance that such projections or estimates will be attained.

 

Section 3.20                             Reserve Reports, Imbalances and
Marketing Matters.

 

(a)                                 Except as set forth on Schedule 3.20,
Borrower and each Guarantor has Defensible Title to each Mortgaged Property
having a book cost in excess of $2,000,000 (except to the extent that (1) such
assets have thereafter been disposed of in compliance with this Agreement or
(2) leases for such property have expired pursuant to their terms), in each case
free and clear of all Liens, except (i) Permitted Liens, (ii) obligations or
duties to any municipality or public authority with respect to any franchise,
grant, license or permit and all applicable laws, rules, regulations and orders
of any Governmental Authority, (iii) all lessors’ royalties, overriding
royalties, net profits interests, production payments, carried interests,
reversionary interests and other burdens on or deductions from the proceeds of
production, (iv) the terms and conditions of joint operating agreements and
other oil and gas contracts, (v) all rights to consent

 

51

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

 

by required notices to, and filing with or other actions by governmental or
tribal entities, if any, in connection with the change of ownership or control
of an interest in federal, state, tribal or other domestic governmental oil and
gas leases, if the same are customarily obtained in connection with such change
of ownership or control, but only insofar as such consents, notices, filings and
other actions relate to the transactions permitted by this Agreement, (vi) any
preferential purchase rights, (vii) required third party consents to assignment,
(viii) conventional rights of reassignment prior to abandonment and (ix) the
terms and provisions of oil and gas leases, unit agreements, pooling agreements,
and other documents creating interests comprising the Oil and Gas Properties,
Hydrocarbons and Hydrocarbon Interests; provided, however, the exceptions
described in clauses (i) through (viii) inclusive above are qualified to include
only those exceptions in each case which do not operate to (A) materially reduce
the net revenue interest of Borrower or any Guarantor below that set forth in
the Reserve Report, (B) materially increase the proportionate share of costs and
expenses of leasehold operations attributable to or to be borne by the working
interest of Borrower or any Guarantor above that set forth in the Reserve Report
without a proportionate increase in the net revenue interest of Borrower or such
Guarantor or (C) materially increase the working interest of Borrower or any
Guarantor above that set forth in the Reserve Report without a proportionate
increase in the net revenue interest of Borrower or such Guarantor, and provided
further that the foregoing defects, limitations, liens and encumbrances, whether
individually material or not, do not in the aggregate create a Material Adverse
Effect (the categories of exceptions in clauses (i) through (ix), as so
qualified and as any such exceptions may exist from time to time, being referred
to as the “Designated Title Exceptions”).

 

(b)                                 After giving full effect to the Permitted
Liens, except as set forth on Schedule 5.2, the Credit Parties own the net
interests in production attributable to the wells and units evaluated in the
Initial Reserve Report or the most recent Reserve Report furnished to the
Lenders pursuant to Section 4.1(i) or (j), as applicable, or except to the
extent that (i) such assets have thereafter been disposed of incompliance with
this Agreement or (ii) leases for such property have expired pursuant to their
terms.  Except as provided in paragraph (a) above, the ownership of such Oil and
Gas Properties shall not in any material respect obligate the Credit Parties to
bear the costs and expenses relating to the maintenance, development and
operations of each such Oil and Gas Property in any amount materially in excess
of the working interest of each Oil and Gas Property set forth in the Initial
Reserve Report or the most recent Reserve Report furnished to the Lenders
pursuant to Section 4.1(i) or (j), as applicable.  The Credit Parties have paid
all royalties payable under the oil and gas leases to which they are an
operator, except those not yet due or contested in accordance with the terms of
the applicable joint operating agreement or otherwise contested in good faith by
appropriate proceedings or where failure to so pay could not reasonably be
expected to have a Material Adverse Effect.  Upon the delivery of each Reserve
Report furnished to the Lenders pursuant to Section 4.1(i) or (j), as
applicable, the statements made in the preceding sentences of this section
shall, as of the date of such Reserve Report, be true in all material respects
with respect to such Reserve Reports.

 

Section 3.21                             Maintenance and Development of
Properties.

 

Except as set forth on Schedule 3.21, as of the effective date of each Reserve
Report with respect to the Oil and Gas Properties reflected in such Reserve
Report, the Oil and Gas Properties (and all properties unitized therewith) are
being maintained, operated and

 

52

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

 

developed in a good and workmanlike manner, in accordance with prudent industry
standards and in conformity with (i) all applicable Laws, (ii) all oil, gas or
other mineral leases and other contracts and agreements forming a part of such
Oil and Gas Properties and (iii) any Permitted Liens burdening such Oil and Gas
Properties, except to the extent the failure to so comply would not reasonably
be expected to have a Material Adverse Effect.  Except as set forth on
Schedule 3.16, each Credit Party has all governmental licenses and permits
necessary or appropriate to own and operate the Oil and Gas Properties, except
where a failure to have such licenses or permits could not reasonably be
expected to have a Material Adverse Effect, and no Credit Party has received
notice of any violations in respect of any such licenses or permits which
violation could reasonably be expected to have a Material Adverse Effect.

 

Section 3.22                             Security Documents.

 

The Security Documents are effective to create in favor of the Administrative
Agent, for the benefit of the Secured Parties, a legal, valid and enforceable
security interest in the Collateral described therein and proceeds thereof. 
When stock certificates representing Collateral are delivered to the
Administrative Agent (together with a properly completed and signed stock power
or endorsement) or the administrative agent under the First Lien Credit
Agreement, and in the case of the other Collateral (other than the Mortgages
described below), when financing statements are filed in the appropriate
offices, the Security Documents shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Credit Parties in
such Collateral (to the extent such Collateral can be perfected by the actions
described above) and the proceeds thereof, as security for the Obligations, in
each case prior and superior in right to any other Person (subject only to
Permitted Liens).  Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Secured Parties, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the appropriate offices, each such
Mortgage shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the Credit Parties in the Mortgaged Properties
and the proceeds thereof, as security for the Obligations, in each case prior
and superior in right to any other Person (subject only to Permitted Liens).

 

ARTICLE 4
AFFIRMATIVE COVENANTS

 

Borrower agrees that:

 

Section 4.1                                    Financial Statements and Other
Reports.

 

Borrower will maintain and will cause each Credit Party to maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with GAAP
and to provide the information required to be delivered to Administrative Agent
and Lenders hereunder, and will deliver to Administrative Agent and each Lender,
upon such Lender’s request, all of the following deliveries:

 

53

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

 

(a)                                 Quarterly Financial Statements.  As soon as
practicable and in any event within forty-five (45) days after the end of the
first three fiscal quarters, a consolidated balance sheet of Borrower and its
Consolidated Subsidiaries as of and at the end of such quarter and the related
consolidated statements of operations and cash flows for such quarter, and for
the portion of the Fiscal Year ended at the end of such quarter setting forth in
each case in comparative form the figures for the corresponding periods of the
previous Fiscal Year and the figures for such quarter and for such portion of
the Fiscal Year ended at the end of such quarter, all in reasonable detail and
certified by a Responsible Officer as fairly presenting in all material respects
the financial condition and results of operations of Borrower and its
Consolidated Subsidiaries and as having been prepared in accordance with GAAP
applied on a basis consistent with the audited financial statements of Borrower,
subject to changes resulting from audit and normal year end adjustments and the
absence of footnote disclosures.

 

(b)                                 Annual Financial Statements.  As soon as
available and in any event within ninety (90) days after the end of each Fiscal
Year, an audited consolidated balance sheet of Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Year and the related audited
consolidated statements of operations, stockholders’ equity (or the comparable
item, if Borrower is not a corporation) and cash flows for such Fiscal Year,
setting forth in each case in comparative form the figures for the previous
Fiscal Year, reported on without qualification (including with respect to the
scope of audit, but excluding any “going concern” qualification) or exception
arising out of the scope of the audit, by independent public accountants of
nationally recognized standing and reasonably acceptable to the Lead Lenders.

 

(c)                                  Compliance Certificates.  Together with
each delivery of financial statements pursuant to Sections 4.1(a) and 4.1(b),
(i) a Compliance Certificate and (ii) if Borrower is no longer subject to the
public reporting requirements under the rules of the Securities and Exchange
Commission, a management report (A) describing the operations and financial
condition of Borrower and its Consolidated Subsidiaries for the fiscal period
covered by such financial statements and the portion of the current Fiscal Year
then elapsed (or for the Fiscal Year then ended in the case of year-end
financials) and (B) discussing the reasons for any significant variations as
between the fiscal period covered and the portion of the Fiscal Year then
elapsed, as between such periods and the same periods during the immediately
preceding Fiscal Year, and as between such periods and the same periods included
in the projections and forecasts delivered pursuant to Section 4.1(h), all such
information to be presented in reasonable detail and to be certified by a
Responsible Officer to the effect that such information fairly presents, in all
material respects, the results of operations and financial condition of Borrower
and its Consolidated Subsidiaries as at the dates and for the periods indicated.

 

(d)                                 Regulatory Filing Information.  Promptly
upon their becoming Publicly Disclosed, copies of (i) all financial statements,
reports, notices and proxy statements sent or made available generally by any
Credit Party to its security holders, (ii) all regular and periodic reports and
all registration statements and prospectuses filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
successor, (iii) all press releases and other statements made available
generally by any Credit Party concerning material developments in the business
of any Credit Party and (iv) all Swap Contracts entered into by any Credit
Party.

 

54

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

 

(e)                                  Notices of Material Events.  Promptly upon
any Responsible Officer of any Credit Party obtaining knowledge of (i) the
existence of any Event of Default or Default, or becoming aware that the holder
of any Debt of any Credit Party in excess of $10,000,000 has given any notice or
taken any other action with respect to a claimed default thereunder, (ii) the
institution of any Litigation seeking equitable relief or involving an alleged
liability of any Credit Party equal to or greater than $10,000,000 above
insurance coverage or any adverse determination in any Litigation involving
equitable relief or a potential liability of any Credit Party equal to or
greater than $10,000,000 above insurance coverage, (iii) the institution of any
dispute, litigation, investigation, proceeding or suspension by any Governmental
Authority in respect of any Credit Party or any property of any Credit Party
that, if adversely determined, could reasonably be expected to have a Material
Adverse Effect, (iv) any loss, damage or destruction of any Collateral having a
fair market value in excess of $10,000,000, whether or not covered by insurance,
or (v) any other development that results in or could reasonably be expected to
have a Material Adverse Effect, a certificate of a Responsible Officer
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person and the
nature of such claimed default (including any Event of Default or Default),
event or condition, and what action the applicable Credit Party has taken, is
taking or proposes to take with respect thereto.

 

(f)                                   ERISA Notices.  Borrower or an ERISA
Affiliate shall provide, promptly following receipt thereof, copies of (i) any
documents described in Sections 101(k) or 101(l) of ERISA that Borrower or any
ERISA Affiliate may request with respect to any Multiemployer Plan or any
documents described in Section 101(f) of ERISA that Borrower or any ERISA
Affiliate may request with respect to any Plan; provided, that if Borrower or
ERISA Affiliates have not requested such documents or notices from the
administrator or sponsor of the applicable Multiemployer Plans, then, upon
reasonable request of the Administrative Agent, Borrower or the ERISA Affiliate
shall promptly make a request for such documents or notices from such
administrator or sponsor and Borrower shall provide copies of such documents and
notices to the Administrative Agent promptly after receipt thereof.

 

(g)                                  Environmental Notices.  Promptly upon any
Responsible Officer of any Credit Party obtaining knowledge of any written
complaint, order, citation, notice or other written communication from any
Person delivered to any Credit Party with respect to, or if any Responsible
Officer of any Credit Party becomes aware of (i) the existence or alleged
existence of a violation by any Credit Party of any applicable Environmental
Law, which could reasonably be expected to have a Material Adverse Effect,
(ii) any release by any Credit Party of any Hazardous Materials into the
environment which could reasonably be expected to have a Material Adverse
Effect, (iii) the commencement by any Credit Party of any cleanup of any
Hazardous Materials, which could reasonably be expected to result in costs to a
Credit Party in excess of $2,000,000 above insurance coverage, (iv) any pending
legislative or threatened governmental proceeding for the termination,
suspension or non-renewal of any Permit of any Credit Party required under any
applicable Environmental Law, which termination, suspension or non-renewal could
reasonably be expected to have a Material Adverse Effect, or (v) any property of
any Credit Party that is or will be subject to a Lien imposed pursuant to any
Environmental Law, a certificate of a Responsible Officer specifying the nature
and period of existence of any such condition or event, or specifying the notice
given or action taken by such

 

55

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

 

holder or Person, and what action the applicable Credit Party has taken, is
taking or proposes to take with respect thereto.

 

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

 

(i)                                     Annual Reserve Report.  Prior to April 1
of each year, commencing the first such day after the Closing Date, a Reserve
Report effective as of December 31 of the preceding year, prepared by
independent petroleum engineers chosen by Borrower and reasonably acceptable to
the Lead Lenders, concerning all Oil and Gas Properties owned by any Credit
Party which are located in the United States and which have attributable to them
Proved Reserves.  The report shall (i) be in form delivered to the First Lien
Agent, (ii) take into account any “over-produced” status under gas balancing
arrangements, (iii) contain information and analysis sufficient to enable
Borrower to meet the reporting requirements concerning oil and gas reserves
contained in Regulations S-K and SX promulgated by the Securities and Exchange
Commission and (iv) distinguish (or be delivered together with a certificate
from an appropriate officer of Borrower which distinguishes) those Oil and Gas
Properties treated in the report that are Collateral from those Oil and Gas
Properties in the report that are not, which report shall be accompanied by a
report detailing the Swap Contracts of the Credit Parties relating to commodity
prices that are then currently in effect.

 

(j)                                    Interim Reserve Report.  Prior to
October 1 of each year, commencing the first such day after the Closing Date, a
Reserve Report effective as of the preceding June 30 by petroleum engineers who
are employees of Borrower (or, at Borrower’s option, by an independent engineers
as specified above), in the same form and scope as the report in Section 4.1(i),
which report shall be accompanied by updates, if any, to the most recent reports
specified in Section 4.1(i) to the extent necessary for such reports to be
accurate in all material respects on the date of the applicable Reserve Report
provided pursuant to this Section 4.1(j).

 

(k)                                 Reserve Documents.  At the time of delivery
of any report pursuant to Section 4.1(i) or (j):  (i) a report detailing by
lease or unit the gross volume of production and sales attributable to
production of Hydrocarbons from the Oil and Gas Properties described in the most
recent Reserve Report for the month most recently available and for each prior
month since the last report delivered pursuant to this subsection and describing
the related severance taxes, other taxes, and leasehold operating expenses
attributable to each lease or unit and incurred during each such month, (ii) a
list of Persons purchasing any material production of Hydrocarbons from the Oil
and Gas Properties, and (iii) such other reports, data and supplemental
information necessary to cause the representations and warranties contained in
Section 3.20 and Section 3.21 to be true and correct and such other information
as may be reasonably requested by Administrative Agent or Lead Lenders (the
Reserve Report, such certificate and such reports, data and supplemental
information, the “Reserve Documents”).

 

56

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

 

(l)                                     Swap Contracts.  Together with each
delivery of financial statements pursuant to Sections 4.1(a) and 4.1(b), a
report detailing the Swap Contracts of the Credit Parties relating to commodity
prices that are then currently in effect.

 

(m)                             Credit Party Information.  With reasonable
promptness, such other information and data with respect to any Credit Party as
from time to time may be delivered to the First Lien Agent.

 

(n)                                 First Lien Credit Agreement.  Any amendment,
modification, waiver or consent of the First Lien Credit Agreement or any notice
delivered to any Credit Party by the First Lien Agent or the lenders or other
secured parties under the First Lien Credit Agreement.

 

Documents required to be delivered pursuant to Section 4.1(a), Section 4.1(b) or
Section 4.1(e) (to the extent any such documents are included in materials
otherwise filed with the Securities and Exchange Commission) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date (i) on which Borrower posts such documents, or provides a link thereto
on Borrower’s website on the Internet at http://www.warrenresources.com; or
(ii) on which such documents are posted on Borrower’s behalf on an Internet or
intranet website reasonably acceptable to Administrative Agent to which each
Lender and Administrative Agent have access; provided that Borrower shall notify
Administrative Agent and each Lender (by telecopier or electronic mail) of the
posting of any such documents, and Borrower shall provide to Administrative
Agent by electronic mail electronic versions (i.e., soft copies) of such
documents; notwithstanding anything contained herein, in every instance Borrower
shall be required to provide paper copies of the compliance certificate required
by Section 4.1(c) to Administrative Agent, which shall then promptly furnish
such compliance certificate to the Lenders.  Except for such compliance
certificates, Administrative Agent shall have no obligation to request the
delivery copies of the documents referred to above, and in any event shall have
no responsibility to monitor compliance by Borrower with any such request for
delivery, and each Lender shall be solely responsible for requesting delivery to
it or maintaining its copies of such documents.

 

Section 4.2                                    Payment and Performance of
Obligations.

 

Borrower (i) will pay and discharge, and cause each other Credit Party to pay
and discharge, at or before maturity, all of their respective obligations and
liabilities, including tax liabilities, except for such obligations and/or
liabilities (A) that may be the subject of a Permitted Contest and (B) the
nonpayment or nondischarge of which could not reasonably be expected to have a
Material Adverse Effect, (ii) will maintain, and cause each other Credit Party
to maintain, in accordance with GAAP, appropriate reserves for the accrual of
all of their respective obligations and liabilities and (iii) will not breach or
permit any other Credit Party to breach, or permit to exist any default under,
the terms of any lease, commitment, contract, instrument or obligation to which
it is a party, or by which its properties or assets are bound, except for such
breaches or defaults which could not reasonably be expected to have a Material
Adverse Effect.

 

57

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

 

Section 4.3                                    Maintenance of Existence.

 

Borrower will, and will cause each of its Restricted Subsidiaries to, do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect (a) its legal existence and (b) except where the failure to do so
could not reasonably be excepted to result in a Material Adverse Effect, the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 5.7.

 

Section 4.4                                    Maintenance of Property;
Insurance.

 

(a)                                 Maintenance of Property and Insurance. 
Borrower will, and will cause each of its Restricted Subsidiaries to, (i) keep
and maintain all operating equipment material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted, and
(ii) maintain, with financially sound and reputable insurance companies,
insurance in such amounts and against such risks as are customarily maintained
by companies engaged in the same or similar businesses operating in the same or
similar locations.  All such insurance shall be provided by insurers having an
A.M. Best policyholders rating reasonably acceptable to the Lead Lenders. 
Borrower will not, and will not permit any other Credit Party to, bring or keep
any article on any business location of any Credit Party, or cause or allow any
condition to exist, if the presence of such article or the occurrence of such
condition could reasonably cause the invalidation of any insurance required by
this Section 4.4(a), or would otherwise be prohibited by the terms thereof.

 

(b)                                 Evidence of Insurance Coverage.  On or prior
to the Closing Date, and at all times thereafter, Borrower will cause
Administrative Agent to be named as an additional insured and loss payee (which
shall include, as applicable, identification as mortgagee), as applicable, on
each insurance policy required to be maintained pursuant to this Section 4.4
pursuant to endorsements in form and substance reasonably acceptable to the Lead
Lenders.  Borrower will deliver to Administrative Agent and Lenders (i) on the
Closing Date, a certificate from Borrower’s insurance broker dated such date
showing the amount of coverage as of such date, and that such policies will
include effective waivers of applicable rights of subrogation against loss
payees and additional insureds, and that if all or any part of such policy is
canceled, terminated or expires, the insurer will endeavor to give notice
thereof to each additional insured and loss payee at least thirty (30) days
prior thereto, (ii) on an annual basis, and upon the request of any Lender
through Administrative Agent from time to time full information as to the
insurance carried, (iii) within five (5) Business Days of receipt of notice from
any insurer, a copy of any notice of cancellation, nonrenewal or material change
in coverage from that existing on the date of this Agreement and (iv) forthwith,
notice of any cancellation or nonrenewal of coverage by Borrower.

 

(c)                                  Right to Purchase Insurance.  In the event
Borrower fails to provide Administrative Agent with evidence of the insurance
coverage required by this Agreement within three (3) Business Days after request
therefor, Administrative Agent may after twenty (20) days’ notice to Borrower,
purchase insurance at Borrower’s expense to protect Administrative Agent’s
interests in the Collateral.  This insurance may, but need not, protect
Borrower’s interests.  The coverage purchased by Administrative Agent may not
pay any claim

 

58

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

 

made by Borrower or any claim that is made against Borrower in connection with
the Collateral.  Borrower may later cancel any insurance purchased by
Administrative Agent, but only after providing Administrative Agent with
evidence that Borrower has obtained insurance as required by this Agreement.  If
Administrative Agent purchases insurance for the Collateral, Borrower will be
responsible for the costs of that insurance to the fullest extent provided by
Law including interest and other charges imposed by Administrative Agent in
connection with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance.  The costs of the insurance may be
added to the Obligations.  The costs of the insurance may be more than the cost
of insurance Borrower is able to obtain on its own.

 

Section 4.5                                    Compliance with Laws.

 

Borrower will comply, and cause each other Credit Party to comply, with the
requirements of all applicable Laws, except to the extent that failure to so
comply could not reasonably be expected to have a Material Adverse Effect or
result in any Lien upon a material portion of the assets of any such Person in
favor of any Governmental Authority.

 

Section 4.6                                    Inspection of Property, Books and
Records.

 

Borrower will keep, and will cause each other Credit Party to keep, proper books
of record and account in accordance with GAAP; and will permit, and will cause
each other Credit Party to permit, at the sole cost of Borrower or any
applicable other Credit Party, representatives of Administrative Agent and of
any Lender (but at such Lender’s expense unless such visit or inspection is made
concurrently with Administrative Agent or is made during the existence and
continuance of an Event of Default) to visit and inspect any of their respective
properties, to examine and make abstracts or copies from any of their respective
books and records, to conduct a collateral audit and analysis of their
respective inventory and accounts and to discuss their respective affairs,
finances and accounts with their respective officers, as often as may reasonably
be desired, subject in all cases to any confidentiality restrictions that may be
applicable to Borrower and its Subsidiaries and to any confidentiality
restrictions that Borrower reasonably imposes on the Persons receiving such
information; provided, however, that neither Borrower nor any of its
Subsidiaries shall be required to disclose to Administrative Agent or any agents
or representatives thereof any information which is the subject of
attorney-client privilege or attorney’s work product privilege properly asserted
by the applicable Person to prevent the loss of such privilege in connection
with such information; and provided, further, that Borrower will use
commercially reasonable efforts to furnish such information (excluding
information covered by confidentiality restrictions in agreements relating to
seismic, geologic or geophysical data or similar technical and business matters
relating to the exploration for oil and gas), which requirement shall be
satisfied if Administrative Agent is offered the opportunity to review such
confidential information by executing or otherwise becoming a party to the
confidentiality restrictions on substantially the same terms (including any
standstill provisions) as are applicable to Borrower.  In the absence of an
Event of Default, Administrative Agent or any Lender exercising any rights
pursuant to this Section 4.6 shall give Borrower or any applicable other Credit
Party commercially reasonable prior written notice of such exercise.  No notice
shall be required during the existence and continuance of any Event of Default.

 

59

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

 

Section 4.7                                    Use of Proceeds.

 

The proceeds of the Loans shall be used by Borrower solely for lawful corporate
purposes (not in violation of this Agreement), including to finance corporate
and capital expenditures and permitted acquisitions of Oil and Gas Properties
and other assets related to the exploration, production, development,
processing, gathering, storage and transportation of Hydrocarbons and for
working capital needs of Credit Parties.

 

Section 4.8                                    Lenders’ Meetings.

 

Promptly after the delivery to Administrative Agent and Lenders of Reserve
Reports pursuant to Section 4.1(i) or (j), Borrower will, in each case to the
extent reasonably requested by either Administrative Agent or Lead Lenders,
conduct a meeting of Administrative Agent and Lenders to discuss the most
recently reported financial results and the financial condition and engineering
projections of Borrower and its Subsidiaries, at which shall be present a
Responsible Officer and such other officers of the Credit Parties as may be
reasonably requested to attend by Administrative Agent or Lead Lenders, such
request or requests to be made within a reasonable time prior to the scheduled
date of such meeting.  Such meetings shall be held at a time and place
convenient to Lenders and to Borrower.

 

Section 4.9                                    Hazardous Materials; Remediation.

 

If any release or disposal of Hazardous Materials shall occur or shall have
occurred on any real property or any other assets of Borrower or any other
Credit Party, which could reasonably be expected to have a Material Adverse
Effect, Borrower will cause, or direct the applicable Credit Party to cause, the
prompt containment and removal of such Hazardous Materials and the remediation
of such real property or other assets as is necessary to comply with all
Environmental Laws and to preserve the value of such real property or other
assets.  Without limiting the generality of the foregoing, Borrower shall, and
shall cause each other Credit Party to, comply with each Environmental Law
requiring the performance at any real property by Borrower or any other Credit
Party of activities in response to the release or threatened release of a
Hazardous Material, except where the failure to so comply could not reasonably
be expected to have a Material Adverse Effect.

 

Section 4.10                             Further Assurances.

 

(a)                                 General.  Borrower will, and will cause each
other Credit Party, at its own cost and expense, to promptly and duly take,
execute, acknowledge and deliver all such further acts, documents and assurances
as Administrative Agent or Lead Lenders may from time to time reasonably request
in order to carry out the intent and purposes of the Financing Documents and the
transactions contemplated thereby, including all such actions to establish,
create, preserve, protect and perfect a second priority Lien (subject only to
Permitted Liens) in favor of Administrative Agent for the benefit of the Secured
Parties on the Collateral (including Collateral acquired after the date hereof),
including on any and all assets of each Credit Party, whether now owned or
hereafter acquired.

 

(b)                                 New Subsidiaries.  Without limiting the
generality of the foregoing, in the event Borrower or any of its Restricted
Subsidiaries shall form any new Restricted Subsidiary after the

 

60

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

 

date hereof (including the re-designation of an Unrestricted Subsidiary as a
Restricted Subsidiary), Borrower or the respective Restricted Subsidiary will
cause such new Restricted Subsidiary, promptly following such formation or
re-designation (excluding any Excluded Subsidiary), (i) to execute a Guarantee
(in form and substance reasonably acceptable to Administrative Agent)
guaranteeing payment and performance of all of the Obligations and to execute a
joinder to the Security Agreement and to take such other action (including,
without limitation, authorizing the filing of such UCC financing statements and
delivering certificates in respect of the Capital Stock of such Restricted
Subsidiary) as shall be necessary or appropriate to establish, create, preserve,
protect and perfect a second priority Lien (subject only to Permitted Liens) in
favor of Administrative Agent for the benefit of the Secured Parties to the
extent required by Section 4.10(e), (ii) to execute such other Security
Documents and Collateral Documents, in form and substance reasonably acceptable
to Administrative Agent and the Lead Lenders, as may be required or requested by
Administrative Agent and the Lead Lenders in connection with the actions
contemplated hereby and (iii) to deliver such proof of corporate (or comparable)
action, incumbency of officers, opinions of counsel and other documents as
Administrative Agent and the Lead Lenders shall have reasonably required or
requested.

 

(c)                                  Capital Stock.  Borrower will, and will
cause each of its Restricted Subsidiaries, to take such action from time to time
as shall be necessary to ensure that each of its Restricted Subsidiaries is a
Wholly-Owned Subsidiary and that Administrative Agent shall have, for the
benefit of the Secured Parties, a second priority Lien on all Capital Stock of
each Restricted Subsidiary, provided that neither Borrower nor any Restricted
Subsidiary shall be required to pledge (i) more than 65% of the voting stock of
(A) any First-tier Foreign Subsidiary, or (B) any Domestic Subsidiary that is a
FSHCO or is owned directly or indirectly by a CFC, or (ii) the Capital Stock of
a Foreign Subsidiary that is not a First-tier Foreign Subsidiary. Subject to the
foregoing limitations, in the event that any additional Capital Stock shall be
issued by any Restricted Subsidiary, Borrower shall or shall cause each of its
Restricted Subsidiaries to, promptly following such issuance, deliver to
Administrative Agent to the extent required by the applicable Financing
Documents the certificates evidencing such Capital Stock, accompanied by undated
powers executed in blank and to take such other action as Administrative Agent
shall request to perfect the security interest created therein pursuant to such
Financing Documents and Intercreditor Agreements.

 

(d)                                 Mortgage of Oil and Gas Property.  Prior to
March 1 and September 1 of each calendar year, Borrower shall review the Reserve
Report and the list of current Mortgaged Properties to ascertain whether the
Mortgaged Properties represent at least 90% of the total PV-10 Value of Proved
Reserves attributable to the Oil and Gas Properties evaluated in the most
recently completed Reserve Report after giving effect to any exploration and
production activities, acquisitions, dispositions and production.  In the event
that the Mortgaged Properties do not represent at least 90% of such total PV-10
Value, then on or prior to such March 1 or September 1, as applicable, Borrower
shall, and shall cause its Restricted Subsidiaries to, grant to Administrative
Agent as security for the Obligations a second-priority Lien (subject only to
Permitted Liens) under the Mortgages on additional Oil and Gas Properties not
already subject to such a Lien under the Mortgages such that after giving effect
thereto, the Mortgaged Properties will represent at least 90% of the total PV-10
Value of Proved Reserves attributable to the Oil and Gas Properties evaluated by
the relevant Reserve Report.

 

61

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

 

(e)                                  Other Collateral.  Upon Administrative
Agent’s request, given at the direction of the Required Lenders, Borrower will
and will cause its Restricted Subsidiaries (excluding any Excluded Subsidiary)
to grant Liens as security for the Obligations on (i) assets and interests
related to the Mortgaged Properties, including related operating equipment,
accounts, inventory, contract rights and all products, proceeds and other
interests related to the ownership, operation and or production of the Mortgaged
Properties and (ii) all other material facilities (including gathering,
transportation, compression, processing, treating and storage facilities) and
other material real and personal property owned by it from time to time
(excluding any interest in any Unrestricted Subsidiaries and any Excluded
Property (as defined in the Mortgages)).

 

(f)                                   Production Proceeds.  Notwithstanding that
by the terms of the Mortgages, Credit Parties are and will be assigning to
Administrative Agent for the benefit of the Secured Parties all of the
“Production Proceeds” (as defined therein) accruing to the property covered
thereby, so long as no Event of Default has occurred, Credit Parties may
continue to receive from the purchasers of production all such Production
Proceeds, subject, however, to the Liens created under the Mortgages.  Upon the
occurrence of an Event of Default, Administrative Agent may exercise all rights
and remedies granted under the Mortgages, including the right to obtain
possession of all Production Proceeds then held by Credit Parties or to receive
directly from the purchasers of production all other Production Proceeds.  In no
case shall any failure, whether intentional or inadvertent, by Administrative
Agent or Lenders to collect directly any such Production Proceeds constitute in
any way a waiver, remission or release of any of their rights under the Security
Documents, nor shall any release of any Production Proceeds by Administrative
Agent or Lenders to Credit Parties constitute a waiver, remission, or release of
any other Production Proceeds or of any rights of Administrative Agent or
Lenders to collect other Production Proceeds thereafter.

 

(g)                                  Title Information.  Promptly upon request
of Administrative Agent, given at the direction of the Required Lenders,
Borrower will deliver title information in form delivered to the First Lien
Agent covering enough of the Oil and Gas Properties evaluated in the most
recently delivered Reserve Report, so that Administrative Agent shall have
received, together with title information previously delivered to Administrative
Agent in connection with previous Reserve Reports or otherwise, title
information evidencing the Credit Parties have Defensible Title on at least 70%
of the total PV-10 Value of Proved Reserves attributable to the Oil and Gas
Properties evaluated by such Reserve Report.  If Borrower has provided title
information for Oil and Gas Properties under the preceding sentence, Borrower
shall, within sixty (60) days of notice from Administrative Agent or Lead
Lenders that material title defects or exceptions exist with respect to such Oil
and Gas Properties such that the Credit Parties do not have Defensible Title to
70% of the PV-10 Value of such properties, either (1) cure any such material
title defects or exceptions (including defects or exceptions as to priority)
raised by such information, (2) substitute acceptable Mortgaged Properties
having at least an equivalent value such that the Credit Parties do have
Defensible Title to 70% of the PV-10 Value of such properties, or (3) deliver
title information in form and substance acceptable to Administrative Agent or
Lead Lenders so that Administrative Agent shall have received, together with
title information previously delivered to Administrative Agent, title
information evidencing the Credit Parties have Defensible Title on at least 70%
of the PV-10 Value of Proved Reserves attributable to the Oil and Gas Properties
evaluated by such Reserve Report.

 

62

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

 

Section 4.11                             Reserved.

 

Section 4.12                             Maintenance of Exchange Listing.

 

Borrower shall use its reasonable best efforts to maintain at least one class of
common shares of Borrower having trading privileges on NASDAQ or other national
exchange reasonably acceptable to the Administrative Agent and the Lead Lenders
(including by way of reverse stock split).

 

ARTICLE 5
NEGATIVE COVENANTS

 

Borrower agrees that, so long as any Credit Exposure exists:

 

Section 5.1                                    Debt.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, create, incur, assume, guarantee or otherwise become or remain
directly or indirectly liable with respect to, any Debt, except for:

 

(a)                                 Debt incurred under the Financing Documents;

 

(b)                                 Debt outstanding on the date of this
Agreement and set forth on Schedule 5.1 and any Refinancing Indebtedness in
connection therewith;

 

(c)                                  Intercompany Debt arising from loans made
by (i) Borrower to any Guarantor, (ii) any Guarantor to Borrower, (iii) Borrower
to its Restricted Subsidiaries that are Wholly-Owned Subsidiaries to fund
working capital requirements of such Restricted Subsidiaries in the Ordinary
Course of Business, or (iv) any Restricted Subsidiary that is a Wholly-Owned
Subsidiary of Borrower to Borrower; provided, however, that upon the request of
Administrative Agent at any time, any such Debt shall be evidenced by promissory
notes having terms reasonably satisfactory to Administrative Agent and Lead
Lenders, and the sole originally executed counterparts of which shall be pledged
and delivered (subject to any obligation to deliver to the First Lien Agent) to
Administrative Agent, for the benefit of the Secured Parties, as security for
the Obligations;

 

(d)                                 Guarantees by Borrower of Debt of any
Restricted Subsidiary permitted hereunder and by any Restricted Subsidiary of
Debt of Borrower or any other Restricted Subsidiary permitted hereunder;

 

(e)                                  Debt of Borrower or any Restricted
Subsidiary incurred to finance the acquisition, construction or improvement of
any fixed or capital assets, including Capital Lease Obligations and any Debt
assumed in connection with the acquisition of any such assets or secured by a
Lien on any such assets prior to the acquisition thereof, and extensions,
renewals and replacements of any such Debt that do not increase the outstanding
principal amount thereof; provided that the aggregate principal amount of Debt
permitted by this clause (e) shall not exceed $10,000,000 at any time
outstanding;

 

63

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

 

(f)                                   Debt, if any, arising under Swap Contracts
(subject to the limitations in the definition of Swap and Swap Contract), to the
extent permitted under Section 5.6;

 

(g)                                  [Reserved;]

 

(h)                                 Debt of any Person that becomes a Subsidiary
after the Closing Date; provided that such Debt exists at the time such Person
becomes a Subsidiary and is not created in contemplation of or in connection
with such Person becoming a Subsidiary;

 

(i)                                     Debt constituting Permitted Pari Debt;
provided that (A) at the time of the incurrence thereof, after giving effect
thereto, the aggregate amount of Permitted Pari Debt incurred at or prior to
such time does not exceed the positive excess, if any, of (1)(x) $20,000,000
plus (y) any additional amount of Permitted Pari Debt so long as Borrower would
be permitted to incur $1.00 of additional Permitted Pari Debt subject to a pro
forma compliance with (i) a ratio of PDP PV-10 Value to Consolidated Secured
Total Debt of not less than 0.8:1.0 and (ii) a Consolidated Secured Total
Leverage Ratio of not greater than 6.0:1.0, reduced by (2) the amount of
outstanding Debt incurred pursuant to Section 5.1(a), (B) no Default or Event of
Default shall have occurred and be continuing on the date of incurrence of such
Permitted Pari Debt and (C) Borrower shall have delivered a certificate executed
by a Responsible Officer to the Administrative Agent and the Lead Lenders
demonstrating with reasonable detail compliance with the requirements in the
preceding clauses (A) and (B) and the definition of Permitted Pari Debt;

 

(j)                                    Debt incurred to finance the acquisition
of equipment, provided that the amount of such Debt does not exceed the purchase
price of such equipment;

 

(k)                                 other Debt in an aggregate principal amount
not exceeding $5,000,000 at any time outstanding;

 

(l)                                     any Contingent Obligation permitted by
Section 5.3;

 

(m)                             Debt incurred pursuant to an Excluded Property
Leaseback;

 

(n)                                 Debt incurred under Bonds;

 

(o)                                 Debt constituting letters of credit and bank
guaranties, to the extent that such letters of credit and bank guaranties are
fully cash collateralized, in an aggregate principal amount not exceeding
$10,000,000 at any time outstanding; provided that, if any Permitted Pari Debt
is in the form of a revolving credit facility or letter of credit facility than
this basket shall be zero;

 

(p)                                 First Lien Credit Agreement Debt and
Permitted Additional First Lien Debt and any Refinancing Indebtedness in
connection therewith; provided that the aggregate amount of such Debt shall not
exceed the First Lien Debt Cap at any one time outstanding; and

 

(q)                                 Junior Lien Debt and unsecured Debt in the
form of notes or loans under credit agreements, indentures or other similar
agreements or instruments; provided that either the terms

 

64

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

 

and conditions of such Debt have been consented to by the Lead Lenders (not to
be unreasonably withheld or delayed) or:

 

(i)                                     the terms of such Debt do not provide
for any scheduled repayment, mandatory redemption or sinking fund obligations
prior to the date that is ninety one (91) days after the Maturity Date (other
than customary offers to repurchase upon a change of control, asset sale or
event of loss and customary acceleration rights after an event of default);

 

(ii)                                  the covenants, events of default and
Guarantees and other terms of such Debt (other than with respect to interest
rate and premiums):

 

A.                                    shall not include any financial
maintenance covenants; and

 

B.                                    shall comply with one (or more) of the
following statements with respect to such covenants, events of default and
Guarantees and other terms of such Debt, as determined in good faith by the
board of directors of Borrower and certified in good faith to the Administrative
Agent and Lead Lenders in a certificate of the Chief Financial Officer of
Borrower prior to or at the time of the incurrence of such Debt, which
certificate shall include a copy of the board of directors’ resolutions as to
such determination and a reasonably detailed description of the material terms
and conditions of such Debt or drafts of the documentation relating thereto :

 

(1)                                 the covenants, events of default and
Guarantees and other terms of such Debt are customary for similar Debt in light
of then-prevailing market conditions;

 

(2)                                 the covenants, events of default and
Guarantees and other terms of such Debt are substantially the same as those set
forth herein; or

 

(3)                                 when taken as a whole (other than interest
rate and redemption premiums), the covenants, events of default and Guarantees
and other terms of such Debt are not more restrictive to Borrower and the
Restricted Subsidiaries than those set forth in this Agreement;

 

(iii)                               if such Debt is subordinated, the
Obligations have been designated as “Designated Senior Debt” or its equivalent
in respect of such Debt;

 

(iv)                              immediately before and immediately after
giving pro forma effect to the incurrence of such Debt, no Default or Event of
Default shall have occurred and be continuing;

 

(v)                                 such Debt shall not contain any terms that
may prohibit or prevent the repayment of the Obligations; and

 

(vi)                              any fees and other consideration paid by
Borrower in connection with the incurrence of such Debt to the lenders under the
First Lien Credit Agreement shall be paid pro-rata to the Lenders, based upon an
aggregate of (1) the amount of loans outstanding under the First Lien Credit
Agreement made by each such lender, and (2) the amount of Loans outstanding made
by each such Lender.

 

65

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

 

Section 5.2                                    Liens.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:

 

(a)                                 Liens created by the Security Documents;

 

(b)                                 Permitted Encumbrances;

 

(c)                                  any Lien on any property of Borrower or any
Restricted Subsidiary existing on the date hereof and set forth in Schedule 5.2
(other than Liens permitted under Section 5.2(h)); provided that (i) such Lien
shall not apply to any other property of Borrower or any Restricted Subsidiary
and (ii) such Lien shall secure only those obligations which it secures on the
date hereof and extensions, renewals or replacements thereof that do not
increase the outstanding principal amount thereof;

 

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

 

(e)                                  Liens on fixed or capital assets (together
with receivables, intangibles and proceeds thereof) acquired, constructed or
improved by Borrower or any Restricted Subsidiary; provided that (i) such
security interests secure Debt permitted by Section 5.1(e), (ii) such security
interests and the Debt secured thereby are incurred prior to or within 180 days
after such acquisition or the completion of such construction or improvement,
(iii) the Debt secured thereby does not exceed the cost of acquiring,
constructing or improving such fixed or capital assets and (iv) such security
interests shall not apply to any other property of Borrower or any Restricted
Subsidiary;

 

(f)                                   Liens securing obligations and liabilities
of Borrower and any Restricted Subsidiary under Swap Contracts with Eligible
Secured Swap Counterparties to the extent such Swap Contracts are permitted
hereunder;

 

(g)                                  Liens on the Capital Stock of an
Unrestricted Subsidiary granted by a Restricted Subsidiary to secure
Non-Recourse Debt;

 

(h)                                 Liens granted to secure (i) Permitted Pari
Debt incurred pursuant to Section 5.1(i), (ii) Permitted First Lien Debt
incurred pursuant to Section 5.1(p) (not to exceed the First Lien Debt Cap), and
(iii) Junior Lien Debt incurred pursuant to Section 5.1(q); provided that, such

 

66

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

 

Liens are not senior to the Liens securing the Obligations and junior to the
Liens securing the Permitted First Lien Debt;

 

(i)                                     Liens granted to secure other
obligations in an amount not to exceed $5,000,000 in the aggregate so long as
the assets and properties secured by such Liens do not constitute Collateral;
and

 

(j)                                    Liens granted to secure letters of credit
and bank guaranties permitted pursuant to Section 5.1(o) in an amount not to
exceed the amount of Debt permitted under Section 5.1(o).

 

Section 5.3                                    Contingent Obligations.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, create, assume, incur or suffer to exist any Contingent Obligations,
except for:

 

(a)                                 Contingent Obligations arising in respect of
the Debt under the Financing Documents and the First Lien Credit Agreement Loan
Documents;

 

(b)                                 Contingent Obligations resulting from
endorsements for collection or deposit in the Ordinary Course of Business;

 

(c)                                  Contingent Obligations existing or arising
under any Swap Contract, provided that (i) so long as there exists no Event of
Default both immediately before and immediately after giving effect to any such
transaction and (ii) such obligations are (or were) entered into by Borrower or
another Credit Party in the Ordinary Course of Business for the purpose of
directly mitigating risks associated with liabilities, commitments, investments,
assets, or property held or reasonably anticipated by such Person and not for
purposes of speculation;

 

(d)                                 Contingent Obligations outstanding on the
date of this Agreement and set forth on Schedule 5.3 and Contingent Obligations
with respect to Debt permitted under Section 5.1;

 

(e)                                  Contingent Obligations incurred in the
Ordinary Course of Business with respect to Bonds;

 

(f)                                   Contingent Obligations arising under
indemnity agreements in connection with mortgagee title insurance policies;

 

(g)                                  Contingent Obligations arising with respect
to customary indemnification obligations in favor of purchasers in connection
with dispositions permitted under Section 5.7;

 

(h)                                 Contingent Obligations in favor of Credit
Parties; and

 

(i)                                     Contingent Obligations to the extent
constituting a Permitted Lien.

 

Section 5.4                                    Restricted Payments.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, declare, order, pay, make or set apart any sum for any Restricted
Payment; provided

 

67

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

 

that the foregoing shall not restrict or prohibit (a) dividends or distributions
made by any Restricted Subsidiary, directly or indirectly, to Borrower or to any
Restricted Subsidiary that is a Wholly-Owned Subsidiary of Borrower,
(b) dividends declared and paid by Subsidiaries ratably with respect to their
Capital Stock (or on a basis more favorable to Borrower and its Restricted
Subsidiaries), (c) Restricted Payments pursuant to and in accordance with stock
option plans or other benefit plans for management or employees of Borrower and
its Subsidiaries, (d) cash payments by Borrower in lieu of issuing fractional
shares in an aggregate amount not exceeding $200,000 during the term of this
Agreement, provided that no Default or Event of Default exists at the time of
such payment, such payment will not cause a Default or Event of Default and such
payment is made only in respect of Borrower’s 8% Convertible Preferred Stock
outstanding on the Closing Date, (e) distributions declared and paid by Borrower
effecting “poison pill” rights plans provided that any securities or rights so
distributed have a nominal fair market value at the time of declaration,
(f) Restricted Payments in respect of the Senior Notes with any one or more of
the following:  (i) Debt incurred pursuant to Section 5.1(q), (ii) preferred or
common equity interests or rights, warrants or options for such interests,
(iii) cash proceeds of any of the foregoing, (iv) up to $20,000,000 of the
proceeds of any loans under the Delayed Draw Commitment (as defined in the First
Lien Credit Agreement) under the First Lien Credit Agreement if, at the time of
application of such proceeds and after giving effect thereto, the Restricted
Payments in respect of Senior Notes after the date of this Agreement will result
in an aggregate amount of Junior Lien Debt and unsecured Debt (including Senior
Notes) outstanding that is not greater than $83,633,000 and (v) up to $7,000,000
in cash on hand if, at the time of application of such proceeds and after giving
effect thereto, the Restricted Payments in respect of Senior Notes after the
date of this Agreement will result in an aggregate amount of Junior Lien Debt
and unsecured Debt (including Senior Notes) outstanding that is not greater than
$54,361,450, (g) repayments of Debt from the proceeds of Debt constituting
Refinancing Indebtedness and (h) other Restricted Payments in an amount not to
exceed $1,000,000 in the aggregate.  Borrower will not, and will not permit any
other Credit Party to issue preferred Capital Stock providing for Restricted
Payments not permitted by this Section 5.4.

 

Section 5.5                                    Restrictive Agreements.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of Borrower or any Restricted Subsidiary to create, incur or permit to
exist any Lien upon any of its property or assets (other than (1) Capital Stock
in any Unrestricted Subsidiary, (2) other investments in Capital Stock of joint
ventures permitted under Section 5.8, (3) investments permitted under
Section 5.8(j) if such restriction or conditions apply only to the property or
assets that are the subject of such investment), or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to Borrower or any other
Restricted Subsidiary or to Guarantee Debt of Borrower or any other Restricted
Subsidiary; provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, (ii) the foregoing shall not
apply to restrictions and conditions existing on the date hereof identified on
Schedule 5.5 (but shall apply to any extension or renewal of, or any amendment
or modification expanding the scope of, any such restriction or condition),
(iii) the foregoing shall not apply to customary restrictions and conditions
contained in agreements relating to the sale of a Subsidiary or other assets
pending such sale, provided such

 

68

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

 

restrictions and conditions apply only to the Subsidiary or other assets that is
to be sold and such sale is permitted hereunder, (iv) clause (a) of the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Debt permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Debt,
(v) clause (a) of the foregoing shall not apply to customary provisions in
leases and other contracts restricting the assignment thereof, (vi) existing
restrictions with respect to a Person acquired by Borrower or any of its
Restricted Subsidiaries (except to the extent such restrictions were put in
place in connection with or in contemplation of such acquisition), which
restrictions are not applicable to any Person, or the properties or assets of
any Person other than the Person, or the property or assets of the Person, so
acquired, (vii) restrictions contained in any agreement or instrument relating
to Swap Contracts to the extent, in the good faith judgment of the Borrower,
such restrictions, at the time such Debt is incurred, either (A) are on
customary market terms for Debt of such type, so long as Borrower has determined
in good faith that such restrictions would not reasonably be expected to impair
in any material respect the ability the Borrower and the other Restricted
Subsidiaries to meet their ongoing payment obligations under the Financing
Documents, or (B) are not materially more restrictive, taken as a whole with
respect to the Borrower and the other Restricted Subsidiaries, than the
restrictions in the Financing Documents, (viii) customary supermajority voting
provisions and other customary provisions with respect to the disposition or
distribution of assets, each contained in corporate charters, bylaws,
stockholders’ agreements, limited liability company agreements, partnership
agreements, joint venture agreements and other similar agreements entered into
in the Ordinary Course of Business of Borrower and its Restricted Subsidiaries,
and (ix) non-material, ordinary course of business provisions and conditions
contained in the existing operating units, farmout exchange, joint exploration,
transportation and related oil and gas agreements executed in the ordinary
course of business.

 

Section 5.6                                    Swap Contracts.

 

Borrower will not, and will not permit any other Credit Party to enter into any
Swap Contracts other than Swap Contracts in respect of commodities (i) with
Eligible Swap Counterparties, (ii) with durations not to exceed 120 months at
any time, and (iii) the notional volumes for which (when aggregated with other
commodity Swap Contracts then in effect other than basis differential swaps on
volumes already hedged pursuant to other Swap Contracts) do not exceed, as of
the date such Swap Contract is executed, 85% of the Projected Oil and Gas
Production from Proved Developed Producing Reserves attributable to the Oil and
Gas Properties for each month during the period during which such Swap Contract
is in effect for each of crude oil and natural gas, calculated separately;
provided that (x) such limitations in clauses (i) and (ii) of this Section 5.6
do not apply to forward agreements requiring the physical delivery of
Hydrocarbons and (y) such limitation in clause (iii) of this Section 5.6 shall
not apply to Swap Contracts in respect of commodities that are floor prices or
puts for which no further payment obligation is owed by such Credit Party and
not in excess of 100% of Proved Developed Producing Reserves attributable to the
Oil and Gas Properties for each month during the period during which such Swap
Contract is in effect for each of crude oil and natural gas, calculated
separately.  Not later than thirty (30) days after consummation of an Asset
Disposition in respect of Oil and Gas Properties which, together with any other
Asset Dispositions of Oil and Gas Properties not theretofore taken into account
in connection with this sentence, reduces by more than 5% the Credit Parties’
aggregate Projected Oil and Gas Production from Proved

 

69

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

 

Developed Producing Reserves, Borrower will cause the notional volumes of Swap
Contracts maintained by Borrower and other Credit Parties in respect of
commodities not to exceed in the aggregate the amounts that would be permitted
under clause (iii) of the preceding sentence if such Swap Contracts were entered
into immediately after giving effect to such Asset Disposition.

 

Section 5.7                                    Consolidations, Mergers and Sales
of Assets.

 

(a)                                 Borrower will not, and will not permit any
other Credit Party to, directly or indirectly consolidate or merge with or into
any other Person other than (i) mergers of any Restricted Subsidiary with and
into Borrower or another Restricted Subsidiary, (ii) mergers of any Restricted
Subsidiaries with and into Borrower (with Borrower as the surviving entity of
such merger) and (iii) mergers or consolidations with or into any Person so long
as Borrower or a wholly-owned Restricted Subsidiary or a Person who becomes a
wholly-owned Restricted Subsidiary is the surviving entity; provided that any
such merger involving a Person that is not a Wholly-Owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by
Section 5.8.  Any Restricted Subsidiary may liquidate or dissolve if Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of Borrower and is not materially disadvantageous to the Lenders.

 

(b)                                 Borrower will not, and will not permit any
other Credit Party to, directly or indirectly, consummate any Asset Dispositions
other than (i) dispositions of Excluded Property, (ii) dispositions of property
(other than Oil and Gas Properties) for fair market value so long as any
prepayment required under Section 2.3(c) is made in accordance with this
Agreement, and (iii) dispositions of any Oil and Gas Property or any interest
therein if (A) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of such Oil
and Gas Property or interest therein (as reasonably determined by Borrower), and
(B) any prepayment required under Section 2.3(c) is made in accordance with this
Agreement; provided that if an Event of Default shall exist at the time of such
disposition, any disposition under clause (iii) shall be for consideration
consisting solely of cash plus customary indemnifications, warranties and
purchase and sale covenants.

 

Section 5.8                                    Investments.

 

Borrower will not, and will not permit any Credit Party to, purchase, hold or
acquire (including pursuant to any merger with any Person that was not a
Wholly-Owned Subsidiary prior to such merger) any capital stock, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, Guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) (x) all or
substantially all of the property and assets or business of another Person or
(y) any assets of any other Person constituting a business unit, except:

 

(a)                                 Permitted Investments;

 

(b)                                 investments by Borrower and its Subsidiaries
in the Capital Stock of its Restricted Subsidiaries that are Guarantors;

 

70

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

 

(c)                                  loans or advances made by Borrower to any
Restricted Subsidiary and made by any Subsidiary to Borrower or any other
Restricted Subsidiary that is a Guarantor;

 

(d)                                 Guarantees constituting Debt permitted by
Section 5.1;

 

(e)                                  investments consisting of Swap Contracts to
the extent permitted under Section 5.6;

 

(f)                                   loans or advances to employees in the
Ordinary Course of Business in an aggregate amount for all employees of Borrower
and its Subsidiaries not in excess of $750,000 at any one time outstanding;

 

(g)                                  trade credits and accounts arising in the
Ordinary Course of Business;

 

(h)                                 investments made as a result of the receipt
of non-cash considerations from a disposition that was made pursuant to and in
compliance with this Agreement;

 

(i)                                     investments made in any debtor of
Borrower or any Restricted Subsidiary as a result of the receipt of stock,
obligations or securities in settlement of debts created in the Ordinary Course
of Business and owing to Borrower or any Restricted Subsidiary;

 

(j)                                    investments made pursuant to the
requirements of farm-out, farm in, unit, joint operating, unit operating, joint
venture, area of mutual interest and other oil and gas agreements, gathering
systems, pipelines or other similar or customary arrangements entered into the
Ordinary Course of Business (including advances to operators under operating
agreements entered into by Borrower or any Subsidiary in the Ordinary Course of
Business); provided that any such single investment in excess of $20,000,000
shall be approved by the Board of Directors of Borrower;

 

(k)                                 investments made in connection with the
purchase, lease, or other acquisition of tangible assets of any Person and
investments made in connection with the purchase, lease or other acquisition of
all or substantially all of the business, of any Person, or all of the capital
stock or other equity interests of any Person (provided that such Person becomes
a Guarantor), or any division, line of business or business unit of any Person
(including (i) by the merger or consolidation of such Person into Borrower or
any Guarantor or by the merger of a Restricted Subsidiary into such Person and
(ii) the purchase of proved reserves);

 

(l)                                     investments held by a Person acquired
(including by way of merger, amalgamation or consolidation) after the Closing
Date to the extent that such Investments were not made in contemplation of or in
connection with such acquisition, merger, amalgamation or consolidation and were
in existence on the date of such acquisition, merger, amalgamation or
consolidation;

 

(m)                             repurchase of Capital Stock deemed to occur upon
exercise of stock options or warrants if such Capital Stock represents a portion
of the exercise price or such options or warrants or the payment of withholding
taxes through the issuance of Capital Stock;

 

71

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

 

(n)                                 the purchase of fractional shares arising
out of stock dividends, splits or combinations or business combinations;

 

(o)                                 any other investments in any Person having
an aggregate fair market value (measured on the date each such investment was
made and without giving effect to subsequent changes in value), when taken
together will all other investments made pursuant to this clause (o) do not
exceed $5,000,000 outstanding at any time;

 

(p)                                 investments outstanding as of the Closing
Date in Unrestricted Subsidiaries and listed on Schedule 5.8;

 

(q)                                 investments, loans, advances and
acquisitions in exchange for, or out of the net cash proceeds from the sale of,
Capital Stock of Borrower issued after the Closing Date;

 

(r)                                    [reserved]; and

 

(s)                                   Dispositions permitted by Section 5.7 to
the extent constituting Investments.

 

Section 5.9                                    Transactions with Affiliates.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower, except (i) as expressly permitted by
this Agreement, (ii) as otherwise disclosed on Schedule 5.9, and (iii) for
transactions which contain terms that are no less favorable to Borrower or any
other Credit Party, as the case may be, than those which might be obtained from
a third party not an Affiliate of any Credit Party, (iv) any Restricted Payment
permitted by Section 5.4 or a disposition of Excluded Property, (v) with respect
to any Person serving as an officer, director, employee or consultant of
Borrower or any Restricted Subsidiary, (1) the payment of reasonable
compensation, benefits or indemnification liabilities in connection with his or
her services in such capacity provided that the payment of any such
compensation, benefits or indemnification liabilities are approved by a majority
of the disinterested members of the Board of Directors of Borrower or by the
compensation committee of Borrower, (2) the making of advances for travel or
other business expenses in the Ordinary Course of Business or (3) such Person’s
participation in any benefit or compensation and (vi) with respect to
transactions among Credit Parties

 

Section 5.10                             Modification of Certain Documents.

 

(a)                                 Borrower will not, directly or indirectly,
amend or otherwise modify any Organizational Documents of Borrower, except for
such amendments or other modifications required by Law or which are not
materially adverse to the interests of Administrative Agent or any Lender and
which, in each instance, are fully disclosed to Administrative Agent.

 

(b)                                 Borrower will not, directly or indirectly,
amend or modify, or permit the amendment or modification of, any provision of
any agreement governing (i) Permitted Pari Debt or Junior Lien Debt except for
such amendments or other modifications which are not materially adverse to the
interest of the Administrative Agent or any Lender and which, in each instance,
are fully disclosed to the Administrative Agent and the Lead Lenders or (ii) the
Senior

 

72

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

 

Notes or any other unsecured Debt (other than to amend or delete any covenant,
event of default, mandatory prepayment or obligation to offer to purchase Senior
Notes).

 

Section 5.11                             Fiscal Year.

 

Borrower will not, and will not permit any other Credit Party to, change its
Fiscal Year.

 

Section 5.12                             Conduct of Business.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, engage in any line of business other than those businesses engaged
in on the Closing Date and described on Schedule 5.12 and businesses reasonably
related thereto.

 

Section 5.13                             Capital Stock.

 

Borrower will not, nor cause or permit any Restricted Subsidiary to, permit a
Lien (other than a Lien created under a Financing Document, a Lien permitted
under Section 5.2(h) or an involuntary Permitted Lien) to be placed on any of
the Capital Stock owned by Borrower or such Restricted Subsidiary in any other
Person; provided that Liens against Capital Stock in an Unrestricted Subsidiary
shall be permitted to the extent such Lien is granted to secure Non-Recourse
Debt.

 

Section 5.14                             Limitation on Sale and Leaseback
Transactions.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, enter into any arrangement with any Person whereby in a
substantially contemporaneous transaction Borrower or any of its Restricted
Subsidiaries sells or transfers all or substantially all of its right, title and
interest in an asset and, in connection therewith, acquires or leases back the
right to use such asset; provided this Section 5.14 shall not prohibit (i) any
sale-leaseback resulting from the incurrence of any lease of any capital asset
entered into within 180 days of the acquisition of such capital asset for the
purpose of providing permanent financing of such asset, provided that the Debt
related thereto is permitted by Section 5.1 or (ii) any Excluded Property
Leaseback.

 

Section 5.15                             Bank Accounts.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, establish any new bank account (excluding any account established
after notice to Administrative Agent exclusively for payroll or petty cash),
prior to the Discharge of First Lien Obligations, without the prior written
consent of the First Lien Agent (and after the Discharge of First Lien
Obligations, the Administrative Agent) (the First Lien Agent or the
Administrative Agent, as applicable, the “Lead Administrative Agent”), and
provided that in each case, Lead Administrative Agent, Borrower or such other
Credit Party and the bank at which the account is to be opened enter into a
control agreement regarding such bank account pursuant to which such bank
acknowledges the security interest of Lead Administrative Agent in such bank
account, agrees to comply with instructions originated by Lead Administrative
Agent directing disposition of the funds in such bank account without further
consent from Borrower, and agrees to

 

73

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

 

subordinate and limit any security interest such bank may have in such bank
account on terms reasonably satisfactory to Lead Administrative Agent.

 

Section 5.16                             Compliance with Anti-Corruption Laws.

 

(a)                                 None of Borrower, its Subsidiaries, or to
the knowledge of Borrower or any Subsidiary, their respective directors,
officers, agents, employees or other persons that act for or on behalf of
Borrower or its Subsidiaries (individually and collectively, “Borrower
Representative”) has taken any act that would violate the U.S. Foreign Corrupt
Practices Act, the UK Bribery Act, or any other applicable anti-bribery law (the
“Anti-Corruption Laws”).

 

(b)                                 Without limiting the foregoing, none of
Borrower or any Subsidiary, or to the knowledge of Borrower or any Subsidiary,
any Borrower Representative has offered, paid, promised to pay, or authorized
the payment of any money, or offered, given, promised to give, or authorized the
giving of anything of value, to any officer, employee or any other person acting
in an official capacity for any Governmental Authority, quasi-governmental
authority, public international organization, to any political party or official
thereof, or to any candidate for political office (individually and
collectively, “Government Official”) or to any person under circumstances where
Borrower, its Subsidiaries or Borrower Representatives knew or had reason to
know or believe that all or a portion of such money or thing of value would be
offered, given, or promised, directly or indirectly, to any person, in each case
for the purpose of (i) influencing any act or decision of such person in his
official capacity as a Government Official, (ii) inducing such person to perform
or omit to perform any activity related to his legal duties, (iii) securing any
improper advantage, or (iv) inducing such person to influence or affect any act
or decision of any Governmental Authority, quasi-governmental authority, public
international organization, in each case, in order to assist Borrower, its
Subsidiaries or any Borrower Representatives in obtaining or retaining business
for or with, or in directing business to, Borrower or any other person.

 

Section 5.17                             Compliance with Anti-Terrorism Laws.

 

Borrower will not, and will not permit any other Credit Party to, engage in any
activities which could cause them to become a Blocked Person.  Borrower shall
immediately notify Administrative Agent if Borrower has knowledge that Borrower,
any additional Credit Party or any of their respective Affiliates or their
respective employees or agents acting or benefiting in any capacity in
connection with the transactions contemplated by this Agreement is or becomes a
Blocked Person or (i) is convicted on, (ii) pleads nolo contendere to, (iii) is
indicted on or (iv) is arraigned and held over on charges involving money
laundering or predicate crimes to money laundering.  Borrower will not, and will
not permit any other Credit Party to, directly or indirectly, (i) engage in any
business, transaction or dealing in or with any Blocked Person, or with any
government, country or territory where such activities would violate
Anti-Terrorism Law or (ii) act in any manner that will result in a violation of
any Anti-Terrorism Law.

 

74

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

 

Section 5.18                             Anti-layering Covenant.

 

(a)                                 No Credit Party will incur any Lien that is
junior to the Liens created pursuant to the First Lien Credit Agreement Loan
Documents (other than the Liens securing the Obligations and the Permitted Pari
Debt) unless such Lien is also junior to the Liens securing the Obligations and
the Permitted Pari Debt.

 

(b)                                 No Credit Party will directly incur any Debt
that is subordinate in right of payment to the Permitted First Lien Debt unless
such Debt is also subordinated in right of payment to the Obligations and the
Permitted Pari Debt.

 

ARTICLE 6
[RESERVED]

 

ARTICLE 7
CONDITIONS

 

Section 7.1                                    Conditions to Closing.

 

The obligation of each Lender to make the initial Loans on the Closing Date
shall be subject to the receipt by Administrative Agent and the Initial Lenders
of each agreement, document and instrument set forth on the Closing Checklist,
each in form and substance reasonably satisfactory to Administrative Agent and
the Initial Lenders, and to the satisfaction of the following conditions
precedent, each to the satisfaction of Administrative Agent and Initial Lenders
in their sole discretion:

 

(a)                                 after giving effect to the Transactions,
(i) neither the Borrower nor any of its Subsidiaries shall have any material
Debt for borrowed money other than the Obligations, the First Lien Credit
Agreement Debt or the Senior Notes and (ii) the Borrower shall have unrestricted
cash and Permitted Investments of not less than $15,000,000;

 

(b)                                 the Administrative Agent and Initial Lenders
shall have received on or before the Closing Date duly executed counterparts, as
applicable, of the Notice of Borrowing, each of the Financing Documents and any
other agreement, document, instrument and other item set forth on the Closing
Checklist attached hereto as Annex B, each in form and substance reasonably
satisfactory to the Administrative Agent and the Initial Lenders;

 

(c)                                  [Reserved];

 

(d)                                 the representations and warranties of each
Credit Party contained in the Financing Documents shall be true, correct and
complete on and as of the Closing Date;

 

(e)                                  upon giving effect to the Transactions
contemplated to occur hereunder, (i) no Default or Event of Default shall be
outstanding or shall result therefrom and (ii) no default, event of default or
similar event will exist under the First Lien Credit Agreement, the Senior Notes
or any ancillary document to which any Credit Party is a party;

 

75

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

 

(f)                                   the Administrative Agent and the Initial
Lenders shall have received a certificate from an officer of Borrower (in such
officer’s representative capacity and not in his individual capacity), dated as
of the Closing Date, certifying (i) that the statement set forth in
Section 7.1(d) is true and correct and (ii) that the conditions set forth in
this Section 7.1 have been satisfied;

 

(g)                                  since December 31, 2014, other than has
been Publicly Disclosed, there shall not have been any change, event,
development, circumstance, condition, occurrence or effect that has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;

 

(h)                                 the Administrative Agent shall have
received, at least five (5) Business Days prior to the Closing Date, all
completed tax forms (including W-9 if applicable), documentation and other
information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including the PATRIOT
Act, that is requested by the Administrative Agent or any Initial Lender in
writing at least five (5) Business Days prior to the Closing Date;

 

(i)                                     the Administrative Agent and the Lead
Lenders shall have received the executed legal opinions of (i) Thompson & Knight
LLP, as counsel to the Credit Parties, and (ii) local counsel to Borrower in the
jurisdictions listed on Schedule 7.1(i) in form and substance reasonably
satisfactory to the Administrative Agent and the Lead Lenders (Borrower, the
other Credit Parties and the Administrative Agent hereby instruct such counsel
to deliver such legal opinion);

 

(j)                                    the Administrative Agent and the Lead
Lenders shall have received copies of insurance certificates, if applicable,
evidencing insurance required to be maintained by Borrower and the Restricted
Subsidiaries pursuant to Section 4.4, each of which shall name the Secured
Parties, as additional insureds on any such liability insurance and, if casualty
insurance is obtained, name the Administrative Agent as additional loss payee
under any such casualty insurance, in each case in form and substance reasonably
satisfactory to the Administrative Agent and the Lead Lenders (provided that if
such endorsement or amendment cannot be delivered by the Closing Date, the
Administrative Agent (at the direction of the Lead Lenders) may consent to such
endorsement or amendment being delivered at such later date as it reasonably
deems appropriate in the circumstances);

 

(k)                                 the Administrative Agent and the Lead
Lenders shall have received the results of a recent appropriate UCC search with
respect to each Credit Party and title searches with respect to Borrower’s
primary Oil and Gas Properties, and such searches shall reveal no Liens on any
of the assets of the Credit Parties except for (i) Permitted Liens or (ii) Liens
discharged on or prior to the Closing Date pursuant to documentation reasonably
satisfactory to the Administrative Agent and the Lead Lenders;

 

(l)                                     all actions necessary to establish that
(i) the Administrative Agent will have a perfected second priority security
interest (subject to Permitted Liens) in the Collateral shall have been taken
and (ii) the Collateral includes all collateral securing the First Lien Credit
Agreement Debt;

 

76

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

 

(m)                             prior to or substantially concurrently with the
Closing Date and the Exchange Agreement shall have become effective according to
its terms, the Conversion Notes shall convert into Converted Loans;

 

(n)                                 Lead Lenders shall have had the opportunity
to review and approve the press release and 8-K disclosure relating to the
Transactions;

 

(o)                                 all fees, expenses and other amounts due and
payable under each Financing Document shall have been paid; and

 

(p)                                 Borrower shall have Publicly Disclosed any
material non-public information it delivered to Public Lenders on or prior to
the Closing Date.

 

Each Lender, by delivering its signature page to this Agreement, shall be deemed
to have acknowledged receipt of, and consented to and approved, each Financing
Document, each additional Financing Document and each other document, agreement
and/or instrument required to be approved by Administrative Agent, Lead Lenders
or Lenders, as applicable, on the Closing Date.

 

ARTICLE 8
EVENTS OF DEFAULT

 

Section 8.1                                    Events of Default.

 

For purposes of the Financing Documents, the occurrence of any of the following
conditions and/or events, whether voluntary or involuntary, by operation of Law
or otherwise, shall constitute an “Event of Default”:

 

(a)                                 Borrower shall fail to pay when due any
principal, interest, premium or fee under any Financing Document or any other
amount payable under any Financing Document and, in the case of any such payment
(other than any principal payment), such failure shall continue unremedied for a
period of three (3) Business Days;

 

(b)                                 Borrower shall fail to observe or perform
any covenant contained in Section 4.1(e), Section 4.1(f), Section 4.3(a),
Section 4.7 or Article 5, provided however, the imposition of a lien under
Section 303(k) or 4068 of ERISA or under Section 430(k) of the Code shall not be
regarded as a failure to perform the covenants contained in Article 5 unless
such lien or liens could reasonably be expected to result, individually or in
the aggregate, in a Material Adverse Effect;

 

(c)                                  any Credit Party defaults in the
performance of or compliance with any term contained in this Agreement or in any
other Financing Document (other than occurrences described in other provisions
of this Section 8.1 for which a different grace or cure period is specified or
for which no grace or cure period is specified and thereby constitute immediate
Events of Default) and such default is not remedied or waived within thirty (30)
days after the earlier of (i) receipt by Borrower of notice from Administrative
Agent or Lead Lenders of such default or (ii) actual knowledge of Borrower or
any other Credit Party of such default;

 

77

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

 

(d)                                 any representation, warranty, certification
or statement made by any Credit Party in any Financing Document or in any
certificate, financial statement or other document delivered pursuant to any
Financing Document is incorrect in any material respect when made (or deemed
made);

 

(e)                                  (i) failure of any Credit Party to pay when
due or within any applicable grace period any principal, interest or other
amount on Debt (other than the Loans, Permitted First Lien Debt or Debt in
respect of any Swap Contract) or the occurrence of any breach, default,
condition or event with respect to any such Debt if the effect of such
occurrence is (A) to cause or to permit the holder or holders of any such Debt,
to cause such Debt to become or be declared immediately due and payable or
(B) to require any mandatory payment, purchase, redemption, retirement,
defeasance, surrender, cancellation or acquisition of such Debt or to require
any Credit Party to offer to pay, purchase, redeem, retire, defease, surrender,
cancel or acquire such Debt, in the case of any or all of the foregoing under
this clause (i) in respect of such Debt having an individual principal amount in
excess of $10,000,000 or having an aggregate principal amount in excess of
$10,000,000; provided that this paragraph (e) shall not apply to (x) secured
Debt that becomes due as a result of the voluntary sale or transfer of the
property or assets securing such Debt or (y) any payment, purchase, redemption,
retirement, defeasance, surrender, cancellation or acquisition of Debt satisfied
by the conversion, exchange or issuance of Capital Stock permitted to be issued
hereunder; or (ii) the occurrence of any event requiring the prepayment of any
subordinated Debt prior to the repayment of the Obligations;

 

(f)                                   Borrower or any Credit Party shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar Law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;

 

(g)                                  an involuntary case or other proceeding
shall be commenced against Borrower or any Credit Party seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar Law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of forty-five (45) days; or an order for relief shall be entered against
Borrower or any Credit Party under the federal bankruptcy laws as now or
hereafter in effect;

 

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

 

(i)                                     one or more judgments or orders for the
payment of money (not paid or fully covered by insurance maintained in
accordance with the requirements of this Agreement and as

 

78

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

 

to which the relevant insurance company has not denied coverage) aggregating in
excess of $10,000,000 shall be rendered against Borrower or any or all Credit
Parties and either (i) enforcement proceedings shall have been commenced by any
creditor upon any such judgments or orders or (ii) there shall be any period of
thirty (30) consecutive days during which a stay of enforcement of any such
judgments or orders, by reason of a pending appeal, bond or otherwise, shall not
be in effect;

 

(j)                                    a Change in Control shall occur;

 

(k)                                 any Lien created by any of the Security
Documents shall at any time fail to constitute a valid and (to the extent
perfection is obtained by filing) perfected Lien on a material portion of the
Collateral purported to be secured thereby, subject to no prior or equal Lien
(except Permitted Liens), or any Credit Party shall so assert;

 

(l)                                     any of the Financing Documents shall for
any reason fail to constitute the valid and binding agreement of any party
thereto, or any Credit Party shall so assert; or

 

(m)                             the occurrence of any breach, default, condition
or event with respect to any Permitted First Lien Debt or Debt in respect of any
Swap Contract if such breach, default, condition or event has resulted in
Permitted First Lien Debt or Debt in respect of any Swap Contract having an
aggregate principal amount in excess of $10,000,000 becoming or being declared
immediately due and payable, including the failure to pay any such Debt at final
maturity.

 

Section 8.2                                    Acceleration and Suspension or
Termination of Loans and Commitments.

 

Upon the occurrence and during the continuance of an Event of Default,
Administrative Agent may, and shall, if so requested by Lead Lenders, by notice
to Borrower declare all or any portion of the Obligations to be, and such
Obligations shall thereupon become, immediately due and payable, with accrued
interest thereon, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Borrower and Borrower will pay the same;
provided that in the case of any of the Events of Default specified in
Section 8.1(f) or 8.1(g) above, without any notice to Borrower or any other act
by Administrative Agent or Lenders, all of the Obligations shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by Borrower and Borrower will pay
the same.  If the maturity of the Loans shall be accelerated (under any
provision of this Section 8.2 or otherwise) a premium equal to the Make-Whole
Amount or Repayment Premium (in each case, determined as if the Loans were
repaid at the time of such acceleration at the option of the Borrower pursuant
to Section 2.5) shall become immediately due and payable, and Borrower will pay
such premium, as compensation to the Lenders for the loss of their investment
opportunity and not as a penalty, whether or not an Insolvency Event has
commenced, and (if an Insolvency Event has commenced) without regard to whether
such Insolvency Event is voluntary or involuntary, or whether payment occurs
pursuant to a motion, plan of reorganization, or otherwise, and without regard
to whether the Loans and other Obligations are satisfied or released by
foreclosure (whether or not by power of judicial proceeding), deed in lieu of
foreclosure or by any other means.  Without limiting the

 

79

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

 

foregoing, any redemption, prepayment, repayment, or payment of the Obligations
in or in connection with an Insolvency Event shall constitute an optional
prepayment thereof under the terms of Section 2.5 and require the immediate
payment of the Make-Whole Amount and Repayment Premium.

 

Section 8.3                                    [Reserved].

 

Section 8.4                                    Default Rate of Interest.

 

At the election of the Lead Lenders, after notice thereof to the Administrative
Agent, after the occurrence of an Event of Default and for so long as it
continues, any portion of the Loans and other Obligations that are overdue shall
bear interest at a rate that is two percent (2.0%) in excess of the applicable
rate otherwise payable under this Agreement.

 

Section 8.5                                    Setoff Rights.

 

During the continuance of any Event of Default, each Lender is hereby authorized
by Borrower at any time or from time to time, with reasonably prompt subsequent
notice to Borrower (any prior or contemporaneous notice being hereby expressly
waived) to set off and to appropriate and to apply any and all (i) balances held
by such Lender or any of such Lender’s Affiliates at any of its offices for the
account of Borrower or any of its Restricted Subsidiaries (regardless of whether
such balances are then due to Borrower or its Restricted Subsidiaries), and
(ii) other property at any time held or owing by such Lender to or for the
credit or for the account of Borrower or any of its Restricted Subsidiaries,
against and on account of any of the Obligations.  Each Lender shall provide
prompt written notice to the Administrative Agent of its exercise of any right
of setoff.  Any Lender exercising a right to set off shall purchase for cash
(and the other Lenders shall sell) interests in each of such other Lender’s Pro
Rata Share of the Obligations as would be necessary to cause all Lenders to
share the amount so set off with each other Lender in accordance with their
respective Pro Rata Share of the Obligations.  Borrower agrees, to the fullest
extent permitted by Law, that any Lender or any of such Lender’s Affiliates may
exercise its right to set off with respect to the Obligations as provided in
this Section 8.5.

 

Section 8.6                                    Application of Proceeds.

 

(a)                                 As to Borrower.  Notwithstanding anything to
the contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Administrative Agent from or on behalf of Borrower or any guarantor
of all or any part of the Obligations, and, as between Borrower on the one hand
and Administrative Agent and Lenders on the other, Administrative Agent shall
have the continuing and exclusive right to apply and to reapply any and all
payments received against the Obligations in such manner as Administrative Agent
may deem advisable or as directed by Required Lenders notwithstanding any
previous application by Administrative Agent.

 

(b)                                 After Event of Default.  Following the
occurrence and continuance of an Event of Default, Administrative Agent shall
apply any and all payments received by Administrative Agent in respect of the
Obligations, and any and all proceeds of Collateral received by Administrative
Agent, in the following order:  first, to all fees, costs, indemnities,
liabilities,

 

80

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

 

obligations and expenses incurred by or owing to Administrative Agent with
respect to this Agreement, the other Financing Documents or the Collateral,
second, to all fees, costs, indemnities and expenses incurred by or owing to any
Lender with respect to this Agreement, the other Financing Documents or the
Collateral, third, to accrued and unpaid interest on the Obligations, fourth, to
the principal amount of the Obligations outstanding, and fifth, to any other
indebtedness or obligations of Borrower owing to Administrative Agent or any
Lender under the Financing Documents.

 

(c)                                  [Reserved].

 

(d)                                 Residuary.  Any balance remaining after
giving effect to the applications set forth in this Section 8.6 shall be
delivered to Borrower or to whoever may be lawfully entitled to receive such
balance or as a court of competent jurisdiction may direct.  In carrying out any
of the applications set forth in this Section 8.6, amounts received shall be
applied in the numerical order provided until exhausted prior to the application
to the next succeeding category.

 

ARTICLE 9
EXPENSES AND INDEMNITY

 

Section 9.1                                    Expenses.

 

Borrower hereby agrees to promptly pay (a)(i) all reasonable and invoiced
out-of-pocket costs and expenses of Administrative Agent and the Lead Lenders
(with respect to counsel, limited to fees, disbursements and other charges for
one lead counsel to each of (x) the Administrative Agent and its respective
Affiliates and (y) the Lenders; and special oil and gas real estate counsel to
each of (x) the Administrative Agent and (y) the Lenders (taken as a whole) and
one local counsel in any relevant jurisdiction to each of (x) the Administrative
Agent and (y) the Lenders (taken as a whole)) in connection with the
examination, review, due diligence investigation, documentation, negotiation,
closing and syndication of the transactions contemplated by the Financing
Documents and the Exchange Agreement, (ii) reasonable and invoiced out-of-pocket
costs and expenses of Administrative Agent and the Lead Lenders (with respect to
counsel, limited to fees, disbursements and other charges for one counsel to
each of (x) the Administrative Agent and its respective Affiliates and (y) the
Lenders; and special oil and gas real estate counsel to each of (x) the
Administrative Agent and (y) the Lenders (taken as a whole) and one local
counsel in any relevant jurisdiction to each of (x) the Administrative Agent and
(y) the Lenders (taken as a whole)) in connection with the performance by
Administrative Agent or the Lead Lenders of their rights and remedies under the
Financing Documents and the Exchange Agreement and in connection with the
continued administration of the Financing Documents and the Exchange Agreement
including (A) any amendments, modifications, consents and waivers to and/or
under any and all Financing Documents and the Exchange Agreement and (B) any
periodic public record searches conducted by or at the request of Administrative
Agent or the Lead Lenders (including, without limitation, title investigations,
UCC searches, fixture filing searches, judgment, pending litigation and tax lien
searches and searches of applicable corporate, limited liability, partnership
and related records concerning the continued existence, organization and good
standing of certain Persons), (b) without limitation of the preceding
clause (a), all reasonable and invoiced out-of-pocket costs and expenses of
Administrative Agent and the Lead Lenders (with respect to counsel, limited to
fees,

 

81

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

 

disbursements and other charges for one counsel to each of (x) the
Administrative Agent and its respective Affiliates and (y) the Lenders; and if
reasonably requested by the Administrative Agent or the Lead Lenders, special
regulatory counsel to each of (x) the Administrative Agent and (y) the Lenders
(taken as a whole) and one local counsel in any relevant jurisdiction to each of
(x) the Administrative Agent and (y) the Lenders (taken as a whole)) in
connection with the creation, perfection and maintenance of Liens pursuant to
the Financing Documents, (c) without limitation of the preceding clause (a), all
reasonable and invoiced out-of-pocket costs and expenses of Administrative Agent
and the Lead Lenders (with respect to counsel, limited to fees, disbursements
and other charges for one counsel to each of (x) the Administrative Agent and
its respective Affiliates and (y) the Lenders; and if reasonably requested by
the Administrative Agent or the Lead Lenders, special regulatory counsel to each
of (x) the Administrative Agent and (y) the Lenders (taken as a whole) and one
local counsel in any relevant jurisdiction to each of (x) the Administrative
Agent and (y) the Lenders (taken as a whole)) in connection with protecting,
storing, insuring, handling, maintaining or selling any Collateral, and (d) all
reasonable and invoiced out-of-pocket costs and expenses incurred by the
Administrative Agent and the Lenders (with respect to counsel, limited to fees,
disbursements and other charges for one counsel to each of (x) the
Administrative Agent and its respective Affiliates and (y) the Lenders; and if
reasonably requested by the Administrative Agent or the Lead Lenders, special
regulatory counsel to each of (x) the Administrative Agent and (y) the Lenders
(taken as a whole) and one local counsel in any relevant jurisdiction to each of
(x) the Administrative Agent and (y) the Lenders (taken as a whole); and, solely
in the case of an actual or perceived conflict of interest, one additional
counsel for the Administrative Agent or Lender affected by such conflict) in
connection with any claim, litigation, dispute, suit, investigation or
proceeding relating to the Transactions, any Financing Document and/or the
Exchange Agreement and in connection with any workout, collection, bankruptcy,
insolvency and other enforcement proceedings under any and all Financing
Documents and the Exchange Agreement; provided that respect to the costs and
expenses incurred by Lead Lenders in connection with clauses (a)(i) and
(a)(ii) of this Section 9.1, Borrower shall not be obligated to pay an aggregate
amount greater  than the amount separately agreed in writing.

 

Section 9.2                                    Indemnity.

 

Borrower hereby agrees to indemnify, pay and hold harmless Administrative Agent,
Lenders and their respective Affiliates and the officers, directors, employees,
trustees, agents, investment advisors, collateral managers, servicers, and
counsel of Administrative Agent, Lenders and their respective Affiliates
(collectively called the “Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for such Indemnitee)
in connection with any investigative, response, remedial, administrative or
judicial matter or proceeding, whether or not such Indemnitee shall be
designated a party thereto and including any such proceeding initiated by or on
behalf of a Credit Party, and the reasonable expenses of investigation by
engineers, environmental consultants and similar technical personnel and any
commission, fee or compensation claimed by any broker (other than any broker
retained by Administrative Agent or Lenders) asserting any right to payment for
the transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby or by the other Financing Documents or the
Exchange

 

82

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

 

Agreement (including (i)(A) as a direct or indirect result of the presence on or
under, or escape, seepage, leakage, spillage, discharge, emission or release
from, any property now or previously owned, leased or operated by Borrower, any
other Credit Party or any other Person of any Hazardous Materials or any
Hazardous Materials Contamination, (B) arising out of or relating to the offsite
disposal of any materials generated or present on any such property or
(C) arising out of or resulting from the environmental condition of any such
property or the applicability of any governmental requirements relating to
Hazardous Materials, whether or not occasioned wholly or in part by any
condition, accident or event caused by any act or omission of Borrower or any
other Credit Party, (ii) the Transactions and (iii) proposed and actual
extensions of credit under this Agreement) and the use or intended use of the
proceeds of the Loans; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such liabilities, losses, damages,
claims or out-of-pocket expenses resulted from the gross negligence or willful
misconduct of such Indemnitee or of any of its Related Indemnified Persons (as
determined by a final non-appealable judgment of a court of competent
jurisdiction).  To the extent that the undertaking set forth in the immediately
preceding sentence may be unenforceable, Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable Law to the
payment and satisfaction of all such indemnified liabilities incurred by the
Indemnitees or any of them.  For purposes of this paragraph, “Related
Indemnified Person” shall mean, with respect to an Indemnitee, (1) any
controlling Person or controlled Affiliate of such Indemnitee, (2) the
respective directors, officers, or employees of such Indemnitee or any of its
controlling Persons or controlled Affiliates and (3) the respective trustees,
agents, investment advisors, collateral managers, servicers and counsel of such
Indemnitee or any of its controlling Persons or controlled Affiliates.

 

ARTICLE 10
ADMINISTRATIVE AGENT

 

Section 10.1                             Appointment and Authorization.

 

Each Lender hereby irrevocably appoints Cortland to act on its behalf as the
Administrative Agent hereunder and under the other Financing Documents and
authorizes Administrative Agent to enter into each of the Financing Documents to
which it is a party (other than this Agreement) on its behalf and to take such
actions as Administrative Agent on its behalf and to exercise such powers under
the Financing Documents as are delegated to Administrative Agent by the terms
thereof, together with all such powers as are reasonably incidental thereto. 
Subject to the terms of Section 11.5 and to the terms of the other Financing
Documents, Administrative Agent and the Lead Lenders are authorized and
empowered to amend, modify, or waive any provisions of this Agreement or the
other Financing Documents on behalf of Lenders.  Other than to the extent set
forth in Section 10.12, the provisions of this Article 10 are solely for the
benefit of Administrative Agent and Lenders and neither Borrower nor any other
Credit Party shall have any rights as a third party beneficiary of any of the
provisions hereof.  In performing its functions and duties under this Agreement,
Administrative Agent shall act solely as a non-fiduciary agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency, fiduciary or trust with or for the Lenders, Borrower or
any other Credit Party.  Subject to the provisions of this Article 10, including
but not limited to Section 10.5 and Section 10.7, the Administrative Agent
hereby agrees to act on the instructions of the Lead Lenders, the Required
Lenders or all the Lenders, as the context requires

 

83

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

 

herein and the other Financing Documents, and/or upon the express conditions
contained herein and the other Financing Documents, as applicable. 
Administrative Agent may perform any of its duties hereunder, or under the
Financing Documents, by or through its own agents or employees.  Administrative
Agent is authorized to appoint co-agents or sub-agents to act for it in
connection with any right or power under the Financing Documents as are
delegated to Administrative Agent by the terms thereof in respect of any
jurisdiction or any Collateral, and all provision hereof benefiting
Administrative Agent shall benefit such co-agents and sub-agents, including
provisions regarding indemnification.

 

Section 10.2                             Administrative Agent and Affiliates.

 

Administrative Agent shall have the same rights and powers under the Financing
Documents as any other Lender and may exercise or refrain from exercising the
same as though it were not Administrative Agent, and Administrative Agent and
its Affiliates may lend money to, invest in and generally engage in any kind of
business with each Credit Party or Affiliate of any Credit Party as if it were
not Administrative Agent hereunder and without any duty to account therefor to
the Lenders.

 

Section 10.3                             Action by Administrative Agent.

 

The duties of Administrative Agent shall be mechanical and administrative in
nature.  Nothing in this Agreement or any of the Financing Documents is intended
to or shall be construed to impose upon Administrative Agent any obligations in
respect of this Agreement or any of the Financing Documents except as expressly
set forth herein or therein.  Without limiting the generality of the foregoing,
the Administrative Agent shall not:

 

(a)                                 be subject to any implied duties, regardless
of whether a Default or Event of Default has occurred and is continuing;

 

(b)                                 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 Financing Documents that
Administrative Agent is required to exercise as directed in writing by the Lead
Lenders or Required Lenders (or such other number or percentage of the Lenders
as shall be expressly provided for herein or in the other Financing Documents);
provided that Administrative Agent shall not be required to take any action
that, in its judgment or the judgment of its counsel, may expose Administrative
Agent to liability or that is contrary to any Financing Document or applicable
Requirements of Law; and

 

(c)                                  except as expressly set forth herein and in
the other Financing Documents, have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to any Credit Party
or any of its Affiliates that is communicated to or obtained by the Person
serving as Administrative Agent or any of its Affiliates in any capacity.

 

Without limiting the generality of the foregoing, the use of the term “agent” in
this Agreement with reference to the Administrative Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law.  Instead, such term us used merely as a
matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties.

 

84

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

 

Each party to this Agreement acknowledges and agrees that the Administrative
Agent and the Lead Lenders or the Required Lenders may use an outside service
provider for the tracking of all UCC financing statements or similar statements
under the laws of any other jurisdiction required to be filed pursuant to the
Financing Documents and notification to the Administrative Agent, the Lead
Lenders or the Required Lenders, as the case may be, of, among other things, the
upcoming lapse or expiration thereof.

 

Section 10.4                             Consultation with Experts; Delegation
of Duties.

 

In determining compliance with any condition hereunder to the making of a Loan
that by its terms must be fulfilled to the satisfaction of a Lender, the
Administrative Agent may presume that such condition is satisfactory to such
Lender unless the Administrative Agent shall have received written notice to the
contrary from such Lender prior to the making of such Loan.  Administrative
Agent may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.  Administrative Agent may perform any and all of its
duties and exercise its rights and powers hereunder or under any other Financing
Document by or through, or delegate any and all such rights and powers to, any
one or more sub-agents appointed by Administrative Agent.  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 shall apply to any such sub-agent and to
the Related Parties of 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. Administrative Agent shall not incur any liability for any action or
inaction taken by a subagent so long as such subagent is appointed with due
care.

 

Section 10.5                             Liability of Administrative Agent.

 

Neither Administrative Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
with the Financing Documents, except that Administrative Agent shall be liable
with respect to its specific duties set forth hereunder, but only to the extent
of its own gross negligence or willful misconduct in the discharge thereof as
determined by a final non-appealable judgment of a court of competent
jurisdiction.  Neither Administrative Agent, any Lead Lender nor any of their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with any Financing Document or any
borrowing hereunder, (ii) the performance or observance of any of the covenants
or agreements specified in any Financing Document, (iii) the satisfaction of any
condition specified in any Financing Document, (iv) the validity, effectiveness,
sufficiency or genuineness of any Financing Document, any Lien purported to be
created or perfected thereby or any other instrument or writing furnished in
connection therewith, (v) the existence or non-existence of any Default or Event
of Default; (vi) the contents of any certificate, report or other document
delivered hereunder or thereunder or in connection herewith or therewith, or
(vii) the financial condition of any Credit Party.  Neither Administrative Agent
nor any Lead Lender shall incur any liability by acting in reliance upon any
notice, consent, certificate, statement, or other writing (which may be a bank
wire, telex, facsimile or electronic transmission or similar writing)

 

85

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

 

believed by it to be genuine or to be signed by the proper party or parties. 
Administrative Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them).  In addition,
Administrative Agent shall not be liable for any action taken or not taken by it
(x) with the consent or at the request of the Lead Lenders or Required Lenders
(or such other number or percentage of the Lenders as shall be necessary, or as
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Section 11.5), or (y) in the absence of its own
gross negligence or willful misconduct as determined by a court of competent
jurisdiction by final and non-appealable judgment.

 

Section 10.6                             Indemnification.

 

Each Lender shall, in accordance with its Pro Rata Share, indemnify
(a) Administrative Agent (to the extent not reimbursed by Borrower within
ten (10) days) upon demand against, and (b) Lead Lenders (to the extent not
reimbursed by Borrower within ten (10) days) upon demand for any amounts paid to
Administrative Agent for, any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such Indemnitee’s gross negligence or willful misconduct as determined by a
final non-appealable judgment of a court of competent jurisdiction) that
Administrative Agent may suffer or incur in connection with the Financing
Documents or any action taken or omitted by Administrative Agent hereunder or
thereunder.  If any indemnity furnished to Administrative Agent or Lead Lender
for any purpose shall, in the opinion of Administrative Agent, be insufficient
or become impaired, Administrative Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against even if so directed
by Lead Lenders until such additional indemnity is furnished.

 

Section 10.7                             Right to Request and Act on
Instructions.

 

Administrative Agent and the Lead Lenders may at any time request instructions
from Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Financing Documents Administrative Agent is permitted
or desires to take or to grant, and if such instructions are promptly requested,
Administrative Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Financing Documents until it shall have received such
instructions from Lead Lenders or all or such other portion of Lenders as shall
be prescribed by this Agreement.  Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Administrative Agent or Lead
Lender as a result of Administrative Agent or Lead Lender, as applicable, acting
or refraining from acting under this Agreement or any of the other Financing
Documents in accordance with the instructions of Lead Lenders (or all or such
other portion of Lenders as shall be prescribed by this Agreement) and,
notwithstanding the instructions of Lead Lenders (or such other applicable
portion of Lenders), Administrative Agent shall have no obligation to take any
action if it believes, in good faith, that such action would violate

 

86

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

 

applicable Law or exposes Administrative Agent to any liability for which it has
not received satisfactory indemnification in accordance with the provisions of
Section 10.6.

 

Section 10.8                             Credit Decision.

 

Each Lender acknowledges that it has, independently and without reliance upon
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.  Each Lender also acknowledges that it
will, independently and without reliance upon Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
any action under the Financing Documents.  Notwithstanding anything herein to
the contrary, each Lender also acknowledges that the Lien and security interest
granted to the Administrative Agent pursuant to the Security Documents and the
exercise of any right or remedy by the Administrative Agent thereunder are
subject to the provisions of the Intercreditor Agreements in effect as of the
date hereof and, to the extent any additional Intercreditor Agreements have been
delivered to the Administrative Agent and the Lead Lenders, such additional
Intercreditor Agreements. In the event of any conflict between the terms of the
Intercreditor Agreements and the Security Documents, the terms of the
Intercreditor Agreements shall govern and control.

 

Section 10.9                             Collateral Matters.

 

(a)                                 Lenders irrevocably authorize Administrative
Agent, at its option and in its discretion, to (i) release any Lien granted to
or held by Administrative Agent under any Security Document (A) upon payment in
full of all Obligations or (B) constituting property sold or disposed of as part
of or in connection with any disposition permitted under any Financing Document
(it being understood and agreed that Administrative Agent may conclusively rely
without further inquiry on a certificate of a Responsible Officer as to the sale
or other disposition of property being made in full compliance with the
provisions of the Financing Documents), (ii) release or subordinate any Lien
granted to or held by Administrative Agent under any Security Document
constituting property described in Section 5.2(d) (it being understood and
agreed that Administrative Agent may conclusively rely without further inquiry
on a certificate of a Responsible Officer as to the identification of any
property described in Section 5.2(d)), and (iii) release any Guarantor from the
Guaranty (and any Lenders Lien on the assets of such Guarantor and the Capital
Stock in such Guarantor shall be terminated as to any Guarantor) at such time as
such Guarantor shall have been designated an Unrestricted Subsidiary pursuant to
the Financing Documents or such Guarantor ceases to be a Subsidiary as a result
of a transaction permitted under this Agreement.  Upon request by Administrative
Agent at any time, Lenders will confirm Administrative Agent’s authority to
release and/or subordinate particular types or items of Collateral pursuant to
this Section 10.9.  Each Lender acknowledges that it has received a copy of the
First/Second Lien Intercreditor Agreement, authorizes the Administrative Agent
to enter into the First/Second Lien Intercreditor Agreement and, if applicable
the Pari Passu Intercreditor Agreement, and agrees to be bound by their terms.

 

(b)                                 The Administrative Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest,

 

87

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

 

mortgage or liens granted to Administrative Agent upon any Collateral to the
extent set forth above; provided, that (i) Administrative Agent shall not be
required to execute any such document on terms which, in Administrative Agent’s
opinion, would expose Administrative Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) other than in
connection with the payment in full of all Obligations (other than inchoate or
contingent or reimbursable obligations for which no claim has been asserted) and
termination of this Agreement, such release shall not in any manner discharge,
affect or impair the Obligations or any security interest in, or mortgage or
lien upon (or obligations of a Credit Party in respect of) the Collateral
retained by any Credit Party.

 

(c)                                  The Administrative Agent shall have no
obligation whatsoever to any Lender or any other person to investigate, confirm
or assure that the Collateral exists or is owned by any Credit Party or is cared
for, protected or insured or has been encumbered, or that any particular items
of Collateral meet the eligibility criteria applicable in respect of the Loans
hereunder, or that the liens and security interests granted to the
Administrative Agent pursuant hereto or any of the Financing Documents or
otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to the Administrative Agent in this Agreement or in any of
the other Financing Documents, it being understood and agreed that in respect of
the Collateral, or any act, omission or event related thereto, subject to the
other terms and conditions contained herein, the Administrative Agent shall have
no duty or liability whatsoever to any Lender.

 

(d)                                 The Administrative Agent, on behalf of
itself and the Lenders, is hereby authorized and instructed to enter into an
intercreditor agreement (which may be a new intercreditor agreement or an
amendment to, or an amendment and restatement of, the First/Second Lien
Intercreditor Agreement) in reliance upon (i) a document executed by the Lead
Lenders to the effect that such intercreditor agreement is reasonably acceptable
to the Lead Lenders or (ii) the certificate of the Chief Financial Officer
delivered pursuant to the definition of Acceptable Junior Lien Intercreditor
Agreement.

 

Section 10.10                      Agency for Perfection.

 

Administrative Agent and each Lender hereby appoint each other Lender as agent
for the purpose of perfecting Administrative Agent’s security interest in assets
which, in accordance with the Uniform Commercial Code in any applicable
jurisdiction, can be perfected by possession or control.  Should any Lender
(other than Administrative Agent) obtain possession or control of any such
assets, such Lender shall notify Administrative Agent thereof, and, promptly
upon Administrative Agent’s request therefor, shall deliver such assets to
Administrative Agent or in accordance with Administrative Agent’s instructions
or transfer control to Administrative Agent in accordance with Administrative
Agent’s instructions.  Each Lender agrees that it will not have any right
individually to enforce or seek to enforce any Security Document or to realize
upon any Collateral for the Loans unless instructed to do so by Administrative
Agent (except as provided in Section 8.5), it being understood and agreed that
such rights and remedies may be exercised only by Administrative Agent.

 

88

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

 

Section 10.11                      Notice of Default.

 

Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default except with respect to defaults in
the payment of principal, interest and fees required to be paid to
Administrative Agent for the account of Lenders, unless Administrative Agent
shall have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a “notice of default”.  Administrative Agent will notify each Lender
of its receipt of any such notice.  Administrative Agent shall take such action
with respect to such Default or Event of Default as may be requested by Lead
Lenders in accordance with the terms hereof.  Unless and until Administrative
Agent has received any such request, Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interests of Lenders.

 

Section 10.12                      Successor Administrative Agent.

 

Administrative Agent may at any time give notice of its resignation to Lenders
and Borrower.  Upon receipt of any such notice of resignation, Lead Lenders
shall have the right, in consultation with Borrower (so long as no Event of
Default exists), to appoint a successor Administrative Agent.  Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder and
notice of such acceptance to the retiring Administrative Agent, such successor
shall succeed to and become vested with all of the rights, powers, privileges
and duties of the retiring (or retired) Administrative Agent, the retiring
Administrative Agent’s resignation shall become immediately effective and the
retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder and under the other Financing Documents (if such
resignation was not already effective and such duties and obligations not
already discharged, as provided below in this paragraph).  Until such time as
the Lead Lenders appoint a successor Administrative Agent as provided for above
in this Section 10.12, all payments, communications and determinations required
to be made by, to or through Administrative Agent shall instead be made by or to
each Lender directly.  The fees payable by Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between Borrower and such successor.  If no such
successor shall have been so appointed by Lead Lenders and shall have accepted
such appointment within thirty (30) days after the retiring Administrative Agent
gives notice of its resignation, then the retiring Administrative Agent may on
behalf of Lenders (but without any obligation) appoint a successor
Administrative Agent.  From and following the expiration of such thirty (30) day
period, Administrative Agent shall have the exclusive right, upon
one (1) Business Days’ notice to Borrower and Lenders, to make its resignation
effective immediately.  From and following the effectiveness of such notice,
(i) the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Financing Documents and (ii) all
payments, communications and determinations provided to be made by, to or
through Administrative Agent shall instead be made by or to each Lender
directly, until such time as Lead Lenders appoint a successor Administrative
Agent as provided for above in this paragraph.  The provisions of this Agreement
shall continue in effect for the benefit of any retiring Administrative Agent
and its sub-agents after the effectiveness of its resignation hereunder and
under the other Financing Documents in respect of any actions taken or omitted
to be taken by any of them while the

 

89

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

 

retiring Administrative Agent was acting or was continuing to act as
Administrative Agent. Any successor Administrative Agent shall provide the
applicable documentation described in Section 2.13(f)(iii) to Borrower on or
prior to the date on which it becomes an Administrative Agent hereunder.

 

Section 10.13                      Payment and Sharing of Payment.

 

(a)                                 [Reserved].

 

(b)                                 [Reserved].

 

(c)                                  Return of Payments.

 

(i)                                     If Administrative Agent pays an amount
to a Lender under this Agreement in the belief or expectation that a related
payment has been or will be received by Administrative Agent from Borrower and
such related payment is not received by Administrative Agent, then
Administrative Agent will be entitled to recover such amount from such Lender on
demand without setoff, counterclaim or deduction of any kind, together with
interest accruing on a daily basis at the Federal Funds Rate.

 

(ii)                                  If Administrative Agent determines at any
time that any amount received by Administrative Agent under this Agreement must
be returned to Borrower or paid to any other Person pursuant to any insolvency
Law or otherwise, then, notwithstanding any other term or condition of this
Agreement or any other Financing Document, Administrative Agent will not be
required to distribute any portion thereof to any Lender.  In addition, each
Lender will repay to Administrative Agent on demand any portion of such amount
that Administrative Agent has distributed to such Lender, together with interest
at such rate, if any, as Administrative Agent is required to pay to Borrower or
such other Person, without setoff, counterclaim or deduction of any kind.

 

(d)                                 Lenders Failing to Make Payment.  The
failure of any Lender to make any payment required by it hereunder shall not
relieve any other Lender of its obligations to make such payment, but neither
any other Lender nor Administrative Agent shall be responsible for the failure
of such Lender to make any payment required hereunder.

 

(e)                                  Sharing of Payments.  If any Lender shall
obtain any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of any Loan (other than pursuant
to the terms of Section 2.7(e)(v) or Section 2.14) in excess of its pro rata
share of payments entitled pursuant to the other provisions of this
Section 10.13, such Lender shall purchase from the other Lenders such
participations in extensions of credit made by such other Lenders (without
recourse, representation or warranty) as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter required to be returned or otherwise
recovered from such purchasing Lender, such portion of such purchase shall be
rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such return or recovery, without interest.  Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
clause (e) may, to the fullest extent permitted

 

90

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

 

by Law, exercise all its rights of payment (including pursuant to Section 8.5)
with respect to such participation as fully as if such Lender were the direct
creditor of Borrower in the amount of such participation.  If under any
applicable bankruptcy, insolvency or other similar Law, any Lender receives a
secured claim in lieu of a setoff to which this clause (e) applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of Lenders entitled under this
clause (e) to share in the benefits of any recovery on such secured claim.

 

Section 10.14                      Right to Perform, Preserve and Protect.

 

If any Credit Party fails to perform any obligation hereunder or under any other
Financing Document, Administrative Agent itself may, but shall not be obligated
to, cause such obligation to be performed at Borrower’s expense.  Administrative
Agent is further authorized by Borrower and Lenders to make expenditures from
time to time which Administrative Agent, in its reasonable business judgment,
deems necessary or desirable to (i) preserve or protect the business conducted
by Borrower, the Collateral, or any portion thereof and/or (ii) enhance the
likelihood of, or maximize the amount of, repayment of the Loans and other
Obligations.  Borrower hereby agrees to reimburse Administrative Agent on demand
for any and all costs, liabilities and obligations incurred by Administrative
Agent pursuant to this Section 10.14.  Each Lender hereby agrees to indemnify
Administrative Agent upon demand for any and all costs, liabilities and
obligations incurred by Administrative Agent pursuant to this Section 10.14, in
accordance with the provisions of Section 10.6.

 

Section 10.15                      Additional Titled Agents.

 

Except for rights and powers, if any, expressly reserved under this Agreement to
any bookrunner, arranger or to any titled agent named on the cover page of this
Agreement, other than Administrative Agent (collectively, the “Additional Titled
Agents”), and except for obligations, liabilities, duties and responsibilities,
if any, expressly assumed under this Agreement by any Additional Titled Agent,
no Additional Titled Agent, in such capacity, has any rights, powers,
liabilities, duties or responsibilities hereunder or under any of the other
Financing Documents.  Without limiting the foregoing, no Additional Titled Agent
shall have nor be deemed to have a fiduciary relationship with any Lender.  At
any time that any Lender serving (or whose Affiliate is serving) as an
Additional Titled Agent shall have transferred to any other Person (other than
any Affiliates) all of its interests in the Loans, such Person shall be deemed
to have concurrently resigned as such Additional Titled Agent.

 

Section 10.16                      Administrative Agent May File Proof of Claim.

 

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

 

91

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

 

(a)                                 file and prove a claim for the whole amount
of the principal and interest owing and unpaid in respect of the Loans and all
other Debt that are owing and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of the Lenders and the
Administrative Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders and the Administrative Agent
and their respective agents and counsel and all other amounts due the Lenders
and the Administrative Agent under Article 9 allowed in such judicial
proceeding); and

 

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

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and their agents and counsel, and any other amounts due the
Administrative Agent under Article 9.

 

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

 

ARTICLE 11
MISCELLANEOUS

 

Section 11.1                             Survival.

 

All agreements, representations and warranties made herein and in every other
Financing Document shall survive the execution and delivery of this Agreement
and the other Financing Documents and the other Financing Documents.  The
provisions of Sections 2.7(e)(v), 2.13 and 2.14 and Articles 9, 10 and 11 shall
survive the payment of the Obligations (both with respect to any Lender and all
Lenders collectively) and any termination of this Agreement.

 

Section 11.2                             No Waivers.

 

No failure or delay by Administrative Agent or any Lender in exercising any
right, power or privilege under any Financing Document shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies herein and therein provided shall be
cumulative and not exclusive of any rights or remedies provided by Law.

 

Section 11.3                             Notices.

 

(a)                                 All notices, requests and other
communications to any party hereunder shall be in writing (including prepaid
overnight courier, facsimile transmission, e-mail, electronic

 

92

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

 

submissions or similar writing) and shall be given to such party at its address,
facsimile number or e mail address set forth on the signature pages hereof (or,
in the case of any Lender who becomes a Lender after the date hereof, in an
Assignment Agreement or in a notice delivered to Borrower and Administrative
Agent by the assignee Lender forthwith upon such assignment) or at such other
address, facsimile number or e-mail address as such party may hereafter specify
for the purpose by notice to Administrative Agent and Borrower; provided, that
notices, requests or other communications shall be permitted by e-mail or other
electronic submissions only in accordance with the provisions of
Section 11.3(c).  Notices sent by hand or overnight courier service, or mailed
by certified or registered mail, shall be deemed to have been given when
received; notices sent by facsimile shall be deemed to have been given when sent
(except that, if not given during normal business hours for the recipient, shall
be deemed to have been given at the opening of business on the next business day
for the recipient). Notices delivered through electronic communications to the
extent provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).  Any party hereto may change its address or facsimile number for
notices and other communications hereunder by written notice to Borrower and the
Administrative Agent.

 

(b)                                 The Administrative Agent agrees that the
receipt of the communications by the Administrative Agent at its e-mail address
as provided herein shall constitute effective delivery of the communications to
the Administrative Agent for purposes of the Financing Documents. Each Lender
agrees that receipt of notice to it (as provided in the next sentence)
specifying that the communications have been posted to the Platform (as defined
below) shall constitute effective delivery of the communications to such Lender
for purposes of the Financing Documents. Each Lender agrees to notify the
Administrative Agent in writing (including by electronic communication) from
time to time of such Lender’s e-mail address to which the foregoing notice may
be sent by electronic transmission.

 

(c)                                  Borrower hereby acknowledges that (i) the
Administrative Agent may make available to the Lenders materials and/or
information provided by or on behalf of Borrower hereunder (collectively, the
“Borrower Materials”) by posting the Borrower Materials on Intralinks or another
similar electronic system (the “Platform”), (ii) the Administrative Agent 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, and (iii) certain of the Lenders may be “public-side” Lenders
(i.e., Lenders, or representatives thereof, that do not wish to receive material
nonpublic information with respect to Borrower or its securities) (each, a
“Public Lender”).  Borrower hereby agrees that (w) all Borrower Materials that
are to be made available to Public Lenders shall be clearly and conspicuously
marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall
appear prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC”, Borrower shall be deemed to have authorized the Administrative Agent
and the Lenders to treat such Borrower Materials as not containing any material
non-public information with respect to Borrower or its securities for purposes
of United States Federal and state securities laws; (y) all Borrower Materials
marked “PUBLIC” are permitted to be made available through a portion of the
Platform designated as “Public Investor”; and (z) the Administrative Agent shall
be entitled to treat any Borrower Materials that are not marked “PUBLIC” as
being suitable only for posting on a portion of the Platform not marked as
“Public Investor”.  Notwithstanding the foregoing, the following

 

93

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

 

Borrower Materials shall be marked “PUBLIC”, unless Borrower notifies the
Administrative Agent promptly (after being given a reasonable opportunity to
review such Borrower Materials) that any such document contains material
non-public information:  (1) the Financing Documents and (2) notification of
changes in the terms of the Financing Documents.

 

(d)                                 THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE”. NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS RELATED PARTIES
WARRANTS THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS OR THE ADEQUACY OF
THE PLATFORM AND EACH EXPRESSLY DISCLAIMS LIABILITY FOR ERRORS OR OMISSIONS IN
THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER
CODE DEFECTS IS MADE BY THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES
IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM.  IN NO EVENT SHALL THE
ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES HAVE ANY LIABILITY TO ANY
CREDIT PARTY, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, WHETHER OR
NOT BASED ON STRICT LIABILITY AND INCLUDING DIRECT OR INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN
TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY CREDIT PARTY’S OR THE
ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET,
EXCEPT TO THE EXTENT THE LIABILITY OF ANY SUCH PERSON IS FOUND IN A FINAL RULING
BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH PERSON’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.

 

Section 11.4                             Severability.

 

In case any provision of or obligation under this Agreement or any other
Financing Document shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

 

Section 11.5                             Amendments and Waivers.  General
Provisions.  No provision of this Agreement or any other Financing Document may
be amended, waived or otherwise modified unless such amendment, waiver or other
modification is in writing and is signed or otherwise approved by Borrower and
Lead Lenders (and, if the rights and duties of Administrative Agent are affected
thereby, by Administrative Agent); provided that a copy of each such amendment,
waiver or modification shall be delivered by Borrower to the Administrative
Agent; provided further that no such amendment, waiver or other modification
shall, unless signed or otherwise approved in writing by all Lenders directly
and adversely affected thereby, (A) reduce the principal of, rate of interest on
or any fees with respect to any Loan or forgive any principal, interest or fees
with respect to any Loan, (B) postpone the date fixed for, or waive, any payment
(other than a payment pursuant to Section 2.3(b), (c) or (e)) of principal of or
interest on any Loan or any fees hereunder or postpone the date of termination
of the commitment of any Lender hereunder, (C) change the definition of either
or both terms Lead Lenders and Required Lenders

 

94

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

 

or the percentage of Lenders which shall be required for Lenders to take any
action hereunder, (D) release all or substantially all of the Collateral or
release all or substantially all of the value of the Guarantees, except, in each
case with respect to this clause (D), as otherwise may be provided in this
Agreement or the other Financing Documents (including in connection with any
disposition permitted hereunder), (E) amend, waive or otherwise modify this
Section 11.5 or the definitions of the terms used in this Section 11.5 insofar
as the definitions affect the substance of this Section 11.5; (F) reduce the
required percentages of Mortgaged Properties pursuant to Section 4.10(d); or
(G) consent to the assignment, delegation or other transfer by any Credit Party
of any of its rights and obligations under any Financing Document or release
Borrower of its payment obligations under any Financing Document, except, in
each case with respect to this clause (G), pursuant to a merger or consolidation
permitted pursuant to this Agreement.  It is hereby understood and agreed that
all Lenders shall be deemed directly and adversely affected by an amendment,
waiver or other modification of the type described in the preceding clauses (D),
(E), (F) and (G) of the preceding sentence.

 

Section 11.6                             Assignments; Participations;
Replacement of Lenders.

 

(a)                                 Assignments.

 

(i)                                     Any Lender may at any time assign to one
or more Eligible Assignees all or any portion of such Lender’s Loans, together
with all related obligations of such Lender hereunder.  Except as Administrative
Agent may otherwise agree, the amount of any such assignment (determined as of
the date of the applicable Assignment Agreement or, if a “Trade Date” is
specified in such Assignment Agreement, as of such Trade Date) shall be in a
minimum aggregate amount equal to $1,000,000 or, if less, the assignor’s entire
interests in the outstanding Loans; provided, that, in connection with
simultaneous assignments to two or more related Approved Funds, such Approved
Funds shall be treated as one assignee for purposes of determining compliance
with the minimum assignment size referred to above.  Borrower and Administrative
Agent shall be entitled to continue to deal solely and directly with such Lender
in connection with the interests so assigned to an Eligible Assignee until
Administrative Agent shall have received and accepted an effective Assignment
Agreement executed, delivered and fully completed by the applicable parties
thereto, an assignment fee of $3,500 and such other information regarding such
Eligible Assignee as Administrative Agent reasonably shall require.

 

(ii)                                  From and after the date on which the
conditions described above have been met, (A) such Eligible Assignee shall be
deemed automatically to have become a party hereto and, to the extent of the
interests assigned to such Eligible Assignee pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and
(B) the assigning Lender, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment Agreement, shall be
released from its rights and obligations hereunder (other than those that
survive termination pursuant to Section 11.1).  Upon the request of the Eligible
Assignee (and, as applicable, the assigning Lender) pursuant to an effective
Assignment Agreement, Borrower shall execute and deliver to the Eligible
Assignee (and, as applicable, the assigning Lender) Notes in the aggregate
principal amount equal to the such Eligible Assignee’s Loans outstanding at the
time of such execution (and, as applicable, Notes in the principal amount equal
to the Loans retained by the assigning Lender).  Upon receipt by the

 

95

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

 

assigning Lender of such Note, the assigning Lender shall return to Borrower any
prior Note held by it, if any.

 

(iii)                               Administrative Agent, acting solely for this
purpose as a non-fiduciary agent of Borrower, shall maintain at its offices a
copy of each Assignment Agreement delivered to it and the Register for the
recordation of the names and addresses of each Lender, and the commitments of,
and principal amount (and stated interest) of the Loans owing to, such Lender
pursuant to the terms hereof.  The entries in the Register shall be conclusive,
and Borrower, Administrative Agent and Lenders may treat each Person whose name
is recorded therein pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary.  The
Register shall be available for inspection by Borrower and any Lender, at any
reasonable time upon reasonable prior notice to Administrative Agent.

 

(iv)                              Notwithstanding the foregoing provisions of
this Section 11.6(a) or any other provision of this Agreement, 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.

 

(v)                                 Notwithstanding the foregoing provisions of
this Section 11.6(a) or any other provision of this Agreement, Administrative
Agent has the right, but not the obligation, to effectuate assignments of Loans
by an electronic settlement system acceptable to Administrative Agent as
designated in writing from time to time to Lenders by Administrative Agent (the
“Settlement Service”).  At any time when Administrative Agent elects, in its
sole discretion, to implement such Settlement Service, each such assignment
shall be effected by the assigning Lender and proposed assignee pursuant to the
procedures then in effect under the Settlement Service, which procedures shall
be consistent with the other provisions of this Section 11.6(a).  Each assigning
Lender and proposed Eligible Assignee shall comply with the requirements of the
Settlement Service in connection with effecting any assignment of Loans pursuant
to the Settlement Service.  With the prior approval of each of Administrative
Agent and Borrower, as applicable, Administrative Agent’s and Borrower’s
approval of such Eligible Assignee shall be deemed to have been automatically
granted with respect to any transfer effected through the Settlement Service. 
Assignments and assumptions of the Loans shall be effected by the provisions
otherwise set forth herein until Administrative Agent notifies Lenders of the
Settlement Service as set forth herein.

 

(vi)                              Certain Additional Payments.  In connection
with any assignment of rights and obligations of any Lender that, at the time of
such assignment, has failed to make a payment required by it 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 to pay and satisfy in full all payment liabilities
then owed by such Lender to the Administrative Agent and each other Lender
hereunder (and interest accrued thereon)).

 

96

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

 

(b)                                 Participations.

 

Any Lender may at any time, without the consent of, or notice to, Borrower or
Administrative Agent, sell to one or more Persons participating interests in its
Loans, commitments or other interests hereunder (any such Person, a
“Participant”).  In the event of a sale by a Lender of a participating interest
to a Participant, (i) such Lender’s obligations hereunder shall remain unchanged
for all purposes, (ii) Borrower and Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations hereunder and (iii) all amounts payable by Borrower shall be
determined as if such Lender had not sold such participation and shall be paid
directly to such Lender.  No Participant shall have any direct or indirect
voting rights hereunder except with respect to any event described in
Section 11.5 expressly requiring the unanimous vote of all Lenders or, as
applicable, all affected Lenders.  Borrower agrees that each Participant shall
be entitled to the benefits of Sections 2.7(e)(v), 2.13 and 2.14 (subject to the
requirements and limitations therein, including the requirements under
Section 2.13(f) (it being understood that the documentation required under
Section 2.13(f) shall be delivered to the participating Lender)) to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (a) of this Section; provided that such Participant
(i) agrees to be subject to the provisions of Sections 2.7(e)(v), 2.13, 2.14 and
11.6 as if it were an assignee under paragraph (a) of this Section and
(ii) shall not be entitled to receive any greater payment under
Sections 2.7(e)(v), 2.13 and 2.14, with respect to any participation, than its
participating Lender would have been entitled to receive, except to the extent
such entitlement to receive a greater payment results from an adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
or compliance by any Lender with any request or directive (whether or not having
the force of law) by any Governmental Authority made subsequent to the date
hereof that occurs after the Participant acquired the applicable participation.
Borrower agrees that if amounts outstanding under this Agreement are due and
payable (as a result of acceleration or otherwise), each Participant shall be
deemed to have the right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement; provided that such right of set-off shall be subject to the
obligation of each Participant to share with Lenders, and Lenders agree to share
with each Participant, as provided in Section 8.5.  Each Lender that sells a
participation shall, acting solely for this purpose as an agent of Borrower,
maintain a register on which it enters the name and address of each Participant
and the principal amounts (and stated interest) of each Participant’s interest
in the Loans or other obligations under the Financing 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
Financing 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.

 

97

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

 

(c)                                  Credit Party Assignments.

 

No Credit Party may assign, delegate or otherwise transfer any of its rights or
other obligations hereunder or under any other Financing Document without the
prior written consent of Administrative Agent and each Lender.

 

Section 11.7                             Headings.

 

Headings and captions used in the Financing Documents (including the Exhibits,
Schedules and Annexes hereto and thereto) are included for convenience of
reference only and shall not be given any substantive effect.

 

Section 11.8                             Confidentiality.

 

Administrative Agent and each Lender shall hold all non-public information
regarding the Credit Parties and their respective businesses in accordance with
such Person’s customary procedures for handling information of such nature,
except that disclosure of such information may be made (i) to their respective
agents, employees, Subsidiaries, Affiliates, attorneys, auditors, professional
consultants, rating agencies, insurance industry associations and portfolio
management services, (ii) to prospective transferees or purchasers of any
interest in the Loans, and to prospective contractual counterparties (or the
professional advisors thereto) in Swap Contracts permitted hereby, provided that
any such Persons shall have agreed to be bound by the provisions of this
Section 11.8, (iii) as required by Law, subpoena, judicial order or similar
order and in connection with any litigation, (iv) as may be required in
connection with the examination, audit or similar investigation of such Person
and (v) to a Person that is a trustee, investment advisor, collateral manager,
servicer, noteholder or secured party in a Securitization (as hereinafter
defined) in connection with the administration, servicing and reporting on the
assets serving as collateral for such Securitization.  For the purposes of this
Section, “Securitization” shall mean a public or private offering by a Lender or
any of its Affiliates or their respective successors and assigns, of Capital
Stock which represent an interest in, or which are collateralized, in whole or
in party, by the Loans.  Confidential information shall not include information
that either (A) is in the public domain, or becomes part of the public domain
after disclosure to such Person through no fault of such Person, or (B) is
disclosed to such Person by a Person other than a Credit Party, provided
Administrative Agent does not have actual knowledge that such Person is
prohibited from disclosing such information.  The obligations of Administrative
Agent and Lenders under this Section 11.8 shall supersede and replace the
obligations of Administrative Agent and Lenders under any confidentiality
agreement in respect of this financing executed and delivered by Administrative
Agent or any Lender prior to the date hereof.

 

Section 11.9                             Waiver of Consequential and Other
Damages.

 

To the fullest extent permitted by applicable Law, Borrower shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of this
Agreement, any other Financing Document or any agreement or instrument
contemplated hereby or thereby, the transactions contemplated hereby

 

98

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

 

or thereby, any Loan or the use of the proceeds thereof.  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 Financing Documents or the transactions contemplated
hereby or thereby, including through the Platform.

 

Section 11.10                      Marshaling; Payments Set Aside.

 

Neither Administrative Agent nor any Lender shall be under any obligation to
marshal any assets in payment of any or all of the Obligations.  To the extent
that Borrower makes any payment or Administrative Agent enforces its Liens or
Administrative Agent or any Lender exercises its right of set-off, and such
payment or the proceeds of such enforcement or set-off is subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid by anyone, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefore, shall be revived and continued in full force and effect as
if such payment had not been made or such enforcement or set-off had not
occurred.

 

Section 11.11                      GOVERNING LAW; SUBMISSION TO JURISDICTION.

 

EXCEPT AS OTHERWISE SET FORTH IN THE MORTGAGES, THIS AGREEMENT, EACH NOTE AND
EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS RELATING HERETO OR THERETO OR
ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE),
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.  BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK,
STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. 
BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS
BEEN POSTED.

 

Section 11.12                      WAIVER OF JURY TRIAL.

 

EACH OF BORROWER, ADMINISTRATIVE AGENT AND LENDERS HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE

 

99

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

 

FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 
EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING
DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS.  EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER
WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY
WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS.

 

Section 11.13                      [Reserved].

 

Section 11.14                      Counterparts; Integration.

 

This Agreement and the other Financing Documents may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.  Signatures by
e-mail and facsimile shall bind the parties hereto.  This Agreement and the
other Financing Documents constitute the entire agreement and understanding
among the parties hereto and supersede any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.

 

Section 11.15                      No Strict Construction.

 

The parties hereto have participated jointly in the negotiation and drafting of
this Agreement.  In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

 

Section 11.16                      USA PATRIOT Act Notification.

 

Administrative Agent (for itself and not on behalf of any Lender) and each
Lender hereby notifies Borrower that pursuant to the requirements of the USA
PATRIOT Act, it is required to obtain, verify and record certain information and
documentation that identifies the Credit Parties, which information includes the
name and address of the Credit Parties and such other information that will
allow Administrative Agent or such Lender, as applicable, to identify the Credit
Parties in accordance with the USA PATRIOT Act.

 

Section 11.17                      First/Second Lien Intercreditor Agreement.

 

Notwithstanding anything herein to the contrary, the exercise of any right or
remedy by the Administrative Agent hereunder is subject to the limitations and
provisions of the First/Second Lien Intercreditor Agreement.  In the event of
any conflict between the terms of the First/Second Lien Intercreditor Agreement
and the terms of this Agreement, the terms of the

 

100

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

 

First/Second Lien Intercreditor Agreement shall govern.  Each Lender hereunder
(i) acknowledges that it has received a copy of the First/Second Lien
Intercreditor Agreement, (ii) agrees that it will be bound by and will take no
actions contrary to the provisions of the First/Second Lien Intercreditor
Agreement, (iii) authorizes and instructs the Administrative Agent to enter into
the First/Second Lien Intercreditor Agreement as Administrative Agent and on
behalf of such Lender and (iv) hereby consents to the subordination of the Liens
securing the Obligations on the terms set forth in the First/Second Lien
Intercreditor Agreement.  Notwithstanding anything to the contrary in the
First/Second Lien Intercreditor Agreement, the foregoing does not limit any
rights of the Administrative Agent and the Lenders as unsecured creditors.

 

Section 11.18                      No Personal Liability of Directors, Officers,
Employees and Stockholders With Respect to Financial Conditional
Representations.

 

No director, officer, employee or stockholder of Borrower or any Guarantor, as
such, shall have any liability for any representations, warranties, certificates
or other statements made by or on behalf of Borrower or any Guarantor under any
Financing Document with respect to the financial condition of Borrower and/or
the Guarantors.  Each Lender by making a Loan hereunder waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Loans and other Obligations.

 

101

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

 

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

 

 

WARREN RESOURCES, INC.

 

 

 

 

 

By:

/s/ Stewart P. Skelly

 

 

Name:

Stewart P. Skelly

 

 

Title:

Vice President and Chief Financial Officer

 

 

 

 

 

 

Address:

1114 Avenue of the Americas

 

 

34th Floor

 

 

New York, NY 10036

 

 

Attention:         Secretary and General Counsel

 

 

 

Facsimile number: (212) 697-9466

 

E-mail Address: ssomalya@warrenresources.com

 

Taxpayer Identification Number: 11-3024080

 

 

 

Borrower’s Account Designation:

 

 

 

JPMorgan Chase Bank

 

One Chase Plaza

 

New York, NY 10081

 

ABA No.: 021000021

 

Account No.: 459-1-517471

 

Account Name: Warren Resources, Inc.

 

489 Fifth Avenue, 32nd Floor

 

New York, NY 10017

 

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

 

 

CORTLAND PRODUCTS CORP., as

 

Administrative Agent

 

 

 

 

 

By:

/s/ Emily Ergang Pappas

 

 

Name:

Emily Ergang Pappas

 

 

Title:

Associate Counsel

 

 

 

Address for notices:

 

 

 

225 West Washington Street, 21st Floor

 

Chicago, IL 60606

 

Attn: Ryan Morick and Legal Department

 

Tel: (312) 564-5100

 

Fax: (312) 376-0751

 

Email:   ryan.morick@cortlandglobal.com

 

and legal@cortlandglobal.com

 

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

 

Annex A

 

Commitment Annex
(as of the Closing Date)

 

Converted Loans

 

Conversion Lender

 

Conversion Note Amount

(plus accrued interest)

 

Conversion Value

 

Claren Road Credit Master Fund, Ltd.

 

$

38,653,192

 

$

24,046,946

 

Claren Road Credit Opportunities Master Fund, Ltd.

 

$

25,769,474

 

$

16,031,720

 

TOTAL:

 

$

64,422,666

 

$

40,078,666

 

 

New Term Loans

 

Lender

 

New Term Loan

Commitment

 

Claren Road Credit Master Fund, Ltd.

 

$

6,570,000

 

Claren Road Credit Opportunities Master Fund, Ltd.

 

$

4,380,000

 

TOTAL:

 

$

10,950,000

 

 

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

 

Annex B

 

Closing Checklist

 

Item

 

Documents

 

 

 

A.

 

CREDIT AGREEMENT AND NOTES

 

 

 

1.

 

Credit Agreement

 

 

 

 

 

Annexes

 

 

 

 

 

Annex A                                                      Commitment Annex

 

 

 

 

 

Annex B                                                      Closing Checklist

 

 

 

 

 

Exhibits

 

 

 

 

 

Exhibit A                                                   Assignment Agreement

 

 

 

 

 

Exhibit B-1                                        Compliance Certificate

 

 

 

 

 

Exhibit B-2                                        Definition of EBITDAX

 

 

 

 

 

Exhibit C                                                   Notice of Borrowing

 

 

 

 

 

Exhibit D                                                   [Reserved]

 

 

 

 

 

Exhibit E-1                                         U.S. Tax Compliance
Certificates for Non-U.S. Lenders that are not Partnerships

 

 

 

 

 

Exhibit E-2                                         U.S. Tax Compliance
Certificates for Non-U.S. Lenders that are Partnerships

 

 

 

 

 

Exhibit E-3                                         U.S. Tax Compliance
Certificates for Foreign Participants that are not Partnerships

 

 

 

 

 

Exhibit E-4                                         U.S. Tax Compliance
Certificates for Foreign Participants that are Partnerships

 

 

 

 

 

Exhibit F                                                     Note

 

 

 

 

 

Schedules

 

 

 

 

 

Schedule 3.1                                 Existence, Organizational
Identification Numbers, Foreign Qualification, Prior Names

 

 

 

 

 

Schedule 3.4                                 Capitalization

 

 

 

 

 

Schedule 3.6                                 Litigation

 

 

 

 

 

Schedule 3.15                          Brokers

 

 

 

 

 

Schedule 3.16                          Environmental Compliance

 

 

 

 

 

Schedule 3.20                          Reserve Reports

 

 

 

 

 

Schedule 3.21                          Maintenance; Permits

 

 

 

 

 

Schedule 5.1                                 Debt

 

 

 

 

 

Schedule 5.2                                 Liens

 

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

 

Item

 

Documents

 

 

 

 

 

Schedule 5.3                                 Contingent Obligations

 

 

 

 

 

Schedule 5.5                                 Restrictive Agreements

 

 

 

 

 

Schedule 5.8                                 Unrestricted Subsidiaries

 

 

 

 

 

Schedule 5.9                                 Affiliate Transactions

 

 

 

 

 

Schedule 5.12                          Business Description

 

 

 

 

 

Schedule 7.1(i)                      Local Counsel Opinion Jurisdiction

 

 

 

B.

 

NON-REAL PROPERTY COLLATERAL DOCUMENTS

 

 

 

1.

 

Guaranty

 

 

 

2.

 

Security Agreement

 

 

 

 

 

Schedules

 

 

 

 

 

Schedule 1                                           Notice Addresses of
Grantors

 

 

 

 

 

Schedule 2                                           [Reserved]

 

 

 

 

 

Schedule 3                                           Filings and Other Actions
Required to Perfect Security Interests

 

 

 

 

 

Schedule 4                                           Correct Legal Name,
Location of Jurisdiction of Organization, Organizational Identification Number,
Taxpayer Identification Number and Chief Executive Office

 

 

 

 

 

Schedule 5                                           Prior Names and Prior Chief
Executive Office

 

 

 

 

 

Schedule 6                                           Locations of Inventory,
Equipment and Other Assets Constituting Collateral and Books and Records
Pertaining to the Collateral

 

 

 

 

 

Schedule 7                                           Commercial Tort Claims

 

 

 

 

 

Schedule 8                                           Deposit and Securities
Accounts

 

 

 

 

 

Schedule 9                                           Intellectual Property

 

 

 

 

 

Annexes

 

 

 

 

 

Annex 1                                                        Assumption
Agreement

 

 

 

 

 

Annex 2                                                        Intellectual
Property Security Agreement

 

 

 

3.

 

Pledge Agreement

 

 

 

 

 

Exhibits

 

 

 

 

 

Exhibit A                                                   Identification of
Pledged Securities

 

 

 

 

 

Exhibit B                                                   Pledge Supplement

 

 

 

4.

 

Perfection Certificate

 

 

 

5.

 

Stock Certificates and Stock Powers

 

 

 

6.

 

Certificates of Insurance (including notice of cancellation endorsements) naming
the Secured Parties, to the extent applicable, as additional insured on any
liability insurance and, if casualty insurance is obtained, naming the
Administrative Agent as additional loss payee under and such casualty insurance)
and Endorsements

 

 

 

C.

 

MORTGAGE DOCUMENTATION

 

 

 

1.

 

Deed of Trust, Mortgage, Assignment, Security Agreement Fixture Filing and
Financing Statement (California)

 

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

 

Item

 

Documents

 

 

 

 

 

Exhibit

 

 

 

 

 

Exhibit A                                                   Description of
Mortgaged Property

 

 

 

2.

 

Open-End Deed of Trust, Mortgage, Assignment, Security Agreement Fixture Filing
and Financing Statement (Pennsylvania)

 

 

 

 

 

Exhibit

 

 

 

 

 

Exhibit A                                                   Description of
Mortgaged Property

 

 

 

3.

 

Deed of Trust, Mortgage, Assignment, Security Agreement Fixture Filing and
Financing Statement (Wyoming)

 

 

 

 

 

Exhibit

 

 

 

 

 

Exhibit A                                                   Description of
Mortgaged Property

 

 

 

D.

 

FILINGS AND SEARCHES

 

 

 

1.

 

UCC-1 Financing Statements naming Administrative Agent as Secured Party and each
Credit Party as Debtor filed in the jurisdictions described on Exhibit A
attached hereto.

 

 

 

2.

 

UCC-1 Fixture Filings to be filed in each county where mortgages are filed.

 

 

 

3.

 

UCC-1 Lien, State and Local Tax, Bankruptcy Fixture and Judgment searches in
each of the locations and against each of the Credit Parties identified on
Exhibit C attached hereto.

 

 

 

4.

 

Real property related searches in each of the locations and against each of the
Credit Parties identified on Exhibit D attached hereto.

 

 

 

E.

 

LEGAL OPINIONS

 

 

 

1.

 

Legal Opinion of T&K (Credit Agreement)

 

 

 

2.

 

Legal Opinion of T&K (Equity)

 

 

 

3.

 

Legal Opinion of California Local Counsel

 

 

 

4.

 

Legal Opinion of Maryland Local Counsel

 

 

 

5.

 

Legal Opinion of Wyoming Local Counsel

 

 

 

6.

 

Legal Opinion of Pennsylvania Local Counsel

 

 

 

7.

 

Legal Opinion of General Counsel (in respect of New Mexico entity, Warren E&P)

 

 

 

F.

 

MISCELLANEOUS  CLOSING DELIVERABLES

 

 

 

1.

 

Exchange Agreement

 

 

 

2.

 

Registration Rights Agreement

 

 

 

3.

 

First/Second Lien Intercreditor Agreement

 

 

 

4.

 

Amendment to First Lien Credit Agreement

 

 

 

5.

 

8K

 

 

 

6.

 

Administrative Agent Fee Letter

 

 

 

7.

 

Funds Flow Memorandum

 

 

 

8.

 

Notices of Borrowing

 

 

 

9.

 

Good Standing Certificates and Foreign Qualification to do Business in the
jurisdictions described on Exhibit E attached hereto

 

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

 

Item

 

Documents

 

 

 

10.

 

Bring-down confirmations of good standing, dated as of the Closing Date, for
each Credit Party from its jurisdiction of organization described on Exhibit E
attached hereto

 

 

 

11.

 

Know-Your-Customer/USA Patriot Act Information, including signed W-9s

 

 

 

G.

 

CORPORATE AND ORGANIZATIONAL DOCUMENTS

 

 

 

1.

 

Certificates from secretary of each of Credit Party certifying as to
(a) articles/certificate of formation, as applicable, and all amendments
thereto, certified by the secretary of the state of incorporation,
(b) bylaws/operating agreement, as applicable, and all amendments thereto,
(c) resolutions and (d) the incumbency and signatures of the officers or
representatives executing the Credit Agreement and the other Financing Documents

 

 

 

 

 

Exhibit A                                                   Resolutions

 

 

 

 

 

Exhibit B                                                   Incumbency

 

 

 

 

 

Exhibit C                                                   Certified Charter
Documents

 

 

 

 

 

Exhibit D                                                   Organizational
Documents

 

 

 

2.

 

Certificate of a Responsible Officer of the Borrower to the effect that (A) each
condition set forth in Section(s) 7.1 of the Credit Agreement has been
satisfied, and (B) the representations and warranties of each Credit Party are
true, correct and complete as of the Closing Date.

 

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

 

Exhibit A to Credit Agreement

 

ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between
[the][each](1) Assignor identified in item 1 below ([the][each, an] “Assignor”)
and [the][each](2) Assignee identified in item 2 below ([the][each, an]
“Assignee”).  [It is understood and agreed that the rights and obligations of
[the Assignors][the Assignees](3) hereunder are several and not joint.](4) 
Capitalized terms used but not defined herein shall have the meanings given to
them in the Credit Agreement identified below (the “Credit Agreement”), receipt
of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms
and Conditions set forth in Annex 1 attached hereto are hereby agreed to and
incorporated herein by reference and made a part of this Assignment and
Assumption as if set forth herein in full.

 

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and
assigns to [the Assignee][the respective Assignees], and [the][each] Assignee
hereby irrevocably purchases and assumes from [the Assignor][the respective
Assignors], subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of [the Assignor’s][the
respective Assignors’] rights and obligations in [its capacity as a
Lender][their respective capacities as Lenders] under the Credit Agreement and
any other documents or instruments delivered pursuant thereto to the extent
related to the amount and percentage interest identified below of all of such
outstanding rights and obligations of [the Assignor][the respective Assignors]
under the respective facilities identified below and (ii) to the extent
permitted to be assigned under applicable law, all claims, suits, causes of
action and any other right of [the Assignor (in its capacity as a Lender)][the
respective Assignors (in their respective capacities as Lenders)] against any
Person, whether known or unknown, arising under or in connection with the Credit
Agreement, any other documents or instruments delivered pursuant thereto or the
loan transactions governed thereby or in any way based on or related to any of
the foregoing, including, but not limited to, contract claims, tort claims,
malpractice claims, statutory claims and all other claims at law or in equity
related to the rights and obligations sold and assigned pursuant to clause
(i) above (the rights and obligations sold and assigned by [the][any] Assignor
to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to
herein collectively as [the][an] “Assigned Interest”).  Each such sale and
assignment is without recourse to [the][any] Assignor and, except as expressly
provided in this Assignment and Assumption, without representation or warranty
by [the][any] Assignor.

 

1.                                      Assignor[s]:

 

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

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

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

(3)  Select as appropriate.

(4)  Include bracketed language if there are either multiple Assignors or
multiple Assignees.

 

1

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

 

[Assignor, as of the date hereof, [has] [has not] made all payments required by
it under the Credit Agreement]

 

2.                                      Assignee[s]:

 

[for each Assignee, indicate [Affiliate][Approved Fund] of [identify Lender]]

 

3.                                     
Borrower:                                          Warren Resources, Inc.

 

4.                                      Administrative Agent:  Cortland Products
Corp., as the administrative agent under the Credit Agreement

 

5.                                      Credit Agreement:  Second Lien Credit
Agreement, dated as of October 22, 2015, among Warren Resources, Inc., the
Lenders from time to time party thereto, and Cortland Products Corp., as
Administrative Agent

 

6.                                      Assigned Interest:

 

Assignor[s](5)

 

Assignee[s](6)

 

Aggregate
Amount of
Commitment/Loans
for all Lenders(7)

 

Amount of
Commitment

/Loans
Assigned

 

Percentage
Assigned of
Commitment/
Loans(8)

 

CUSIP
Number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

$

 

 

 

%

 

 

 

 

 

 

$

 

 

$

 

 

 

%

 

 

 

 

 

 

$

 

 

$

 

 

 

%

 

 

 

Effective Date:                    , 20   [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]

 

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

(5)  List each Assignor, as appropriate.

(6)  List each Assignee, as appropriate.

(7)  Amounts in this column and in the column immediately to the right to be
adjusted by the counterparties to take into account any payments or prepayments
made between the Trade Date and the Effective Date.

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

 

2

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

 

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

 

 

ASSIGNOR

 

 

 

[NAME OF ASSIGNOR]

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

ASSIGNEE

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

 

By:

 

 

 

Title:

 

 

[Consented to and](9) Accepted:

 

 

 

CORTLAND PRODUCTS CORP., as

 

  Administrative Agent

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

WARREN RESOURCES, INC.

 

 

 

By:

 

 

 

Title:

 

 

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

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

 

3

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

 

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

 

STANDARD TERMS AND CONDITIONS FOR

 

ASSIGNMENT AND ASSUMPTION

 

1.                                      Representations and Warranties.

 

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

 

1.2.                            Assignee.  [The][Each] Assignee (a) represents
and warrants that (i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and to become a Lender under the
Credit Agreement, (ii) it meets all the requirements to be an assignee under
[Section 11.6(a)] of the Credit Agreement (subject to such consents, if any, as
may be required under [Section 11.6(a)] of the Credit Agreement), (iii) from and
after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of [the][the relevant]
Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is
sophisticated with respect to decisions to acquire assets of the type
represented by [the][such] Assigned Interest and either it, or the Person
exercising discretion in making its decision to acquire [the][such] Assigned
Interest, is experienced in acquiring assets of such type, (v) it has received a
copy of the Credit Agreement, and has received or has been accorded the
opportunity to receive copies of the most recent financial statements delivered
pursuant to [Section 4.1] thereof, as applicable, and such other documents and
information as it deems appropriate to make its own credit analysis and decision
to enter into this Assignment and Assumption and to purchase [the][such]
Assigned Interest, (vi) it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase
[the][such] Assigned Interest, and (vii) attached hereto is any documentation
required to be delivered by it pursuant to the terms of the Credit Agreement,
duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it
will, independently and without reliance upon the Administrative Agent,
[the][any] Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action

 

4

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

 

under the Financing Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Financing Documents are
required to be performed by it as a Lender.

 

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

 

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

 

5

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

 

Exhibit B-1 to Credit Agreement

 

COMPLIANCE CERTIFICATE

 

WARREN RESOURCES, INC.

 

Date:           ,

 

This certificate is given by                      , a Responsible Officer of
Warren Resources, Inc. (“Borrower”), pursuant to Section 4.1(c) of that certain
Second Lien Credit Agreement dated as of October 22, 2015 among Borrower,
Lenders from time to time party thereto and Cortland Products Corp., as
Administrative Agent for Lenders (as such agreement may have been amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”).  Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer on behalf of Borrower hereby certifies to
Administrative Agent and Lenders that:

 

(a)                                 the financial statements delivered with this
certificate in accordance with Section 4.1(a) and/or 4.1(b) of the Credit
Agreement fairly present in all material respects the results of operations and
financial condition of Borrower and the Subsidiaries as of the dates and the
accounting period covered by such financial statements;

 

(b)                                 I have reviewed the terms of the Credit
Agreement and have made, or caused to be made under my supervision, a review in
reasonable detail of the transactions and conditions of Borrower and the
Subsidiaries during the accounting period covered by such financial statements;
and

 

(c)                                  such review has not disclosed the existence
during or at the end of such accounting period, and I have no knowledge of the
existence as of the date hereof, of any condition or event that constitutes a
Default or an Event of Default, except as set forth in Schedule 1 hereto, which
includes a description of the nature and period of existence of such Default or
an Event of Default and what action Borrower has taken, is undertaking and
proposes to take with respect thereto.

 

1

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

 

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this      day of            ,     .

 

 

 

WARREN RESOURCES, INC.

 

 

 

 

 

By

 

 

Name:

 

 

Title:

 

of Borrower

 

2

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

 

Schedule 1 to
Compliance Certificate

 

[Borrower to list any existing Defaults or Events of Default, specifying the
nature and period of existence of each, and the actions Borrower has taken, is
undertaking and proposes to take in respect thereof.  If no Defaults and no
Events of Default are then in existence, such schedule should read “None”.]

 

3

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

 

Exhibit B-2 to Credit Agreement

 

Definition of EBITDAX

 

EBITDAX for the period of four consecutive fiscal quarters most recently ended
prior to the date of determination for which financial statements are available
to Borrower (the “Defined Period”) is defined as follows:

 

 

 

 

 

The consolidated net income (or loss) for the Defined Period of Borrower and its
Consolidated Subsidiaries (excluding the net income or loss of Unrestricted
Subsidiaries) determined on a consolidated basis in accordance with GAAP, but
excluding:  (a) the income (or loss) of any Person (other than Subsidiaries of
Borrower) in which Borrower or any of its Subsidiaries has an ownership interest
unless received by Borrower or its Subsidiary in a cash distribution; and
(b) the income (or loss) of any Person accrued prior to the date it became a
Subsidiary of Borrower or is merged into or consolidated with Borrower.

 

$

 

 

 

Plus:

Interest expense, deducted (minus any interest income) in the determination of
net income for the Defined Period

 

 

 

 

 

 

 

Any provision for (or less any benefit, including income tax credits, from)
federal, state, local or other income and franchise taxes deducted in the
determination of net income for the Defined Period

 

 

 

 

 

 

 

Amortization, depreciation and depletion of reserves deducted in the
determination of net income for the Defined Period

 

 

 

 

 

 

 

Oil and gas asset impairment write downs deducted (minus any write ups included)
in the determination of net income for the Defined Period

 

 

 

 

 

 

 

Lease impairment expenses included in the determination of net income during the
Defined Period

 

 

 

 

 

 

 

Exploration expenses included in the determination of net income during the
Defined Period

 

 

 

 

 

 

 

Losses (minus any gains) from Asset Dispositions included in the determination
of net income for the Defined Period (excluding sales, expenses or losses
related to current assets)

 

 

 

 

 

 

 

Other non-cash expenses deducted (minus any non-cash gains or income included)
in the determination of net income for the Defined Period and for which no cash
outlay (or cash receipt) is foreseeable prior to the Maturity Date (excluding
(i) any such non-cash expenses that are not an extraordinary item to

 

 

 

1

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

 

 

the extent that it represents an accrual or reserve for a potential cash expense
in any future period or amortization of a prepaid cash expense that was paid in
a prior period or (ii) any such non-cash gains which represent the reversal of
any accrual of or cash reserve for, anticipated cash expenses in any prior
period)

 

 

 

 

 

 

 

Expenses and fees deducted in the determination of net income and incurred
during the Defined Period to consummate the transactions contemplated by the
Financing Documents

 

 

 

 

 

 

 

Extraordinary losses (or minus any extraordinary gains) included in the
determination of net income during the Defined Period, net of related tax
effects

 

 

 

 

 

 

 

Exclusion of the non-cash effect of the early extinguishment of long term debt
and stock option expense

 

 

 

 

 

 

 

Unrealized losses (minus unrealized gains) with respect to Swap Obligations in
such period

 

 

 

 

 

 

 

EBITDAX (defined in a manner consistent with the foregoing) of any person or
properties constituting a division or line of business of any business entity,
division or line of business, in each case, acquired by the Borrower or any
Subsidiary of the Borrower during such period or after such period but on or
prior to the date of determination shall be included on a pro forma basis for
each quarter prior to the acquisition of such person or property included in
such period

 

 

 

 

 

 

Minus:

EBITDAX (defined in a manner consistent with the foregoing) of any person or
properties constituting a division or line of business of any business entity,
division or line of business, in each case, disposed of by the Borrower or any
Subsidiary of the Borrower during such period or after such period but on or
prior to the date of determination shall be deducted on a pro forma basis for
each quarter prior to the disposition of such person or property included in
such period

 

 

 

 

 

 

EBITDAX for the Defined Period

 

 

 

 

$

Consolidated Secured Total Debt

 

 

 

 

$

Consolidated Secured Total Leverage Ratio of Consolidated Secured Total Debt to
EBITDAX for the Defined Period

 

to 1.0

 

2

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

 

Exhibit C to Credit Agreement

 

Notice of Borrowing

 

WARREN RESOURCES, INC.

 

Date:             ,

 

This certificate is given by                     , a Responsible Officer of
Warren Resources, Inc. (“Borrower”), on behalf of Borrower pursuant to
Section 2.2(a) of that certain Second Lien Credit Agreement dated as of
October 22, 2015 among Borrower, Lenders from time to time party thereto and
Cortland Products Corp., as Administrative Agent for Lenders (as such agreement
may have been amended, restated, supplemented or otherwise modified from time to
time the “Credit Agreement”).  Capitalized terms used herein without definition
shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby gives notice to Administrative Agent
of Borrower’s request on [    date    ] to borrow $[          ] of [Converted
Loans][New Term Loans];

 

The undersigned officer hereby certifies that except as set forth on Exhibit A
hereto, both before and after giving effect to the request above, each of the
conditions precedent set forth in Section 7.1 have been satisfied.

 

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this      day of            ,     .

 

 

WARREN RESOURCES, INC.

 

 

 

 

 

By

 

 

Name

 

 

Title

 

of Borrower

 

1

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

 

Exhibit D to Credit Agreement

 

[RESERVED]

 

1

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

 

Exhibit E-1 to Credit Agreement

 

[FORM OF]

 

U.S. TAX COMPLIANCE CERTIFICATE

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

 

Reference is made to the Second Lien Credit Agreement dated as of October 22,
2015 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time) (the “Credit Agreement”), among Warren
Resources, Inc., a Maryland corporation (the “Borrower”), the financial
institutions or other entities from time to time parties thereto, each as a
lender (collectively, the “Lenders”), and Cortland Products Corp., a Delaware
corporation, as Administrative Agent. Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to them in the Credit Agreement.

 

Pursuant to the provisions of Section 2.13(f)(ii)B(3) of the Credit Agreement,
the undersigned hereby certifies that (i) it is the sole record and beneficial
owner of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect
of which it is providing this certificate, (ii) it is not a “bank” within the
meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent
shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the
Code, (iv) it is not a “controlled foreign corporation” related to the Borrower
as described in Section 881(c)(3)(C) of the Code, and (v) no payments in
connection with any Financing Document are effectively connected with the
undersigned’s conduct of a U.S. trade or business.

 

The undersigned has furnished the Administrative Agent and the Borrower with a
certificate of its non-U.S. person status on IRS Form W-8BEN or W-8BEN-E (or
applicable successor IRS Form). By executing this certificate, the undersigned
agrees that (1) if the information provided on this certificate changes, the
undersigned shall promptly so inform the Borrower and the Administrative Agent
in writing and (2) the undersigned shall furnish the Borrower and the
Administrative Agent a properly completed and currently effective certificate in
either the calendar year in which payment is to be made by the Borrower or the
Administrative Agent to the undersigned, or in either of the two calendar years
preceding each such payment.

 

[Signature Page Follows]

 

1

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

 

 

[Non-U.S. Lender]

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

[Address]

 

 

Dated:                      , 20[ ]     

 

 

2

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

 

Exhibit E-2 to Credit Agreement

[FORM OF]

 

U.S. TAX COMPLIANCE CERTIFICATE

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

 

Reference is made to the Second Lien Credit Agreement dated as of October 22,
2015 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time) (the “Credit Agreement”), among Warren
Resources, Inc., a Maryland corporation (the “Borrower”), the financial
institutions or other entities from time to time parties thereto, each as a
lender (collectively, the “Lenders”), and Cortland Products Corp., a Delaware
corporation, as Administrative Agent.  Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to them in the Credit Agreement.

 

Pursuant to the provisions of Section 2.13(f)(ii)B(4) and Section 11.6(b) of the
Credit Agreement, the undersigned hereby certifies that (i) it is the sole
record and beneficial owner of the participation in respect of which it is
providing this certificate, (ii) it is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of
the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is
not a “controlled foreign corporation” related to the Borrower as described in
Section 881(c)(3)(C) of the Code, and (v) no payments in connection with any
Financing Document are effectively connected with the undersigned’s conduct of a
U.S. trade or business.

 

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. person status on IRS Form W-8BEN or W-8BEN-E (or applicable successor
IRS Form). By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender in writing and (2) the undersigned shall have at all times
furnished such Lender with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding each such
payment.

 

[Signature Page Follows]

 

1

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

 

 

[Non-U.S. Participant]

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

[Address]

 

 

Dated:                         , 20[ ]     

 

 

2

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

 

Exhibit E-3 to Credit Agreement

[FORM OF]

 

U.S. TAX COMPLIANCE CERTIFICATE

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

 

Reference is made to the Second Lien Credit Agreement dated as of October 22,
2015 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time) (the “Credit Agreement”), among Warren
Resources, Inc., a Maryland corporation (the “Borrower”), the financial
institutions or other entities from time to time parties thereto, each as a
lender (collectively, the “Lenders”), and Cortland Products Corp., a Delaware
corporation, as Administrative Agent.  Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to them in the Credit Agreement.

 

Pursuant to the provisions of Section 2.13(f)(ii)(B)(4) and Section 11.6(b) of
the Credit Agreement, the undersigned hereby certifies that (i) it is the sole
record owner of the participation in respect of which it is providing this
certificate, (ii) its direct or indirect partners/members are the sole
beneficial owners (within the meaning of Treasury Regulations
Section 1.1441-1(c)(6)) of payments on such participation, (iii) neither the
undersigned nor any of its direct or indirect partners/members claiming the
benefit of the portfolio interest exemption is a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect
partners/members claiming the benefit of the portfolio interest exemption is a
ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, (v) none of its direct or indirect
partners/members claiming the benefit of the portfolio interest exemption is a
“controlled foreign corporation” related to the Borrower as described in
Section 881(c)(3)(C) of the Code, and (vi) no payments in connection with any
Financing Document are effectively connected with the conduct by the undersigned
or its direct or indirect partners/members claiming the benefit of the portfolio
interest exemption of a U.S. trade or business (the certifications stating
(iii)-(vi), a “Portfolio Interest Certificate”).

 

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by (i) an IRS Form W-8IMY from each of its direct or indirect
partners/members that are partnerships and (ii) an IRS Form W-8BEN or W-8BEN-E
(or applicable successor IRS Form) and Portfolio Interest Certificate from each
of its direct or indirect partners/members claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender in writing and (2) the undersigned shall have at all times
furnished such Lender with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding each such
payment.

 

[Signature Page Follows]

 

1

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

 

 

[Non-U.S. Participant]

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

[Address]

 

 

Dated:                         , 20[ ]     

 

 

2

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

 

Exhibit E-4 to Credit Agreement

[FORM OF]

 

U.S. TAX COMPLIANCE CERTIFICATE

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

 

Reference is made to the Second Lien Credit Agreement dated as of October 22,
2015 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time) (the “Credit Agreement”), among Warren
Resources, Inc., a Maryland corporation (the “Borrower”), the financial
institutions or other entities from time to time parties thereto, each as a
lender (collectively, the “Lenders”), and Cortland Products Corp., a Delaware
corporation, as Administrative Agent.  Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to them in the Credit Agreement.

 

Pursuant to the provisions of Section 2.13(f)(ii)B(4) of the Credit Agreement,
the undersigned hereby certifies that (i) it is the sole record owner of the
Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of which it
is providing this certificate, (ii) its direct or indirect partners/members are
the sole beneficial owners (within the meaning of Treasury Regulations
Section 1.1441-1(c)(6)) of payments on such Loan(s) (as well as any
Note(s) evidencing such Loan(s)), (iii) neither the undersigned nor any of its
direct or indirect partners/members claiming the benefit of the portfolio
interest exemption is a “bank” within the meaning of Section 881(c)(3)(A) of the
Code, (iv) none of its direct or indirect partners/members claiming the benefit
of the portfolio interest exemption is a ten percent shareholder of the Borrower
within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its direct
or indirect partners/members claiming the benefit of the portfolio interest
exemption is a “controlled foreign corporation” related to the Borrower as
described in Section 881(c)(3)(C) of the Code, and (vi) no payments in
connection with any Financing Document are effectively connected with the
conduct by the undersigned or its direct or indirect partners/members claiming
the benefit of the portfolio interest exemption of a U.S. trade or business (the
certifications stating (iii)-(vi), a “Portfolio Interest Certificate”).

 

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-8IMY accompanied by (i) an IRS Form W-8IMY from each of its direct or
indirect partners/members that are partnerships and (ii) an IRS Form W-8BEN or
W-8BEN-E(or applicable successor IRS Form) and Portfolio Interest Certificate
from each of its direct or indirect partners/members claiming the portfolio
interest exemption. By executing this certificate, the undersigned agrees that
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent in writing
and (2) the undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding each such
payment.

 

[Signature Page Follows]

 

1

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

 

 

[Non-U.S. Lender]

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

[Address]

 

 

Dated:                         , 20[ ]     

 

 

2

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

 

Exhibit F to Credit Agreement

 

[FORM OF]

 

NOTE

 

FOR VALUE RECEIVED, the undersigned, a Maryland corporation (the “Borrower”),
hereby promises to pay to         or registered assigns (the “Lender”), in
accordance with the provisions of the Credit Agreement (as hereinafter defined),
the principal amount of each Loan from time to time made by the Lender to the
Borrower under that certain Second Lien Credit Agreement, dated as of
October 22, 2015 (as amended, restated, amended and restated, extended,
supplemented or otherwise modified in writing from time to time, the “Credit
Agreement”; the terms defined therein being used herein as therein defined),
among the Borrower, the Lenders from time to time party thereto and Cortland
Products Corp., as the Administrative Agent.

 

Borrower promises to pay interest on the unpaid principal amount of each Loan
from the date of such Loan until such principal amount is paid in full, at such
interest rates and at such times as provided in the Credit Agreement. All
payments of principal and interest shall be made to the Administrative Agent for
the ratable account of the Lender in Dollars in immediately available funds by
wire transfer to the Payment Account. If any amount is not paid in full when due
hereunder, such unpaid amount shall bear interest, to be paid upon demand, from
the due date thereof until the date of actual payment (and before as well as
after judgment) computed at the per annum rate set forth in Section 2.7 of the
Credit Agreement.  This Note is subject to mandatory prepayments and to
voluntary prepayments and to all other terms and conditions as provided in the
Credit Agreement.

 

This Note is one of the promissory notes referred to in the Credit Agreement and
is entitled to the benefits thereof.  This Note is also entitled to the benefits
of the other Financing Documents and is secured by the Collateral.  Upon the
occurrence and continuation of one or more of the Events of Default specified in
the Credit Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided in
the Credit Agreement.  Loans made by the Lender shall be evidenced by an account
or accounts maintained by the Lender and by the register and subaccounts
maintained by the Administrative Agent in accordance with the Credit Agreement. 
The Lender may also attach schedules to this Note and endorse thereon the date,
amount and maturity of its Loans and payments with respect thereto.

 

Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Note.

 

No failure to exercise and no delay in exercising, on the part of the
Administrative Agent, any right, remedy, power or privilege hereunder or under
the

 

1

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

 

Financing Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.  A waiver by the Administrative Agent
of any right, remedy, power or privilege hereunder or under any Financing
Document on any one occasion shall not be construed as a bar to any right or
remedy that the Administrative Agent would otherwise have on any future
occasion.  The rights, remedies, powers and privileges herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights, remedies, powers and privileges provided by law.

 

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

 

IN WITNESS WHEREOF, this Note is executed as of the date set forth above.

 

 

WARREN RESOURCES, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

2

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