Exhibit 10.1

Execution Version

 

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

DATED AS OF

MARCH 27, 2013

AMONG

REX ENERGY CORPORATION,

AS BORROWER,

KEYBANK NATIONAL ASSOCIATION,

AS ADMINISTRATIVE AGENT,

ROYAL BANK OF CANADA,

AS SYNDICATION AGENT,

SUNTRUST BANK,

AS DOCUMENTATION AGENT,

AND

THE LENDERS PARTY HERETO

 

 

JOINT LEAD ARRANGERS AND JOINT BOOKRUNNERS

KEYBANK NATIONAL ASSOCIATION, ROYAL BANK OF CANADA, AND SUNTRUST BANK

 

 

 

 

 

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TABLE OF CONTENTS

 

          Page  

ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS

     1   

Section 1.01

   Terms Defined Above      1   

Section 1.02

   Certain Defined Terms      1   

Section 1.03

   Types of Loans and Borrowings      24   

Section 1.04

   Terms Generally; Rules of Construction      24   

Section 1.05

   Accounting Terms and Determinations; GAAP      24   

ARTICLE II THE CREDITS

     25   

Section 2.01

   Commitments      25   

Section 2.02

   Loans and Borrowings      25   

Section 2.03

   Requests for Borrowings      26   

Section 2.04

   Interest Elections      27   

Section 2.05

   Funding of Borrowings      28   

Section 2.06

   Termination, Reduction and Increase of Aggregate Maximum Credit Amounts     
29   

Section 2.07

   Borrowing Base      31   

Section 2.08

   Letters of Credit      34   

ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

     38   

Section 3.01

   Repayment of Loans      38   

Section 3.02

   Interest      39   

Section 3.03

   Alternate Rate of Interest      40   

Section 3.04

   Prepayments      40   

Section 3.05

   Fees      42   

ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

     43   

Section 4.01

   Payments Generally; Pro Rata Treatment; Sharing of Set-offs      43   

Section 4.02

   Presumption of Payment by the Borrower      44   

Section 4.03

   Payments and Deductions by the Administrative Agent; Defaulting Lenders     
44   

Section 4.04

   Disposition of Proceeds      46   

ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

     47   

Section 5.01

   Increased Costs      47   

Section 5.02

   Break Funding Payments      48   

Section 5.03

   Taxes      49   

Section 5.04

   Mitigation Obligations; Replacement of Lenders      53   

Section 5.05

   Illegality      54   

 

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TABLE OF CONTENTS

(continued)

 

          Page  

ARTICLE VI CONDITIONS PRECEDENT

     54   

Section 6.01

   Effective Date      54   

Section 6.02

   Each Credit Event      57   

ARTICLE VII REPRESENTATIONS AND WARRANTIES

     58   

Section 7.01

   Organization; Powers      58   

Section 7.02

   Authority; Enforceability      58   

Section 7.03

   Approvals; No Conflicts      58   

Section 7.04

   Financial Condition; No Material Adverse Change      59   

Section 7.05

   Litigation      59   

Section 7.06

   Environmental Matters      59   

Section 7.07

   Compliance with the Laws and Agreements; No Defaults      61   

Section 7.08

   Investment Company Act      61   

Section 7.09

   Taxes      61   

Section 7.10

   ERISA      61   

Section 7.11

   Disclosure; No Material Misstatements      63   

Section 7.12

   Insurance      63   

Section 7.13

   Restriction on Liens      63   

Section 7.14

   Subsidiaries      63   

Section 7.15

   Location of Business and Offices      63   

Section 7.16

   Properties; Titles, Etc      64   

Section 7.17

   Maintenance of Properties      65   

Section 7.18

   Gas Imbalances, Prepayments      65   

Section 7.19

   Marketing of Production      65   

Section 7.20

   Swap Agreements      66   

Section 7.21

   Use of Loans and Letters of Credit      66   

Section 7.22

   Solvency      66   

Section 7.23

   International Operations      66   

Section 7.24

   OFAC      66   

ARTICLE VIII AFFIRMATIVE COVENANTS

     67   

Section 8.01

   Financial Statements; Other Information      67   

Section 8.02

   Notices of Material Events      70   

Section 8.03

   Existence; Conduct of Business      71   

Section 8.04

   Payment of Obligations      71   

Section 8.05

   Performance of Obligations under Loan Documents      71   

Section 8.06

   Operation and Maintenance of Properties      71   

Section 8.07

   Insurance      72   

Section 8.08

   Books and Records; Inspection Rights      73   

Section 8.09

   Compliance with Laws      73   

Section 8.10

   Environmental Matters      73   

Section 8.11

   Further Assurances      74   

Section 8.12

   Reserve Reports      74   

 

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TABLE OF CONTENTS

(continued)

 

          Page  

Section 8.13

   Title Information      75   

Section 8.14

   Additional Collateral; Additional Guarantors      76   

Section 8.15

   ERISA Compliance      77   

Section 8.16

   Marketing Activities      77   

ARTICLE IX NEGATIVE COVENANTS

     78   

Section 9.01

   Financial Covenants      78   

Section 9.02

   Debt      78   

Section 9.03

   Liens      80   

Section 9.04

   Dividends, Distributions and Redemptions      81   

Section 9.05

   Investments, Loans and Advances      81   

Section 9.06

   Nature of Business      83   

Section 9.07

   Limitation on Leases      83   

Section 9.08

   Proceeds of Loans      83   

Section 9.09

   ERISA Compliance      84   

Section 9.10

   Sale or Discount of Receivables      85   

Section 9.11

   Mergers, Etc      85   

Section 9.12

   Sale of Properties      85   

Section 9.13

   Environmental Matters      85   

Section 9.14

   Transactions with Affiliates      86   

Section 9.15

   Subsidiaries      86   

Section 9.16

   Negative Pledge Agreements; Dividend Restrictions      87   

Section 9.17

   Gas Imbalances, Take-or-Pay or Other Prepayments      88   

Section 9.18

   Swap Agreements      88   

Section 9.19

   Repayment of Senior Debt; Amendment to Terms of Senior Debt      88   

ARTICLE X EVENTS OF DEFAULT; REMEDIES

     89   

Section 10.01

   Events of Default      89   

Section 10.02

   Remedies      91    ARTICLE XI THE AGENTS      92   

Section 11.01

   Appointment; Powers      92   

Section 11.02

   Duties and Obligations of Administrative Agent      92   

Section 11.03

   Action by Administrative Agent      93   

Section 11.04

   Reliance by Administrative Agent      94   

Section 11.05

   Subagents      94   

Section 11.06

   Resignation or Removal of Administrative Agent      94   

Section 11.07

   Agents as Lenders      95   

Section 11.08

   No Reliance      95   

Section 11.09

   Administrative Agent May File Proofs of Claim      96   

Section 11.10

   Withholding Tax      96   

 

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TABLE OF CONTENTS

(continued)

 

          Page  

Section 11.11

   Authority of Administrative Agent to Release Collateral, Liens and Guarantors
     97   

Section 11.12

   The Arrangers, the Syndication Agent and the Documentation Agent      97   

ARTICLE XII MISCELLANEOUS

     97   

Section 12.01

   Notices      97   

Section 12.02

   Waivers; Amendments      98   

Section 12.03

   Expenses, Indemnity; Damage Waiver      99   

Section 12.04

   Successors and Assigns      102   

Section 12.05

   Survival; Revival; Reinstatement      105   

Section 12.06

   Counterparts; Integration; Effectiveness      106   

Section 12.07

   Severability      107   

Section 12.08

   Right of Setoff      107   

Section 12.09

   GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS      107   

Section 12.10

   Headings      108   

Section 12.11

   Confidentiality      108   

Section 12.12

   Interest Rate Limitation      109   

Section 12.13

   EXCULPATION PROVISIONS      110   

Section 12.14

   Collateral Matters; Swap Agreements      110   

Section 12.15

   No Third Party Beneficiaries      111   

Section 12.16

   USA Patriot Act Notice      111   

Section 12.17

   Amendment and Restatement of Existing Credit Agreement      111   

 

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ANNEXES, EXHIBITS AND SCHEDULES

 

Annex I

   List of Maximum Credit Amounts

Exhibit A

   Form of Note

Exhibit B

   Form of Borrowing Request

Exhibit C

   Form of Interest Election Request

Exhibit D-1

   Form of Effective Date Certificate

Exhibit D-2

   Form of Section 8.01(c) Certificate

Exhibit E

   Security Instruments

Exhibit F

   Form of Assignment and Assumption

Exhibit G-1

   Form of Maximum Credit Amount Increase Certificate

Exhibit G-2

   Form of Additional Lender Certificate

Exhibit H-1

   Form of U.S Tax Compliance Certificate (Foreign Lender/not Partnership)

Exhibit H-2

   Form of U.S Tax Compliance Certificate (Foreign Participant/not Partnership)

Exhibit H-3

   Form of U.S Tax Compliance Certificate (Foreign Participant/Partnership)

Exhibit H-4

   Form of U.S Tax Compliance Certificate (Foreign Lender/Partnership)

Schedule 7.05

   Litigation

Schedule 7.06

   Environmental Matters

Schedule 7.14

   Subsidiaries and Partnerships

Schedule 7.18

   Gas Imbalances

Schedule 7.19

   Marketing Contracts

Schedule 7.20

   Swap Agreements

Schedule 9.02

   Existing Debt

Schedule 9.03

   Existing Liens

Schedule 9.05

   Investments

Schedule 9.14

   Existing Affiliate Transactions

Schedule 9.16

   Existing Negative Pledge Agreements; Dividend Restrictions

 

v

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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of March 27, 2013 is among:
Rex Energy Corporation, a corporation duly formed and existing under the laws of
the State of Delaware (the “Borrower”); each of the Lenders from time to time
party hereto; KeyBank National Association (in its individual capacity,
“KeyBank”), as administrative agent for the Lenders (in such capacity, together
with its successors in such capacity, the “Administrative Agent”); Royal Bank of
Canada, as syndication agent for the Lenders (in such capacity, together with
its successors in such capacity, the “Syndication Agent”); and SunTrust Bank, as
documentation agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Documentation Agent”).

R E C I T A L S

A. The Borrower, the Administrative Agent and the lenders party thereto have
heretofore entered into that certain Credit Agreement, dated as of September 28,
2007 (as heretofore amended, modified or supplemented, the “Existing Credit
Agreement”).

B. The Borrower has requested the Lenders, and the Lenders have agreed, to amend
and restate the Existing Credit Agreement, subject to the terms and conditions
of this Agreement.

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

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

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

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

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

“Additional Lender” has the meaning assigned to such term in Section 2.06(c)(i).

“Additional Lender Certificate” has the meaning assigned to such term in
Section 2.06(c)(ii)(F).

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

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

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“Affected Loans” has the meaning assigned such term in Section 5.05.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

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

“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced, terminated or increased
pursuant to Section 2.06.

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

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus  1/2 of 1% and (c) the Adjusted LIBO Rate for a
one month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1.0%; provided that, for the avoidance
of doubt, the Adjusted LIBO Rate for any day shall be based on the rate
appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute
page of such service, or any successor to or substitute for such service,
providing rate quotations comparable to those currently provided on such page of
such service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market), rounded upwards, if necessary, to the next 1/16
of 1% at which dollar deposits of $5,000,000 with a one month maturity are
offered at approximately 11:00 a.m., London time, on such day (or the
immediately preceding Business Days if such day is not a Business Day). Any
change in the Alternate Base Rate due to a change in the Prime Rate, the Federal
Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and
including the effective date of such change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate, respectively.

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

 

Borrowing Base Utilization Grid

 

Borrowing Base

Utilization Percentage

     <25.0 %     

 

³25.0

<50.0

% 

% 

   

 

³50.0

< 75.0

% 

% 

   

 

³75.0

<90.0

% 

% 

    ³90.0 % 

Eurodollar Loans

     1.750 %      2.000 %      2.250 %      2.500 %      2.750 % 

ABR Loans

     0.500 %      0.750 %      1.000 %      1.250 %      1.500 % 

Commitment Fee Rate

     0.375 %      0.375 %      0.500 %      0.500 %      0.500 % 

 

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Each change in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change; provided, however, that if at any
time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a)
then the “Applicable Margin” means the rate per annum set forth on the grid when
the Borrowing Base Utilization Percentage is at its highest level until the day
that such Reserve Report is delivered to the Administrative Agent.

“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I; provided that if the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect.

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and
(b) any other Person whose long term senior unsecured debt rating is A-/A3 by
S&P or Moody’s (or their equivalent) or higher.

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

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

“Arrangers” means, collectively, KeyBank National Association, Royal Bank of
Canada, and SunTrust Bank, in their capacities as the joint lead arrangers and
joint bookrunners hereunder.

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

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

“Bankruptcy Event” means, with respect to any Person, such Person or its direct
or indirect parent company becomes the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee, administrator,
custodian, assignee for the benefit of creditors or similar Person charged with
the reorganization or liquidation of its business appointed for it, or, in the
good faith determination of the Administrative Agent, has taken any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any such proceeding or appointment; provided that a Bankruptcy Event shall not
result solely by virtue of any ownership interest, or the acquisition of any
ownership interest, in such Person by a Governmental Authority or
instrumentality thereof; provided, further, that such ownership interest does
not result in or provide such Person with immunity from the jurisdiction of
courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Person (or such Governmental Authority
or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or
agreements made by such Person.

 

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

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

“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 2.07(e), Section 2.07(f), Section 8.13(c) or
Section 9.12(d).

“Borrowing Base Deficiency” means the deficiency which occurs if at any time the
total Revolving Credit Exposures exceeds the Borrowing Base then in effect.

“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is the
Borrowing Base in effect on such day.

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

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

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

“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries
having a fair market value in excess of $5,000,000 in the aggregate for any
calendar year.

“Change in Control” means (a) any Person or group (within the meaning of the
Securities Exchange Act of 1934 and the rules of the SEC thereunder, but
excluding any employee benefit plan of such Person or its Subsidiaries, and any
Person acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 of the Securities Exchange Act of 1934) of 51% or more of
the equity securities of the Borrower entitled to vote for members of the board
of directors of the Borrower, or (b) during any period of 24 consecutive months,
a majority of the members on the board of directors of the Borrower cease to be
Persons who were either (i) nominated by the board of directors of the Borrower
or (ii) appointed by directors so nominated.

 

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“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of Section 5.01(b), by any lending office of such Lender or by such
Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement; provided
that notwithstanding anything herein to the contrary (i) the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith, or in implementation
thereof and (ii) all requests, rules, guidelines, requirements or directives
concerning capital adequacy promulgated by the Bank for International
Settlements, the Basel Committee on Banking Regulations and Supervisory
Practices (or any successor or similar authority) or the United States financial
regulatory authorities, in each case pursuant to Basel III, shall be deemed to
be a “Change in Law”, regardless of the date enacted, adopted, promulgated,
issued or implemented.

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

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

“Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

“Consolidated Net Income” means with respect to the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and the Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in cash during such period by such other

 

5

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Person to the Borrower or to a Consolidated Subsidiary, as the case may be;
(b) the net income (but not loss) during such period of any Consolidated
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions or transfers or loans by that Consolidated Subsidiary is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument or Governmental Requirement applicable to such Consolidated
Subsidiary or is otherwise restricted or prohibited, in each case determined in
accordance with GAAP; (c) the net income (or deficit) of any Person accrued
prior to the date it becomes a Consolidated Subsidiary or is merged into or
consolidated with the Borrower or any of its Consolidated Subsidiaries; (d) any
extraordinary gains or losses during such period, (e) non-cash gains, losses or
adjustments under FASB ASC 815 as a result of changes in the fair market value
of derivatives and (f) any gains or losses attributable to writeups or
writedowns of assets; and provided further that if the Borrower or any
Consolidated Subsidiary shall acquire or dispose of any Property during such
period, then Consolidated Net Income shall be calculated after giving pro forma
effect to such acquisition or disposition, as if such acquisition or disposition
had occurred on the first day of such period.

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

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ability to exercise voting power, by contract (other than a contract
under which a Person, or one or more Persons that otherwise constitute a
Subsidiary of such Person, provides management, operation or similar services
but does not control the policies of such Person (including the appointment of
such management)) or otherwise. For the purposes of this definition, and without
limiting the generality of the foregoing, any Person that owns directly or
indirectly 10% or more of the Equity Interests having ordinary voting power for
the election of the directors or other governing body of a Person (other than as
a limited partner of such other Person) will be deemed to “control” such other
Person. “Controlling” and “Controlled” have meanings correlative thereto.

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

“Debt” means, for any Person, each of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, surety or other bonds and similar instruments;
(c) all accounts payable and all accrued expenses, liabilities or other
obligations of such Person to pay the deferred purchase price of Property or
services; (d) all obligations of such Person under Capital Leases; (e) all
obligations under Synthetic Leases; (f) all Debt (as defined in the other
clauses of this definition) of others secured by (or for which the holder of
such Debt has an existing right, contingent or otherwise, to be secured by) a
Lien on any Property of such Person, whether or not such Debt is assumed by such
Person; (g) all Debt (as defined in the other clauses of this definition) of
others guaranteed by such Person or in which such Person otherwise assures a
creditor against loss of such Debt (howsoever such assurance shall be made) to
the extent of the lesser of the amount of such Debt and the maximum stated
amount of such

 

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guarantee or assurance against loss; (h) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or covenants
of others or to purchase the Debt or Property of others; (i) obligations of such
Person to deliver commodities, goods or services, including, without limitation,
Hydrocarbons, in consideration of one or more advance payments, other than gas
balancing arrangements, take or pay arrangements or other similar arrangements,
in each case in the ordinary course of business; (j) obligations of such Person
to pay for goods or services even if such goods or services are not actually
received or utilized by such Person; (k) any Debt of a partnership for which
such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability;
(l) Disqualified Capital Stock of such Person; and (m) the undischarged balance
of any production payment created by such Person or for the creation of which
such Person directly or indirectly received payment; provided however, the term
“Debt” shall not include accruals for plugging and abandonment costs. The Debt
of any Person shall include all obligations of such Person of the character
described above to the extent such Person remains legally liable in respect
thereof notwithstanding that any such obligation is not included as a liability
of such Person under GAAP.

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

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

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which, mandatorily or at the option of the
holder, it is convertible or for which it is exchangeable) or upon the happening
of any event, (i) matures or is mandatorily redeemable for any consideration
other than other Equity Interests (which would not constitute Disqualified
Capital Stock), pursuant to a sinking fund obligation or otherwise, or (ii) is
convertible or exchangeable for Debt or redeemable for any consideration other
than other

 

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Equity Interests (which would not constitute Disqualified Capital Stock) at the
option of the holder thereof, in whole or in part, in either case, on or prior
to the date that is one year after the earlier of (a) the Maturity Date and
(b) the date on which there are no Loans, LC Exposure or other obligations
hereunder outstanding and all of the Commitments are terminated.

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

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

“EBITDAX” means, as of any date of determination, the sum of Consolidated Net
Income for the most recently ended four fiscal quarters (including any such
quarter ending on such date of determination) plus the following expenses or
charges to the extent deducted from Consolidated Net Income in such four fiscal
quarter period: interest, income taxes, depreciation, depletion, amortization,
exploration expenses and other similar non-cash charges (including non-cash
expenses associated with the granting of stock-based compensation to employees
and directors of the Borrower or its Subsidiaries, non-recurring non-cash losses
(or minus any gains), and non-cash impairments or accounting adjustments with
respect to any disposition of assets permitted hereby), minus all non-cash
income added to Consolidated Net Income.

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

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

“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety, the environment or the preservation or reclamation of
natural resources, in effect in any and all jurisdictions in which the Borrower
or any Subsidiary is conducting or at any time has conducted business, or where
any Property of the Borrower or any Subsidiary is located, including without
limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air
Act, as amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection Governmental Requirements. The term
“oil” shall have the meaning specified in OPA, the terms “hazardous substance”
and “Release” (or “threatened Release”) have the meanings specified in CERCLA,
the terms “solid waste” and “disposal” (or “disposed”) have the meanings
specified in RCRA and the term “oil and gas waste” shall mean those waste that
are excluded from the definition of “hazardous waste” pursuant to 40 C.F.R.
Section 261.4(b)(5) (“Section 261.4(b)(5)”); provided, however, that (a) in the
event either OPA, CERCLA, RCRA or Section 261.4(b)(5) is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (b) to the extent
the laws of the state or other jurisdiction in which any Property of the
Borrower or any Subsidiary is located establish a meaning for “oil,” “hazardous
substance,” “Release,” “solid waste,” “disposal” or “oil and gas waste” which is
broader than that specified in either OPA, CERCLA, RCRA or Section 261.4(b)(5),
such broader meaning shall apply.

 

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

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

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

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

“ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA
and the regulations issued thereunder (other than an award for which the 30-day
notice period is waived), (b) the withdrawal of the Borrower, a Subsidiary or
any ERISA Affiliate from a Plan during a plan year in which it was a
“substantial employer” as defined in section 4001(a)(2) of ERISA, (c) the filing
of a notice of intent to terminate a Plan in a distress termination under
Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination
under section 4041 of ERISA, (d) the institution of proceedings to terminate a
Plan by the PBGC, (e) receipt of a notice of withdrawal liability pursuant to
Section 4202 of ERISA or (f) any other event or condition which might constitute
grounds under section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.

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

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

“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) landlord’s liens, operators’, vendors’,
carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’,
materialmen’s, construction or other like Liens, in each case arising in the
ordinary course of business or incident to the exploration, development,
operation and maintenance of Oil and Gas Properties each of which is in respect
of obligations that are not delinquent or which are being contested in good
faith by

 

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appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (d) contractual Liens which arise in the ordinary course
of business under operating agreements, joint venture agreements, oil and gas
partnership agreements, oil and gas leases, farm-out agreements, division
orders, contracts for the sale, transportation or exchange of oil and natural
gas, unitization and pooling declarations and agreements, area of mutual
interest agreements, overriding royalty agreements, marketing agreements,
processing agreements, net profits agreements, development agreements, gas
balancing or deferred production agreements, injection, repressuring and
recycling agreements, salt water or other disposal agreements, seismic or other
geophysical permits or agreements, and other agreements which are usual and
customary in the oil and gas business and are for claims which are not
delinquent or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained in accordance with GAAP;
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Subsidiary or materially impair the
value of such Property subject thereto; (e) Liens arising solely by virtue of
any statutory or common law provision relating to banker’s liens, rights of
set-off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution; provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
the Borrower or any of its Subsidiaries to provide collateral to the depository
institution for any other purpose; (f) easements, restrictions, servitudes,
permits, conditions, covenants, exceptions or reservations in any Property of
the Borrower or any Subsidiary for the purpose of roads, pipelines, transmission
lines, transportation lines, distribution lines for the removal of gas, oil,
coal or other minerals or timber, and other like purposes, or for the joint or
common use of real estate, rights of way, facilities and equipment, that do not
secure any monetary obligations and which in the aggregate do not materially
impair the use of such Property for the purposes of which such Property is held
by the Borrower or any Subsidiary or materially impair the value of such
Property subject thereto; (g) Liens on cash or securities pledged to secure
performance of tenders, surety and appeal bonds, government contracts,
performance and return of money bonds, bids, trade contracts, leases, statutory
obligations, regulatory obligations and other obligations of a like nature
incurred in the ordinary course of business and (h) judgment and attachment
Liens not giving rise to an Event of Default; provided that any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceeding may be initiated shall not have expired and no action to enforce such
Lien has been commenced; provided, further that Liens described in clauses
(a) through (e) shall remain “Excepted Liens” only for so long as no action to
enforce such Lien has been commenced and no intention to subordinate the first
priority Lien granted in favor of the Administrative Agent and the Lenders is to
be hereby implied or expressed by the permitted existence of such Excepted
Liens.

“Excluded Swap Obligations” has the meaning assigned to such term in the
Guaranty Agreement.

“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

 

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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 (other than an assignee pursuant
to a request by the Borrower under Section 5.04), any U.S. federal withholding
tax that is imposed on amounts payable to or for the account of such Lender with
respect to an applicable interest in a Loan or Commitment pursuant to a law in
effect on the date on which (i) such Lender acquires such interest in the Loan
or Commitment (other than pursuant to an assignment request by the Borrower
under Section 5.04(b)) or (ii) such Lender changes its lending office, except in
each case to the extent that, pursuant to Section 5.03, amounts with respect to
such Taxes were payable either to such Lender’s assignor immediately before such
Lender 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 5.03(f), and (d) any U.S. withholding Tax that is imposed under
FATCA.

“Existing Credit Agreement” has the meaning assigned such term in the Recitals
to this Agreement.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any regulations or official
interpretations thereof and any agreements entered into pursuant to
Section 1471(b)(1) of the Code.

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

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

“Financial Statements” means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).

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

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

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

 

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“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government over the
Borrower, any Subsidiary, any of their Properties, any Agent, the Issuing Bank
or any Lender.

“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.

“Guarantors” means, until it or any of them is released as a Guarantor pursuant
to the Loan Documents:

 

  (a) Rex Energy I, LLC,

 

  (b) Rex Energy Operating Corp.,

 

  (c) PennTex Resources Illinois, Inc.,

 

  (d) Rex Energy IV, LLC,

 

  (e) R.E. Gas Development, LLC, and

 

  (f) each other Subsidiary that guarantees the Indebtedness pursuant to
Section 8.14(b).

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

“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law and including, without
limitation: (a) any chemical, compound, material, product, byproduct, substance
or waste defined as or included in the definition or meaning of “hazardous
substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic
waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,”
“pollutant,” or words of similar meaning or import found in any applicable
Environmental Law; (b) petroleum hydrocarbons, petroleum products, petroleum
substances, natural gas, oil, oil and gas waste, crude oil, and any components,
fractions, or derivatives thereof; and (c) radioactive materials, asbestos
containing materials, polychlorinated biphenyls, or radon.

“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such laws from time to time in effect.

 

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“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
Unless otherwise indicated herein, each reference to the term “Hydrocarbon
Interests” shall mean Hydrocarbon Interests of the Borrower and/or the
Subsidiaries, as the context requires.

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

“Indebtedness” means, without duplication, any and all amounts owing or to be
owing by the Borrower, any Subsidiary or any Guarantor whether direct or
indirect (including those acquired by assumption), absolute or contingent, due
or to become due, now existing or hereafter arising: (a) to the Administrative
Agent, the Issuing Bank or any Lender under any Loan Document; (b) to any
Secured Swap Party under any Secured Swap Agreement and (c) all renewals,
extensions and/or rearrangements of any of the above.

“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 Document, and (b) to the extent not otherwise described
in (a), Other Taxes.

“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money
of the Borrower that is not guaranteed by any other Person (other than a
Guarantor) or subject to any other credit enhancement.

“Initial Reserve Report” means the report of Netherland, Sewell and Associates,
Inc. dated as of January 1, 2013, with respect to certain Oil and Gas Properties
of the Borrower and its Subsidiaries as of December 31, 2012.

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

“Interest Expense” means, for any period, the sum (determined without
duplication) of the aggregate gross interest expense of the Borrower and the
Consolidated Subsidiaries for such period, including to the extent included in
interest expense under GAAP: (a) amortization of debt discount, (b) capitalized
interest and (c) the portion of any payments or accruals under Capital Leases
allocable to interest expense, plus the portion of any payments or accruals
under Synthetic Leases allocable to interest expense whether or not the same
constitutes interest expense under GAAP.

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

 

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

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

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

“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any “short sale” or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or capital contribution to, the
assumption of Debt of, the purchase or other acquisition of any other Debt of or
equity participation or interest in, or other extension of credit to, any other
Person (including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person, but excluding any such advance, loan or extension of credit having
a term not exceeding ninety (90) days representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business);
(c) the purchase or acquisition (in one or a series of transactions) of Property
of another Person that constitutes a business unit or (d) the entering into of
any guarantee of, or other contingent obligation (including the deposit of any
Equity Interests to be sold) with respect to, Debt or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.

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

“Issuing Bank” means KeyBank National Association, in its capacity as the issuer
of Letters of Credit hereunder, and its successors in such capacity as provided
in Section 2.08(i). The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term “Issuing Bank” shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.

“LC Commitment” at any time means twenty-five million dollars ($25,000,000).

 

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

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

“Lenders” means the Persons listed on Annex I and any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption, and any Person that shall have become a party hereto as an
Additional Lender pursuant to Section 2.06(c).

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

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

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor
or substitute page of such service, or any successor to or substitute for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates applicable to
dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for
such Interest Period shall be the rate (rounded upwards, if necessary, to the
next 1/16 of 1%) at which dollar deposits of $5,000,000 and for a maturity
comparable to such Interest Period are offered by the principal London office of
the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties. The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations.

“Liquidate” means, with respect to any Swap Agreement, the sale, assignment,
novation (other than a novation of Swap Agreements between the Borrower and/or
Guarantors), unwind or termination of all or any part of such Swap Agreement or
the creation of an offsetting position against all or any part of such Swap
Agreement. The terms “Liquidated” and “Liquidation” have correlative meanings
thereto.

 

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

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

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

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

“Material Divestiture or Acquisition Date” means, the date of (a) any sale,
assignment, farm-out, conveyance or other transfer of Oil and Gas Properties
permitted by Section 9.12 if the consideration therefore exceeds $5,000,000 or
(b) any acquisition by the Borrower or its Subsidiaries of Oil and Gas
Properties permitted by this Agreement if the consideration therefore exceeds
$5,000,000.

“Material Domestic Subsidiary” means, as of any date, any Domestic Subsidiary
that (a) is a Wholly-Owned Subsidiary and (b) together with its Subsidiaries,
owns Property having a fair market value of $10,000,000 or more.

“Material Indebtedness” means any Debt (other than the Loans and Letters of
Credit), or net obligations in respect of one or more Swap Agreements, of any
one or more of the Borrower and its Subsidiaries, in either case in principal
amount exceeding $2,000,000. For purposes of determining Material Indebtedness,
the “principal amount” of the obligations of the Borrower or any Subsidiary in
respect of any Swap Agreement at any time shall be the Swap Termination Value
determined under the circumstances and in accordance with the provision of
clause (a) of such term “Swap Termination Value”.

“Maturity Date” means March 27, 2018.

 

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

“Maximum Credit Amount Increase Certificate” has the meaning assigned to such
term in Section 2.06(c)(ii)(E).

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

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

“Multiemployer Plan” means any employee pension plan as defined in
Section 3(2) of ERISA covered by Title IV of ERISA that is a multiemployer plan
as defined in section 3(37) or 4001 (a)(3) of ERISA.

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

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

“Northstar” means Northstar #3 LLC, a Delaware limited liability company.

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

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other

 

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wells, buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing. Unless otherwise indicated
herein, each reference to the term “Oil and Gas Properties” shall mean Oil and
Gas Properties of the Borrower and/or the Subsidiaries, as the context requires.

“Organizational Documents” means, with respect to any Person, (a) in the case of
any corporation, the certificate of incorporation and by-laws (or similar
documents) of such Person, (b) in the case of any limited liability company, the
certificate of formation and limited liability company agreement (or similar
documents) of such Person, (c) in the case of any limited partnership, the
certificate of formation and limited partnership agreement (or similar
documents) of such Person, (d) in the case of any general partnership, the
partnership agreement (or similar document) of such Person and (e) in any other
case, the functional equivalent of the foregoing.

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

“Other Taxes” means any and all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
made pursuant to Section 5.04(b)).

“Participant” has the meaning set forth in Section 12.04(c)(i).

“Participant Register” has the meaning set forth in Section 12.04(c)(ii).

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

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

“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, that is subject to Title IV of ERISA, other than a Multiemployer Plan,
which (a) is currently or hereafter sponsored, maintained or contributed to by
the Borrower, a Subsidiary or an ERISA Affiliate or (b) the Borrower or a
Subsidiary or an ERISA Affiliate may have any liability or obligation, whether
known or unknown, asserted or unasserted, determined or determinable, absolute
or contingent, accrued or unaccrued and whether due or to become due.

 

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

“Pro Forma Compliance” means, for any date of determination, that the Borrower
is in pro forma compliance with the financial covenant set forth in
Section 9.01(b), as such ratio is recomputed using (a) Total Debt as of such
date and (b) EBITDAX for the period of four fiscal quarters ending on the last
day of the fiscal quarter immediately preceding the date of determination for
which financial statements are available.

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.

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

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

“Proved Reserves” means “Proved Reserves” as defined in the Definitions for Oil
and Gas Reserves (in this paragraph, the “Definitions”) promulgated by the
Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question. “Proved Developed Producing Reserves” means
Proved Reserves which are categorized as both “Developed” and “Producing” in the
Definitions, “Proved Developed Nonproducing Reserves” means Proved Reserves
which are categorized as both “Developed” and “Nonproducing” in the Definitions,
“Proved Developed Reserves” means the sum of Proved Developed Producing Reserves
and Proved Developed Nonproducing Reserves, and “Proved Undeveloped Reserves”
means Proved Reserves which are categorized as “Undeveloped” in the Definitions.

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

“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt. “Redeem” has the correlative meaning thereto.

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

“R.E. Gas” means R.E. Gas Development, a Delaware limited liability company.

 

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

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

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

“Release” has the meaning assigned such term in the definition of the term
“Environmental Laws”.

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

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

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

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

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

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

 

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“RW Gathering” means RW Gathering, LLC, a Delaware limited liability company.

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

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

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

“Secured Swap Agreement” means any Swap Agreement between the Borrower or any
Subsidiary and any Person that is entered into prior to the time, or during the
time, that such Person was, a Lender or an Affiliate of a Lender (including any
such Swap Agreement in existence prior to the date hereof), even if such Person
subsequently ceases to be a Lender (or an Affiliate of a Lender) for any reason
(any such Person, a “Secured Swap Party”); provided that, for the avoidance of
doubt, the term “Secured Swap Agreement” shall not include any transactions
entered into after the time that such Secured Swap Party ceases to be a Lender
or an Affiliate of a Lender.

“Secured Swap Obligations” means all amounts and other obligations owing to any
Secured Swap Party under any Secured Swap Agreement.

“Secured Swap Party” has the meaning assigned to such term in the definition of
Secured Swap Agreement.

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

“Senior Debt” means any unsecured senior or unsecured senior subordinated Debt
securities (whether registered or privately placed) issued or incurred by the
Borrower pursuant to a Senior Debt Indenture.

“Senior Debt Indenture” means any indenture among the Borrower, as issuer, the
subsidiary guarantors party thereto and the trustee named therein, pursuant to
which the Senior Debt is issued or incurred, as the same may be amended,
modified or supplemented in accordance with Section 9.19.

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

 

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

“Subsidiary” means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner. Unless otherwise indicated herein, each reference to the term
“Subsidiary” shall mean a Subsidiary of the Borrower.

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

“Swap Termination Value” means, in respect of any one or more Swap Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements, (a) for any date on or after the
date such Swap Agreements have been closed out and termination value(s)
determined in accordance therewith, such termination value(s) and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Agreements, as determined by the
counterparties to such Swap Agreements.

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

 

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

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

“Total Debt” means, at any date, all Debt of the Borrower and the Consolidated
Subsidiaries on a consolidated basis, excluding (i) non-cash obligations under
FASB ASC 815 and (ii) accounts payable and other accrued liabilities (for the
deferred purchase price of Property or services) from time to time incurred in
the ordinary course of business which are not greater than sixty (60) days past
the date of invoice or which are being contested in good faith by appropriate
action and for which adequate reserves have been maintained in accordance with
GAAP.

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

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

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

“USA Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. 107-56), as amended.

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

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

 

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“Withholding Agent” means the Borrower and the Administrative Agent.

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

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

Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which the Borrower’s independent
certified public accountants concur and which are disclosed to the
Administrative Agent on the next date on which financial statements are required
to be delivered to the Lenders pursuant to Section 8.01(a); provided that,
unless the Borrower and the Majority Lenders shall otherwise agree in writing,
no such change shall modify or affect the manner in which compliance with the
covenants contained herein is computed such that all such computations shall be
conducted utilizing financial information presented consistently with prior
periods.

 

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ARTICLE II

THE CREDITS

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

Section 2.02 Loans and Borrowings.

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

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

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

(d) Notes. Any Lender may request that the Loans made by it shall be evidenced
by a single promissory note of the Borrower in substantially the form of Exhibit
A, dated, in the case of (i) any Lender party hereto as of the date of this
Agreement, as of the date of this Agreement, or (ii) any Lender that becomes a
party hereto pursuant to an Assignment and Assumption, as of the effective date
of the Assignment and Assumption, payable to such Lender in a principal amount
equal to its Maximum Credit Amount as in effect on such date, and otherwise duly
completed. In the event that any Lender’s Maximum Credit Amount increases or
decreases for any reason (whether pursuant to Section 2.06, Section 12.04(b) or
otherwise), the Borrower shall deliver or cause to be delivered on the effective
date of such increase or decrease, a new Note payable to such Lender in a
principal amount equal to its Maximum Credit Amount after giving effect to such
increase or decrease, and otherwise duly completed (and the prior Note shall be
destroyed or, upon request of the Borrower, returned to the Borrower with an
indication that the same has been discharged). The date, amount, Type, interest
rate and, if applicable, Interest Period of each Loan made by each Lender, and
all payments made on account of the

 

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principal thereof, shall be recorded by such Lender on its books for its Note,
and, prior to any transfer, may be endorsed by such Lender on a schedule
attached to such Note or any continuation thereof or on any separate record
maintained by such Lender. Failure to make any such notation or to attach a
schedule shall not affect any Lender’s or the Borrower’s rights or obligations
in respect of such Loans or affect the validity of such transfer by any Lender
of its Note.

Section 2.03 Requests for Borrowings. To request a Borrowing, the Borrower shall
notify the Administrative Agent of such request by telephone (a) in the case of
a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day
before the date of the proposed Borrowing; provided that no such notice shall be
required for any deemed request of an ABR Borrowing to finance the reimbursement
of an LC Disbursement as provided in Section 2.08(e). Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in substantially the form of Exhibit B and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following
information:

(i) the aggregate amount of the requested Borrowing;

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

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

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

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

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

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

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

 

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Section 2.04 Interest Elections.

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

(b) Interest Election Requests. To make an election pursuant to this
Section 2.04, the Borrower shall notify the Administrative Agent of such
election by telephone, fax (or transmit by electronic communication, if
arrangements for doing so have been approved by the Administrative Agent) by the
time that a Borrowing Request would be required under Section 2.03 if the
Borrower were requesting a Borrowing of the Type resulting from such election to
be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in substantially the form of Exhibit C and signed by the Borrower.

(c) Information in Interest Election Requests. Each telephonic, fax, other
approved electronic transmission and written Interest Election Request shall
specify the following information:

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

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

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

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

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

 

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

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

Section 2.05 Funding of Borrowings.

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower designated by the Borrower in the applicable Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.08(e) shall be remitted by the Administrative Agent to
the Issuing Bank. Nothing herein shall be deemed to obligate any Lender to
obtain the funds for its Loan in any particular place or manner or to constitute
a representation by any Lender that it has obtained or will obtain the funds for
its Loan in any particular place or manner.

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

 

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

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

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

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

(ii) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Maximum Credit Amounts under
Section 2.06(b)(i) at least three Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable. Any
termination or reduction of the Aggregate Maximum Credit Amounts shall be
permanent and may not be reinstated. Each reduction of the Aggregate Maximum
Credit Amounts shall be made ratably among the Lenders in accordance with each
Lender’s Applicable Percentage.

(c) Optional Increase in Aggregate Maximum Credit Amounts.

(i) Subject to the conditions set forth in Section 2.06(c)(ii), the Borrower may
increase the Aggregate Maximum Credit Amounts then in effect by increasing the
Maximum Credit Amount of a Lender or by causing a Person that at such time is
not a Lender (subject to the consent of the Administrative Agent and the Issuing
Bank, which consent shall not be unreasonably withheld or denied) to become a
Lender (an “Additional Lender”).

(ii) Any increase in the Aggregate Maximum Credit Amounts shall be subject to
the following additional conditions:

(A) such increase shall not be less than $10,000,000 unless the Administrative
Agent otherwise consents, and no such increase shall be permitted if after
giving effect thereto the Aggregate Maximum Credit Amounts would exceed
$500,000,000;

(B) no Default shall have occurred and be continuing at the effective date of
such increase;

 

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(C) on the effective date of such increase, no Eurodollar Borrowings shall be
outstanding or if any Eurodollar Borrowings are outstanding, then the effective
date of such increase shall be the last day of the Interest Period in respect of
such Eurodollar Borrowings unless the Borrower pays compensation required by
Section 5.02;

(D) no Lender’s Maximum Credit Amount may be increased without the consent of
such Lender;

(E) if the Borrower elects to increase the Aggregate Maximum Credit Amount by
increasing the Maximum Credit Amount of a Lender, the Borrower and such Lender
shall execute and deliver to the Administrative Agent a certificate
substantially in the form of Exhibit G-1 (a “Maximum Credit Amount Increase
Certificate”), together with a processing and recordation fee of $5,000, and the
Borrower shall deliver a new Note payable to such Lender in a principal amount
equal to its Maximum Credit Amount after giving effect to such increase, and
otherwise duly completed; and

(F) If the Borrower elects to increase the Aggregate Maximum Credit Amounts by
causing an Additional Lender to become a party to this Agreement, then the
Borrower and such Additional Lender shall execute and deliver to the
Administrative Agent a certificate substantially in the form of Exhibit G-2 (an
“Additional Lender Certificate”), together with an Administrative Questionnaire
and a processing and recordation fee of $5,000, and the Borrower shall deliver a
Note payable to such Additional Lender in a principal amount equal to its
Maximum Credit Amount, and otherwise duly completed.

(iii) Subject to acceptance and recording thereof pursuant to
Section 2.06(c)(iv), from and after the effective date specified in the Maximum
Credit Amount Increase Certificate or the Additional Lender Certificate (or if
any Eurodollar Borrowings are outstanding, then the last day of the Interest
Period in respect of such Eurodollar Borrowings, unless the Borrower has paid
compensation required by Section 5.02): (A) the amount of the Aggregate Maximum
Credit Amounts shall be increased as set forth therein, and (B) in the case of
an Additional Lender Certificate, any Additional Lender party thereto shall be a
party to this Agreement and the other Loan Documents and have the rights and
obligations of a Lender under this Agreement and the other Loan Documents. In
addition, the Lender or the Additional Lender, as applicable, shall purchase a
pro rata portion of the outstanding Loans (and participation interests in
Letters of Credit) of each of the other Lenders (and such Lenders hereby agree
to sell and to take all such further action to effectuate such sale) such that
each Lender (including any Additional Lender, if applicable) shall hold its
Applicable Percentage of the outstanding Loans (and participation interests)
after giving effect to the increase in the Aggregate Maximum Credit Amount.

(iv) Upon its receipt of a duly completed Maximum Credit Amount Increase
Certificate or an Additional Lender Certificate, executed by the Borrower and
the Lender or the Borrower and the Additional Lender party thereto, as
applicable, the processing and recording fee referred to in Section 2.06(c)(ii),
the Administrative Questionnaire referred to in Section 2.06(c)(ii), if
applicable, and the written consent of the Administrative Agent to such increase
required by Section 2.06(c)(i), the

 

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Administrative Agent shall accept such Maximum Credit Amount Increase
Certificate or Additional Lender Certificate and record the information
contained therein in the Register required to be maintained by the
Administrative Agent pursuant to Section 12.04(b)(iv). No increase in the
Aggregate Maximum Credit Amount shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in this
Section 2.06(c)(iv).

Section 2.07 Borrowing Base.

(a) Initial Borrowing Base. For the period from and including the Effective Date
to but excluding the first Redetermination Date, the amount of the Borrowing
Base shall be $325,000,000. Notwithstanding the foregoing, the Borrowing Base
may be subject to further adjustments from time to time pursuant to
Section 2.07(e), Section 2.07(f), Section 8.13(c) or Section 9.12.

(b) Scheduled and Interim Redeterminations. The Borrowing Base shall be
redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled
Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing
Base shall become effective and applicable to the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders on April 1st and October 1st of each
year, commencing October 1, 2013. In addition, the Borrower may, by notifying
the Administrative Agent thereof, and the Administrative Agent may, at the
direction of the Required Lenders, by notifying the Borrower thereof, one time
during any calendar year, each elect to cause the Borrowing Base to be
redetermined between Scheduled Redeterminations (each redetermination made
pursuant to this sentence or the following sentence, an “Interim
Redetermination”) in accordance with this Section 2.07. The Borrower shall have
the right to request Interim Redeterminations in addition to the one otherwise
provided in this Section 2.07(b) upon the proposed acquisition of Proved
Developed Producing Reserves (whether by purchase of the actual properties or of
the Equity Interests in the Person owning such properties) whose purchase price
is greater than 10% of the Borrowing Base; provided such Interim Redetermination
is in accordance with this Section 2.07.

(c) Scheduled and Interim Redetermination Procedure.

(i) Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: Upon receipt by the Administrative Agent of (A) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, in the case of a Scheduled Redetermination, pursuant
to Section 8.12(a) and (c), and, in the case of an Interim Redetermination,
pursuant to Section 8.12(b) and (c), and (B) such other reports, data and
supplemental information, including, without limitation, the information
provided pursuant to Section 8.12(c), as may, from time to time, be reasonably
requested by the Required Lenders (the Reserve Report, such certificate and such
other reports, data and supplemental information being the “Engineering
Reports”), the Administrative Agent shall evaluate the information contained in
the Engineering Reports and shall, in good faith, propose a new Borrowing Base
(the “Proposed Borrowing Base”) based upon such information and such other
information (including, without limitation, the status of title information with
respect to the Oil and Gas Properties as described in the Engineering Reports
and the

 

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existence of any other Debt) as the Administrative Agent deems appropriate in
its sole discretion and consistent with its normal oil and gas lending criteria
as it exists at the particular time. In no event shall the Proposed Borrowing
Base exceed the Aggregate Maximum Credit Amounts.

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

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

(B) in the case of an Interim Redetermination, promptly, and in any event,
within fifteen (15) days after the Administrative Agent has received the
required Engineering Reports.

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

 

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

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

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

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

(e) Reduction of Borrowing Base Upon Incurrence of Senior Debt. Notwithstanding
anything to the contrary contained herein, if the Borrower incurs any Senior
Debt, then the Borrowing Base then in effect shall be reduced immediately upon
the date of such incurrence by an amount equal to the product of 0.25 multiplied
by an amount equal to the stated principal amount of such Senior Debt. The
Borrowing Base as so reduced shall become the new Borrowing Base immediately
upon the date of such incurrence, effective and applicable to the Borrower, the
Agents, the Issuing Bank and the Lenders on such date until the next
redetermination or modification thereof hereunder. For purposes of this
Section 2.07(e), if any such Senior Debt is issued at a discount or otherwise
sold for less than “par”, the reduction shall be calculated based upon the
stated principal amount without reference to such discount.

(f) Reduction of Borrowing Base Related to Swap Agreements. If any Swap
Agreement to which the Borrower or any Subsidiary is a party is Liquidated
between two successive Scheduled Redetermination Dates and the Borrowing Base
value assigned to the Liquidated portion of such Swap Agreement after giving
effect to any other Swap Agreements executed within two Business Days of such
Liquidation (as determined by the Administrative Agent), when combined with the
fair market value of the sale or other disposition of Oil and Gas Property or
Subsidiary owning Oil and Gas Properties included in the most recently delivered
Reserve Report during the period between such successive Scheduled
Redetermination Dates, exceeds ten percent (10%) of the Borrowing Base as then
in effect (as determined by the Administrative Agent), individually or in the
aggregate, then contemporaneously with such Liquidation, the Borrowing Base then
in effect shall be reduced by an amount equal to the value, if any, assigned to
the Liquidated portion of such Swap Agreement in the then effective Borrowing
Base, as determined by the Administrative Agent.

 

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Section 2.08 Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, the Borrower
may request the issuance of dollar denominated Letters of Credit for its own
account or for the account of any of its Subsidiaries, in a form reasonably
acceptable to the Administrative Agent and the Issuing Bank, at any time and
from time to time during the Availability Period; provided that the Borrower may
not request the issuance, amendment (other than an amendment in respect to the
reduction of the outstanding amount of a Letter of Credit or the termination of
a Letter of Credit prior to its stated expiration date), renewal or extension of
Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time
or would exist as a result thereof. In the event of any inconsistency between
the terms and conditions of this Agreement and the terms and conditions of any
form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.

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

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

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

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

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

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

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

 

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A Letter of Credit shall be issued, amended, renewed or extended only if (and
each notice shall constitute a representation and warranty by the Borrower
that), after giving effect to the requested issuance, amendment, renewal or
extension, as applicable, (i) the LC Exposure shall not exceed the LC Commitment
and (ii) the total Revolving Credit Exposures shall not exceed the total
Commitments (i.e. the lesser of the Aggregate Maximum Credit Amounts and the
then effective Borrowing Base).

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

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

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

(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by
paying to the Administrative Agent an amount equal to such LC Disbursement not
later than 12:00 noon, New York City time, on the date that such LC Disbursement
is made, if the Borrower shall have received notice of such LC Disbursement
prior to 10:00 a.m., New York City time, on such date, or, if such notice has
not been received by the Borrower prior to such time on such date, then not
later than 12:00 noon, New York City time, on (i) the Business Day that the
Borrower receives such notice, if such notice is received prior to 10:00 a.m.,
New York City time, on the day of receipt, or (ii) the Business Day immediately
following the day that the Borrower receives such notice, if such notice is not
received prior to such time on the day of receipt; provided that if such LC
Disbursement is not less than $1,000,000, the Borrower shall, subject to the
conditions to Borrowing set forth herein, be deemed to have requested, and the
Borrower does hereby request under such circumstances, that such payment be
financed with an ABR Borrowing in an equivalent amount and, to the extent so
financed, the Borrower’s obligation to make such payment shall be discharged and
replaced by the resulting ABR Borrowing. If the Borrower fails

 

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to make such payment when due, the Administrative Agent shall notify each Lender
of the applicable LC Disbursement, the payment then due from the Borrower in
respect thereof and such Lender’s Applicable Percentage thereof. Promptly
following receipt of such notice, each Lender shall pay to the Administrative
Agent its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.05 with respect to Loans made by such
Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to
the Issuing Bank the amounts so received by it from the Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this Section 2.08(e), the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this Section 2.08(e) to reimburse the Issuing Bank, then to such
Lenders and the Issuing Bank as their interests may appear. Any payment made by
a Lender pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any
LC Disbursement (other than the funding of ABR Loans as contemplated above)
shall not constitute a Loan and shall not relieve the Borrower of its obligation
to reimburse such LC Disbursement.

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

 

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upon such documents without responsibility for further investigation, regardless
of any notice or information to the contrary, or refuse to accept and make
payment upon such documents if such documents are not in strict compliance with
the terms of such Letter of Credit.

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

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

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

(j) Cash Collateralization. If (i) any Event of Default shall occur and be
continuing and the Borrower receives notice from the Administrative Agent or the
Majority Lenders demanding that the Borrower cash collateralize the outstanding
LC Exposure, (ii) the Borrower is required to cash collateralize the excess
attributable to an LC Exposure in connection with any prepayment pursuant to
Section 3.04(c), or (iii) the Borrower is required to cash collateralize a
Defaulting Lender’s LC Exposure pursuant to Section 4.03(c)(iii)(B), then the
Borrower shall pledge and deposit with or deliver to the Administrative Agent
(as a first priority, perfected security interest), for the benefit of the
Issuing Bank, at a location and pursuant to documentation in form and substance
satisfactory to the Administrative Agent, an amount in cash in dollars equal to
such LC Exposure or excess attributable to such LC Exposure,

 

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as the case may be, as of such date plus any accrued and unpaid interest
thereon; provided that the obligation to deposit such cash collateral shall
become effective immediately, and shall become immediately due and payable,
without demand or other notice of any kind, upon the occurrence of any Event of
Default described in Section 10.01(h) or Section 10.01(i). The Borrower hereby
grants to the Administrative Agent, for the benefit of the Issuing Bank and the
Lenders, an exclusive first priority and continuing perfected security interest
in and Lien on such account and all cash, checks, drafts, certificates and
instruments, if any, from time to time deposited or held in such account, all
deposits or wire transfers made thereto, any and all investments purchased with
funds deposited in such account, all interest, dividends, cash, instruments,
financial assets and other Property from time to time received, receivable or
otherwise payable in respect of, or in exchange for, any or all of the
foregoing, and all proceeds, products, accessions, rents, profits, income and
benefits therefrom, and any substitutions and replacements therefor. The
Borrower’s obligation to deposit amounts pursuant to this Section 2.08(j) shall
be absolute and unconditional, without regard to whether any beneficiary of any
Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Borrower or any Subsidiary may now
or hereafter have against any such beneficiary, the Issuing Bank, the
Administrative Agent, the Lenders or any other Person for any reason whatsoever.
Such deposit shall be held as collateral securing the payment and performance of
the Borrower’s and the Guarantors’ obligations under this Agreement and the
other Loan Documents. The Administrative Agent shall, subject to the terms of
the Loan Documents, have exclusive dominion and control, including the exclusive
right of withdrawal, over such account. Other than any interest earned on the
investment of such deposits of the type described in Sections 9.05(c), 9.05(d),
9.05(e), 9.05(f) and 9.05(g), which investments shall be made at the option of
the Administrative Agent and with the consent of the Borrower, but at the
Borrower’s risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall be applied by the Administrative Agent to reimburse the
Issuing Bank for LC Disbursements for which it has not been reimbursed and, to
the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or,
if the maturity of the Loans has been accelerated, be applied to satisfy other
obligations of the Borrower and the Guarantors under this Agreement and the
other Loan Documents. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default or
pursuant to Section 4.03(c)(iii)(B) as a result of a Defaulting Lender, and the
Borrower is not otherwise required to cash collateralize the excess attributable
to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c),
then such amount (to the extent not applied as aforesaid) shall be returned to
the Borrower within three Business Days after all Events of Default have been
cured or waived or the events giving rise to such cash collateralization
pursuant to Section 4.03(c)(iii)(B) have been satisfied or resolved.

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

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

 

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Section 3.02 Interest.

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

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

(c) Post-Default Rate and Borrowing Base Deficiency Rate. Notwithstanding the
foregoing, (i) if an Event of Default has occurred and is continuing, or if any
principal of or interest on any Loan or any fee payable by the Borrower pursuant
to Section 3.05 or any Guarantor hereunder or under any other Loan Document is
not paid when due, whether at stated maturity, upon acceleration or otherwise,
and including any payments in respect of a Borrowing Base Deficiency under
Section 3.04(c), then all Loans outstanding, in the case of an Event of Default,
including such overdue amount, in the case of a failure to pay amounts when due,
shall bear interest, after as well as before judgment, at a rate per annum equal
to two percent (2%) plus the respective rates then in effect, but in no event to
exceed the Highest Lawful Rate, until such Event of Default has been cured or
such amount is fully paid, as the case may be, and (ii) if a Borrowing Base
Deficiency has occurred and has continued unremedied for 45 days, then all Loans
outstanding at such time shall bear interest, after as well as before judgment,
at a rate per annum equal to two percent (2%) plus the respective rates then in
effect, but in no event to exceed the Highest Lawful Rate, until such Borrowing
Base Deficiency has been cured; provided that such Borrowing Base Deficiency
rate shall not apply while any default interest rate is in effect pursuant to
Section 3.02(c)(i).

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

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

 

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

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

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

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

Section 3.04 Prepayments.

(a) Optional Prepayments. The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to prior
notice in accordance with Section 3.04(b).

(b) Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later
than 12:00 noon, New York City time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 12:00 noon, New York City time, one Business Day before the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid. Promptly following receipt of any such notice relating to a
Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof. Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.02. Each prepayment of a Borrowing shall be applied
ratably to the Loans included in the prepaid Borrowing. Prepayments shall be
accompanied by accrued interest to the extent required by Section 3.02 and any
payments to the extent required by Section 5.02.

(c) Mandatory Prepayments.

(i) If, after giving effect to any termination or reduction of the Aggregate
Maximum Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit
Exposures exceeds the total Commitments, then the Borrower shall (A) prepay the
Borrowings on the date of such termination or reduction in an aggregate
principal amount equal to such excess, and (B) if any excess remains after
prepaying all of the Borrowings as a result of an LC Exposure, cash
collateralize such excess as provided in Section 2.08(j).

 

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(ii) Upon any redetermination of or adjustment to the amount of the Borrowing
Base in accordance with Section 2.07 (other than pursuant to Section 2.07(e) or
Section 2.07(f)) or Section 8.13(c), if the total Revolving Credit Exposure
exceeds the redetermined or adjusted Borrowing Base, then the Borrower shall
(A) prepay the Borrowings in an aggregate principal amount equal to such excess,
and (B) if any excess remains after prepaying all of the Borrowings as a result
of an LC Exposure, cash collateralize such excess as provided in
Section 2.08(j). The Borrower shall be obligated to make such prepayment and/or
cash collateralize such excess within ninety (90) days following the date it
receives the New Borrowing Base Notice in accordance with Section 2.07(d) or the
date the adjustment occurs pursuant to Section 8.13(c); provided that all
payments required to be made pursuant to this Section 3.04(c)(ii) must be made
on or prior to the Termination Date.

(iii) Upon any adjustment to the Borrowing Base pursuant to Section 2.07(e),
Section 2.07(f) or Section 9.12(d), if the total Revolving Credit Exposure
exceeds the Borrowing Base as adjusted, then the Borrower shall (A) prepay the
Borrowings in an aggregate principal amount equal to such excess, and (B) if any
excess remains after prepaying all of the Borrowings as a result of an LC
Exposure, cash collateralize such excess as provided in Section 2.08(j). The
Borrower shall be obligated to make such prepayment and/or cash collateralize
such excess (A) in the case of an adjustment pursuant to Section 2.07(e) or
Section 2.07(f), on the date the adjustment occurs and (B) in the case of an
adjustment to the Borrowing Base pursuant to Section 9.12(d), on the date that
the relevant sale or other disposition occurs; provided that all payments
required to be made pursuant to this Section 3.04(c)(iii) must be made on or
prior to the Termination Date.

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

(v) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied ratably to the Loans included in the prepaid Borrowings. Prepayments
pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the
extent required by Section 3.02.

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

 

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Section 3.05 Fees.

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

(b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative
Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Margin used to determine the interest rate applicable to Eurodollar Loans on the
average daily amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the date of this Agreement to but excluding the later of the date on
which such Lender’s Commitment terminates and the date on which such Lender
ceases to have any LC Exposure, (ii) to the Issuing Bank a fronting fee, which
shall accrue at the rate of 0.200% per annum on the average daily amount of the
LC Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date of this Agreement
to but excluding the later of the date of termination of the Commitments and the
date on which there ceases to be any LC Exposure; provided that in no event
shall such fee be less than $500 during any quarter, and (iii) to the Issuing
Bank, for its own account, its standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the later of (i) the third Business Day following such last day or
(ii) three Business Days after the Borrower’s receipt of a notice therefore from
the Administrative Agent, commencing on the first such date to occur after the
date of this Agreement; provided that all such fees shall be payable on the
Termination Date and any such fees accruing after the Termination Date shall be
payable on demand. Any other fees payable to the Issuing Bank pursuant to this
Section 3.05(b) shall be payable within 10 days after demand. All participation
fees and fronting fees shall be computed on the basis of a year of 360 days,
unless, if such fees are deemed interest, such computation would exceed the
Highest Lawful Rate, in which case such fees shall be computed on the basis of a
year of 365 days (or 366 days in a leap year), and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).

(c) Administrative Agent Fees. The Borrower agrees to pay to the Administrative
Agent, for its own account, fees payable in the amounts and at the times
separately agreed upon between the Borrower and the Administrative Agent in the
Fee Letter between the Borrower and the Administrative Agent dated March 25,
2013.

 

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(d) Borrowing Base Increase Fees. The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender then party to this
Agreement, ratably in accordance with its Applicable Percentage, a Borrowing
Base increase fee equal to 25 bps on the amount of any increase of the Borrowing
Base over the highest Borrowing Base previously in effect, payable on the
effective date of any such increase to the Borrowing Base.

ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

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

(a) Payments by the Borrower. The Borrower shall make each payment required to
be made by it hereunder (whether of principal, interest, fees or reimbursement
of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02,
Section 5.03 or otherwise) prior to 12:00 noon, New York City time, on the date
when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and
shall not be refundable under any circumstances. Any amounts received after such
time on any date may, in the discretion of the Administrative Agent, be deemed
to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, except payments
to be made directly to the Issuing Bank as expressly provided herein and except
that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and
Section 12.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.

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

(c) Sharing of Payments by Lenders. If any Lender shall, by exercising any right
of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and
participations in LC Disbursements; provided that (i) if any such participations
are

 

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purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this Section 4.01(c) shall apply). The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.

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

Section 4.03 Payments and Deductions by the Administrative Agent; Defaulting
Lenders.

(a) Certain Deductions by the Administrative Agent. If any Lender shall fail to
make any payment required to be made by it pursuant to Section 2.05(b),
Section 2.08(d), Section 2.08(e), Section 4.02, Section 5.03(h) or
Section 12.03(c), then the Administrative Agent may, in its sole discretion
(notwithstanding any contrary provision hereof), (i) apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
for the benefit of the Administrative Agent or the Issuing Bank to satisfy such
Lender’s obligations to it under such Section until all such unsatisfied
obligations are fully paid, and/or (ii) hold any such amounts in a segregated
account as cash collateral for, and application to, any future funding
obligations of such Lender under any such Section, in the case of each of
clauses (i) and (ii) above, in any order as determined by the Administrative
Agent in its sole discretion.

(b) Payments to Defaulting Lenders. If a Defaulting Lender (or a Lender who
would be a Defaulting Lender but for the expiration of the relevant grace
period) as a result of the exercise of a set-off shall have received a payment
in respect of its Revolving Credit Exposure which results in its Revolving
Credit Exposure being less than its Applicable Percentage of the aggregate
Revolving Credit Exposures, then no payments will be made to such Defaulting
Lender until such time as such Defaulting Lender shall have complied with
Section

 

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4.03(c) and all amounts due and owing to the Lenders have been equalized in
accordance with each Lender’s respective pro rata share of the Indebtedness.
Further, if at any time prior to the acceleration or maturity of the Loans, the
Administrative Agent shall receive any payment in respect of principal of a Loan
or a reimbursement of an LC Disbursement while one or more Defaulting Lenders
shall be party to this Agreement, the Administrative Agent shall apply such
payment first to the Borrowing(s) for which such Defaulting Lender(s) shall have
failed to fund its pro rata share until such time as such Borrowing(s) are paid
in full or each Lender (including each Defaulting Lender) is owed its Applicable
Percentage of all Loans then outstanding. After acceleration or maturity of the
Loans, subject to the first sentence of this Section 4.03(b), all principal will
be paid ratably as provided in Section 10.02(c).

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

(i) Fees shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 3.05(a).

(ii) The Commitment, the Maximum Credit Amount and the Revolving Credit Exposure
of such Defaulting Lender shall not be included in determining whether the
Required Lenders or the Majority Lenders have taken or may take any action
hereunder (including any consent to any amendment or waiver pursuant to
Section 12.02); provided that any waiver, amendment or modification requiring
the consent of all Lenders or each affected Lender shall require the consent of
such Defaulting Lender; and provided further that any redetermination or
affirmation of the Borrowing Base shall occur without the participation of a
Defaulting Lender, but the Commitment (i.e., the Applicable Percentage of the
Borrowing Base of a Defaulting Lender) may not be increased without the consent
of such Defaulting Lender.

(iii) If any LC Exposure exists at the time a Lender becomes a Defaulting Lender
then:

(A) all or any part of the LC Exposure of such Defaulting Lender shall be
reallocated among the Non-Defaulting Lenders in accordance with their respective
Applicable Percentages (for the purposes of such reallocation the Defaulting
Lender’s Commitment shall be disregarded in determining the Non-Defaulting
Lender’s Applicable Percentage) but only to the extent (1) the sum of all
Non-Defaulting Lenders’ Revolving Credit Exposures plus such Defaulting Lender’s
LC Exposure does not exceed the total of all Non—Defaulting Lenders’
Commitments, and (2) the sum of each Non-Defaulting Lender’s Revolving Credit
Exposure plus its reallocated share of such Defaulting Lender’s LC Exposure does
not exceed such Non-Defaulting Lender’s Commitment;

(B) if the reallocation described in clause (A) above cannot, or can only
partially, be effected, then the Borrower shall within one Business Day
following notice by the Administrative Agent cash collateralize for the benefit
of the Issuing Bank only the Borrower’s obligations corresponding to such
Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation
pursuant to clause (A) above) in accordance with the procedures set forth in
Section 2.08(j) for so long as such LC Exposure is outstanding;

 

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(C) if the Borrower cash collateralizes any portion of such Defaulting Lender’s
LC Exposure pursuant to clause (B) above, then the Borrower shall not be
required to pay any fees to such Defaulting Lender pursuant to Section 3.05(b)
with respect to such Defaulting Lender’s LC Exposure during the period such
Defaulting Lender’s LC Exposure is cash collateralized;

(D) if the LC Exposure of the Non-Defaulting Lenders is reallocated pursuant to
clause (A) above, then the fees payable to the Lenders pursuant to
Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such
Non-Defaulting Lenders’ Applicable Percentages;

(E) if all or any portion of such Defaulting Lender’s LC Exposure is neither
reallocated nor cash collateralized pursuant to clause (A) or (B) above, then,
without prejudice to any rights or remedies of the Issuing Bank or any Lender
hereunder, all commitment fees that otherwise would have been payable to such
Defaulting Lender (solely with respect to the portion of such Defaulting
Lender’s Commitment that was utilized by such LC Exposure) and letter of credit
fees payable under Section 3.05(b) with respect to such Defaulting Lender’s LC
Exposure shall be payable to the Issuing Bank until such LC Exposure is
reallocated and/or cash collateralized; and

(iv) So long as such Lender is a Defaulting Lender, the Issuing Bank shall not
be required to issue, amend or increase any Letter of Credit, unless it is
satisfied that the related exposure and the Defaulting Lender’s then outstanding
LC Exposure will be 100% covered by the Commitments of the Non-Defaulting
Lenders and/or cash collateral will be provided by the Borrower in accordance
with Section 4.03(c), and participating interests in any such newly issued or
increased Letter of Credit shall be allocated among Non-Defaulting Lenders in a
manner consistent with Section 4.03(c)(iii)(A) (and such Defaulting Lender shall
not participate therein).

In the event that the Administrative Agent, the Borrower and the Issuing Bank
each agrees that a Defaulting Lender has adequately remedied all matters that
caused such Lender to be a Defaulting Lender, and such Lender is no longer a
Defaulting Lender, then the LC Exposure of the Lenders shall be readjusted to
reflect the inclusion of such Lender’s Commitment and on such date, if
necessary, such Lender shall purchase at par such of the Loans and/or
participations in Letters of Credit of the other Lenders as the Administrative
Agent shall determine may be necessary in order for such Lender to hold such
Loans in accordance with its Applicable Percentage.

Section 4.04 Disposition of Proceeds. The Security Instruments contain a
collateral assignment by the Borrower and/or the Guarantors unto and in favor of
the Administrative Agent for the benefit of the Lenders of all of the Borrower’s
or each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property. The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and

 

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secured thereby. Notwithstanding such assignment contained in such Security
Instruments, unless an Event of Default has occurred and is continuing, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and its
Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to
take such actions as may be necessary to cause such proceeds to be paid to the
Borrower and/or such Subsidiaries.

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

Section 5.01 Increased Costs.

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

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or

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

(iii) impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender in connection with any such Loan (whether of
principal, interest or otherwise), then the Borrower will pay to such Lender
such additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered.

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

 

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(c) Certificates. A certificate of a Lender or the Issuing Bank setting forth in
reasonable detail the computation of the amount or amounts (as determined
reasonably and in good faith) necessary to compensate such Lender or the Issuing
Bank or its holding company, as the case may be, as specified in Section 5.01(a)
or (b) shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof. Each such certificate shall contain the representation
and warranty of the Person sending it that the Borrower is being treated no less
favorably with respect to amounts being charged under Section 5.01(a) and
(b) than are other similarly situated customers of such Lenders or Issuing Bank.

(d) Effect of Failure or Delay in Requesting Compensation. Failure or delay on
the part of any Lender or the Issuing Bank to demand compensation pursuant to
this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing
Bank’s right to demand such compensation; provided that the Borrower shall not
be required to compensate a Lender or the Issuing Bank pursuant to this
Section 5.01 for any increased costs or reductions incurred more than 180 days
prior to the date that such Lender or the Issuing Bank, as the case may be,
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender’s or the Issuing Bank’s intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 180-day period
referred to above shall be extended to include the period of retroactive effect
thereof.

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

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

 

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Section 5.03 Taxes.

(a) Defined Terms. For purposes of this Section 5.03, the term “Lender” includes
any Issuing Bank and the term “applicable law” includes FATCA.

(b) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction or withholding for any Taxes,
except as required by applicable law. If any applicable law (as determined in
the good faith discretion of an applicable Withholding Agent) requires the
deduction or withholding of any Tax from any such payment by a Withholding
Agent, then the applicable Withholding Agent shall be entitled to make such
deduction or withholding and shall timely pay the full amount deducted or
withheld to the relevant Governmental Authority in accordance with applicable
law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower
or a Guarantor, as applicable, shall be increased as necessary so that after
such deduction or withholding has been made (including such deductions and
withholdings applicable to additional sums payable under this Section) the
applicable Recipient receives an amount equal to the sum it would have received
had no such deduction or withholding been made.

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

(d) Indemnification by the Borrower. The Borrower shall indemnify each
Recipient, within 10 days after written demand therefor, for the full amount of
any Indemnified Taxes paid by such Recipient on or with respect to any payment
by or on account of any obligation of the Borrower or any Guarantor hereunder or
in connection with any Loan Document (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this
Section 5.03) 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 such payment or liability under this
Section 5.03 shall be 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, and any such certificate shall be conclusive absent manifest
error.

(e) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or by the Borrower or a Guarantor to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

(f) Status of Lenders. (i) Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this Agreement or
any other Loan Document shall deliver to the Borrower and the Administrative
Agent, at the time or times prescribed by applicable law or reasonably requested
by the Borrower or the Administrative

 

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Agent, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Borrower or the Administrative
Agent as will permit such payments to be made without withholding or at a
reduced rate of withholding. In addition, any Lender, if reasonably requested by
the Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrower or the
Administrative Agent as will enable the Borrower or the Administrative Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements. Notwithstanding anything to the contrary in
the preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in
Section 5.03(f)(ii)(A), Section 5.03(f)(ii)(B) and Section 5.03(f)(ii)(D) below)
shall not be required if in the Lender’s judgment such completion, execution or
submission would subject such Lender to any material unreimbursed cost or
expense or would materially prejudice the legal or commercial position of such
Lender.

(ii) Without limiting the generality of the foregoing:

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

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

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

(2) executed originals of IRS Form W-8ECI (or any successor form);

(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 H-1 to the effect that (A) such Foreign
Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a
“10 percent shareholder” of the Borrower within the meaning of
Section 881(c)(3)(B) of the Code, or a “controlled foreign

 

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corporation” described in Section 881(c)(3)(C) of the Code and (B) the interest
payments in question are not effectively connected with a U.S. trade or business
conducted by such Foreign Lender or are effectively connected but are not
includible in the Foreign Lender’s gross income for U.S. federal income tax
purposes under an income tax treaty (a “U.S. Tax Compliance Certificate”) and
(y) executed originals of IRS Form W-8BEN (or any successor form); or

(4) to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY (or any successor form), accompanied by a Form
W-8ECI (or any successor form), W-8BEN (or any successor form), a U.S. Tax
Compliance Certificate substantially in the form of Exhibit H-2 or Exhibit H-3,
Form W-9 (or any successor form), 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 H-4 on
behalf of each such direct or indirect partner;

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

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

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

 

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(g) Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 5.03 (including by
the payment of additional amounts pursuant to this Section 5.03), it shall pay
to the indemnifying party an amount equal to such refund (but only to the extent
of indemnity payments made under this Section with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses (including Taxes) of
such indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund). Such indemnifying
party, upon the request of such indemnified party, shall repay to such
indemnified party the amount paid over pursuant to this paragraph (g) (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this paragraph (g), in no event will the indemnified party be required to pay
any amount to an indemnifying party pursuant to this paragraph (g) the payment
of which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid. This paragraph shall not be construed
to require any indemnified party to make available its Tax returns (or any other
information relating to its Taxes that it deems confidential) to the
indemnifying party or any other Person.

(h) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within 10 days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that the
Borrower has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Borrower to do so),
(ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 12.04(c)(ii) relating to the maintenance of a Participant
Register and (iii) any Excluded Taxes attributable to such Lender, in each case,
that are payable or paid by the Administrative Agent in connection with any Loan
Document, and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to any Lender by the Administrative Agent shall be
conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing
to such Lender under any Loan Document or otherwise payable by the
Administrative Agent to the Lender from any other source against any amount due
to the Administrative Agent under this Section 5.03(h).

(i) Effect of Failure or Delay in Requesting Indemnification. Failure or delay
on the part of the Administrative Agent, any Lender or the Issuing Bank to
demand indemnification pursuant to this Section 5.03 shall not constitute a
waiver of the Administrative Agent’s, such Lender’s or the Issuing Bank’s right
to demand such indemnification; provided that the Borrower shall not be required
to indemnify the Administrative Agent, a Lender or the Issuing Bank pursuant to
this Section 5.03 for any Indemnified Taxes or Other Taxes incurred more than
180 days prior to the date that the Administrative Agent, such Lender or the
Issuing Bank, as the case may be, notifies the Borrower of the event giving rise
to such Indemnified Taxes or Other Taxes and of the Administrative Agent’s, such
Lender’s or the Issuing Bank’s intention to claim indemnification therefor;
provided further that, if the event giving rise to indemnification is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.

 

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Section 5.04 Mitigation Obligations; Replacement of Lenders.

(a) Designation of Different Lending Office. If any Lender requests compensation
under Section 5.01, or if the Borrower is required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 5.03, or any Lender gives a notice pursuant to Section 5.05,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would
(A) eliminate or reduce amounts payable pursuant to Section 5.01 or
Section 5.03, as the case may be, in the future or (B) eliminate the need for
the notice pursuant to Section 5.05, and (ii) would not subject such Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.

(b) Replacement of Lenders. If (i) any Lender or the Issuing Bank requests
compensation under Section 5.01 or gives a notice pursuant to Section 5.05,
(ii) the Borrower is required to pay any additional amount to any Lender, the
Issuing Bank or any Governmental Authority for the account of any Lender or the
Issuing Bank pursuant to Section 5.03, (iii) any Lender becomes a Defaulting
Lender or the Issuing Bank defaults in its obligation to issue Letters of Credit
hereunder, (iv) pursuant to Section 2.07(c)(iii), any Lender votes against an
increase in the Borrowing Base when such increase has been approved by at least
the Required Lenders, or (v) any Lender does not consent to any proposed
amendment, waiver or modification of any provision of this Agreement or any
other Loan Document that requires the consent of “each Lender” or “each Lender
directly affected thereby” with respect to which the consent of the Required
Lenders has been obtained, then the Borrower may, at its sole expense and
effort, upon notice to such Lender (or the Issuing Bank) and the Administrative
Agent, require such Lender (or the Issuing Bank) to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 12.04(b)), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (ii) in the case of
any such assignment resulting from a claim for compensation under Section 5.01
or payments required to be made pursuant to Section 5.03, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
Notwithstanding the foregoing, a Lender shall not be required to make any such
assignment and delegation if such Lender any Affiliate of such Lender is party
to an outstanding Swap Agreement with the Borrower or any Subsidiary, unless on
or prior thereto, all such Swap Agreements have been terminated or novated to
another Person and such Lender (or its Affiliate)

 

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shall have received payment of all amounts, if any, payable to it in connection
with such termination or novation. Each Lender agrees that if it is replaced
pursuant to this Section 5.04(b), it shall execute and deliver to the
Administrative Agent an Assignment and Assumption to evidence such sale and
purchase and shall deliver to the Administrative Agent any Note (if the
assigning Lender’s Loans are evidenced by a Note) subject to such Assignment and
Assumption; provided that the failure of any Lender replaced pursuant to this
Section 5.04(b) to execute an Assignment and Assumption or deliver such Note
shall not render such sale and purchase (and the corresponding assignment)
invalid and such assignment shall be recorded in the Register and the Note shall
be deemed cancelled upon such failure. Each Lender hereby irrevocably appoints
the Administrative Agent (such appointment being coupled with an interest) as
such Lender’s attorney-in-fact, with full authority in the place and stead of
such Lender and in the name of such Lender, from time to time in the
Administrative Agent’s discretion, with prior written notice to such Lender, to
take any action and to execute any such Assignment and Assumption or other
instrument that the Administrative Agent may deem reasonably necessary to carry
out the provisions of this Section 5.04(b).

Section 5.05 Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender or its applicable lending
office to honor its obligation to make or maintain Eurodollar Loans either
generally or having a particular Interest Period hereunder, then (a) such Lender
shall promptly notify the Borrower and the Administrative Agent thereof and such
Lender’s obligation to make such Eurodollar Loans shall be suspended (the
“Affected Loans”) until such time as such Lender may again make and maintain
such Eurodollar Loans and (b) all Affected Loans which would otherwise be made
by such Lender shall be made instead as ABR Loans (and, if such Lender so
requests by notice to the Borrower and the Administrative Agent, all Affected
Loans of such Lender then outstanding shall be automatically converted into ABR
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) ABR Loans, all payments
of principal which would otherwise be applied to such Lender’s Affected Loans
shall be applied instead to its ABR Loans.

ARTICLE VI

CONDITIONS PRECEDENT

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

(a) The Administrative Agent, the Arrangers and the Lenders shall have received
all commitment, arrangement, upfront and agency fees and all other fees and
amounts due and payable on or prior to the Effective Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by the Borrower hereunder (including, without
limitation, the fees and expenses of Paul Hastings LLP, counsel to the
Administrative Agent).

(b) Reserved.

 

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

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

(e) The Administrative Agent shall have received an Effective Date certificate
which shall be substantially in the form of Exhibit D-1, duly and properly
executed by a Responsible Officer and dated as of the Effective Date.

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

(g) The Administrative Agent shall have received duly executed Notes payable to
each Lender requesting a note in a principal amount equal to its Maximum Credit
Amount dated as of the date hereof.

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

(i) be reasonably satisfied that the Security Instruments create first priority,
perfected Liens (subject only to Excepted Liens identified in clauses (a) to
(d) and (f) of the definition thereof, but subject to the provisos at the end of
such definition) on at least 80% of the total value of the Oil and Gas
Properties evaluated in the Initial Reserve Report, including Liens on the Oil
and Gas Properties mortgaged pursuant to the Existing Credit Agreement;

(ii) to the extent such Equity Interests are certificated, have received
certificates, together with undated, blank stock powers for each such
certificate, representing all of the issued and outstanding Equity Interests of
each of the Guarantors; and

 

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(iii) be reasonably satisfied that it has a Lien on all Property of the Borrower
and the Guarantors, as contemplated by the parties hereto.

(i) The Administrative Agent shall have received an opinion of (i) Fulbright &
Jaworski L.L.P., counsel to the Borrower, in form and substance satisfactory to
the Administrative Agent, and (ii) local counsel in each state in which a
mortgage or deed of trust is filed naming the Administrative Agent as the
secured party and any other jurisdictions reasonably requested by the
Administrative Agent, substantially in form and substance satisfactory to the
Administrative Agent.

(j) The Administrative Agent shall have received a certificate of insurance
coverage of the Borrower evidencing that the Borrower is carrying insurance in
accordance with Section 7.12.

(k) The Administrative Agent shall have received title information as the
Administrative Agent may reasonably require satisfactory to the Administrative
Agent setting forth the status of title to the Oil and Gas Properties evaluated
in the Initial Reserve Report.

(l) The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Subsidiaries.

(m) The Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower certifying that the Borrower has received all consents
and approvals required by Section 7.03.

(n) The Administrative Agent shall have received the financial statements
referred to in Section 7.04(a) and the Initial Reserve Report accompanied by a
certificate covering the matters described in Section 8.12(c).

(o) The Administrative Agent shall have received appropriate UCC search results
reflecting no prior Liens encumbering the Properties of the Borrower and the
Guarantors, other than those being assigned or released on or prior to the
Effective Date or Liens permitted by Section 9.03.

(p) The Administrative Agent and the Lenders shall have received, and be
reasonably satisfied in form and substance with, all documentation and other
information required by bank regulatory authorities under applicable
“know-your-customer” and anti-money laundering rules and regulations, including
but not restricted to the USA Patriot Act.

(q) The Administrative Agent shall have received such other documents as the
Administrative Agent or special counsel to the Administrative Agent may
reasonably request.

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit

 

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hereunder shall not become effective unless each of the foregoing conditions is
satisfied (or waived pursuant to Section 12.02) at or prior to 3:00 p.m.,
Houston, Texas time, on March 27, 2013 (and, in the event such conditions are
not so satisfied or waived, the Commitments shall terminate at such time).

Without limiting the generality of the provisions of Section 11.04, for purposes
of determining compliance with the conditions specified in this Section 6.01,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed Effective Date specifying
its objection thereto.

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

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

(b) The representations and warranties of the Borrower and the Guarantors set
forth in this Agreement and in the other Loan Documents shall be true and
correct on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, except
to the extent any such representations and warranties are expressly limited to
an earlier date, in which case, on and as of the date of such Borrowing or the
date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, such representations and warranties shall continue to be true and
correct as of such specified earlier date and except for purposes of this
Section 6.02, the representations and warranties contained in Section 7.04(b)
shall be deemed to refer to the fiscal year end date of the most recent
financial statement delivered pursuant to Section 8.01(a).

(c) The making of such Loan or the issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, would not conflict with, or cause any
Lender or the Issuing Bank to violate or exceed, any applicable Governmental
Requirement, and no Change in Law shall have occurred, and no litigation shall
be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
any Loan, the issuance, amendment, renewal, extension or repayment of any Letter
of Credit or any participations therein or the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

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

 

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

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

Section 7.01 Organization; Powers. Each of the Borrower and the Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all corporate or equivalent requisite
power and authority, and has all material governmental licenses, authorizations,
consents and approvals necessary, to own its assets and to carry on its business
as now conducted, and is qualified to do business in, and is in good standing
in, every jurisdiction where such qualification is required, except where
failure to have such power, authority, licenses, authorizations, consents,
approvals and qualifications could not reasonably be expected to have a Material
Adverse Effect.

Section 7.02 Authority; Enforceability. The Transactions are within the
Borrower’s and each Guarantor’s corporate or equivalent powers and have been
duly authorized by all necessary corporate or equivalent action including,
without limitation, any action required to be taken by any other Person, whether
interested or disinterested, in order to ensure the due authorization of the
Transactions. Each Loan Document to which the Borrower and each Guarantor is a
party has been duly executed and delivered by the Borrower and such Guarantor
and constitutes a legal, valid and binding obligation of the Borrower and such
Guarantor, as applicable, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.

Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require, as a
condition thereto, any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority or any other third Person
(including members, shareholders or any class of directors or managers, whether
interested or disinterested, of the Borrower or any other Person) to be obtained
or made by the Borrower or any Subsidiary pursuant to any statutory law or
regulation applicable to it, nor is any such consent, approval, registration,
filing or other action necessary for the validity or enforceability of any Loan
Document against the Borrower or any Guarantor as herein provided or the
consummation of the transactions contemplated thereby, except such as have been
obtained or made and are in full force and effect other than (i) the recording
and filing of the Security Instruments as required by this Agreement and
(ii) those third party approvals or consents which, if not made or obtained,
would not cause a Default hereunder, could not reasonably be expected to have a
Material Adverse Effect or do not have an adverse effect on the enforceability
of the Loan Documents, (b) will not violate any applicable law or regulation or
the Organizational Documents of the Borrower or any Subsidiary or any order of
any Governmental Authority applicable to the Borrower or any Subsidiary,
(c) will not violate or result in a default under any indenture or other
material instrument binding upon the Borrower or any Subsidiary or its
Properties, or give rise to a right thereunder to require any

 

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payment to be made by the Borrower or such Subsidiary and (d) will not result in
the creation or imposition of any consentual Lien by the Borrower or any
Subsidiary on any Property of the Borrower or any Subsidiary (other than the
Liens created by the Loan Documents).

Section 7.04 Financial Condition; No Material Adverse Change.

(a) The Borrower has heretofore furnished to the Lenders (i) its consolidated
balance sheet and statements of income, stockholders equity and cash flows as of
and for the fiscal year ended December 31, 2012, reported on by KPMG LLP or
other independent public accountants and (ii) a pro forma consolidated balance
sheet as of the Effective Date. The financial statements described in clause
(i) and (ii) of the preceding sentence present fairly, in all material respects,
the financial position and results of operations and cash flows of the Borrower
and its Consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, except as therein provided.

(b) Since December 31, 2012, (i) there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Subsidiaries has
been conducted only in the ordinary course consistent with past business
practices.

(c) Neither the Borrower nor any Subsidiary has on the date hereof any material
Debt (including Disqualified Capital Stock) or any contingent liabilities,
off-balance sheet liabilities or partnerships, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the Financial Statements or disclosed in any Schedules provided for herein prior
to the Effective Date.

Section 7.05 Litigation.

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

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

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

(a) the Borrower and its Subsidiaries and each of their respective Properties
and operations thereon are, and within all applicable statute of limitation
periods have been, in compliance with all applicable Environmental Laws;

 

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(b) the Borrower and its Subsidiaries have obtained all Environmental Permits
required for their respective operations and each of their Properties, with all
such Environmental Permits being currently in full force and effect, and none of
Borrower or its Subsidiaries has received any written notice or otherwise has
knowledge that any such existing Environmental Permit will be revoked or that
any application for any new Environmental Permit or renewal of any existing
Environmental Permit will be protested or denied;

(c) there are no claims, demands, suits, orders, inquiries, or proceedings
concerning any violation of, or any liability (including as a potentially
responsible party) under, any applicable Environmental Laws that is pending or
to the knowledge of a Responsible Officer of the Borrower threatened against the
Borrower or its Subsidiaries or any of their respective Properties or as a
result of any operations at the Properties;

(d) none of the Properties of the Borrower or any Subsidiary contain or have
contained any: (i) underground storage tanks; (ii) asbestos-containing
materials; or (iii) landfills or dumps; (iv) hazardous waste management units as
defined pursuant to RCRA or any comparable state law; or (v) sites on or
nominated for the National Priority List promulgated pursuant to CERCLA or any
state remedial priority list promulgated or published pursuant to any comparable
state law;

(e) there has been no Release or threatened Release, of Hazardous Materials at,
on, under or from any of Borrower’s or its Subsidiaries’ Properties, there are
no investigations, remediations, abatements, removals, or monitorings of
Hazardous Materials required under applicable Environmental Laws at such
Properties and none of such Properties are adversely affected by any Release or
threatened Release of a Hazardous Material originating or emanating from any
other real property;

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

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

(h) the Borrower and its Subsidiaries have provided to Lenders complete and
correct copies of all environmental site assessment reports, investigations,
studies, analyses, and correspondence on environmental matters (including
matters relating to any alleged non-compliance with or liability under
Environmental Laws) that are in any of the Borrower’s or its Subsidiaries’
possession or control and relating to their respective Properties or operations
thereon.

 

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

(a) Each of the Borrower and each Subsidiary (i) is in compliance with all
Governmental Requirements applicable to it or its Property and all agreements
and other instruments binding upon it or its Property, and (ii) possesses all
licenses, permits, franchises, exemptions, approvals and other authorizations
granted by Governmental Authorities necessary for the ownership of its Property
and the conduct of its business, except in either case where the failure to do
so, individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse Effect.

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

(c) No Default has occurred and is continuing.

Section 7.08 Investment Company Act. Neither the Borrower nor any Subsidiary is
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of, or subject to regulation under, the Investment Company
Act of 1940, as amended.

Section 7.09 Taxes. Each of the Borrower and its Subsidiaries has timely filed
or caused to be filed all Tax returns and reports required to have been filed
and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves in accordance with GAAP or (b) to the
extent that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of Taxes and other governmental charges
are, in the reasonable opinion of the Borrower, adequate. No Tax Lien (other
than an Excepted Lien of the type in (a) of the definition thereof) has been
filed and, to the knowledge of the Borrower, no claim is being asserted with
respect to any such Tax or other such governmental charge.

Section 7.10 ERISA.

(a) Except for such noncompliance as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, the Borrower, the
Subsidiaries and each ERISA Affiliate have complied with ERISA and, where
applicable, the Code regarding each Plan.

(b) Except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, each Plan is, and has been, maintained in
substantial compliance with ERISA and, where applicable, the Code.

 

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(c) Except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, no act, omission or transaction has
occurred which could result in imposition on the Borrower, any Subsidiary or any
ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty
assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of
fiduciary duty liability damages under section 409 of ERISA.

(d) No Plan (other than a defined contribution plan) or any trust created under
any such Plan has been terminated in a distress termination under
Section 4041(c) of ERISA since January 1, 2000. Except as could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect, no liability to the PBGC (other than for the payment of current premiums
which are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate
has been incurred with respect to any Plan. Except as could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
no ERISA Event with respect to any Plan has occurred.

(e) Except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, full payment when due has been made of all
amounts which the Borrower, the Subsidiaries or any ERISA Affiliate is required
under the terms of each Plan or applicable law to have paid as contributions to
such Plan as of the date hereof, and no accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan.

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

(g) Except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, neither the Borrower, the Subsidiaries nor
any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare
benefit plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former employees of
such entities, that may not be terminated by the Borrower, a Subsidiary or any
ERISA Affiliate in its sole discretion at any time.

(h) Except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, neither the Borrower, the Subsidiaries nor
any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in
the six-year period preceding the date hereof sponsored, maintained or
contributed to, any Multiemployer Plan.

(i) Except for amounts less than $100,000, neither the Borrower, the
Subsidiaries nor any ERISA Affiliate is required to provide security under
section 401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the Plan.

 

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Section 7.11 Disclosure; No Material Misstatements. The Borrower has disclosed
to the Administrative Agent and the Lenders all agreements, instruments and
corporate or other restrictions to which it or any of its Subsidiaries is
subject, and all other matters known to it, that, individually or in the
aggregate, could, if breached or violated by, enforced against, or adversely
determined in relation to, the Borrower or any of its Subsidiaries, reasonably
be expected to result in a Material Adverse Effect. No reports, financial
statements, certificates or other information furnished by or on behalf of the
Borrower or any Subsidiary to the Administrative Agent or any Lender or any of
their Affiliates in connection with the negotiation of this Agreement or any
other Loan Document or delivered hereunder or under any other Loan Document (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time. There
are no statements or conclusions in any Reserve Report prepared by the chief
engineer of the Borrower (and with respect to a Reserve Report prepared by an
Approved Petroleum Engineer, to the knowledge of a Responsible Officer of the
Borrower), which are based upon or include misleading information or fail to
take into account material information regarding the matters reported therein.

Section 7.12 Insurance. The Borrower maintains, and has caused to be maintained
for each of its Subsidiaries, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations. The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans are
endorsed in favor of and made payable to the Administrative Agent as its
interests may appear, and such policies name the Administrative Agent and the
Lenders as “additional insureds” and provide that the insurer will endeavor to
give at least 30 days prior notice of any cancellation to the Administrative
Agent.

Section 7.13 Restriction on Liens. Neither the Borrower nor any of the
Subsidiaries is a party to any material agreement or arrangement (other than
(a) the Senior Debt Indenture and (b) Capital Leases creating Liens permitted by
Section 9.03(c), but then only on the Property subject of such Capital Lease),
or subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to the Administrative Agent and
the Lenders on or in respect of their Properties to secure the Indebtedness and
the Loan Documents, except, in each case, as provided in Section 9.16.

Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14 or as disclosed
in writing to the Administrative Agent (which shall promptly furnish a copy to
the Lenders), which shall be a supplement to Schedule 7.14, the Borrower has no
Subsidiaries and the Borrower has no Foreign Subsidiaries. Each Subsidiary on
such schedule is a Wholly-Owned Subsidiary.

Section 7.15 Location of Business and Offices. The Borrower’s jurisdiction of
organization is Delaware; the name of the Borrower as listed in the public
records of its jurisdiction of organization is Rex Energy Corporation; and the
organizational identification number of the Borrower in its jurisdiction of
organization is 4313846 (or, in each case, as set forth in a notice delivered to
the Administrative Agent pursuant to Section 8.01(n) in accordance with
Section 12.01). The Borrower’s principal place of business and chief executive
offices are

 

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located at the address specified in Section 12.01 (or as set forth in a notice
delivered pursuant to Section 8.01(n) and Section 12.01(c)). Each Subsidiary’s
jurisdiction of organization, name as listed in the public records of its
jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(n)).

Section 7.16 Properties; Titles, Etc.

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

(b) All material leases and agreements necessary for the conduct of the business
of the Borrower and the Subsidiaries in all material respects are valid and
subsisting, in full force and effect, and there exists no default or event or
circumstance which with the giving of notice or the passage of time or both
would give rise to a default under any such lease or leases, which could
reasonably be expected to have a Material Adverse Effect.

(c) The rights and Properties presently owned, leased or licensed by the
Borrower and the Subsidiaries including, without limitation, all easements and
rights of way, include all rights and Properties necessary to permit the
Borrower and the Subsidiaries to conduct their business in all material respects
in the same manner as its business has been conducted prior to the date hereof.

(d) All of the personal Properties of the Borrower and the Subsidiaries which
are reasonably necessary for the operation of their businesses in all material
respects are in good working condition and are maintained in accordance with
prudent business standards, except for such Properties as could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.

(e) The Borrower and each Subsidiary owns, or possesses the right to use, all
trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower and such
Subsidiary does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect. The

 

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Borrower and its Subsidiaries either own or have valid licenses or other rights
to use all databases, geological data, geophysical data, engineering data,
seismic data, maps, interpretations and other technical information used in
their businesses as presently conducted, subject to the limitations contained in
the agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to have a
Material Adverse Effect.

Section 7.17 Maintenance of Properties. Except for such acts or failures to act
as could not be reasonably expected to have a Material Adverse Effect, the Oil
and Gas Properties (and Properties unitized therewith) of the Borrower and its
Subsidiaries have been maintained, operated and developed by the Borrower or its
Subsidiaries in a good and workmanlike manner and in conformity in all material
respects with all applicable Governmental Requirements and in conformity in all
material respects with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Borrower and its
Subsidiaries, in each case to which the Borrower or its Subsidiaries are a
party. Specifically in connection with the foregoing, except for those as could
not be reasonably expected to have a Material Adverse Effect, (i) no Oil and Gas
Property of the Borrower or any Subsidiary is subject to having allowable
production reduced below the full and regular allowable (including the maximum
permissible tolerance) because of any overproduction (whether or not the same
was permissible at the time) and (ii) none of the wells comprising a part of the
Oil and Gas Properties (or Properties unitized therewith) of the Borrower or any
Subsidiary is deviated from the vertical more than the maximum permitted by
Governmental Requirements, and such wells are, in fact, bottomed under and are
producing from, and the well bores are wholly within, the Oil and Gas Properties
(or in the case of wells located on Properties unitized therewith, such unitized
Properties) of the Borrower or such Subsidiary. All pipelines, wells, gas
processing plants, platforms and other material improvements, fixtures and
equipment owned in whole or in part by the Borrower or any of its Subsidiaries
that are necessary to conduct normal operations in all material respects are
being maintained in a condition reasonably adequate to conduct normal
operations, and with respect to such of the foregoing which are operated by the
Borrower or any of its Subsidiaries, in a manner consistent with the Borrower’s
or its Subsidiaries’ past practices (other than those the failure of which to
maintain in accordance with this Section 7.17 could not reasonably be expected
to have a Material Adverse Effect.

Section 7.18 Gas Imbalances, Prepayments. Except as set forth on Schedule 7.18
or on the most recent certificate delivered pursuant to Section 8.12(c), on a
net basis there are no gas imbalances, take or pay or other prepayments which
would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons
produced from the Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor exceeding one-half bcf of gas (on an
mcf equivalent basis) in the aggregate.

Section 7.19 Marketing of Production. Except for contracts listed and in effect
on the date hereof on Schedule 7.19, and thereafter either disclosed in writing
to the Administrative Agent or included in the most recently delivered Reserve
Report (with respect to all of which contracts the Borrower represents that it
or its Subsidiaries are receiving a price for all production sold thereunder
which is computed substantially in accordance with the terms of the

 

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relevant contract and are not having deliveries curtailed substantially below
the subject Property’s delivery capacity), no material agreements exist which
are not cancelable on 60 days’ notice or less without penalty or detriment for
the sale of production from the Borrower’s or its Subsidiaries’ Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that
(a) pertain to the sale of production at a fixed price and (b) have a maturity
or expiry date of longer than six (6) months from the date hereof.

Section 7.20 Swap Agreements. Schedule 7.20, as of the date hereof, and after
the date hereof, each report required to be delivered by the Borrower pursuant
to Section 8.01(f), sets forth a true and complete list of all Swap Agreements
of the Borrower and each Subsidiary, the material terms thereof (including the
type, term, effective date, termination date and notional amounts or volumes),
the net mark to market value thereof, all credit support agreements relating
thereto (including any margin required or supplied) and the counterparty to each
such agreement.

Section 7.21 Use of Loans and Letters of Credit. The proceeds of the Loans and
the Letters of Credit shall be used to provide working capital for exploration
and production operations and for general corporate purposes. The Borrower and
its Subsidiaries are not engaged principally, or as one of its or their
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board). No part of the
proceeds of any Loan or Letter of Credit will be used for any purpose which
violates the provisions of Regulations T, U or X of the Board.

Section 7.22 Solvency. After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as
a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a
consolidated basis, as the Debt becomes absolute and matures, (b) each of the
Borrower and the Guarantors will not have incurred or intended to incur, and
will not believe that it will incur, Debt beyond its ability to pay such Debt
(after taking into account the timing and amounts of cash to be received by each
of the Borrower and the Guarantors and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably
be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) each of the
Borrower and the Guarantors will not have (and will have no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.

Section 7.23 International Operations. None of the Borrower and its Subsidiaries
own, and have not acquired or made any other expenditure (whether such
expenditure is capital, operating or otherwise) in or related to, any Oil and
Gas Properties located outside of the geographical boundaries of the United
States or in the offshore federal waters of the United States of America.

Section 7.24 OFAC. Neither the Borrower nor any of its Subsidiaries, nor any
director, officer, agent, employee or Affiliate of the Borrower or any of its
Subsidiaries is currently subject to any material U.S. sanctions administered by
OFAC, and the Borrower will not directly

 

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or indirectly use the proceeds from the Loans or lend, contribute or otherwise
make available such proceeds to any Subsidiary, joint venture partner or other
Person, for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC.

ARTICLE VIII

AFFIRMATIVE COVENANTS

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

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

(a) Annual Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 90 days after the end of
each fiscal year of the Borrower commencing December 31, 2013, its audited
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all reported
on by KPMG LLP or other independent public accountants of recognized national
standing (without a “going concern” or like qualification or exception and
without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied.

(b) Quarterly Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Borrower, its
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes.

(c) Certificate of Financial Officer – Compliance. Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit D-2
hereto (i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 8.14(a) and Section 9.01 and (iii) stating

 

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whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 7.04(a) that
would affect the preparation of the financial statements most-recently required
to be delivered in accordance with Section 8.01(a) and Section 8.01(b) or the
computation of any financial ratio in Section 9.01 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate.

(d) Certificate of Accounting Firm – Defaults. Concurrently with any delivery of
financial statements under Section 8.01(a), a certificate of the independent
accounting firm that reported on such financial statements stating whether they
obtained knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the extent
required by accounting rules or guidelines).

(e) Certificate of Financial Officer – Consolidating Information. If, at any
time, all of the Subsidiaries of the Borrower are not Consolidated Subsidiaries,
then concurrently with any delivery of financial statements under
Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer setting
forth consolidating spreadsheets that show all Subsidiaries and the eliminating
entries, in such form as would be presentable to the independent accountants of
the Borrower.

(f) Certificate of Financial Officer – Swap Agreements. Concurrently with any
delivery of financial statements under Section 8.01(a) and Section 8.01(b), a
certificate of a Financial Officer, in form and substance satisfactory to the
Administrative Agent, setting forth as of the last Business Day of such fiscal
quarter or fiscal year, a true and complete list of all Swap Agreements of the
Borrower and each Subsidiary, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
mark-to-market value therefor, any new credit support agreements relating
thereto not listed on Schedule 7.19, any margin required or supplied under any
credit support document, and the counterparty to each such agreement.

(g) Certificate of Insurer – Insurance Coverage. Concurrently with any delivery
of financial statements under Section 8.01(a), a certificate of insurance
coverage from each insurer or one or more insurance agencies with respect to the
insurance required by Section 8.07, in form and substance satisfactory to the
Administrative Agent, and, if requested by the Administrative Agent or any
Lender, copies of the applicable policies.

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

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

 

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(j) Notices Under Material Instruments. Promptly after the furnishing thereof,
copies of any financial statement, report or notice furnished by the Borrower to
any holder of debt securities of the Borrower or any Subsidiary pursuant to the
terms of any preferred stock designation, indenture, loan or credit or other
similar agreement, other than this Agreement and not otherwise required to be
furnished to the Lenders pursuant to any other provision of this Section 8.01.

(k) Lists of Purchasers. Promptly following the written request of the
Administrative Agent, a list of all Persons, as of a specified date, purchasing
Hydrocarbons from the Borrower or any Subsidiary.

(l) Notice of Sales of Oil and Gas Properties and Liquidation of Swap Agreements
In the event the Borrower or any Subsidiary intends to sell, transfer, assign or
otherwise dispose of any Oil or Gas Properties or any Equity Interests in any
Subsidiary in accordance with Section 9.12 (other than Hydrocarbons in the
ordinary course of business), prior written notice of such disposition, the
price thereof and the anticipated date of closing and any other details thereof
reasonably requested by the Administrative Agent or any Lender. In the event
that the Borrower or any Subsidiary receives any notice of early termination of
any Swap Agreement to which it is a party from any of its counterparties, or any
Swap Agreement to which the Borrower or any Subsidiary is a party is Liquidated,
prompt written notice of the receipt of such early termination notice or such
Liquidation, as the case may be, together with a reasonably detailed description
or explanation thereof and any other details thereof requested by the
Administrative Agent or any Lender.

(m) Notice of Casualty Events. Prompt written notice, and in any event within
three Business Days following the knowledge thereof by, or the services of
process on, (as the case may be) a Responsible Officer of the Borrower, of the
occurrence of any Casualty Event or the commencement of any action or proceeding
that could reasonably be expected to result in a Casualty Event.

(n) Information Regarding Borrower and Guarantors. Prompt written notice (and in
any event within ten (10) Business Days thereafter) of any change (i) in the
Borrower’s or any Guarantor’s company or corporate name or in any trade name
used to identify such Person in the conduct of its business or in the ownership
of its Properties, (ii) in the location of the Borrower’s or any Guarantor’s
chief executive office or principal place of business, (iii) in the Borrower’s
or any Guarantor’s identity or company or corporate structure or in the
jurisdiction in which such Person is incorporated, organized or formed, (iv) in
the Borrower’s or any Guarantor’s organizational identification number in its
jurisdiction of organization, and (v) in the Borrower’s or any Guarantor’s
federal taxpayer identification number.

(o) Production Report and Lease Operating Statements. Within 60 days after the
end of each fiscal quarter, a report setting forth, for each calendar month
during the then elapsed portion of the fiscal year, the volume of production and
sales attributable to production (and the prices at which such sales were made
and the revenues derived from such sales) for each such calendar month from the
Oil and Gas Properties, and setting forth the related ad valorem, severance and
production taxes and lease operating expenses attributable thereto and incurred
for each such calendar month.

 

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(p) Notices of Certain Changes. Promptly, but in any event within
five (5) Business Days after the execution thereof, copies of any amendment,
modification or supplement to the Organizational Documents, any preferred stock
designation or any other organic document of the Borrower or any Subsidiary.

(q) Ratings Change. Promptly after Moody’s or S&P shall have announced a change
in the rating established or deemed to have been established for the Index Debt
or any other Material Indebtedness, written notice of such rating change.

(r) Other Requested Information. Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Borrower or any Subsidiary (including, without limitation, any
Plan or Multiemployer Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement or any other
Loan Document, as the Administrative Agent or any Lender may reasonably request.

(s) Notice of Senior Debt Issuance. Written notice at least (5) days prior to
the offering of any Senior Debt as contemplated by Section 9.02(i), the amount
thereof and the anticipated date of closing and a copy of the preliminary
offering memorandum (if any) and the final offering memorandum (if any) and any
other material documents relating to such offering of Senior Debt.

(t) Material Divestiture or Acquisition. Upon any Material Divestiture or
Acquisition Date, the Borrower shall provide to the Administrative Agent and the
Lenders written notice thereof.

Documents required to be delivered pursuant to Section 8.01(a), (b), (h), (i) or
(j), to the extent any such documents are included in materials otherwise filed
with the SEC, may be delivered electronically and if so delivered, shall be
deemed to have been delivered to the Administrative Agent and each Lender on the
date on which the Borrower notifies the Agent such documents (i) have been
posted, or on which the Borrower provides a link thereto on the Borrower’s
website on the Internet at the website address listed in Section 12.01; or
(ii) are posted on the Borrower’s behalf on an Internet or intranet website, if
any, to which Lender and the Administrative Agent have access (whether a
commercial, third-party website or whether sponsored by the Administrative
Agent); provided the Borrower shall notify the Administrative Agent (by
telecopier or electronic mail) of the posting by the Borrower of its Annual
Reports on form 10-K, Quarterly Reports on Form 10-Q and current Reports on Form
8-K.

Section 8.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of, or the threat in writing of, any action,
suit, proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting the Borrower or any Subsidiary not
previously disclosed in writing to the Administrative Agent or any material
adverse development in any action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Administrative Agent)
that, in either case, if adversely determined (and with respect to any threat,
reasonably sustainable in the Borrower’s good faith determination), could
reasonably be expected to result in a Material Adverse Effect;

 

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(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$5,000,000;

(d) the occurrence of any of the events described in Section 10.01(h), (i) or
(j) with respect to any Subsidiary that is not a Guarantor; and

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

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

Section 8.03 Existence; Conduct of Business. The Borrower will, and will cause
each Subsidiary to, do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence and the rights,
licenses, permits, privileges and franchises material to the conduct of its
business and maintain, if necessary, its qualification to do business in each
other jurisdiction in which its Oil and Gas Properties is located or the
ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
conversion, consolidation, liquidation or dissolution permitted under
Section 9.11.

Section 8.04 Payment of Obligations. The Borrower will, and will cause each
Subsidiary to, pay its obligations, including Tax liabilities of the Borrower
and all of its Subsidiaries before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate actions, (b) the Borrower or such Subsidiary has set
aside on its books adequate reserves with respect thereto in accordance with
GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect or result in the
seizure or levy of any material Property of the Borrower or any Subsidiary.

Section 8.05 Performance of Obligations under Loan Documents. The Borrower will
pay the Loans in accordance with the terms hereof, and the Borrower will, and
will cause each Subsidiary to, do and perform every act and discharge all of the
obligations to be performed and discharged by them under the Loan Documents,
including, without limitation, this Agreement, at the time or times and in the
manner specified.

Section 8.06 Operation and Maintenance of Properties. The Borrower will, and
will cause each Subsidiary to:

(a) operate its Oil and Gas Properties and other material Properties or cause
such Oil and Gas Properties and other material Properties to be operated in a
careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable

 

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contracts and agreements and in compliance with all applicable Governmental
Requirements, including, without limitation, applicable pro ration requirements
and Environmental Laws, and all applicable laws, rules and regulations of every
other Governmental Authority from time to time constituted to regulate the
development and operation of its Oil and Gas Properties and the production and
sale of Hydrocarbons and other minerals therefrom, except, in each case, where
the failure to comply could not reasonably be expected to have a Material
Adverse Effect.

(b) keep and maintain all Property material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted, and preserve,
maintain and keep in good repair, working order and efficiency (ordinary wear
and tear excepted) all of its material Oil and Gas Properties and other material
Properties, including, without limitation, all equipment, machinery and
facilities.

(c) promptly pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Properties and will do all other things necessary
to keep unimpaired their rights with respect thereto and prevent any forfeiture
thereof or default thereunder, except where (i) the validity or amount thereof
is being contested in good faith by appropriate actions, (ii) it has set aside
adequate reserves with respect thereto in accordance with GAAP and (iii) the
failure to so act could not reasonably be expected to result in a Material
Adverse Effect or result in the forfeiture of any of its material Property.

(d) promptly perform or make reasonable and customary efforts to cause to be
performed, in accordance with industry standards, the obligations required by
each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and other
material Properties, except where (i) the validity or amount thereof is being
contested in good faith by appropriate actions, (ii) it has set aside adequate
reserves with respect thereto in accordance with GAAP and (iii) the failure to
so act could not reasonably be expected to result in a Material Adverse Effect
or result in the forfeiture of any of its material Property.

(e) to the extent the Borrower is not the operator of any Property, the Borrower
shall use reasonable efforts to cause the operator to comply with this
Section 8.06; provided, however, in no event shall it be required to expend any
amounts, incur any obligations or expose itself to any economic consequences as
a requirement to comply with this Section 8.06(e).

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

 

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Section 8.08 Books and Records; Inspection Rights. The Borrower will, and will
cause each Subsidiary to, keep proper books of record and account in which full,
true and correct entries are made of all dealings and transactions in relation
to its business and activities. The Borrower will, and will cause each
Subsidiary to, permit any representatives designated by the Administrative Agent
or any Lender, upon reasonable prior notice and during normal business hours, to
visit and inspect its Properties, to examine and make extracts from its books
and records, and to discuss its affairs, finances and condition with its
officers and independent accountants, all at such reasonable times and as often
as reasonably requested, in each case, subject to applicable safety standards,
applicable privilege and confidentiality restrictions, and restrictions of
owners of such records or properties who are neither the Borrower nor any
Subsidiary.

Section 8.09 Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply in all material respects with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its Property,
except where (i) such law, rule, regulation or order is being contested in good
faith by appropriate actions diligently conducted or (ii) the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

Section 8.10 Environmental Matters.

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

 

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(b) The Borrower will promptly, but in no event later than five days of the
occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any landowner or
other third party against the Borrower or its Subsidiaries or their Properties
of which the Borrower has knowledge in connection with any Environmental Laws
(excluding routine testing and corrective action) if the Borrower reasonably
anticipates that such action will result in liability (whether individually or
in the aggregate) in excess of $1,000,000, not fully covered by insurance,
subject to normal deductibles.

(c) The Borrower will, and will cause each Subsidiary to, provide environmental
audits and tests in accordance with American Society of Testing Materials
standards upon request by the Administrative Agent and the Lenders and no more
than once per year in the absence of any Event of Default (or as otherwise
required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority), in connection with any future acquisitions of Oil and
Gas Properties or other Properties.

Section 8.11 Further Assurances.

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

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

Section 8.12 Reserve Reports.

(a) On or before March 1st and September 1st of each year, commencing
September 1, 2013, the Borrower shall furnish to the Administrative Agent and
the Lenders a Reserve Report evaluating the Oil and Gas Properties of the
Borrower and its Subsidiaries as of the immediately preceding January 1st and
July 1st, respectively. The Reserve Report as of January 1 of each year shall be
prepared by one or more Approved Petroleum Engineers, and the

 

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July 1 Reserve Report of each year shall be prepared by or under the supervision
of the chief engineer of the Borrower who shall certify such Reserve Report to
be true and accurate in all material respects and to have been prepared in
accordance with the procedures used in the immediately preceding January 1
Reserve Report.

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

(c) With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects: (i) the factual information contained
in the Reserve Report and any other information delivered in connection
therewith is true and correct, (ii) the Borrower or its Subsidiaries owns good
and defensible title to the Oil and Gas Properties evaluated in such Reserve
Report and such Properties are free of all Liens except for Liens permitted by
Section 9.03, (iii) except as set forth on an exhibit to the certificate, on a
net basis there are no gas imbalances, take or pay or other prepayments in
excess of the volume specified in Section 7.18 with respect to its Oil and Gas
Properties evaluated in such Reserve Report which would require the Borrower or
any Subsidiary to deliver Hydrocarbons either generally or produced from such
Oil and Gas Properties at some future time without then or thereafter receiving
full payment therefor, (iv) none of their Oil and Gas Properties have been sold
since the date of the last Borrowing Base determination except as set forth on
an exhibit to the certificate, which certificate shall list all of its Oil and
Gas Properties sold and in such detail as reasonably required by the
Administrative Agent, (v) attached to the certificate is a list of all marketing
agreements entered into subsequent to the later of the date hereof or the most
recently delivered Reserve Report which the Borrower could reasonably be
expected to have been obligated to list on Schedule 7.19 had such agreement been
in effect on the date hereof and (vi) attached thereto is a schedule of the Oil
and Gas Properties evaluated by such Reserve Report that are Mortgaged
Properties and demonstrating the percentage of the total value of the Oil and
Gas Properties that the value of such Mortgaged Properties represent.

Section 8.13 Title Information.

(a) On or before the delivery to the Administrative Agent and the Lenders of
each Reserve Report required by Section 8.12(a), the Borrower will deliver title
information in form and substance acceptable to the Administrative Agent
covering enough of the Oil and Gas Properties evaluated by such Reserve Report
that were not included in the immediately preceding Reserve Report, so that the
Administrative Agent shall have received together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 80% of the total value of the Oil and Gas Properties evaluated by
such Reserve Report.

 

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(b) If the Borrower has provided title information for additional Properties
under Section 8.13(a), the Borrower shall, within 60 days of notice from the
Administrative Agent that title defects or exceptions (other than, of a
(y) nature or type that constitutes a permitted Lien pursuant to Section 9.03 or
(z) economically insignificant nature) exist with respect to such additional
Properties, either (i) cure any such title defects or exceptions (including
defects or exceptions as to priority) which are not permitted by Section 9.03
raised by such information, (ii) substitute acceptable Mortgaged Properties with
no title defects or exceptions except for Excepted Liens (other than Excepted
Liens described in clauses (e), (g) and (h) of such definition and other than,
of a (y) nature or type that constitutes a permitted Lien pursuant to
Section 9.03 or (z) economically insignificant nature) having an equivalent
value or (iii) deliver title information in form and substance acceptable to the
Administrative Agent so that the Administrative Agent shall have received,
together with title information previously delivered to the Administrative
Agent, satisfactory title information on at least 80% of the value of the Oil
and Gas Properties evaluated by such Reserve Report.

(c) If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured pursuant to Section 8.13(c)
within such 60-day period or the Borrower does not comply with the requirements
to provide acceptable title information covering 80% of the value of the Oil and
Gas Properties evaluated in the most recent Reserve Report, such default shall
not be a Default, but instead the Administrative Agent and/or the Required
Lenders shall have the right to exercise the following remedy in their sole
discretion from time to time, and any failure to so exercise this remedy at any
time shall not be a waiver as to future exercise of the remedy by the
Administrative Agent or the Lenders. To the extent that the Administrative Agent
or the Required Lenders are not satisfied with title to any Oil and Gas Property
after the 60-day period has elapsed, such unacceptable Oil and Gas Property
shall not count towards the 80% requirement, and the Administrative Agent may
send a notice to the Borrower and the Lenders that the then outstanding
Borrowing Base shall be reduced by an amount as determined by the Required
Lenders to cause the Borrower to be in compliance with the requirement to
provide acceptable title information on 80% of the value of the Oil and Gas
Properties. This new Borrowing Base shall become effective immediately after the
Borrower’s receipt of such notice.

Section 8.14 Additional Collateral; Additional Guarantors.

(a) In connection with each redetermination of the Borrowing Base, the Borrower
shall review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 80% of the total value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production. In the event that the Mortgaged Properties do not represent at least
80% of such total value, then the Borrower shall, and shall cause its
Subsidiaries to, grant (from its available unencumbered Property), within
thirty (30) days of delivery of the certificate required under Section 8.12(c),
to the Administrative Agent as security for the Indebtedness a first-priority
Lien interest (provided that Excepted Liens of the type described in clauses
(a) to (d) and (f) of the definition thereof may exist, but subject to the
provisos at the end of such definition) on additional Oil and Gas Properties not
already subject to a Lien of the Security Instruments such that after giving
effect thereto, the Mortgaged Properties will represent at least

 

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80% of such total value. All such Liens will be created and perfected by and in
accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent and the Borrower and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes. In order to comply with the foregoing, if
any Subsidiary places a Lien on its Oil and Gas Properties and such Subsidiary
is not a Guarantor, then it shall become a Guarantor and comply with
Section 8.14(b).

(b) In the event that the Borrower determines that any Subsidiary is a Material
Domestic Subsidiary, the Borrower shall promptly cause such Subsidiary to
guarantee the Indebtedness pursuant to the Guaranty Agreement. In connection
with any such guaranty, the Borrower shall, or shall cause such Subsidiary to,
(A) execute and deliver a supplement to the Guaranty Agreement executed by such
Subsidiary, (B) pledge all of the Equity Interests of such new Subsidiary
(including, without limitation, delivery (if applicable) of original
certificates evidencing the Equity Interests of such Subsidiary, together with
an appropriate undated stock powers for each certificate duly executed in blank
by the registered owner thereof) and (C) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.

Section 8.15 ERISA Compliance. The Borrower will promptly furnish and will cause
the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) promptly after receipt of a written request by the
Administrative Agent, copies of each annual and other report with respect to
each Plan or any trust created thereunder, filed with the United States
Secretary of Labor, the Internal Revenue Service or the PBGC, (ii) immediately
upon becoming aware of the occurrence of any ERISA Event or of any “prohibited
transaction,” as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by the Chief Executive Officer or the principal Financial Officer,
the Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature
thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is
taking or proposes to take with respect thereto, and, when known, any action
taken or proposed by the Internal Revenue Service, the Department of Labor or
the PBGC with respect thereto, and (iii) immediately upon receipt thereof,
copies of any notice of the PBGC’s intention to terminate or to have a trustee
appointed to administer any Plan. With respect to each Plan (other than a
Multiemployer Plan), the Borrower will, and will cause each Subsidiary and ERISA
Affiliate to, (i) satisfy in full and in a timely manner, without incurring any
late payment or underpayment charge or penalty and without giving rise to any
lien, all of the contribution and funding requirements of section 412 of the
Code (determined without regard to subsections (d), (e), (f) and (k) thereof)
and of section 302 of ERISA (determined without regard to sections 303, 304 and
306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely
manner, without incurring any late payment or underpayment charge or penalty,
all premiums required pursuant to sections 4006 and 4007 of ERISA.

Section 8.16 Marketing Activities. The Borrower will not, and will not permit
any of its Subsidiaries to, engage in marketing activities for any Hydrocarbons
or enter into any contracts related thereto other than (a) contracts for the
sale of Hydrocarbons scheduled or reasonably estimated to be produced from their
proved Oil and Gas Properties during the period of such contract, (b) contracts
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be produced from proved Oil and Gas Properties of third parties during the
period of such contract associated with the Oil and Gas Properties of the
Borrower and its Subsidiaries that the Borrower or one of its Subsidiaries has
the right to market pursuant to joint operating agreements, unitization
agreements or other similar contracts that are usual and customary in the oil
and gas business and (c) other contracts for the purchase and/or sale of
Hydrocarbons of third parties (i) which have generally offsetting provisions
(i.e. corresponding pricing mechanics, delivery dates and points and volumes)
such that no “position” is taken and (ii) for which appropriate credit support
has been taken to alleviate the material credit risks of the counterparty
thereto.

ARTICLE IX

NEGATIVE COVENANTS

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

Section 9.01 Financial Covenants.

(a) Interest Coverage Ratio. The Borrower will not, as of the last day of any
fiscal quarter ending on or after March 31, 2013, permit its ratio of EBITDAX
for the period ending on such day to Interest Expense for the period of the four
fiscal quarters ending on such day to be less than 3.0 to 1.0.

(b) Ratio of Total Debt to EBITDAX. The Borrower will not, as of the last day of
any fiscal quarter ending on or after March 31, 2013, permit its ratio of Total
Debt as of such date to EBITDAX for the period of four fiscal quarters then
ending on such day to be greater than 4.25 to 1.00.

(c) Current Ratio. The Borrower will not permit, as of the last day of any
fiscal quarter ending on or after March 31, 2013, its ratio of (i) consolidated
current assets (including the unused amount of the total Commitments, but
excluding non-cash assets under FASB ASC 815) as of such day to
(ii) consolidated current liabilities (excluding non-cash obligations under FASB
ASC 815 and unused availability under this Agreement) as of such day to be less
than 1.0 to 1.0.

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

(a) the Indebtedness or any guaranty of or suretyship arrangement for the
Indebtedness.

(b) Debt of the Borrower and its Subsidiaries existing on the date hereof and
listed in Schedule 9.02, and any refinancings, refundings, renewals or
extensions thereof; provided that (i) the amount of each such Debt has not
increased at the time of such refinancing, funding, renewal or extension except
by an amount equal to a reasonable premium or other

 

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reasonable amount paid, and fees and expenses reasonably incurred, in connection
with such refinancing, refunding, renewal or extension, (ii) the terms related
to principal amount, amortization, maturity, collateral (if any), and other
material terms taken as a whole, of any such refinancing, refunding, renewal or
extending Debt, and of any agreement entered into or of any instrument issued in
connection therewith, are no more restrictive in any material respect to the
Borrower or any Subsidiary then the terms of any agreement or instrument
governing the Debt being refinanced, refunded, renewed or extended and the
interest rate applicable to any such refinancing, refunding, renewing or
extending Debt does not exceed the range of the market interest rates then
available to the obligor thereunder for comparable transactions, and (iii) if
such Debt is subordinated to the Indebtedness, the terms relating to
subordination of any such refinancing, refunding, renewal or extending Debt are
no less favorable to the Lenders and the terms of any agreement or instrument
governing the Debt being refinanced, refunded, renewed or extended.

(c) accounts payable and accrued expenses, liabilities or other obligations to
pay the deferred purchase price of Property or services, from time to time
incurred in the ordinary course of business which are not greater than
sixty (60) days past the date of invoice or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP.

(d) Debt under Capital Leases not to exceed $5,000,000 in the aggregate at any
one time.

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

(f) intercompany Debt between the Borrower and any Subsidiary Guarantor or
between Subsidiary Guarantors to the extent permitted by Section 9.05(e);
provided that (i) such Debt is not held, assigned, transferred, negotiated or
pledged to any Person other than the Borrower or one of its Wholly-Owned
Subsidiaries, (ii) any such Debt owed by either the Borrower or a Guarantor
shall be subordinated to the Indebtedness on terms set forth in the Guaranty
Agreement and (iii) any such Debt shall not have any scheduled amortization
prior to March 27, 2019.

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

(h) guarantees of the Borrower and any Guarantor in respect of Debt otherwise
permitted hereunder.

(i) Senior Debt and any guarantees thereof, the principal amount of which does
not exceed $500,000,000 in the aggregate at any one time outstanding; provided
that: (i) the Borrower shall have complied with Section 8.01(s); (ii) both
before and immediately after giving effect to the incurrence of any such Debt,
no Default, Event of Default or Borrowing Base Deficiency exists or would exist
(after giving effect to any concurrent prepayment made pursuant to
Section 3.04(c)(iii) and any concurrent repayment of Debt with the proceeds of
such incurrence, if any); (iii) the Borrower is in Pro Forma Compliance after
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incurrence of any such Debt and the transactions contemplated thereby; (iv) the
Borrowing Base shall be adjusted to the extent required by Section 2.07(e) and
the Borrower shall make any prepayment required by Section 3.04(c)(iii);
(v) such Senior Debt does not have any scheduled principal amortization prior to
the date which is one hundred eighty days after the Maturity Date; (vi) such
Senior Debt does not mature sooner than the date which is one hundred eighty
days after the Maturity Date; (vii) no Subsidiary is required to guarantee such
Senior Debt unless such Subsidiary has guaranteed the Indebtedness pursuant to
the Guaranty Agreement; (viii) if such Senior Debt is senior subordinated Debt,
such Senior Debt is expressly subordinate to the payment in full of all of the
Indebtedness on terms and conditions reasonably satisfactory to the
Administrative Agent and the Required Lenders; (ix) such Senior Debt and any
guarantees thereof are on terms, taken as a whole, at least as favorable to the
Borrower and the Subsidiaries as market terms for issuers of similar size and
credit quality given the then prevailing market conditions as determined by the
Administrative Agent and the Required Lenders; and (x) such Senior Debt does not
have any mandatory prepayment or redemption provisions (other than customary
change of control or asset sale tender offer provisions) which would require a
mandatory prepayment or redemption in priority to the Indebtedness.

(j) other Debt not to exceed $10,000,000 in the aggregate at any one time
outstanding.

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

(a) Liens securing the payment of any Indebtedness.

(b) Excepted Liens.

(c) Liens securing Capital Leases permitted by Section 9.02(d) but only on the
Property under lease.

(d) Liens existing on the date hereof and listed in Schedule 9.03 and any
renewals or extensions thereof; provided that (i) neither the property nor the
description of the property covered thereby is changed other than as a result of
maintenance capital expenditures, (ii) the amount secured or benefited thereby
is not increased other than as contemplated by Section 9.02(b), (iii) the direct
or any contingent obligor with respect thereto is not changed other than in a
transaction that is not prohibited by Section 9.11, and (iv) any renewal or
extension of the obligations secured or benefited thereby is permitted by
Section 9.02(b).

(e) Liens on Property not constituting collateral for the Indebtedness and not
otherwise permitted by the foregoing clauses of this Section 9.03; provided that
the aggregate principal or face amount of all Debt secured under this
Section 9.03(e) shall not exceed $5,000,000 at any time.

(f) Liens on the Property of a Person which becomes a Subsidiary, or Property
acquired after the date hereof securing Debt permitted by Section 9.02; provided
that (i) such Liens existed at the time such Person becomes a Subsidiary or such
Property is acquired, as the case may be, and were not created in anticipation
thereof, (ii) no such Lien covers any other Property of the Borrower or a
Guarantor, and (iii) the amount of Debt secured thereby is not increased.

 

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Section 9.04 Dividends, Distributions and Redemptions.

(a) Restricted Payments. The Borrower will not, and will not permit any of its
Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution of its Property to its Equity Interest holders, except
(a) the Borrower may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its Equity Interests (other
than Disqualified Capital Stock), (b) Subsidiaries may declare and pay dividends
ratably with respect to their Equity Interests and (c) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Borrower and its
Subsidiaries.

(b) Redemption or Repayment of Subordinated Debt. Other than as provided in
Section 9.19, the Borrower will not and will not permit any Subsidiary to:
(i) call, make or offer to make any Redemption of or otherwise Redeem (whether
optional or mandatory and whether in whole or in part) or repay any subordinated
Debt permitted to be incurred hereunder except for a payment of interest or
principal at its scheduled payment date and otherwise in accordance with the
terms of such Debt or at any time with proceeds from a sale or issuance of
Equity Interests; (ii) amend, modify, waive or otherwise change, consent or
agree to any amendment, modification, waiver or other change to, any of the
terms of any notes evidencing any subordinated Debt permitted hereunder or any
indenture, agreement, instrument, certificate or other document relating to any
subordinated Debt permitted hereunder if (A) the effect of such amendment,
modification or waiver is to shorten the final maturity, create amortization of
principal thereof, or increase the amount of any payment of principal thereof or
increase the interest rate or shorten any period for payment of interest thereon
or modify the method of calculating the interest rate, (B) such action requires
the payment of a consent, amendment, waiver or other similar fee on the stated
principal amount thereof, (C) such action adds covenants, events of default or
other agreements to the extent more restrictive than those contained in this
Agreement, or (D) such action adds collateral unless the Loan Documents are
being amended at the same time to reflect such new collateral or the addition of
guarantors if required by the terms thereof; or (iii) designate any Debt (other
than any Indebtedness) as “Specified Senior Indebtedness” or “Specified
Guarantor Senior Indebtedness” or give any such other Debt any other similar
designation for the purposes of any indentures or other documents relating to
any subordinated Debt permitted hereunder.

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

(a) Investments reflected in the Financial Statements or which are disclosed to
the Lenders in Schedule 9.05.

(b) accounts receivable arising in the ordinary course of business.

 

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(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed or insured by the United States or any agency thereof, in
each case maturing within one year from the date of acquisition thereof.

(d) commercial paper maturing within one year from the date of acquisition
thereof rated in the highest grade by S&P or Moody’s.

(e) deposits maturing within one year from the date of acquisition thereof with,
including certificates of deposit issued by, any Lender or any office located in
the United States of any other bank or trust company which is organized under
the laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $100,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively.

(f) repurchase obligations with a term of not more than 30 days from the date of
acquisition thereof for underlying securities of the type described in
Section 9.05(c) and Section 9.05(e).

(g) deposits in money market funds investing exclusively in Investments
described in Section 9.05(c), Section 9.05(d), Section 9.05(e) or
Section 9.05(f).

(h) Investments (i) made by the Borrower in or to the Guarantors, (ii) made by
any Subsidiary in or to the Borrower or any Guarantor and (iii) made by the
Borrower or any Subsidiary in or to all other Domestic Subsidiaries which are
not Guarantors in an aggregate amount at any one time outstanding not to exceed
$2,000,000.

(i) subject to the limits in Section 9.06, Investments (including, without
limitation, capital contributions) in general or limited partnerships or other
types of entities (each a “venture”) entered into by the Borrower or a
Subsidiary with others in the ordinary course of business; provided that (i) any
such venture is engaged exclusively in oil and gas exploration, development,
production, processing and related activities, including transportation,
(ii) the interest in such venture is acquired in the ordinary course of business
and on fair and reasonable terms and (iii) such venture interests acquired and
capital contributions made (valued as of the date such interest was acquired or
the contribution made) do not exceed, in the aggregate at any time outstanding
an amount equal to $5,000,000.

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

(k) loans or advances to employees, officers or directors in the ordinary course
of business of the Borrower or any of its Subsidiaries, in each case only as
permitted by applicable law, including Section 402 of the Sarbanes Oxley Act of
2002, but in any event not to exceed $2,000,000 in the aggregate at any time
outstanding.

 

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(l) Investments in stock, obligations or securities received in settlement of
debts arising from Investments permitted under this Section 9.04(b) owing to the
Borrower or any Subsidiary as a result of a bankruptcy or other insolvency
proceeding of the obligor in respect of such debts or upon the enforcement of
any Lien in favor of the Borrower or any of its Subsidiaries; provided that the
Borrower shall give the Administrative Agent prompt written notice in the event
that the aggregate amount of all Investments held at any one time under this
Section 9.05(l) exceeds $5,000,000.

(m) Investments existing on the date hereof and listed in Schedule 9.05.

(n) (i) guarantees permitted by Section 9.02, and (ii) guarantees by the
Borrower or any Subsidiary for the performance or payment obligations of the
Borrower or any Wholly Owned Subsidiary, which obligations were incurred in the
ordinary course of business and do not constitute Indebtedness.

(o) Investments in any Person to the extent such Investment represents the
non-cash portion of consideration received for a disposition of any property
that was made pursuant to and in compliance with Section 9.12.

(p) any Investments received solely in exchange for Equity Interests consisting
of common stock of the Borrower.

(q) other Investments not to exceed $2,000,000 in the aggregate at any time.

(r) Investments by R.E. Gas in Northstar and RW Gathering in an aggregate amount
not to exceed $30,000,000 in cash and $3,000,000 in Property.

Section 9.06 Nature of Business. The Borrower will not, and will not permit any
Subsidiary to, allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company.

Section 9.07 Limitation on Leases. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist any obligation for
the payment of rent or hire of Property of any kind whatsoever (real or personal
but excluding Capital Leases and leases of Oil and Gas Properties), under leases
or lease agreements which would cause the aggregate amount of all net payments
made by the Borrower and the Subsidiaries pursuant to all such leases or lease
agreements, including, without limitation, any residual payments at the end of
any lease, to exceed $5,000,000 in any period of twelve consecutive calendar
months during the life of such leases.

Section 9.08 Proceeds of Loans. The Borrower will not permit the proceeds of the
Loans to be used for any purpose other than those permitted by Section 7.21.
Neither the Borrower nor any Person acting on behalf of the Borrower has taken
or will take any action which might cause any of the Loan Documents to violate
Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect. If requested by the Administrative Agent, the Borrower will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

 

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

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

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

(c) fail to make, or permit any ERISA Affiliate to fail to make, full payment
when due of all amounts which, under the provisions of any Plan, agreement
relating thereto or applicable law, the Borrower, a Subsidiary or any ERISA
Affiliate is required to pay as contributions thereto.

(d) permit to exist, or allow any ERISA Affiliate to permit to exist, any
accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan.

(e) except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, permit, or allow any ERISA Affiliate to
permit, the actuarial present value of the benefit liabilities under any Plan
maintained by the Borrower, a Subsidiary or any ERISA Affiliate which is
regulated under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities. The term “actuarial present
value of the benefit liabilities” shall have the meaning specified in section
4041 of ERISA.

(f) except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, contribute to or assume an obligation to
contribute to, or permit any ERISA Affiliate to contribute to or assume an
obligation to contribute to, any Multiemployer Plan.

(g) except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, acquire, or permit any ERISA Affiliate to
acquire, an interest in any Person that causes such Person to become an ERISA
Affiliate with respect to the Borrower or a Subsidiary or with respect to any
ERISA Affiliate of the Borrower or a Subsidiary if such Person sponsors,
maintains or contributes to, or at any time in the six-year period preceding
such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA
under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities.

 

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(h) incur, or permit any ERISA Affiliate to incur, a liability to or on account
of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA.

(i) amend, or permit any ERISA Affiliate to amend, a Plan resulting in an
increase in current liability such that the Borrower, a Subsidiary or any ERISA
Affiliate is required to provide security to such Plan under section 401(a)(29)
of the Code.

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

Section 9.11 Mergers, Etc. Other than (i) a merger of the Borrower or a Domestic
Subsidiary to effectuate a reincorporation or statutory conversion in another
state of the United States or (ii) a statutory conversion in any state of the
United States, in either case upon at least 30 days’ prior written notice to the
Administrative Agent, the Borrower will not, and will not permit any Subsidiary
to, merge into or with or consolidate with any other Person, or permit any other
Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property to any other Person (whether now owned
or hereafter acquired) (any such transaction, a “consolidation”), or liquidate
or dissolve; except that (i) any Subsidiary may merge with or dissolve into any
other Subsidiary, (ii) that the Borrower may merge with any Subsidiary (or such
Subsidiary may be dissolved into the Borrower) so long as the Borrower is the
survivor, (iii) any Subsidiary may dispose of all or substantially all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or to another
Subsidiary, and may thereafter liquidate or dissolve if applicable; provided
that if the transferor in such a transaction is a Guarantor, then the transferee
must either be the Borrower or a Guarantor and (iv) the Borrower or any
Subsidiary may dispose of all of the Equity Interests of any Subsidiary in
accordance with Section 9.12.

Section 9.12 Sale of Properties. The Borrower will not, and will not permit any
Subsidiary to, sell, assign, farm-out, convey or otherwise transfer any Property
except for (a) the sale of Hydrocarbons in the ordinary course of business;
(b) farmouts in the ordinary course of business of non-proven acreage and
assignments in connection with such farmouts, or the abandonment, farm-out,
exchange, lease or sublease of Oil and Gas Properties not containing such
reserves; (c) the sale or transfer of equipment that is no longer useful or
necessary for the business of the Borrower or such Subsidiary or is replaced by
equipment of at least comparable value or use; (d) the sale or other disposition
of any Oil and Gas Property or any interest therein or any Subsidiary owning Oil
and Gas Properties; provided that (i) 100% of the consideration received in
respect of such sale or other disposition shall be cash, (ii) the consideration
received in respect of such sale or other disposition shall be equal to or
greater than the fair market value of the Oil and Gas Property, interest therein
or Subsidiary subject of such sale or other disposition (if such consideration
exceeds $5,000,000, as reasonably determined by the board of directors or other
governing body of the Borrower and, if requested by the Administrative Agent,

 

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the Borrower shall deliver a certificate of a Responsible Officer of the
Borrower certifying to that effect), (iii) if such sale or other disposition of
Oil and Gas Property or Subsidiary owning Oil and Gas Properties included in the
most recently delivered Reserve Report during any period between two successive
Scheduled Redetermination Dates, when combined with the Borrowing Base value
assigned to the Liquidated portion of Swap Agreements Liquidated (after giving
effect to any other Swap Agreements executed within two Business Days of such
Liquidation) between such successive Scheduled Redetermination Dates, has a fair
market value in excess of ten percent (10%) of the Borrowing Base as then in
effect (as determined by the Administrative Agent), individually or in the
aggregate, the Borrowing Base shall be reduced, effective immediately upon such
sale or disposition, by an amount equal to the value, if any, assigned such
Property in the most recently delivered Reserve Report and (iv) if any such sale
or other disposition is of a Subsidiary owning Oil and Gas Properties, such sale
or other disposition shall include all the Equity Interests of such Subsidiary;
(e) dispositions permitted by Section 9.11; (f) the trade or exchange of Oil and
Gas Properties for Oil and Gas Properties of equivalent value (including any
cash or Investments of the nature described in any of Section 9.05(c), (d),
(e) and (f) necessary in order to achieve an exchange of equivalent value);
provided that (i) the Administrative Agent shall determine, in its sole
discretion, whether the such value is equivalent and (ii) any Oil and Gas
Properties to which any proved reserves are attributed in the most recent
Reserve Report delivered hereunder may be traded or exchanged hereunder only for
Oil and Gas Properties to which comparable quantities of proved reserves are
attributable; (g) dispositions of assets received pursuant to Section 9.05(l);
(h) the grant in the ordinary course of business of any non-exclusive license of
patents, trademarks, registrations therefor and other similar intellectual
property; (i) the granting of any Lien permitted hereunder and dispositions of
property subject to any such Lien that is transferred to the lienholder or its
designee in satisfaction or settlement of such lienholder’s claim; (j) any
disposition of assets pursuant to (i) a condemnation, appropriation, seizure or
similar taking or proceeding by a Governmental Authority, (ii) the requirement
of, or at the direction of, a Governmental Authority or (iii) a Casualty Event;
(k) dispositions of assets, other than collateral for the Indebtedness,
constituting non-cash contributions to a joint venture to the extent such
Investment is permitted pursuant to Section 9.05(i) (for the purpose of
determining compliance with the limitations of such Section, the assets shall be
valued at the value attributable thereto in the joint venture agreement, or, if
greater, fair market value); (l) dispositions of Property to the Borrower or any
Guarantor; and (m) sales and other dispositions of Properties not regulated by
Section 9.12(a) to (d) having a fair market value not to exceed $5,000,000
during any 12-month period.

Section 9.13 Environmental Matters. The Borrower will not, and will not permit
any Subsidiary to, cause or permit any of its Property to be in violation of, or
perform any action or permit any action which will subject any such Property to
any Remedial Work under any Environmental Laws, assuming disclosure to the
applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations could reasonably be expected to have a Material Adverse
Effect.

Section 9.14 Transactions with Affiliates. The Borrower will not, and will not
permit any Subsidiary to, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate (other than the Guarantors and Wholly-Owned
Subsidiaries of the Borrower, as the case may be) unless such

 

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transactions are upon fair and reasonable terms no less favorable to it than it
would obtain in a comparable arm’s length transaction with a Person not an
Affiliate; provided that the foregoing restriction shall not apply to
transactions as follows: (i) transactions between or among the Borrower and any
Guarantor or Wholly-Owned Subsidiary of the Borrower or between and among any
Guarantors and Wholly-Owned Subsidiaries of the Borrower; (ii) any Restricted
Payment permitted by Section 9.04(a); (iii) Investments permitted under
Section 9.05(h), Section 9.05(i) or Section 9.05(j); (iv) loans and advances
permitted under Section 9.05(k) and Guarantees permitted under Section 9.05(n);
(v) the performance of employment, equity award, equity option or equity
appreciation agreements, plans or other similar compensation or benefit plans or
arrangements (including vacation plans, health and insurance plans, deferred
compensation plans and retirement or savings plans) entered into by the Borrower
or any Subsidiary in the ordinary course of its business with its employees,
officers and directors; (vi) the performance of any agreement set forth under
Schedule 9.14 and existing on the date hereof or as otherwise in a form as
provided on such Schedule, together with each extension, renewal, amendment or
modification to the extent it does not expand the scope of undertakings provided
thereby on more restrictive or onerous terms than as in effect on the date
hereof; and (vii) fees and compensation to, and indemnity provided on behalf of,
officers, directors, and employees of the Borrower or any Subsidiary in their
capacity as such, to the extent such fees and compensation are customary.

Section 9.15 Subsidiaries. The Borrower will not, and will not permit any
Subsidiary to, create or acquire any additional Subsidiary unless the Borrower
gives written notice to the Administrative Agent of such creation or acquisition
and complies with Section 8.14(b). The Borrower shall not, and shall not permit
any Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in
any Subsidiary except in compliance with Section 9.12. Neither the Borrower nor
any Subsidiary shall have any Foreign Subsidiaries.

Section 9.16 Negative Pledge Agreements; Dividend Restrictions. Except for
restrictions and conditions (i) imposed by law, (ii) existing on the date hereof
and set forth in Schedule 9.16, together with each extension, renewal, amendment
or modification to the extent it does not expand the scope of any such
restriction or condition or otherwise make the same more restrictive, (iii) of a
customary nature contained in agreements relating to the disposition of a
Subsidiary otherwise permitted under this Agreement pending such disposition;
provided such restrictions and conditions apply only to the Subsidiary that is
to be Disposed of or (iv) contained in joint venture agreements or other similar
agreements entered into in the ordinary course of business in respect to the
disposition or distribution of assets of such joint venture, the Borrower will
not, and will not permit any Subsidiary to, create, incur, assume or suffer to
exist any contract, agreement or understanding (other than Capital Leases
creating Liens permitted by Section 9.03(c)) which in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of
its Property in favor of the Administrative Agent and the Lenders or restricts
any Subsidiary from paying dividends or making distributions to the Borrower or
any Guarantor, or which requires the consent of or notice to other Persons in
connection therewith; provided, however, this Section 9.16 shall not
(a) prohibit any negative pledge incurred or provided in favor of any holder of
a Lien permitted by clause (g) in the defined term “Excepted Liens” and by
Section 9.03(f) solely to the extent such negative pledge relates to the
property the subject of such Indebtedness, and (b) apply to customary provisions
in leases, licenses and similar contracts restricting the assignment,
encumbrance, sub-letting or transfer thereof.

 

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Section 9.17 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will
not, and will not permit any Subsidiary to, allow gas imbalances, take-or-pay or
other prepayments with respect to the Oil and Gas Properties of the Borrower or
any Subsidiary that would require the Borrower or such Subsidiary to deliver
Hydrocarbons at some future time without then or thereafter receiving full
payment therefor to exceed one bcf of gas (on an mcf equivalent basis) in the
aggregate.

Section 9.18 Swap Agreements. The Borrower will not, and will not permit any
Subsidiary to, enter into any Swap Agreements with any Person other than
(a) Swap Agreements in respect of commodities (i) with an Approved Counterparty
and (ii) the notional volumes for which (when aggregated with other commodity
Swap Agreements then in effect other than basis differential swaps on volumes
already hedged pursuant to other Swap Agreements) do not exceed, as of the date
such Swap Agreement is executed, 85% of the reasonably anticipated projected
production from Proved Developed Producing Reserves for the 36 months following
the date such Swap Agreement is entered into, and 75% thereafter, for each of
crude oil and natural gas, calculated separately, and (b) Swap Agreements in
respect of interest rates with an Approved Counterparty, as follows: (i) Swap
Agreements effectively converting interest rates from fixed to floating, the
notional amounts of which (when aggregated with all other Swap Agreements of the
Borrower and its Subsidiaries then in effect effectively converting interest
rates from fixed to floating) do not exceed 50% of the then outstanding
principal amount of the Borrower’s Debt for borrowed money which bears interest
at a fixed rate and (ii) Swap Agreements effectively converting interest rates
from floating to fixed, the notional amounts of which (when aggregated with all
other Swap Agreements of the Borrower and its Subsidiaries then in effect
effectively converting interest rates from floating to fixed) do not exceed the
greater of $20,000,000 and 75% of the then outstanding principal amount of the
Borrower’s Debt for borrowed money which bears interest at a floating rate. In
no event shall any Swap Agreement contain any requirement, agreement or covenant
for the Borrower or any Subsidiary to post collateral or margin to secure their
obligations under such Swap Agreement or to cover market exposures other than
collateral provided for in, and upon the terms and conditions set forth in, this
Agreement and the relevant Security Instruments.

Section 9.19 Repayment of Senior Debt; Amendment to Terms of Senior Debt. The
Borrower will not, and will not permit any of its Subsidiaries to, prior to the
date that is one hundred eighty (180) days after the Maturity Date: (i) call,
make or offer to make any optional or voluntary Redemption of or otherwise
optionally or voluntarily Redeem (whether in whole or in part) any Senior Debt;
provided that, so long as no Default, Event of Default or Borrowing Base
Deficiency shall have occurred and be continuing or would result therefrom, the
Borrower may prepay Senior Debt with the net cash proceeds of any sale of Equity
Interests (other than Disqualified Capital Stock) of the Borrower; (ii) amend,
modify, waive or otherwise change, consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the Senior Debt or
the Senior Debt Indenture if (A) the effect thereof would be to shorten its
maturity or average life or increase the amount of any payment of principal
thereof or increase the rate or shorten any period for payment of interest
thereon or (B) such action requires the payment of a consent fee (howsoever
described); provided that the foregoing shall not prohibit

 

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the execution of supplemental indentures associated with the incurrence of
additional Senior Debt to the extent permitted by Section 9.02(i) or the
execution of supplemental indentures to add guarantors if required by the terms
of any Senior Debt Indenture; provided such Person complies with Section 8.14(b)
or (C) with respect to any Senior Debt that is subordinated to the Indebtedness
or any other Debt, designate any Debt (other than obligations of the Borrower
and the Subsidiaries pursuant to the Loan Documents) as “Specified Senior
Indebtedness” or “Specified Guarantor Senior Indebtedness” or give any such
other Debt any other similar designation for the purposes of any Senior Debt
Indenture related to Senior Debt that is subordinated to the Indebtedness or any
other Debt.

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

Section 10.01 Events of Default. The occurrence of any one or more of the
following events shall constitute an “Event of Default”:

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

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

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

(d) the Borrower or any Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in Section 3.04(c), Section 8.01(j),
Section 8.01(n), Section 8.01(q), Section 8.02, Section 8.03, Section 8.14,
Section 8.15 or in Article IX.

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

 

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

(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the Redemption
thereof or any offer to Redeem to be made in respect thereof, prior to its
scheduled maturity or require the Borrower or any Subsidiary to make an offer in
respect thereof.

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

(i) the Borrower or any Guarantor shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in Section 10.01(h), (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Borrower or any Guarantor or for a substantial part of its assets, (iv) file
an answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the foregoing.

(j) the Borrower or any Guarantor shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due.

(k) (i) one or more judgments for the payment of money in an aggregate amount in
excess of $2,000,000 (to the extent not covered by independent third party
insurance provided by financially sound and reputable insurers as to which the
insurer does not dispute coverage and is not subject to an insolvency
proceeding) or (ii) any one or more non-monetary judgments that have, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, shall be rendered against the Borrower, any Subsidiary or any
combination thereof and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed, or any
action shall be legally taken by a judgment creditor to attach or levy upon any
assets of the Borrower or any Subsidiary to enforce any such judgment.

 

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(l) any material provision of any Loan Document after delivery thereof shall for
any reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and enforceable in accordance with
their terms against the Borrower or a Guarantor party thereto as represented and
warranted pursuant to Section 7.02 or shall be repudiated by any of them, or
cease to create a valid and perfected Lien of the priority required thereby on
any of the collateral purported to be covered thereby, except to the extent
permitted by the terms of this Agreement, or the Borrower or any Guarantor shall
so state in writing.

(m) an ERISA Event shall have occurred that, when taken together with all other
ERISA Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect.

(n) a Change in Control shall occur.

Section 10.02 Remedies.

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

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

 

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

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

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

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

(iv) fourth, pro rata to payment of (A) principal outstanding on the Loans,
(B) reimbursement obligations in respect of Letters of Credit pursuant to
Section 2.08(e) (and cash collateralization of LC Exposure hereunder), and
(C) Secured Swap Obligations (other than Excluded Swap Obligations) owing to
Secured Swap Parties;

(v) fifth, pro rata to any other Indebtedness;

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

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

ARTICLE XI

THE AGENTS

Section 11.01 Appointment; Powers. Each of the Lenders and the Issuing Bank
hereby irrevocably appoints the Administrative Agent as its agent and authorizes
the Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof and the
other Loan Documents, together with such actions and powers as are reasonably
incidental thereto. The provisions of this Article are solely for the benefit of
the Administrative Agent, the Lenders and the Issuing Bank, and neither the
Borrower nor any Guarantor shall have rights as a third party beneficiary of any
of such provisions (other than the provisions of Section 11.06).

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

Section 11.03 Action by Administrative Agent. The Administrative Agent shall
have no duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that the Administrative Agent is required to
exercise in writing as directed by the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02) and in all cases the Administrative Agent shall be
fully justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders, as applicable, (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in
Section 12.02) specifying the action to be taken and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions as aforesaid and any action taken or failure to act pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders. If a
Default has occurred and is continuing, then the Administrative Agent shall take
such action with respect to such Default as shall be directed by the requisite
Lenders in the written instructions (with indemnities) described in this
Section 11.03; provided that, unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders.
In no event, however, shall the Administrative Agent be required to take any
action which exposes the Administrative Agent to personal liability or which is
contrary to this Agreement, the Loan Documents or applicable law. If a Default
has occurred and is continuing, neither the Syndication Agent nor the
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respect thereof. The Administrative Agent shall not be liable for any action
taken or not taken by it with the consent or at the request of the Majority
Lenders or the Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 12.02), and
otherwise the Administrative Agent shall not be liable for any action taken or
not taken by it hereunder or under any other Loan Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except
for its own gross negligence or willful misconduct.

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

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

Section 11.06 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided in
this Section 11.06, the Administrative Agent may resign at any time by notifying
the Lenders, the Issuing Bank and the Borrower, and the Administrative Agent may
be removed at any time with or without cause by (a) the Borrower upon 45 days
prior written notice or (b) the Required Lenders, with the consent of the
Borrower (if no Event of Default has occurred and is not then continuing), such
consent not to be unreasonably withheld, delayed or conditioned. Upon any such
resignation or removal, the Majority Lenders shall have the right, in
consultation with the Borrower in any event, and with the consent of the
Borrower if no Event of Default has occurred and is then continuing, to appoint
a successor. If no successor shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent gives notice of its resignation or removal of the
retiring Administrative Agent, then the retiring Administrative Agent may, on
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Bank, appoint a successor Administrative Agent which shall be a bank with an
office in New York, New York, or an Affiliate of any such bank. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Administrative Agent’s
resignation or removal hereunder, the provisions of this Article XI and
Section 12.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent. Any resignation or removal of any Person serving
as Administrative Agent pursuant to this Section shall also constitute its
resignation or removal as the Issuing Bank. Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder, (a) such successor shall succeed
to and become vested with all of the rights, powers, privileges and duties of
the retiring Issuing Bank, (b) the retiring Issuing Bank shall be discharged
from all of its respective duties and obligations hereunder or under the other
Loan Documents, and (c) the successor Issuing Bank shall issue Letters of Credit
in substitution for the Letters of Credit, if any, outstanding at the time of
such succession or make other arrangements satisfactory to the retiring Issuing
Bank to effectively assume the obligations of the retiring Issuing Bank with
respect to such Letters of Credit.

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

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

 

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Section 11.09 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans and all other Indebtedness that are
owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and

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

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

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

Section 11.10 Withholding Tax. To the extent required by any applicable law, the
Administrative Agent may withhold from any payment to any Lender an amount
equivalent to any applicable withholding tax. Without limiting the provisions of
Section 5.03(b) or Section 5.03(d), each Lender and the Issuing Bank shall, and
does hereby, indemnify the Administrative Agent, and shall make payable in
respect thereof within 30 days after demand therefor, against any and all Taxes
and any and all related losses, claims, liabilities and expenses (including
fees, charges and disbursements of any counsel for the Administrative Agent)
incurred by or asserted against the Administrative Agent by the Internal Revenue
Service or any other Governmental Authority as a result of the failure of the
Administrative Agent to properly withhold tax from amounts paid to or for the
account of any Lender for any reason (including, without limitation, because the
appropriate form was not delivered or not property executed, or because such
Lender failed to notify the Administrative Agent of a change in circumstance
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exemption from, or reduction of withholding tax ineffective). A certificate as
to the amount of such payment or liability delivered to any Lender or the
Issuing Bank by the Administrative Agent shall be conclusive absent manifest
error. Each Lender and the Issuing Bank hereby authorizes the Administrative
Agent to set off and apply any and all amounts at any time owing to such Lender
or the Issuing Bank under this Agreement or any other Loan Document against any
amount due the Administrative Agent under this Section 11.10. The agreements in
this Section 11.10 shall survive the resignation and/or replacement of the
Administrative Agent, any assignment of rights by, or the replacement of, a
Lender, the termination of the Commitments and the repayment, satisfaction or
discharge of all other Indebtedness.

Section 11.11 Authority of Administrative Agent to Release Collateral, Liens and
Guarantors. Each Lender and the Issuing Bank hereby authorizes the
Administrative Agent to release any collateral that is permitted to be sold or
released and release any Guarantor that is permitted to be released from its
obligations under the Loan Documents, in each case pursuant to the applicable
terms of the Loan Documents. Each Lender and the Issuing Bank hereby authorizes
the Administrative Agent to execute and deliver to the Borrower, at the
Borrower’s sole cost and expense, any and all releases of Liens, termination
statements, assignments, release of guarantees or Guarantors (as the case may
be) or other documents reasonably requested by the Borrower in connection with
any sale or other disposition of Property or any one or more Guarantors to the
extent such sale or other disposition is permitted by the terms of Section 9.12
or is otherwise authorized by the terms of the Loan Documents. The Arrangers,
the Syndication Agent and the Documentation Agent

Section 11.12 The Arrangers, the Syndication Agent and the Documentation Agent.
The Arrangers, the Syndication Agent and the Documentation Agent shall have no
duties, responsibilities or liabilities under this Agreement and the other Loan
Documents other than their duties, responsibilities and liabilities in their
capacity as Lenders hereunder.

ARTICLE XII

MISCELLANEOUS

Section 12.01 Notices.

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

(i) if to the Borrower, to it at 476 Rolling Ridge Drive, Suite 300, State
College, PA 16801, Attention of Michael L. Hodges, Chief Financial Officer
(Telecopy No. 814.278.7286, and regarding the Borrower’s website for electronic
delivery of documents as referred to in the concluding paragraph of
Section 8.02, such website is www.rexenergycorp.com);

(ii) if such notice is not a payment, to the Administrative Agent or the Issuing
Bank, to it at 8115 Preston Road, Suite 500, Dallas, TX 75225, Attention of Evan
Knooihuizen (Telecopy No. 214-414-2610), with a copy to 127 Public Square,
Cleveland, Ohio 44114, Attention of Yvette Dyson-Owens (Facsimile:
(216) 689-5962);

 

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(iii) if such notice is a payment, to the Administrative Agent or the Issuing
Bank, to it at 127 Public Square, Cleveland, Ohio 44114, Attention of Yvette
Dyson-Owens (Facsimile: (216)689-5962, email: Yvette_Dyson-Owens@KeyBank.com) or
to such wire transfer number as the Administrative Agent may provide; and

(iv) the Administrative Agent will forward all relevant notices from the
Borrower to the Lenders.

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

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

Section 12.02 Waivers; Amendments.

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

(b) Neither this Agreement nor any provision hereof nor any Security Instrument
or any provision thereof may be waived, amended or modified except pursuant to
an agreement or agreements in writing entered into by the Borrower and the
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the Borrower and the Administrative Agent with the consent of the Majority
Lenders; provided that no such agreement shall (i) increase the Commitment or
the Maximum Credit Amount of any Lender without the written consent of such
Lender, (ii) increase the Borrowing Base without the written consent of each
Lender decrease or maintain the Borrowing Base without the consent of the
Required Lenders, or modify Section 2.07 in any manner without the consent of
each Lender; provided that a Scheduled Redetermination may be postponed by the
Required Lenders, (iii) reduce the principal amount of any Loan or LC
Disbursement or reduce the rate of interest thereon, or reduce any fees payable
hereunder, or reduce any other Indebtedness hereunder or under any other Loan
Document, without the written consent of each Lender affected thereby; provided,
however, that only the consent of the Majority Lenders shall be necessary (A) to
amend the meaning of “default rate” or to waive any obligation of the Borrower
to pay interest or Letter of Credit fees at such default rate or (B) to amend
any financial covenant hereunder (or any defined term used therein) even if the
effect of such amendment would be to reduce the rate of interest on any Loan or
LC Disbursement or to reduce any fee payable hereunder, (iv) postpone the
scheduled date of payment or prepayment of the principal amount of any Loan or
LC Disbursement, or any interest thereon, or any fees payable hereunder, or any
other Indebtedness hereunder or under any other Loan Document, or reduce the
amount of, waive or excuse any such payment, or postpone or extend the
Termination Date without the written consent of each Lender affected thereby,
(v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (vi) waive or amend Section 3.04(c), Section 6.01, Section 8.14,
Section 10.02(c) or Section 12.14, without the written consent of each Lender
affected thereby; (vii) release any Guarantor (except as set forth in the
Guaranty Agreement or in any other Loan Document), release all or substantially
all of the collateral (other than as provided in Section 11.11), or reduce the
percentage set forth in Section 8.14(a) to less than 80%, without the written
consent of each Lender or (viii) change any of the provisions of this
Section 12.02(b) or Section 12.04(a)(i) or the definition of “Majority Lenders”,
“Required Lenders” or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
under any other Loan Documents or make any determination or grant any consent
hereunder or any other Loan Documents, without the written consent of each
Lender; provided further that no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent, any other Agent, or the
Issuing Bank hereunder or under any other Loan Document without the prior
written consent of the Administrative Agent, such other Agent or the Issuing
Bank, as applicable. Notwithstanding the foregoing, (a) any supplement to
Schedule 7.14 (Subsidiaries) shall be effective upon delivery by the Borrower to
the Administrative Agent a supplemental schedule clearly marked as such and,
upon receipt, the Administrative Agent will promptly deliver a copy thereof to
the Lenders, and (b) any Security Instrument may be supplemented to add
additional collateral with the consent of the Administrative Agent.

Section 12.03 Expenses, Indemnity; Damage Waiver.

(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by
the Administrative Agent and its Affiliates, including, without limitation, the
reasonable fees, charges and disbursements of counsel and other outside
consultants for the Administrative Agent, the reasonable travel, photocopy,
mailing, courier, telephone and other similar expenses, and the cost of
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syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and
other charges incurred by any Agent or any Lender in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement or any Security Instrument or any other document referred to
therein, (iii) all reasonable out-of-pocket expenses incurred by the Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder, (iv) all out-of-pocket
expenses incurred by any Agent, the Issuing Bank or any Lender, including the
fees, charges and disbursements of any counsel for any Agent, the Issuing Bank
or any Lender, in connection with the enforcement or protection of its rights in
connection with this Agreement or any other Loan Document, including its rights
under this Section 12.03, or in connection with the Loans made or Letters of
Credit issued hereunder, including, without limitation, all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans or Letters of Credit.

(b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGERS, THE ISSUING BANK AND
EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH
PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS
FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES,
INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE,
INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION
WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR
THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN
DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE
TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE
LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN
CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE
PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY THE
ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE
DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY
LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
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THEREWITH, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF
THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS
SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE
THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR
PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE,
RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL
OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR
ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF
THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH
LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY,
(xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION,
THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR
DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR
AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR
ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY
PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY
ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF, OR VIOLATION OF LAW BY, SUCH INDEMNITEE.
NOTWITHSTANDING THE FOREGOING, NO INDEMNIFICATION SHALL BE GIVEN TO THE EXTENT
IT ARISES (y) BY REASON OF A CLAIM BY ONE OR MORE INDEMNITEES AGAINST ONE OR
MORE OTHER INDEMNITEES, OR (z) FROM A CLAIM BROUGHT BY THE BORROWER AGAINST AN
INDEMNITEE FOR (1) SUCH INDEMNITEE’S BREACH OF

 

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ITS OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT OR (2) BAD FAITH OF
SUCH INDEMNITEE HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, IN EITHER CASE IF
THE BORROWER HAS OBTAINED A FINAL NON NONAPPEALABLE JUDGMENT IN ITS FAVOR ON
SUCH CLAIM AS DETERMINED BY A COURT OF COMPETENT JURISDICTION. SO LONG AS NO
DEFAULT IS CONTINUING AND THE BORROWER IS FINANCIALLY SOLVENT, NO INDEMNITEE MAY
SETTLE ANY CLAIM TO BE INDEMNIFIED HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT
OF THE BORROWER, WHICH CONSENT WILL NOT BE UNREASONABLY OR UNTIMELY WITHHELD.
THIS SECTION 12.03(B) SHALL NOT APPLY WITH RESPECT TO TAXES OTHER THAN ANY TAXES
THAT REPRESENT LOSSES, CLAIMS, DAMAGES, ETC. ARISING FROM ANY NON-TAX CLAIM.

(c) To the extent that the Borrower fails to pay any amount required to be paid
by it to any Agent, the Arrangers or the Issuing Bank under Section 12.03(a) or
(b) (and provided that such failure is not due to such Agent’s, Arrangers’ or
Issuing Bank’s gross negligence or willful misconduct), each Lender severally
agrees to pay to such Agent, the Arrangers or the Issuing Bank, as the case may
be, such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against such Agent, the Arrangers or the Issuing Bank in its capacity
as such.

(d) To the extent permitted by applicable law, the 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 Loan Document or any agreement or instrument contemplated
hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of
the proceeds thereof.

(e) All amounts due under this Section 12.03 shall be payable within 30 days
following receipt by the Borrower of a reasonably detailed statement therefor.

Section 12.04 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04 (and in no event may any Lender assign to the Borrower, an
Affiliate of the Borrower, a Defaulting Lender or an Affiliate of a Defaulting
Lender all or any portion of such Lender’s rights and obligations under this
Agreement or all or any portion of its Commitments or the Loans owing to it
hereunder). Nothing in this Agreement, expressed or implied, shall be construed
to confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of the Issuing
Bank that issues any Letter

 

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of Credit), Participants (to the extent provided in Section 12.04(c)) and, to
the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender
may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld) of:

(A) the Borrower; provided that no consent of the Borrower shall be required if
such assignment is to a Lender, an Affiliate of a Lender, an Approved Fund or,
if an Event of Default has occurred and is continuing, is to any other assignee;
and

(B) the Administrative Agent; provided that no consent of the Administrative
Agent shall be required for an assignment to an assignee that is a Lender
immediately prior to giving effect to such assignment.

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

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $10,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent; provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;

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

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

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

(iii) Subject to Section 12.04(b)(iv) and the acceptance and recording thereof,
from and after the effective date specified in each Assignment and Assumption
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease

 

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to be a party hereto but shall continue to be entitled to the benefits of
Section 5.01, Section 5.02, Section 5.03 and Section 12.03). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this Section 12.04 shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with Section 12.04(c).

(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Maximum Credit Amount of, and principal amount
of the Loans and LC Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be
conclusive, absent manifest error, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice. In
connection with any changes to the Register, if necessary, the Administrative
Agent will reflect the revisions on Annex I and forward a copy of such revised
Annex I to the Borrower, the Issuing Bank and each Lender.

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

(c) (i) Any Lender may, without the consent of the Borrower, the Administrative
Agent or the Issuing Bank, sell participations to one or more banks or other
entities (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided that (A) such Lender’s obligations under
this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent, the Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver that affects such Participant. In addition
such agreement must provide that the Participant be bound by the provisions of
Section 12.03. Subject to Section 12.04(c)(ii), the Borrower agrees that each
Participant shall be entitled to the benefits of Section 5.01, Section 5.02 and
Section 5.03 (subject to the requirements and limitations therein, including the
requirements

 

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under Section 5.03 (it being understood that the documentation required under
Section 5.03(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 Section 12.04(b); provided that such Participant agrees to be
subject to the provisions of Section 5.04 as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender; provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under
Section 5.01 or Section 5.03 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, except to
the extent such entitlement to receive a greater payment results from a Change
in Law that occurs after the Participant acquired the applicable participation.
Each Lender that sells a participation shall, acting solely for this purpose as
an agent of the Borrower, maintain a register on which it enters the name and
address of each Participant and the principal amounts (and stated interest) of
each Participant’s interest in the Loans or other obligations under the Loan
Documents (the “Participant Register”). Any such Participant Register shall be
available for inspection by the Administrative Agent at any reasonable time and
from time to time upon reasonable prior notice; provided that the applicable
Lender shall have no obligation to show such Participant Register to the
Borrower except to the extent such disclosure is necessary to establish that
such Loan, commitment, letter of credit or other obligation is in registered
form under Section 5f.l03-l(c) of the 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.

(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply
to any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.

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

Section 12.05 Survival; Revival; Reinstatement.

(a) All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement

 

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and the making of any Loans and issuance of any Letters of Credit, regardless of
any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent, any other Agent, the Issuing Bank
or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of
Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and Article XI shall
survive, on an unsecured and non-guaranteed basis, and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Commitments or the termination of this Agreement, any other Loan
Document or any provision hereof or thereof.

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

Section 12.06 Counterparts; Integration; Effectiveness.

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

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

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

 

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

Section 12.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations (of whatsoever kind, including,
without limitation, obligations under Swap Agreements) at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower or any
Subsidiary against any of and all the obligations of the Borrower or any
Subsidiary owed to such Lender now or hereafter existing under this Agreement or
any other Loan Document, irrespective of whether or not such Lender shall have
made any demand under this Agreement or any other Loan Document and although
such obligations may be unmatured. The rights of each Lender under this
Section 12.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender or its Affiliates may have.

Section 12.09 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS.

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED
STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE
OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER
IS LOCATED (AND IN SUCH EVENT, SUCH FEDERAL LAWS SHALL PERTAIN SOLELY TO SUCH
LENDER). CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY
TO THIS AGREEMENT OR THE NOTES.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF HARRIS COUNTY IN THE STATE OF TEXAS OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN
ANY COURT OTHERWISE HAVING JURISDICTION.

 

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

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

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

Section 12.11 Confidentiality. Each of the Administrative Agent, the other
Agents, the Arrangers, the Issuing Bank, the Lenders and each other party hereto
or to any other Loan Document, agrees to maintain, and agrees to cause each of
its Affiliates to maintain, the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority purporting to have jurisdiction over it, (c) to the
extent required by applicable laws or regulations or by any subpoena or similar
legal process (and in each such case, such Person shall, if permitted by law,
notify the Borrower of such occurrence as soon as reasonably practicable
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of any such process on such Person), (d) to any other party to this Agreement or
any other Loan Document, (e) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any suit, action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section 12.11, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant in,
any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any Swap Agreement relating to the
Borrower and its obligations, (g) with the consent of the Borrower or (h) to the
extent such Information (i) becomes publicly available other than as a result of
a breach of this Section 12.11 or (ii) becomes available to the Administrative
Agent, another Agent, the Arrangers, the Issuing Bank, any Lender or other party
hereto on a nonconfidential basis from a source other than the Borrower. For the
purposes of this Section 12.11, “Information” means all information received
from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary
and their businesses, other than any such information that is available to the
Administrative Agent, the other Agents, the Arrangers, the Issuing Bank, any
Lender or any other party hereto on a nonconfidential basis prior to disclosure
by the Borrower or a Subsidiary; provided that, in the case of information
received from the Borrower or any Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section 12.11 shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Notes or any other
Indebtedness is accelerated by reason of an election of the holder thereof
resulting from any Event of Default under this Agreement or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Lender may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, provided for in this Agreement or otherwise shall be canceled automatically
by such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
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forbearance or detention of sums due hereunder shall, to the extent permitted by
law applicable to such Lender, be amortized, prorated, allocated and spread
throughout the stated term of the Loans evidenced by the Notes until payment in
full so that the rate or amount of interest on account of any Loans hereunder
does not exceed the maximum amount allowed by such applicable law. If at any
time and from time to time (i) the amount of interest payable to any Lender on
any date shall be computed at the Highest Lawful Rate applicable to such Lender
pursuant to this Section 12.12 and (ii) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Lender would
be less than the amount of interest payable to such Lender computed at the
Highest Lawful Rate applicable to such Lender, then the amount of interest
payable to such Lender in respect of such subsequent interest computation period
shall continue to be computed at the Highest Lawful Rate applicable to such
Lender until the total amount of interest payable to such Lender shall equal the
total amount of interest which would have been payable to such Lender if the
total amount of interest had been computed without giving effect to this
Section 12.12. To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate applicable to a
Lender, such Lender elects to determine the applicable rate ceiling under such
Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the
Texas Finance Code does not apply to the Borrower’s obligations hereunder.

Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY
AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT
AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS
AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL
COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS
ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT
IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF
THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH
LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE
OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

Section 12.14 Collateral Matters; Swap Agreements. The benefit of the Security
Instruments and of the provisions of this Agreement relating to any collateral
securing the Indebtedness shall also extend to and be available to the Secured
Swap Parties on a pro rata basis (but subject to the terms of the Loan
Documents, including, without limitation, provisions thereof relating to the
application and priority of payments to the Persons entitled thereto) in respect
of any Secured Swap Obligations. No Secured Swap Party shall have any voting
rights under any Loan Documents as a result of the existence of Secured Swap
Obligations owed to it.

 

110

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Section 12.15 No Third Party Beneficiaries. This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans and the Issuing Bank
to issue, amend, renew or extend Letters of Credit hereunder are solely for the
benefit of the Borrower, and no other Person (including, without limitation, any
Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or
materialsman) shall have any rights, claims, remedies or privileges hereunder or
under any other Loan Document against the Administrative Agent, any other Agent,
the Issuing Bank or any Lender for any reason whatsoever. There are no third
party beneficiaries, other than to the extent contemplated by the last sentence
of Section 12.04(a).

Section 12.16 USA Patriot Act Notice. Each Lender hereby notifies the Borrower
that pursuant to the requirements of the USA Patriot Act, it is required to
obtain, verify and record information that identifies the Borrower and the
Guarantors, which information includes the name and address of the Borrower and
the Guarantors and other information that will allow such Lender to identify the
Borrower and the Guarantors in accordance with the US Patriot Act.

Section 12.17 Amendment and Restatement of Existing Credit Agreement. On the
Effective Date, the Existing Credit Agreement shall be amended and restated in
its entirety as set forth herein. This Agreement and any Notes issued hereunder
have been given in renewal, extension, rearrangement and increase, and not in
extinguishment of the obligations under the Existing Credit Agreement and the
notes and other documents related thereto. This Agreement does not constitute a
novation of the obligations and liabilities under the Existing Credit Agreement
or evidence repayment of any such obligations and liabilities. All Liens, deeds
of trust, mortgages, assignments and security interests securing the Existing
Credit Agreement and the obligations relating thereto are hereby ratified,
confirmed, renewed, extended, brought forward and rearranged as security for the
Indebtedness. None of the Liens and security interests created pursuant to the
Existing Credit Agreement are released. Additionally, the substantive rights and
obligations of the parties hereto shall be governed by this Agreement, rather
than the Existing Credit Agreement. Without limitation of any of the foregoing,
(a) this Agreement shall not in any way release or impair the rights, duties,
Indebtedness (as defined in the Existing Credit Agreement) or Liens (as defined
in the Existing Credit Agreement) created pursuant to the Existing Credit
Agreement or any other Loan Document (as defined therein) or affect the relative
priorities thereof, in each case to the extent in force and effect thereunder as
of the Effective Date and except as modified hereby or by documents, instruments
and agreements executed and delivered in connection herewith, and all of such
rights, duties, Indebtedness and Liens are assumed, ratified and affirmed by the
Borrower and each of the Guarantors; (b) all indemnification obligations of the
Borrower and each of the Guarantors under the Existing Credit Agreement and any
other Loan Documents (as defined therein) shall survive the execution and
delivery of this Agreement and shall continue in full force and effect for the
benefit of the Lenders, the Agents, the Issuing Bank, the Arrangers, and any
other Person indemnified under the Existing Credit Agreement or any other Loan
Document (as defined therein) at any time prior to the Effective Date; (c) the
Indebtedness incurred under the Existing Credit Agreement shall, to the extent
outstanding on the Effective Date, continue outstanding under this Agreement and
shall not be deemed to be paid, released, discharged or otherwise satisfied by
the execution of this Agreement, and this Agreement shall not constitute a
refinancing, substitution or novation of such Indebtedness or any of the other
rights, duties and obligations of the parties hereunder, and the terms
“Indebtedness”, “Guaranteed Obligations” and “Secured Obligations” or similar
terms as such terms are used in the Loan Documents shall include the
Indebtedness as increased,

 

111

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

amended and restated under this Agreement; (d) the execution, delivery and
effectiveness of this Agreement shall not operate as a waiver of any right,
power or remedy of the Lenders or the Administrative Agent or the Issuing Bank
(as defined therein) under the Existing Credit Agreement, nor constitute a
waiver of any covenant, agreement, default or obligation under the Existing
Credit Agreement, except to the extent that any such covenant, agreement,
default or obligation is no longer set forth herein or is modified hereby;
(e) any and all references to the Existing Credit Agreement in any Security
Instrument or other Loan Document shall, without further action of the parties,
be deemed a reference to the Existing Credit Agreement, as amended and restated
by this Agreement, and as this Agreement shall be further amended, restated,
supplemented or otherwise modified from time to time, and any and all references
to the Security Instruments or Loan Documents in any such Security Instruments
or any other Loan Documents shall be deemed a reference to the Security
Instruments or Loan Documents under the Existing Credit Agreement, as amended
and restated by this Agreement, and as this Agreement shall be further amended,
restated, supplemented or otherwise modified from time to time; and (f) the
Liens granted pursuant to the Security Instruments to which each of the Borrower
or any Subsidiary is a party shall continue without any diminution thereof and
shall remain in full force and effect on and after the Effective Date.

[SIGNATURES BEGIN NEXT PAGE]

 

112

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

 

BORROWER:     REX ENERGY CORPORATION     By:     /s/ Michael L. Hodges      
Michael L. Hodges       Chief Financial Officer

[Signature Page—Amended and Restated Credit Agreement]

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

ADMINISTRATIVE AGENT:    

KEYBANK NATIONAL ASSOCIATION

as Administrative Agent and a Lender

    By:     /s/ Paul J. Pace     Name: Paul J. Pace     Title: Senior Vice
President

[Signature Page—Amended and Restated Credit Agreement]

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

SYNDICATION AGENT:     ROYAL BANK OF CANADA     By:     /s/ Kristan Spivey    
Name: Kristan Spivey     Title: Authorized Signatory

[Signature Page—Amended and Restated Credit Agreement]

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

DOCUMENTATION AGENT     SUNTRUST BANK     By:     /s/ Shannon Juhan     Name:
Shannon Juhan     Title: Vice President

[Signature Page—Amended and Restated Credit Agreement]

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

LENDERS:     BMO HARRIS FINANCING, INC.     By:     /s/ James V. Ducote    
Name: James V. Ducote     Title: Director

[Signature Page—Amended and Restated Credit Agreement]

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

WELLS FARGO BANK, NATIONAL ASSOCIATION By:     /s/ Jonathan Herrick

Name: Jonathan Herrick

Title: Assistant Vice President

[Signature Page—Amended and Restated Credit Agreement]

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

UNION BANK, N.A. By:     /s/ Zachary Holly

Name: Zachary Holly

Title: Vice President

[Signature Page—Amended and Restated Credit Agreement]

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

CAPITAL ONE, NATIONAL ASSOCIATION By:     /s/ Matthew L. Molero

Name: Matthew L. Molero

Title: Vice President

[Signature Page—Amended and Restated Credit Agreement]

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

M&T BANK By:     /s/ David J. Ladori

Name: David J. Ladori

Title: Vice President

[Signature Page—Amended and Restated Credit Agreement]

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

U.S. BANK NATIONAL ASSOCIATION By:     /s/ Todd S. Anderson

Name: Todd S. Anderson

Title: Vice President

[Signature Page—Amended and Restated Credit Agreement]

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

ANNEX I

LIST OF MAXIMUM CREDIT AMOUNTS

Aggregate Maximum Credit Amounts

 

Name of Lender

   Maximum
Credit Amount  

KeyBank National Association

   $ 40,000,000   

Royal Bank of Canada

   $ 37,000,000   

SunTrust Bank

   $ 37,000,000   

BMO Harris Financing, Inc.

   $ 34,500,000   

Wells Fargo Bank, National Association

   $ 34,500,000   

Union Bank, N.A.

   $ 34,500,000   

Capital One, National Association

   $ 30,000,000   

M&T Bank

   $ 28,000,000   

U.S. Bank, National Association

   $ 24,500,000      

 

 

 

TOTAL

   $ 300,000,000      

 

 

 

 

Annex I - 1

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

EXHIBIT A

FORM OF NOTE

 

$[            ]

   [            ], 201[            ]

FOR VALUE RECEIVED, Rex Energy Corporation, a Delaware corporation (the
“Borrower”) hereby promises to pay to [            ] (the “Lender”), at the
principal office of KeyBank National Association (the “Administrative Agent”)
designated in Section 4.01(a) of the Credit Agreement, as hereinafter defined,
the principal sum of [            ] Dollars ($[            ]) (or such lesser
amount as shall equal the aggregate unpaid principal amount of the Loans made by
the Lender to the Borrower under the Credit Agreement), in lawful money of the
United States of America and in immediately available funds, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of each such Loan, at such office, in like money and
funds, for the period commencing on the date of such Loan until such Loan shall
be paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.

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

This Note is one of the Notes referred to in the Amended and Restated Credit
Agreement dated as of March 27, 2013 among the Borrower, the Administrative
Agent, and the other agents and lenders signatory thereto (including the
Lender), and evidences Loans made by the Lender thereunder (such Credit
Agreement as the same may be amended, supplemented or restated from time to
time, the “Credit Agreement”). Capitalized terms used in this Note have the
respective meanings assigned to them in the Credit Agreement.

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

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

 

REX ENERGY CORPORATION By:    

Name:    

Title:    

 

Exhibit A - 1

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

EXHIBIT B

FORM OF BORROWING REQUEST

[            ], 201[            ]

Rex Energy Corporation, a Delaware corporation (the “Borrower”), pursuant to
Section 2.03 of the Amended and Restated Credit Agreement dated as of March 27,
2013 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”) among the Borrower, KeyBank
National Association, as Administrative Agent and the other agents and lenders
(the “Lenders”) which are or become parties thereto (unless otherwise defined
herein, each capitalized term used herein is defined in the Credit Agreement),
hereby requests a Borrowing as follows:

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

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

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

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

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

(vi) Total Revolving Credit Exposures on the date hereof (i.e., outstanding
principal amount of Loans and total LC Exposure without regard to the Borrowing
requested hereby) is $[            ]; and

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

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

[                                ]

[                                 ]

[                                 ]

[                                 ]

[                                 ]

 

Exhibit B - 1

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

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

 

REX ENERGY CORPORATION By:    

Name:    

Title:    

 

Exhibit B - 2

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

EXHIBIT C

FORM OF INTEREST ELECTION REQUEST

[            ], 201[            ]

Rex Energy Corporation, a Delaware corporation (the “Borrower”), pursuant to
Section 2.04 of the Amended and Restated Credit Agreement dated as of March 27,
2013 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”) among the Borrower, KeyBank
National Association, as Administrative Agent and the other agents and lenders
(the “Lenders”) which are or become parties thereto (unless otherwise defined
herein, each capitalized term used herein is defined in the Credit Agreement),
hereby makes an Interest Election Request as follows:

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

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

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

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

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

 

REX ENERGY CORPORATION By:    

Name:    

Title:    

 

Exhibit C - 1

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

EXHIBIT D-1

FORM OF

EFFECTIVE DATE CERTIFICATE

March 27, 2013

The undersigned hereby certifies that he is the Chief Financial Officer of Rex
Energy Corporation, a Delaware corporation (the “Borrower”), and that as such he
is authorized to execute this certificate on behalf of the Borrower. With
reference to the Amended and Restated Credit Agreement dated as of even date
herewith (together with all amendments, restatements, supplements or other
modifications thereto being the “Agreement”) among the Borrower, the lenders
party thereto, KeyBank National Association, as administrative agent for the
lenders, and the other agents which are party thereto, the undersigned
represents and warrants, on behalf of the Borrower and not individually, as
follows (each capitalized term used herein having the same meaning given to it
in the Agreement unless otherwise specified):

(a) The representations and warranties of the Borrower and the Guarantors set
forth in the Credit Agreement and in the other Loan Documents are true and
correct on and as of the date hereof, except to the extent any such
representations and warranties are expressly limited to an earlier date, in
which case, such representations and warranties continue to be true and correct
as of such specified earlier date.

(b) On the date hereof, immediately after giving effect to any Borrowing or the
issuance, amendment, renewal or extension of any Letter of Credit, as
applicable, no Default shall have occurred and be continuing.

(c) The Borrower has received all consents and approvals required by
Section 7.03 of the Credit Agreement.

EXECUTED AND DELIVERED as of the first date written above.

 

REX ENERGY CORPORATION By:        

Name: Michael L. Hodges

Title:   Chief Financial Officer

 

Exhibit D - 1

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

EXHIBIT D-2

FORM OF SECTION 8.01(C) CERTIFICATE

The undersigned hereby certifies that he/she is the [            ] of Rex Energy
Corporation, a Delaware corporation (the “Borrower”), and that as such he/she is
authorized to execute this certificate on behalf of the Borrower. With reference
to the Amended and Restated Credit Agreement dated as of March 27, 2013
(together with all amendments, restatements, supplements or other modifications
thereto being the “Agreement”) among the Borrower, KeyBank National Association,
as Administrative Agent, and the other agents and lenders (the “Lenders”) which
are or become a party thereto, and such Lenders, the undersigned represents and
warrants as follows (each capitalized term used herein having the same meaning
given to it in the Agreement unless otherwise specified):

(a) There exists no Default or Event of Default [or specify Default and
describe].

(b) Attached hereto are the detailed computations necessary to determine whether
the Borrower is in compliance with Section 9.01(a), (b) and (c) and
Section 8.14(a) as of the end of the [fiscal quarter][fiscal year] ending
[            ].

(c) [Select one of the following as applicable:] [There has been no change in
GAAP or in the application thereof, in each case as GAAP was applied in the
Financial Statements, (i) in the preparation of the Borrower’s financial
statements most-recently required to be delivered in accordance with
Section 8.01(a) or (b), or (ii) that would affect the computation of any
financial ratio in Section 9.01] or [There has been one or more changes in GAAP
or in the application thereof, in each case as GAAP was applied in the Financial
Statements, (i) in the preparation of the Borrower’s financial statements
most-recently required to be delivered in accordance with Section 8.01(a) or
(b), or (ii) that would affect the computation of any financial ratio in
Section 9.01, as follows and with the following effects: [specify].

EXECUTED AND DELIVERED this [            ] day of [            ].

 

REX ENERGY CORPORATION By:    

Name:    

Title:    

 

Exhibit D-2- 1

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

EXHIBIT E

SECURITY INSTRUMENTS

1) Amended and Restated Guaranty and Collateral Agreement dated as of March 27,
2013 made by the Borrower and each of the other Grantors (as defined therein) in
favor of the Administrative Agent.

2) Financing Statements in respect of item 1, by:

 

  a) the Borrower

 

  b) Rex Energy I, LLC

 

  c) Rex Energy Operating Corp.

 

  d) PennTex Resources Illinois, Inc.

 

  (e) R.E. Gas Development, LLC

 

  (f) Rex Energy IV, LLC

3) Stock Powers delivered in respect of item 1.

 

  (a) PennTex Resources Illinois, Inc., a Delaware corporation

 

  (b) Rex Energy Operating Corp., a Delaware corporation

4) Amended and Restated Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from Rex Energy I, LLC to
Administrative Agent (Illinois).

5) Financing Statement in respect of item 4.

6) Amended and Restated Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from Rex Energy I, LLC to
Administrative Agent (Indiana).

7) Financing Statements in respect of item 6.

8) Amended and Restated Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from Rex Energy IV, LLC
to Administrative Agent (Illinois).

9) Financing Statements in respect of item 8.

 

Exhibit E - 1

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

10) Amended and Restated Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from Rex Energy IV, LLC
to Administrative Agent (Indiana).

11) Financing Statements in respect of item 10.

12) Amended and Restated Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from Rex Energy IV, LLC
and PennTex Resources Illinois, Inc. to Administrative Agent (Illinois).

13) Financing Statements in respect of item 12.

14) Amended and Restated Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from Rex Energy IV, LLC
and PennTex Resources Illinois, Inc. to Administrative Agent (Indiana).

15) Financing Statements in respect of item 14.

16) Amended and Restated Open End Mortgage, Assignment of Leases, Assignment of
As-Extracted Collateral, Security Agreement, Fixture Filing and Financing
Statement from R.E. Gas Development, LLC to Administrative Agent.

17) Financing Statements in respect of item 16.

18) Amended and Restated Open End Mortgage, Assignment of Leases, Assignment of
As-Extracted Collateral, Security Agreement, Fixture Filing and Financing
Statement from Rex Energy I, LLC to Administrative Agent.

19) Financing Statements in respect of item 18.

 

Exhibit E-2- 2

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

EXHIBIT F

FORM OF ASSIGNMENT AND ASSUMPTION1

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit and guarantees included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

 

1.

   Assignor:   

 

  

2.

   Assignee:   

 

        

[and is an Affiliate/Approved Fund of [identify Lender]2]

3.

   Borrower:    Rex Energy Corporation

4.

   Administrative Agent:        KeyBank National Association, as the
administrative agent under the Credit Agreement

5.

   Credit Agreement:    The Amended and Restated Credit Agreement dated as of
March 27, 2013 among Rex Energy Corporation, the Lenders parties thereto,
KeyBank National Association, as Administrative Agent, and the other agents
parties thereto]

 

 

1  Please provide suggested revisions.

2  Select as applicable.

 

Exhibit F - 1

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

6. Assigned Interest:

 

Commitment Assigned

   Aggregate Amount of
Commitment/Loans for
all Lenders      Amount of
Commitment/Loans
Assigned      Percentage Assigned of
Commitment/Loans3      $                    $                           %     $
        $                %     $         $                % 

Effective Date:                  , 201     [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]

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

 

ASSIGNOR

 

[NAME OF ASSIGNOR]

By:         Title:

 

ASSIGNEE

 

[NAME OF ASSIGNEE]

By:         Title:

 

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

 

Exhibit F - 2

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

[Consented to and]4 Accepted:

 

[NAME OF ADMINISTRATIVE AGENT], as

    Administrative Agent

By         Title:

 

[Consented to:]5

 

[NAME OF RELEVANT PARTY]

By         Title:

 

 

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

5  To be added only if the consent of the Borrower and/or other parties (e.g.
Issuing Bank) is required by the terms of the Credit Agreement.

 

Exhibit F - 3

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

ANNEX 1

REX ENERGY CORPORATION CREDIT AGREEMENT

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim, (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 is not a Defaulting Lender; and (b) assumes no
responsibility with respect to (i) any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document,
(ii) the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Borrower, any of its Subsidiaries or Affiliates or any other
Person obligated in respect of any Loan Document or (iv) the performance or
observance by the Borrower, any of its Subsidiaries or Affiliates or any other
Person of any of their respective obligations under any Loan Document.

1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 8.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest, (v) it has independently and
without reliance upon the Administrative Agent or any other Lender and base 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 Assigned Interest, and (vi) if it is a Foreign Lender, attached to
the Assignment and Assumption is any documentation required to be delivered by
it pursuant to the terms of the Credit Agreement, duly completed and executed by
the Assignee; and (b) agrees that (i) it will, independently and without
reliance on the Administrative Agent, the Assignor or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

 

Exhibit F - 4

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

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

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. 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 Texas.

 

Exhibit F - 5

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

EXHIBIT G-1

FORM OF MAXIMUM CREDIT AMOUNT INCREASE CERTIFICATE

[            ], 201[            ]

To:  [            ],

as Administrative Agent

The Borrower, the Administrative Agent and the other Agents and certain Lenders
have heretofore entered into an Amended and Restated Credit Agreement, dated as
of March 27, 2013, as amended from time to time (the “Credit Agreement”).
Capitalized terms not otherwise defined herein shall have the meaning given to
such terms in the Credit Agreement.

This Maximum Credit Amount Increase Certificate is being delivered pursuant to
Section 2.06(c) of the Credit Agreement.

Please be advised that the undersigned has agreed (a) to increase its Maximum
Credit Amount under the Credit Agreement effective [            ],
201[            ] from $[            ] to $[            ] and (b) that it shall
continue to be a party in all respect to the Credit Agreement and the other Loan
Documents.

The [Borrower/Lender] shall pay the fee payable to the Administrative Agent
pursuant to Section 2.06(c)(ii) of the Credit Agreement.

 

Very truly yours,

 

[            ]

By:      

        Name:    

        Title:    

 

Exhibit G-1 - 1

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

Accepted and Agreed:

 

[            ],

    as Administrative Agent

By:      

        Name:    

        Title:    

 

Accepted and Agreed:

 

[            ],

By:      

        Name:    

        Title:    

 

Exhibit G-1 - 2

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

EXHIBIT G-2

FORM OF ADDITIONAL LENDER CERTIFICATE

[            ], 201[            ]

To:  [            ],

as Administrative Agent

The Borrower, the Administrative Agent and the other Agents and certain Lenders
have heretofore entered into an Amended and Restated Credit Agreement, dated as
of March 27, 2013, as amended from time to time (the “Credit Agreement”).
Capitalized terms not otherwise defined herein shall have the meaning given to
such terms in the Credit Agreement.

This Additional Lender Certificate is being delivered pursuant to
Section 2.06(c) of the Credit Agreement.

Please be advised that the undersigned has agreed (a) to become a Lender under
the Credit Agreement effective [            ], 201[            ] with a Maximum
Credit Amount of $[            ] and (b) that it shall be a party in all respect
to the Credit Agreement and the other Loan Documents.

This Additional Lender Certificate is being delivered to the Administrative
Agent together with (i) if the Additional Lender is a Foreign Lender, any
documentation required to be delivered by such Additional Lender pursuant to
Section 5.03(f) of the Credit Agreement, duly completed and executed by the
Additional Lender, and (ii) an Administrative Questionnaire in the form supplied
by the Administrative Agent, duly completed by the Additional Lender. The
[Borrower/Additional Lender] shall pay the fee payable to the Administrative
Agent pursuant to Section 2.06(c)(ii) of the Credit Agreement.

 

Very truly yours,

 

[            ]

By:      

Name:    

Title:    

 

Exhibit G-2 - 1

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

Accepted and Agreed:

 

[            ],

    as Administrative Agent

By:      

        Name:    

        Title:    

 

Accepted and Agreed:

 

[            ],

By:      

        Name:    

        Title:    

 

Exhibit G-2 - 2

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

EXHIBIT H-1

U.S. TAX COMPLIANCE CERTIFICATE

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

Reference is hereby made to the Amended and Restated Credit Agreement dated as
of March 27, 2013 (as amended, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among Rex Energy Corporation, a Delaware
corporation (the “Borrower”); each of the Lenders from time to time party
hereto; and KeyBank National Association, as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the
“Administrative Agent”).

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and
(iv) it is not a controlled foreign corporation related to the Borrower as
described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with a
certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent, and (2) the undersigned shall have at all times
furnished the Borrower and the Administrative Agent with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

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

 

[NAME OF LENDER] By:        

Name: [                ]

Title:   [                ]

Date:                                          
                                   

 

EXHIBIT H-1

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

EXHIBIT H-2

U.S. TAX COMPLIANCE CERTIFICATE

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

Reference is hereby made to the Amended and Restated Credit Agreement dated as
of March 27, 2013 (as amended, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among Rex Energy Corporation, a Delaware
corporation (the “Borrower”); each of the Lenders from time to time party
hereto; and KeyBank National Association, as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the
“Administrative Agent”).

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the
Code.

The undersigned has furnished the participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform the Lender in writing, and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

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

 

[NAME OF PARTICIPANT] By:        

Name: [                ]

Title:   [                ]

Date:                                          
                                   

 

EXHIBIT H-2

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

EXHIBIT H-3

U.S. TAX COMPLIANCE CERTIFICATE

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

Reference is hereby made to the Amended and Restated Credit Agreement dated as
of March 27, 2013 (as amended, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among Rex Energy Corporation, a Delaware
corporation (the “Borrower”); each of the Lenders from time to time party
hereto; and KeyBank National Association, as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the
“Administrative Agent”).

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect to such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of the
Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN, or (ii) an
IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each such
partner’s/member’s beneficial owners that is claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender, and (2) the undersigned shall have at all times furnished
such Lender with a properly completed and currently effective certificate in
either the calendar year in which each payment is to be made to the undersigned,
or in either of the two calendar years preceding such payments.

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

 

[NAME OF PARTICIPANT] By:        

Name: [                ]

Title:   [                ]

Date:                                          
                                   

 

EXHIBIT H-3

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

EXHIBIT H-4

U.S. TAX COMPLIANCE CERTIFICATE

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

Reference is hereby made to the Amended and Restated Credit Agreement dated as
of March 27, 2013 (as amended, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among Rex Energy Corporation, a Delaware
corporation (the “Borrower”); each of the Lenders from time to time party
hereto; and KeyBank National Association, as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the
“Administrative Agent”).

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
(as well as any Note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) its direct or indirect partners/members are the
sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such
Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit
Agreement or any other Loan Document, neither the undersigned nor any of its
direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of the Borrower within
the meaning of Section 871(h)(3)(B) of the Code, and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-8IMY accompanied by one of the following forms from each of its
partners/members that is claiming the portfolio interest exemption: (i) an IRS
Form W-8BEN, or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from
each such partner’s/member’s beneficial owners that is claiming the portfolio
interest exemption. By executing this certificate, the undersigned agrees that
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Administrative Agent and the Borrower, and (2) the
undersigned shall have at all times furnished the Administrative Agent and the
Borrower with a properly completed and currently effective certificate in either
the calendar year in which each payment is to be made to the undersigned, or in
either of the two calendar years preceding such payments.

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

 

[NAME OF LENDER] By:        

Name: [                ]

Title:   [                ]

Date:                                          
                                   

 

Exhibit H-4

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

SCHEDULE 7.05

LITIGATION

A putative class action lawsuit brought in the Court of Common Pleas of
Clearfield County, Pennsylvania styled Lucinda A. Cardinale and Iola Hugney, et
al. v. R. E. Gas Development, LLC and Rex Energy Corporation, Case No. 2011-1791
– CD relating to leasing activities of the defendants in 2008.

A putative class action lawsuit brought in the Court of Common Pleas of
Clearfield County, Pennsylvania styled Mary R. Billotte v. R.E. Gas Development,
LLC and Rex Energy Corporation, Case No. 2012 – 1099-CD related to leasing
activities of the defendants in 2008.

A lawsuit brought in the Court of Common Pleas of Clearfield County,
Pennsylvania styled Dennis Meeker, et al. v. R.E. Gas Development, LLC and Rex
Energy Corporation, Case No. 2012 – 1100-CD related to leasing activities of the
defendants in 2008.

A civil action brought in the Court of Common Pleas of Butler County,
Pennsylvania styled Fred J. McIntyre and Janet A. McIntyre, his wife v. Rex
Energy Corporation, et al., Case No. AD 13-10079. Although we have received a
Writ of Summons and filed a Praecipe for Rule to File Complaint, we have not yet
received a Complaint and we do not know the cause of action as of this date.

 

Schedule 7.05 - 1

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

SCHEDULE 7.06

ENVIRONMENTAL MATTERS

 

1.

In approximately 2002, predecessors of PennTex Resources Illinois, Inc.
(“PennTex Illinois”) received complaints from local residents of the cities of
Bridgeport and Petrolia, Illinois concerning odors alleged to be emanating from
oil wells, emergency pits and facilities located in the company’s Lawrence field
operations. The complainants alleged that the odors were caused by hydrogen
sulfide (“H2S”) gas. The complainants alleged that H2S gas emissions from the
oil wells and associated facilities also caused corrosion damages to HVAC
systems and other personal property at each of their residences. Each
complainant requested compensation for the repair or replacement of personal
items located at their residences. Predecessors of PennTex Illinois entered into
settlement agreements with certain of these residents relating to their claims
of corrosion damages. On October 7, 2004, a predecessor of PennTex Illinois
(then known as ERG Illinois, Inc.) received a Violation Notice dated October 6,
2004, pursuant to Section 31(a)(1) of the Illinois Environmental Protection Act
from the Illinois Environmental Protection Agency (“Illinois EPA”) regarding
odors allegedly emanating from its Newell Facility emergency pit or in the
general vicinity of the emergency pit. Thereafter, on December 16, 2004, the
company received a letter entitled “Request to Provide Information Pursuant to
the Clean Air Act” from the U.S. EPA. The U.S. EPA requested information
necessary to determine whether the operations surrounding the Newell Facility
were in compliance with the Illinois State Implementation Plan and the Clean Air
Act. On December 27, 2004, ERG Illinois, Inc. submitted to the Illinois EPA a
proposed Compliance Commitment Agreement (“CCA”) that responded to the
October 6, 2004 Violation Notice with a denial of the alleged violations, but
accompanied by a proposal to periodically clean the emergency pit. On
January 26, 2005, the Illinois EPA provided a letter to the company indicating
that the company’s previously submitted CCA had been accepted, thus resolving
the Violation Notice.

On January 28, 2005, PennTex Illinois submitted a response to the U.S. EPA’s
December 16, 2004 information request. On February 9, 2005, the U.S. EPA
requested additional data from PennTex Illinois regarding the quantity of H2S
emissions from various sources including the Newell Facility and the wells in
and around the city of Bridgeport, Illinois. In March 2005, PennTex Illinois
engaged a third party environmental consulting firm to prepare a Preliminary
Action Plan designed to identify and analyze emissions from PennTex Illinois’
operations and to propose recommendations to address any identified concerns. A
report entitled “PAP/Odor Investigation Results” with recommendations and a
cover letter were sent to the U.S. EPA on July 18, 2005 (the “PAP Report”). The
PAP Report concluded that, for all wells monitored, PennTex Illinois was in
compliance with all known federal, state and local rules and regulations in
regard to H2S emissions and exposures. The PAP Report recommended that
additional H2S controls, such as the installation of scavenger drums, be
implemented with respect to some of the monitored wells. The PAP Report
described the results of high range and low range H2S instrument sampling in the
vicinity of the Newell Facility and concluded that no additional operational
controls or modifications appeared to be necessary or feasible to further reduce
H2S concentrations in the vicinity of the Newell Facility.

 

Schedule 7.06 - 1

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

On March 13, 2006, PennTex Illinois received a second information request from
the U.S. EPA requesting additional information relating to, among other matters,
the company’s installation of flares and scavenger drums to control H2S
emissions at its oil well locations. On March 27, 2006, PennTex Illinois
submitted a response to the U.S. EPA’s second information request. In September
2006, the U.S. DOJ and the U.S. EPA initiated an enforcement action seeking
mandatory injunctive relief and potential civil penalties from PennTex Illinois
and Rex Energy Operating Corp. (“Rex Operating”) based on allegations that the
companies were violating the Clean Air Act in connection with the release of H2S
and other volatile organic compounds (“VOCs”) in the course of PennTex Illinois’
oil operations in the Lawrence Field near the towns of Bridgeport and Petrolia,
Illinois. Senior management of the companies met with representatives of the
U.S. EPA, U.S. DOJ, Illinois EPA and the Agency for Toxic Substances and Disease
Registry (“ATSDR”) on September 7, 2006, to discuss matters relating to the
enforcement action. This meeting had been preceded by certain monitoring of air
emissions in the areas surrounding Bridgeport and Petrolia, Illinois that the
U.S. EPA and ATSDR had conducted in May 2006.

In October 2006, PennTex Illinois and Rex Operating entered into a non-binding
agreement in principle with the U.S. EPA to address matters that were the
subject of the pending enforcement action. Pursuant to this agreement, the
companies agreed to (i) develop and carry out a detailed and comprehensive
written response plan designed to further reduce possible emissions of H2S and
VOCs from PennTex Illinois’ oil wells and associated facilities in the Lawrence
Field that were closest to populated areas, (ii) operate and maintain the
control measures described in the response plan in accordance with a written
operations and maintenance plan to be approved by the U.S. EPA, (iii) evaluate
the effectiveness of the control measures in the Lawrence Field through a
monitoring program, and (iv) evaluate the need for additional control measures
at other facilities within the Lawrence Field within 60 days. In April 2007,
PennTex Illinois, Rex Operating and the U.S. EPA and U.S. DOJ executed a
comprehensive consent decree in which PennTex Illinois and Rex Operating,
without any admission of wrongdoing or liability and without any agreement to
pay any civil fine or penalty, agreed to install certain control measures and to
implement certain operating and maintenance procedures in the Lawrence Field.
Under the terms of the proposed consent decree, PennTex Illinois and Rex
Operating agreed to establish a monitoring protocol that would be designed to
facilitate the reduction of possible emissions of H2S and VOCs from PennTex
Illinois’ operations near Bridgeport and Petrolia. On June 1, 2007, the United
States filed a motion for the approval and entry of the proposed consent decree
with the United States District Court for the Southern District of Illinois. On
June 6, 2007, the court granted the United States’ motion for approval and entry
of the proposed consent decree.

PennTex Illinois and Rex Energy began implementing the control measures required
by the consent decree in late 2006, prior to the formal effective date of the
decree. Certain primary control measures listed in the decree were installed by
the third quarter of 2007. Certain secondary control measures proposed by
PennTex Illinois and Rex Energy and approved by the U.S. EPA and the U.S. DOJ
were completed by the end of 2008. Since then, PennTex Illinois and Rex Energy
have implemented a number of voluntary control

 

Schedule 7.06 - 2

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

measures in the Lawrence Field, but have not been required to implement
additional controls by the U.S. EPA and the U.S. DOJ. In light of four years
having passed since the installation of the last controls required by the
consent decree, and based on feedback from the U.S. EPA and the U.S. DOJ,
PennTex Illinois and Rex Energy do not expect that additional controls will be
required. For calendar year 2013, PennTex Illinois and Rex Energy have budgeted
an insignificant amount (<$200,000) for operating costs to maintain the current
controls and minor additional controls for the Lawrence Field and a control
project for a facility which is not covered by the consent decree.

 

2. PennTex Illinois and Rex Energy were defendants in a class action lawsuit
filed in the United States District Court for the Southern District of Illinois.
The action was commenced in October 2006 by plaintiffs Julia Leib and Lisa
Thompson, individually and as putative class representatives on behalf of all
persons and non-governmental entities that own property or reside on property
located in the towns of Bridgeport and Petrolia, Illinois. The complaint
asserted several causes of action, including violation of the Resource
Conservation and Recovery Act, Illinois Environmental Protection Act,
negligence, private nuisance, trespass, and willful and wanton misconduct.

In December 2009, PennTex Illinois and Rex Energy entered into a Settlement
Agreement and Release (the “Settlement Agreement”) with Leib and Thompson,
individually and on behalf of a certified class, to settle the class action
lawsuit. Under the terms of the Settlement Agreement, without any admission of
liability, PennTex Illinois and Rex Energy agreed to pay the class a total of
$1.9 million. Pursuant to the terms of a pollution liability policy, $1.0
million of the settlement payment was funded by Rex’s insurance carrier.
Pursuant to the Settlement Agreement, PennTex Illinois and Rex Energy also
agreed to permanently plug four inactive oil wells. In return for the above
consideration, each member of the class released all claims against PennTex
Illinois and Rex Energy that in any way related to hydrogen sulfide or other
environmental conditions in the class area that were the subject of, or could
have been the subject of, the claims alleged in the class action lawsuit. In
addition, each class member released any claims related to any future releases
of hydrogen sulfide in the class area on the condition that PennTex Illinois and
Rex Energy substantially comply with the terms and conditions of the consent
decree describe above. The Settlement Agreement did not provide for a release of
any potential individual claims of other class members since those claims were
not the subject of the class action lawsuit. The Settlement Agreement became
effective in April 2010.

 

Schedule 7.06 - 3

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

SCHEDULE 7.14

SUBSIDIARIES AND PARTNERSHIPS

Borrower:

 

Legal Name/Address

  

Trade Names

Used in Past 5
Years

  

Current
Jurisdiction of
Organization

  

Jurisdiction of
Organizations

in Past 5

Years

  

Org. ID No.

  

Taxpayer ID

No.

  

Chief Executive
Office or Sole Place
of Business over the
last 5 years

Rex Energy Corporation

   None    Delaware    Not Applicable    4313846    20-8814402   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

Subsidiaries and Partnerships:

 

Legal Name/Address

  

Trade Names

Used in Past 5
Years

  

Current
Jurisdiction of
Organization

  

Jurisdiction of
Organizations in
Past 5 Years

  

Org. ID No.

  

Taxpayer ID No.

  

Chief Executive
Office or Sole Place
of Business over
the last 5 years

Rex Energy I, LLC

   None    Delaware    Not Applicable    4335969    20-8909799   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

Rex Energy Operating Corp.

   None    Delaware    Not Applicable    3865470    20-2120390   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

Rex Energy IV, LLC

   None    Delaware    Not Applicable    4219136    20-5549688   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801 Route 1, Box 197, Bridgeport, Illinois 62417

 

Schedule 7.14 - 1

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

Legal Name/Address

  

Trade Names

Used in Past 5
Years

  

Current
Jurisdiction of
Organization

  

Jurisdiction of
Organizations in
Past 5 Years

  

Org. ID No.

  

Taxpayer ID No.

  

Chief Executive
Office or Sole Place
of Business over
the last 5 years

PennTex Resources Illinois, Inc.

   ERG Illinois, Inc.    Delaware    Not Applicable    3757111    20-0660609   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

R.E. Gas Development, LLC

   None    Delaware    Not Applicable    4456607    20-8814402   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

Rex Energy Marketing, LLC

   None    Delaware    Not Applicable    4256285    20-5956080   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

Butler Gas Processing LLC

   None    Delaware    Not Applicable    4687040    27-0173276   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

Rex Energy Rockies, LLC

   None    Delaware    Not Applicable    4783736    27-1822511   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

Northstar #3, LLC6

   None    Delaware    Not Applicable    5023301    20-8814402   

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

 

6  Entity is not a wholly subsidiary. R.E. Gas Development, LLC owns 51% of the
Equity Interests in such entity.

 

Schedule 7.14 - 2

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

Legal Name/Address

  

Trade Names

Used in Past 5
Years

  

Current
Jurisdiction of
Organization

  

Jurisdiction of
Organizations in
Past 5 Years

  

Org. ID No.

  

Taxpayer ID No.

  

Chief Executive
Office or Sole Place
of Business over
the last 5 years

Water Solutions Holdings, LLC7

   None    Delaware    Not Applicable    4753283    27-1340877   

1129 West Governor Road

PO Box 797

Hershey, PA 17033

Keystone Clearwater Solutions, LLC

   None    Delaware    Not Applicable    4546252    26-2597715   

1129 West Governor Road

PO Box 797

Hershey, PA 17033

Cocoa Properties I, LLC

   None    Delaware    Not Applicable    4877263    27-4218421   

1129 West Governor Road

PO Box 797

Hershey, PA 17033

Please note: Rex Energy Corporation is planning to move its corporate
headquarters in April 2013. From and after April 22, 2013, the chief executive
office for all of the entities listed above (other than Water Solutions
Holdings, LLC, Keystone Clearwater Solutions, LLC and Cocoa Properties I, LLC)
will change to:

[Name of Entity]

366 Walker Drive

State College, PA 16801

Attn: Michael L. Hodges, Chief Financial Officer

mhodges@rexenergycorp.com

Copy: Jennifer L. McDonough, Vice President, General Counsel and Secretary

jmcdonough@rexenergycorp.com

Fax: 814.278.7286

 

7  Entity is not a wholly-owned subsidiary. Rex Energy Corporation owns 80% of
the Equity Interests in such entity.

 

Schedule 7.14 - 3

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

SCHEDULE 7.18

GAS IMBALANCES

None.

 

Schedule 7.18 - 1

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

SCHEDULE 7.19

MARKETING CONTRACTS

Long Term Crude Oil Sales Agreements

 

  1. Master Crude Purchase Agreement dated December 30, 2009, by and among
Countrymark Cooperative, LLP, PennTex Resources Illinois., PennTex Resources,
L.P., Rex Energy IV, LLC and Rex Energy I, LLC, including certain confirmations
related thereto.

Long Term Natural Gas or Natural Gas Liquids Sales Agreements

 

  1. Natural Gas Sales Agreement dated August 9, 2011 by and between R.E. Gas
Development, LLC and BP Energy Company.

 

  2. Natural Gas Sales Agreement dated November 30, 2011 by and between R.E. Gas
Development, LLC and BP Energy Company.

 

  3. Natural Gas Production Election and Marketing Agreement dated January 6,
2010 by and among Williams Production Appalachia LLC and Rex Energy I, LLC and
R.E. Gas Development, LLC.

 

  4. Natural Gas Liquid – Commercial Terms – Contract No. NGL-SP-1053, as
amended, by and between Enbridge Energy Marketing, L.L.C. and R.E. Gas
Development, LLC, dated August 31, 2011 and expiring March 31, 2013.

 

  5. Second Amendment to Gas Gathering, Compression and Processing Agreement
dated May 20, 2012 by and among Keystone Midstream Services, LLC (became
MarkWest), R.E. Gas Development, LLC, and Summit Resources II, LLC (beginning on
March 31, 2013, MarkWest will market all NGLs for R.E. Gas Development under
this agreement.)

 

  6. Service Agreement for Processing and Fractionation Services (including NGL
marketing) by and between Dominion Natrium, LLC and R.E. Gas Development, LLC
dated October 26, 2011, as amended.

 

  7. Confirmation Notice for purposes of Enterprise Products Operating LLC
Natural Gas Liquids Purchase, Sale, or Exchange General Terms and Conditions
dated February 11, 2013 (purchase of ethane beginning 2014).

 

  8. Ethane Sale Agreement between R.E. Gas Development, LLC and NOVA Chemicals
Corporation dated January 25, 2013 (for sale of ethane beginning 2014).

 

Schedule 7.19 - 1

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

SCHEDULE 7.20

SWAP AGREEMENTS

 

Derivative Instrument

  Counter-
party   Notional
Volume
(Mcf)   Notional
Volume
(Bls)   Period   Floor
Price     Ceiling
Price     Fixed
Price     Fair Market
Value (As
of 12/31/12)  

As of March 19, 2013

             

Swap

  Key Bank     5,000/month   1/13—12/13       $ 90.75        (147,987 ) 

Swap

  BMO     5,000/month   1/13—12/13       $ 92.07        (68,923 ) 

Swap

  Wells Fargo     30,000/month   1/13—12/13        

Put Spread

  BMO     7,000/month   1/14—12/14     90.00/75.00         

Put Spread

  RBC     7,000/month   1/14—12/14     90.00/75.00         

Collar

  Key Bank     5,000/month   1/13—12/13     70.00        110.00          (38,260
) 

Collar

  Key Bank     10,000/month   1/13—12/13     80.00        101.50         
(116,335 ) 

Collar

  Key Bank     5,000/month   1/14—12/14     90.00        97.65       

3-Way Collar

  BMO     6,000/month   1/14—12/14     84.75/75.00        105.00       

3-Way Collar

  Key Bank     6,000/month   1/14—12/14     84.50/75.00        105.00       

3-Way Collar

  BMO     4,000/month   1/14—12/14     80.00/65.00        110.00         
(22,940 ) 

3-Way Collar

  Key Bank     14,000/month   1/14—12/14     85.00/65.00        102.00         
(207,372 ) 

3-Way Collar

  RBC     5,000/month   1/13—12/13     85.00/65.00        100.00         
(45,009 ) 

Swap

  Key Bank   30,000/month     1/12—12/13       $ 4.705        418,039   

Swap

  BMO   30,000/month     1/12—12/13         4.42        283,601   

Swap

  Key Bank   30,000/month     1/12—12/13         4.00        164,606   

Swap

  Key Bank   150,000/month     1/13—12/13         4.25        1,272,379   

Swap

  Wells Fargo   150,000/month     2/12—12/13         3.35        (341,604 ) 

Swap

  BMO   30,000/month     4/12—3/13         3.20        (9,476 ) 

Swap

  Key Bank   50,000/month     6/12—12/14         3.425        (431,505 ) 

Swap

  Key Bank   50,000/month     5/12—12/14         3.42        (437,486 ) 

Swap

  Key Bank   50,000/month     1/13—12/13         4.005        277,339   

Swap

  RBC   100,000/month     1/14—12/14         4.25        238,579   

Swap

  Wells Fargo   70,000/month     4/13—3/14         3.80     

Swap

  Key Bank   70,000/month     4/14—12/14         3.98     

Swap

  BMO   50,000/month     1/14—12/15         4.15     

Swap

  RBC   50,000/month     1/14—12/15         4.20     

Swap

  Key Bank   50,000/month     5/13—3/14         4.10     

Swap

  Key Bank   50,000/month     7/13—3/14         4.15     

Swaption

  RBC   50,000/month     1/13—12/13         4.50        176,839   

Swaption

  RBC   50,000/month     1/13—12/13         4.50        176,839   

Collar

  Wells Fargo   150,000/month     1/13—12/13     5.00        6.25         
2,686,224   

Collar

  Key Bank   40,000/month     1/12—12/13     5.00        5.25          702,952
  

 

Schedule 7.20 - 1

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

Collar

   Key Bank    40,000/month       1/13—12/13      4.61         5.50           
535,041   

Collar

   BMO    50,000/month       1/12—12/13      4.00         4.45           
286,877   

Collar

   Key Bank    50,000/month       1/14—12/14      3.50         4.30           
(84,425 ) 

Collar

   Key Bank    100,000/month       1/14—12/14      3.52         4.50           
(81,102 ) 

Put

   RBC    70,000/month       1/13—12/13      5.00               614,546   

Put

   Key Bank    150,000/month       1/13—12/13      5.00               2,693,507
  

3-Way Collar

   Wells Fargo    60,000/month       1/12—12/13      5.00/4.00         5.85   
        620,779   

3-Way Collar

   BMO    50,000/month       1/12—12/13      4.00/3.25         4.73           
206,596   

3-Way Collar

   BMO    50,000/month       1/12—12/13      4.00/3.25         4.50           
193,231   

3-Way Collar

   BMO    50,000/month       1/13—12/14      3.50/2.75         4.25           
(69,547 ) 

3-Way Collar

   BMO    100,000/month       1/14—12/14      3.70/2.75         5.00           
80,442   

3-Way Collar

   BMO    50,000/month       1/14—12/14      4.00/3.00         4.75           
69,818   

3-Way Collar

   Wells Fargo    200,000/month       1/14—12/14      4.10/3.00         4.60   
        315,421   

3-Way Collar

   Wells Fargo    50,000/month       1/15—12/15      4.25/3.40         4.75   
     

3-Way Collar

   BMO    100,000/month       1/14—12/15      4.10/3.35         4.51         

Call

   Key Bank    150,000/month       1/14—12/14            5.00         (366,345
) 

Swap—Propane

   Key Bank       4,000/month    6/12—12/13            43.26         257,158   

Swap—Propane

   Wells Fargo       5,000/month    6/12—12/13            43.26         278,369
  

Swap—Propane

   Wells Fargo       2,000/month    1/13—12/13            37.80      

Swap—Butane

   Key Bank       2,000/month    2/13—12/13            66.36      

Swap—Isobutane

   Key Bank       1,000/month    2/13—12/13            70.35      

Swap—Isobutane

   Key Bank       1,000/month    3/13—12/13            67.83      

Swap—Natural Gasoline

   Key Bank       3,000/month    2/13—12/13            89.15      

Swap—Natural Gasoline

   Wells Fargo       3,000/month    1/13—12/13            87.68      

Swap—Natural Gasoline

   Key Bank       1,000/month    3/13—3/14            89.04      

 

Schedule 7.20 - 2

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

SCHEDULE 9.02

EXISTING DEBT

None.

 

Schedule 9.02 - 1

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

SCHEDULE 9.03

EXISTING LIENS

None.

 

Schedule 9.03 - 1

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

SCHEDULE 9.05

INVESTMENTS

 

  1. Rex Energy I, LLC owns all of the outstanding membership interest of Rex
Energy Marketing, LLC, a Delaware limited liability company, Butler Gas
Processing LLC a Delaware limited liability company, and Rex Energy Rockies,
LLC, Delaware limited liability company.

 

  2. The Borrower owns 80% of the outstanding membership interest of Water
Solutions Holdings, LLC, a Delaware limited liability company.

 

  3. Water Solutions Holdings, LLC owns 100% of the outstanding membership
interest of Keystone Clearwater Solutions, LLC, a Delaware limited liability
company, and Cocoa Properties I, LLC, a Delaware limited liability company.

 

  4. R.E. Gas Development, LLC owns 40% the outstanding membership interest of
RW Gathering, LLC, a Delaware limited liability company.

 

  5. R.E. Gas Development, LLC owns 51% the outstanding membership interest of
Northstar #3, LLC, a Delaware limited liability company.

 

  6. Rex Energy Operating Corp. owns a 24.75% limited partnership interest in
Charlie Brown II Limited Partnership, a Delaware limited partnership, and a 25%
membership interest in its general partner, L&B Air LLC, a Delaware limited
liability company.

 

Schedule 9.05 - 1

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

SCHEDULE 9.14

EXISTING AFFILIATE TRANSACTIONS

 

  1. Rex Energy Operating Corp. has amended its 401k Plan (the “Plan”) to allow
employees of Keystone Clearwater Solutions, LLC, the operating subsidiary of
Water Solutions Holdings, LLC, to participate in the Plan. In connection with
the amendment to the Plan, Rex Energy Operating Corp. may enter into one or more
agreements with Water Solutions Holding, LLC to provide clerical, administrative
and management services relating to the administration of the Plan.

 

  2. The use of two airplanes owned by Charlie Brown Air Corp. pursuant to an
oral month-to-month agreement between Rex Energy Operating Corp. and Charlie
Brown Air Corp.

 

  3. The use of an Eclipse 500 Airplane to be owned by Charlie Brown II Limited
Partnership pursuant to the terms of (i) the Amended and Restated Limited
Liability Company Agreement, dated June 21, 2007, of L&B Air LLC, (ii) the
Amended and Restated Limited Partnership Agreement, dated June 21, 2007, of
Charlie Brown II Limited Partnership and (iii) the First Amended and Restated
Aircraft Joint Ownership and Management Agreement, dated June 21, 2007, between
Charlie Brown Air Corp. and Charlie Brown II Limited Partnership.

 

  4. Northstar #3, LLC, a subsidiary of R.E. Gas Development, LLC, is the owner
of a salt water disposal well and is a party to a well operating agreement with
NorthStar Water Management, LLC, dated November 3, 2011.

 

  5. Natural Gas Production Election and Marketing Agreement dated January 6,
2010 by and among Williams Production Appalachia LLC, Rex Energy I, LLC and R.E.
Gas Development, LLC.

 

  6. Accounting and Financial Services Agreement dated December 21, 2009 by and
between Water Solutions Holdings, LLC and Rex Energy Operating Corp.

 

  7. Office lease agreement entered into June 27, 2012 with Shaner Office
Holdings, L.P., which will replace our existing headquarters office lease in
State College, Pennsylvania.

 

Schedule 9.14 - 1

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

SCHEDULE 9.16

EXISTING NEGATIVE PLEDGE AGREEMENTS; DIVIDEND RESTRICTIONS

None.

 

Schedule 9.16 - 1