Exhibit 10.1

Execution Version

AMENDED AND RESTATED

RESTRUCTURING SUPPORT AGREEMENT

This AMENDED AND RESTATED RESTRUCTURING SUPPORT AGREEMENT (this “Agreement”) is
made and entered into as of July 11, 2016, by and among (i) Warren Resources,
Inc., a Maryland corporation (the “Parent Debtor”), (ii) the Subsidiary Debtors,
(iii) GSO Capital Partners LP, solely on behalf of, and in its capacity as
investment adviser or sub-adviser to, certain funds and accounts (including
subsidiaries of such funds and accounts) advised or sub-advised by it or its
affiliates and named as signatories hereto (solely in such capacity, the “Plan
Sponsor”), (iv) Claren Road Credit Master Fund, Ltd. and Claren Road Credit
Opportunities Master Fund, Ltd. (collectively, “Claren Road”), and (v) each
beneficial holder (or investment manager or advisor for the beneficial holder)
of Senior Notes Claims identified on the signature pages hereto (each, together
with any of their respective successors and permitted assigns under this
Agreement, an “Initial Consenting Senior Noteholder,” and, together with any
beneficial holder (or investment or advisor for a beneficial holder) of the
Senior Notes Claims that becomes a party hereto after the Agreement Effective
Date in accordance with the terms hereof by executing and delivering a Joinder,
an “Additional Consenting Senior Noteholder”, and together with the Initial
Consenting Senior Noteholders, the “Consenting Senior Noteholders”). Certain
capitalized terms used herein are defined in Section 1.01 below.

RECITALS

WHEREAS, the Parties (other than Claren Road) entered into the Restructuring
Support Agreement, dated as of June 2, 2016 (the “Original RSA”), pursuant to
which such Parties agreed to certain matters pertaining to the support of a plan
of reorganization of the Debtors to be implemented pursuant to voluntary cases
under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the Southern District of Texas;

WHEREAS, since the date of the Original RSA, the Parties (including Claren Road)
have continued to engage in arm’s-length, good-faith discussions regarding a
restructuring of the Debtors’ capital structure on the terms set forth in the
Restructuring Term Sheet attached hereto as Exhibit A, including the Debtors’
indebtedness and obligations under the First Lien Facility, the Second Lien
Facility, and the Senior Notes;

WHEREAS, each Party desires that the Original RSA be amended and restated in its
entirety to, among other things, include Claren Road as a Consenting Debt Claims
Holder and express the agreement of each Party that the Restructuring be
implemented through the Agreed Restructuring Plan;

WHEREAS, to effectuate the Restructuring, the Debtors have commenced voluntary
reorganization cases under the Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of Texas;

WHEREAS, to ensure an orderly confirmation process in connection with the
Chapter 11 Cases, the Debtors are prepared to perform their obligations
hereunder subject to the terms and conditions hereof, including, among other
things, to file the Agreed Restructuring Plan and the Disclosure Statement, and
to use commercially reasonable efforts to have the Disclosure Statement approved
and the Agreed Restructuring Plan confirmed by the Bankruptcy Court;

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WHEREAS, the Plan Sponsor has consented to permit the Debtors to continue to
access cash collateral solely in accordance with the terms and conditions set
forth in the Interim Financing Order and the Final Financing Order;

WHEREAS, the Plan Sponsor has agreed to provide to the Debtors the DIP Credit
Facility;

WHEREAS, subject to the execution of definitive documentation and appropriate
approvals by the Bankruptcy Court, the following sets forth the agreement among
the Parties concerning their respective obligations with respect to the
Restructuring; and

WHEREAS, each Party has reviewed or has had the opportunity to review this
Agreement, the Restructuring Term Sheet, the New Warrants Term Sheet, the Final
Financing Order, and the DIP Credit Agreement, and each Party has agreed to the
terms of the Restructuring on the terms set forth therein.

NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each Party, intending to be legally bound hereby,
agrees as follows:

AGREEMENT

Section 1. Defined Terms; Incorporated Instruments; Conditions to Effectiveness.

1.01. Definitions. As used herein, the following capitalized terms have the
respective meanings assigned to them below:

“Agreed Restructuring Plan” means an amended joint chapter 11 plan of
reorganization (including all annexes, exhibits, or supplements thereto) that
amends and restates the Preliminary Restructuring Plan and is consistent with
the Restructuring Term Sheet in all material respects and shall contain such
other terms and conditions acceptable to the Debtors and the Plan Sponsor and
reasonably acceptable to Claren Road and the Required Consenting Senior
Noteholders.

“Agreement Effective Date” has the meaning given to such term in Section 1.04
hereof.

“Bankruptcy Code” means chapter 11 of title 11 of the United States Code,
11 U.S.C. §§ 101 et seq.

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern
District of Texas (Houston Division).

“Business Day” means each day that is not a Saturday, Sunday or other day on
which banking institutions in New York, New York or Houston, Texas are
authorized or required by law to remain closed.

 

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“Chapter 11 Cases” means the voluntary reorganization cases of the Debtors under
the Bankruptcy Code in the Bankruptcy Court.

“Claren Road Termination Events” has the meaning given to such term in
Section 5.02 hereof.

“Confirmation Order” has the meaning given to such term in Section 3.01(d)(i)(E)
hereof.

“Consenting Debt Claims Holder” means the beneficial owner of any Debt Claim
that is a party to this Agreement, on the date hereof or pursuant to a Joinder
entered into in accordance with the terms hereof.

“Consenting First Lien Facility Claims Holder” means the Plan Sponsor and any
other beneficial owner of First Lien Facility Claims that is a party to this
Agreement, on the date hereof or pursuant to a Joinder entered into in
accordance with the terms hereof.

“Consenting Second Lien Facility Claims Holders” means Claren Road and any other
beneficial owner of Second Lien Facility Claims that is a party to this
Agreement, on the date hereof or pursuant to a Joinder entered into in
accordance with the terms hereof.

“Consenting Senior Noteholder” means any beneficial owner of Senior Notes Claims
that is a party to this Agreement, on the date hereof or pursuant to a Joinder
entered into in accordance with the terms hereof.

“Debt Claims” means any First Lien Facility Claims, Second Lien Facility Claims,
and Senior Notes Claims.

“Debtor” means any of the Parent Debtor and the Subsidiary Debtors, and
“Debtors” means all of such entities collectively.

“Debtor Termination Events” has the meaning given to such term in Section 5.04
hereof.

“Definitive Documents” has the meaning given to such term in
Section 3.01(d)(i)(I) hereof.

“Disclosure Statement” means a disclosure statement that amends and restates the
Disclosure Statement to Accompany Plan of Reorganization of Warren Resources,
Inc. and its Affiliated Debtors, dated as of June 20, 2016 [Docket No. 114] in
its entirety, and describes the Agreed Restructuring Plan, the ballots and
related solicitation materials, in each case in form and substance acceptable to
the Debtors and the Plan Sponsor and reasonably acceptable to Claren Road and
the Required Consenting Senior Noteholders.

“Disclosure Statement Order” has the meaning given to such term in
Section 3.02(b)(iii) hereof.

 

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“DIP Credit Agreement” means the Senior Secured Term Loan Priority Collateral
Priming Super-Priority DIP Credit Agreement, in substantially the form attached
hereto as Exhibit B, including all annexes thereto, as may be amended,
supplemented, or modified from time to time in accordance with Section 7 of this
Agreement.

“DIP Credit Facility” means the debtor-in-possession credit facility governed
pursuant to the terms set forth in the DIP Credit Agreement.

“Final Financing Order” has the meaning given to such term in
Section 3.01(d)(i)(F) hereof.

“First Lien Facility” means the credit agreement, dated as of May 22, 2015, by
and among the Parent Debtor, as borrower, the guarantor parties thereto, the
First Lien Facility Agent, and the lenders parties thereto, as amended,
restated, amended and restated, supplemented, or otherwise modified from time to
time.

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

“First Lien Facility Claims” means all claims of lenders or the First Lien
Facility Agent, under the First Lien Facility.

“Interim Financing Order” means the Interim Order (a) Authorizing Use of Cash
Collateral On An Interim Basis and Final Basis, (b) Granting Liens and Providing
Superpriority Administrative Expense Status, (c) Granting Adequate Protection,
(d) Modifying Automatic Stay, and (e) Scheduling a Final Hearing [Docket
No. 48].

“Joinder” means a joinder in the form attached hereto as Exhibit C.

“New Common Equity” has the meaning given to such term in the Restructuring Term
Sheet.

“New Warrants” has the meaning given to such term in the Restructuring Term
Sheet.

“New Warrants Term Sheet” has the meaning given to such term in
Section 3.01(d)(i)(G) hereof.

“Party” means each of the parties to this Agreement and “Parties” means all of
such entities collectively.

“Petition Date” means June 2, 2016, the date on which the Chapter 11 Cases were
commenced in the Bankruptcy Court.

“Plan Effective Date” has the meaning given to such term in Section 3.02(b)(v)
hereof.

“Plan Solicitation Materials” has the meaning given to such term in
Section 3.01(d)(i)(C) hereof.

 

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“Plan Sponsor Termination Events” has the meaning given to such term in
Section 5.01 hereof.

“Plan Supplement” has the meaning given to such term in Section 3.01(d)(i)(H)
hereof.

“Preliminary Restructuring Plan” means, collectively, (a) the Plan of
Reorganization of Warren Resources, Inc. And Its Affiliated Debtors, dated as of
June 16, 2016 [Docket No. 97], and (b) the Plan of Reorganization of Warren
Resources, Inc. And Its Affiliated Debtors, dated as of June 20, 2016
[Docket No. 115], in each case, including all annexes, exhibits, or supplements
thereto.

“Qualified Marketmaker Joinder Date” has the meaning given to such term in
Section 6.02.

“Qualified Marketmaker” has the meaning given to such term in Section 6.02.

“Required Consenting Noteholder Termination Event” has the meaning given to such
term in Section 5.03 hereof.

“Required Consenting Senior Noteholders” means, as of any date of determination,
the Consenting Senior Noteholders, collectively holding at least a majority of
the aggregate outstanding principal amount of all the Senior Notes held by the
Consenting Senior Noteholders.

“Restructuring” means the restructuring of the Debt Claims pursuant to the terms
and conditions set forth herein and in the Restructuring Term Sheet.

“Restructuring Term Sheet” means the Restructuring Term Sheet attached hereto as
Exhibit A, as may be amended, supplemented, or modified from time to time in
accordance with Section 7 of this Agreement.

“Second Lien Facility” means the credit agreement, dated as of October 22, 2015,
by and among the Parent Debtor, as borrower, the guarantor parties thereto,
Cortland Capital Market Services, LLC, as administrative agent, and the lenders
thereto, as amended, restated, amended and restated, supplemented, or otherwise
modified from time to time.

“Second Lien Facility Agent” means Cortland Capital Market Services, LLC, as
administrative agent under the Second Lien Facility, and any successor
administrative agent thereunder.

“Second Lien Facility Claims” means all claims of lenders or the Second Lien
Facility Agent, under the Second Lien Facility.

“Senior Notes” means the 9.000% Senior Notes due 2022 issued by the Parent
Debtor under the Senior Notes Indenture.

“Senior Notes Claims” means all claims of holders of the Senior Notes thereunder
or under the Senior Notes Indenture.

 

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“Senior Notes Indenture” means the indenture, dated as of August 11, 2014, by
and among the Parent Debtor, as issuer, the subsidiary guarantor parties
thereto, and the Senior Notes Trustee, as amended, restated, amended and
restated, supplemented, or otherwise modified from time to time, providing for
the issuance of the Senior Notes.

“Senior Notes Trustee” means U.S. Bank National Association, as trustee under
the Senior Notes Indenture, and any successor trustee thereunder.

“Subsidiary Debtors” means the following subsidiaries of the Parent Debtor:
(i) Warren E&P, Inc., a New Mexico corporation, (ii) Warren Resources of
California, Inc., a California corporation, (iii) Warren Management Corp., a
Delaware corporation, (iv) Warren Energy Services, LLC, a Delaware limited
liability company and (v) Warren Marcellus LLC, a Delaware limited liability
company.

“Superior Proposal” has the meaning given to such term in Section 3.01(h)
hereof.

“Termination Events” has the meaning given to such term in Section 5.03 hereof.

“Transfer” with respect to any Debt Claim, means to sell, pledge, hypothecate,
or otherwise transfer or dispose of, or grant, issue or sell any option, right
to acquire, voting participation or other interest in such Debt Claim.
“Transferee” has the correlative meaning.

1.02. Interpretation. Unless otherwise specified, references in this Agreement
to any Section or clause refer to such Section or clause as contained in this
Agreement. The words “herein,” “hereof” and “hereunder” and other words of
similar import in this Agreement refer to this Agreement as a whole, and not to
any particular Section or clause contained in this Agreement. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural. The words “including”,
“includes” and “include” shall be deemed to be followed by the words “without
limitation.”

1.03. Incorporated Instruments. The Restructuring Term Sheet, the New Warrants
Term Sheet, the Final Financing Order, and the DIP Credit Agreement (as such
documents, including all exhibits and annexes thereto, may be amended or
modified in accordance with Section 7 hereof) are expressly incorporated by
reference herein and made a part of this Agreement as if fully set forth herein.

1.04. Conditions to Effectiveness. This Agreement shall become effective and
binding upon each of the Parties on the date and time (the “Agreement Effective
Date”) immediately following the execution and delivery of this fully-executed
Agreement by each Debtor, the Plan Sponsor, Claren Road, and Consenting Senior
Noteholders that in the aggregate hold at least 66 2/3% of the aggregate
outstanding principal amount of the Senior Notes Claims (determined without
regard to any claims held by a person or entity that is an “insider” as that
term is defined in section 101(31) of the Bankruptcy Code), it being understood
that the execution and delivery of this Agreement by each Party hereto shall
represent an acknowledgement by such Party that each such condition has been
satisfied. Upon and after the Agreement Effective Date, this Agreement may only
be amended, modified, waived, or otherwise supplemented as set forth in
Section 7 hereof.

 

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Section 2. Restructuring Term Sheet, Final Financing Order, and DIP Credit
Agreement.

The general terms and conditions of the Restructuring are set forth in the
Restructuring Term Sheet, the New Warrants Term Sheet, the Interim Financing
Order, the Final Financing Order, and the DIP Credit Agreement, in each case, as
supplemented by the terms and conditions of this Agreement, which the Parties
agree and acknowledge amends and restates the Original RSA in its entirety. In
the event of any inconsistency between the terms of this Agreement, on one hand,
and the Restructuring Term Sheet, the New Warrants Term Sheet, the Final
Financing Order, and/or the DIP Credit Agreement, on the other hand, the terms
of this Agreement shall control and govern. In the event of any inconsistency
between: (a) the Restructuring Term Sheet, on the one hand, and the Final
Financing Order and/or the DIP Credit Agreement, on the other hand, the Final
Financing Order shall control and govern; (b) the Restructuring Term Sheet, on
the one hand, and the DIP Credit Agreement, on the other hand, the Restructuring
Term Sheet shall govern; and (c) the DIP Credit Agreement, on the one hand, and
the Final Financing Order, on the other hand, the Final Financing Order shall
govern.

Section 3. Commitments Regarding the Restructuring Transactions.

3.01. Agreement to Support.

(a) Commitment of the Debtors. Subject to the terms and conditions hereof and
for so long as this Agreement has not been terminated in accordance with the
terms hereof, each Debtor shall comply with the following covenants:

(i) Each Debtor shall support consummation of the Restructuring, including the
solicitation, confirmation, and consummation of the Agreed Restructuring Plan
pursuant to the terms set forth herein or in the Restructuring Term Sheet, the
New Warrants Term Sheet, the Interim Financing Order, the Final Financing Order,
or the DIP Credit Agreement.

(ii) Except as otherwise expressly permitted hereby, each Debtor shall not,
directly or indirectly, in its capacity as a Party or otherwise, in any material
respect,

(A) object to, delay, impede, or take any other action to interfere with the
Restructuring (including entry of the Final Financing Order or approval of the
DIP Credit Facility);

(B) propose, file, support, seek, solicit, encourage, or vote for any
restructuring, chapter 11 plan, proposal, offer, dissolution, winding up,
liquidation, reorganization, merger, consolidation, business combination, joint
venture, partnership, or sale of assets (including an asset sale under
section 363 of the Bankruptcy Code) for any of the Debtors, other than the
Agreed Restructuring Plan (or cause any of the foregoing to occur); or

(C) take any other action that is inconsistent with or that would delay or
obstruct the proposal, solicitation, confirmation, or consummation of the Agreed
Restructuring Plan.

 

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(iii) Each Debtor shall not object to the Agreed Restructuring Plan, or
otherwise commence any proceeding to oppose the Agreed Restructuring Plan, the
Disclosure Statement, or any other pleadings or reorganization documents filed
by any of the Debtors in accordance with the Agreed Restructuring Plan.

(b) Commitment of the Consenting Debt Claims Holders. Subject to the terms and
conditions hereof and for so long as this Agreement has not been terminated in
accordance with the terms hereof, each Consenting Debt Claims Holder agrees to
comply with the following covenants (provided however that nothing in this
Section 3.01(b) shall require any Consenting Second Lien Facility Claims Holder
or any Consenting Senior Noteholder to incur any material expenses, liabilities
or other obligations, or agree to any commitments, undertakings, concessions,
indemnities or other arrangement that could result in the incurrence of any
material expenses, liabilities or other obligations by any Consenting Second
Lien Facility Claims Holder or any Consenting Senior Noteholder, respectively):

(i) Each Consenting Debt Claims Holder shall support consummation of the
Restructuring, including the solicitation, confirmation, and consummation of the
Agreed Restructuring Plan pursuant to the terms set forth in the Restructuring
Term Sheet, the New Warrants Term Sheet, the Final Financing Order, the DIP
Credit Agreement, and this Agreement.

(ii) Except as otherwise expressly permitted by this Agreement, each Consenting
Debt Claims Holder shall not, directly or indirectly, in its capacity as a
Consenting Debt Claims Holder or otherwise, in any material respect,

(A) object to, delay, impede, or take any other action to interfere with the
Restructuring (including entry of the Final Financing Order or approval of the
DIP Credit Facility);

(B) propose, file, support, seek, solicit, encourage, or vote for any
restructuring, chapter 11 plan, proposal, offer, dissolution, winding up,
liquidation, reorganization, merger, consolidation, business combination, joint
venture, partnership, or sale of assets (including an asset sale under
section 363 of the Bankruptcy Code) for any of the Debtors, other than the
Agreed Restructuring Plan (or cause any of the foregoing to occur); or

(C) take any other action that is inconsistent with, or that would reasonably be
expected to cause a delay or obstruction of the proposal, solicitation,
confirmation, or consummation of the Agreed Restructuring Plan.

 

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(iii) Each Consenting Debt Claims Holder shall, so long as its vote has been
properly solicited pursuant to sections 1125 and 1126 of the Bankruptcy Code,
including its receipt of a Bankruptcy Court-approved Disclosure Statement:

(A) vote or cause to be voted all of its Debt Claims, to accept the Agreed
Restructuring Plan by delivering its duly executed and timely completed ballot
or ballots accepting the Agreed Restructuring Plan following commencement of the
solicitation of acceptances of the Agreed Restructuring Plan in accordance with
sections 1125 and 1126 of the Bankruptcy Code; and

(B) not change or withdraw such vote (or cause or direct such vote to be changed
or withdrawn); provided that, upon termination of this Agreement pursuant to the
terms hereof, such vote shall be immediately revoked and deemed void ab initio.

(iv) Each Consenting Debt Claims Holder shall not object to, or vote or cause to
be voted any of its Debt Claims or other claims under its control to reject, the
Agreed Restructuring Plan, or otherwise commence any proceeding to oppose the
Agreed Restructuring Plan, the Disclosure Statement, or any other pleadings or
reorganization documents filed by any of the Debtors in connection with the
Agreed Restructuring Plan.

(v) Subject to the terms and conditions hereof, the Plan Sponsor agrees to
provide the DIP Credit Facility pursuant to the DIP Credit Agreement (subject to
the terms and conditions therein), and each Consenting Debt Claims Holder agrees
to the proposed treatment of the DIP Credit Facility set forth in the
Restructuring Term Sheet.

(c) Reservation of Rights Regarding Commitment to Support the Restructuring.
Notwithstanding the foregoing, except as otherwise expressly set forth in this
Agreement and subject to the terms and conditions hereof, the foregoing
provisions of Section 3.01 hereof shall not:

(i) prohibit the Consenting First Lien Facility Claims Holder from issuing any
instruction to the First Lien Facility Agent to take or not take any action
relating to the maintenance, protection, and preservation of the collateral
under the First Lien Facility;

(ii) prohibit the Consenting Second Lien Facility Claims Holders from issuing
any instruction to the Second Lien Facility Agent to take or not take any action
under the Second Lien Facility in accordance with this Agreement and the
Intercreditor Agreement (as defined in the Second Lien Facility);

(iii) prohibit any Consenting Senior Noteholder from issuing any instruction to
the Senior Notes Trustee to take or not take any action relating to the Senior
Notes Indenture or the Senior Notes;

(iv) prohibit the Consenting First Lien Facility Claims Holder, the Consenting
Second Lien Facility Claims Holders, or the Consenting Senior Noteholders from
objecting to any motion or pleading filed with the Bankruptcy

 

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Court seeking approval to use cash collateral in a manner inconsistent with the
Restructuring Term Sheet, the Interim Financing Order, or the Final Financing
Order or use proceeds of the DIP Credit Facility in a manner inconsistent with
the DIP Credit Agreement or the Final Financing Order in any material respect;

(v) limit the rights of the Parties under applicable law to appear and
participate as a party in interest in any matter to be adjudicated in any case
under the Bankruptcy Code (or otherwise) concerning the Debtors, so long as such
appearance and the positions advocated in connection therewith are not
inconsistent with this Agreement or the terms of the proposed Restructuring in
any material respect, and do not hinder, delay, or prevent consummation of the
proposed Restructuring; or

(vi) prohibit the Parties from appearing in proceedings for the purpose of
contesting whether any matter or fact is or results in a breach of, or is
inconsistent with, this Agreement; provided that, in the event this Agreement is
terminated, this Agreement and all communications and negotiations among the
Parties with respect hereto or any of the transactions contemplated hereunder
are without waiver or prejudice to the Parties’ rights and remedies and the
Parties hereby reserve all claims, defenses, and positions that they may have
with respect to each other.

Furthermore, nothing in this Agreement shall be deemed to (1) limit or restrict
any action by any Party to enforce any right, remedy, condition, consent, or
approval requirement under the Restructuring Term Sheet, the Agreed
Restructuring Plan, or the Definitive Documents (as defined below) or
(2) prevent any of the Debtors from taking any action that it is obligated to
take (or failing to take any action that it is prohibited from taking) in the
performance of any fiduciary duty or as otherwise required by applicable law
that such Debtor or the board of directors (or the members of any other
governing body performing a similar function) of such Debtor owes to any other
person or entity under applicable law; provided that any such action that
results in a Termination Event (as defined below) shall be subject to the
provisions set forth in Section 5 hereof. Each of the Debtors represents to the
Consenting First Lien Facility Claims Holder, the Consenting Second Lien
Facility Claims Holders, and the Consenting Senior Noteholders that, as of the
Agreement Effective Date, based on the facts and circumstances actually known by
such Debtor as of the Agreement Effective Date and after consulting with such
Debtor’s legal counsel, such Debtor’s entry into this Agreement is consistent
with the fiduciary duties or the board of directors (or the members of any other
governing body performing a similar function) of such Debtor.

(d) Definitive Documents.

(i) Subject to the terms and conditions hereof, each Party shall negotiate in
good faith each of the documents implementing, achieving and relating to the
Restructuring, including all definitive documents necessary for the Agreed
Restructuring Plan, including:

(A) all first-day motions, applications, and proposed orders, including those
relating to paying general unsecured claims,

 

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paying utility providers, paying critical vendors, continuing customer programs,
paying employee wages, paying insurance providers, and maintaining the Debtors’
existing cash management system;

(B) the Agreed Restructuring Plan;

(C) the Disclosure Statement, ballots, and other solicitation materials in
respect of the Agreed Restructuring Plan (collectively, the “Plan Solicitation
Materials”) and the related proposed order approving the Plan Solicitation
Materials (the “Disclosure Statement Order”);

(D) any motion to approve the Disclosure Statement and seek confirmation of the
Agreed Restructuring Plan;

(E) the proposed order confirming the Agreed Restructuring Plan
(the “Confirmation Order”), which must be in form and substance acceptable to
the Plan Sponsor and the Debtors and reasonably acceptable to Claren Road and
the Required Consenting Senior Noteholders;

(F) the final order authorizing the Debtors to use cash collateral and approving
the DIP Credit Facility, in the form annexed hereto as Exhibit D (such final
order, as may be amended, supplemented, or modified from time to time in
accordance with Section 7 of this Agreement being referred to herein as the
“Final Financing Order”);

(G) any document or agreement referenced in this Agreement, the Restructuring
Term Sheet, and/or the DIP Credit Agreement, including the definitive documents
governing the New First Lien Facility (as defined in the Restructuring Term
Sheet) and the warrant agreement governing the New Warrants, the terms of which
warrant agreement shall be consistent with the term sheet attached hereto as
Exhibit E (the “New Warrants Term Sheet”);

(H) the documents comprising the plan supplement setting forth, among other
things, (1) executory contracts and unexpired leases to be assumed or rejected,
(2) the identities of each Debtor’s post-effective date directors, managers, and
officers (as applicable), (3) claims and causes of action held by the Debtors to
be retained or released, as applicable, by the reorganized Debtors on the Agreed
Restructuring Plan’s effective date and (4) the corporate documents (including
bylaws, charters, shareholder agreement and other similar corporate documents)
for the reorganized Debtors (the “Plan Supplement”); and

 

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(I) such other documents and instruments necessary or appropriate to implement
the Restructuring (together with the Plan Supplement, and all documents,
agreements, motions or orders described in the immediately foregoing clauses (A)
through (H), the “Definitive Documents”); and

(ii) Subject to the terms and conditions hereof, and for so long as this
Agreement has not been terminated, each Party shall execute the Definitive
Documents that require execution by such Party and otherwise support the
Definitive Documents.

(iii) The Definitive Documents shall be consistent in all material respects with
the Restructuring Term Sheet and shall contain such other terms and conditions
acceptable to the Debtors and the Plan Sponsor and reasonably acceptable to
Claren Road and the Required Consenting Senior Noteholders.

(e) Plan Sponsor Fees and Expenses. The Debtors shall pay, when due and payable,
all outstanding prepetition and postpetition fees and expenses incurred by the
Plan Sponsor and its advisors, including the fees of and expenses incurred by
Kirkland & Ellis LLP, as counsel to the Plan Sponsor, Zack A. Clement PLLC, as
local counsel to the Plan Sponsor, and any financial advisor, technical advisor,
or other consultant, advisor, analyst, or other professional engaged by the Plan
Sponsor in connection with the Chapter 11 Cases. If this Agreement is terminated
in accordance with its terms, any unpaid fees and expenses shall be paid in full
within five (5) Business Days of such termination. The fees and expenses owed
under this section shall be entitled to administrative expense priority status.

(f) Claren Road Fees and Expenses. The Debtors shall pay, within ten
(10) calendar days’ receipt of an invoice, all reasonable and documented
outstanding prepetition and postpetition fees and expenses of and expenses
incurred by Bracewell LLP, as counsel, and Opportune LLP, as financial advisor,
to Claren Road in connection with the Chapter 11 Cases. If this Agreement is
terminated in accordance with its terms, any unpaid fees and expenses shall be
paid in full within five (5) Business Days of such termination. The fees and
expenses owed under this section shall be entitled to administrative expense
priority status.

(g) Consenting Senior Noteholder Fees and Expenses. Prior to the Petition Date,
the Debtors shall pay all then-accrued but unpaid reasonable and documented
prepetition fees and expenses incurred by Stroock & Stroock & Lavan LLP
(“Stroock”), as counsel to the Initial Consenting Senior Noteholders, and Haynes
and Boone, LLP (“HB”), as local counsel to the Initial Consenting Senior
Noteholders, plus a retainer in an amount to be agreed between Stroock and the
Company. Following the Petition Date, the Debtors shall pay, within ten
(10) calendar days’ receipt of an invoice, all outstanding prepetition and
postpetition fees and expenses incurred by the Consenting Senior Noteholders,
including the fees of and expenses incurred by Stroock and HB. If this Agreement
is terminated in accordance with its terms, any unpaid fees and expenses shall
be paid in full within five (5) Business Days of such termination. The fees and
expenses owed under this section shall be entitled to administrative expense
priority status.

 

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(h) Alternative Proposals. In the event that, during the period from the
Agreement Effective Date until the entry of an order approving the Disclosure
Statement describing the Agreed Restructuring Plan, the Debtors receive a
Superior Proposal (as defined below), the Debtors shall promptly provide a
written copy of such Superior Proposal to (i) Stroock and the Consenting
Supporting Noteholders, (ii) Claren Road and the professionals engaged by Claren
Road in connection with the Chapter 11 Cases and (iii) the Plan Sponsor and the
professionals engaged by the Plan Sponsor in connection with the Chapter 11
Cases. A “Superior Proposal” means a bona fide written proposal determined by
the board of directors of the Parent Debtor, in good faith after consultation
with the Parent Debtor’s external legal counsel and its financial advisor, to be
(i) more favorable, from a financial point of view, to the Debtors’ stakeholders
than the transactions contemplated by the Agreed Restructuring Plan, and
(ii) reasonably likely to be consummated on a timely basis, taking into account
legal, financial, regulatory, and other aspects of the proposal (including
conditions to consummation).

3.02. Milestones and Other Covenants.

(a) Subject to entry into appropriate confidentiality agreements, each of the
Debtors shall permit and facilitate any and all due diligence necessary to
consummate the Restructuring, including: (i) cooperating fully with the Plan
Sponsor, Claren Road, and the Consenting Senior Noteholders and each of their
respective officers, directors, employees, and advisors, in furnishing
information, as and when requested, including with respect to the Debtors’
financial affairs, finances, financial condition, and business operations;
(ii) authorizing the Plan Sponsor, Claren Road, and the Consenting Senior
Noteholders to meet and/or have discussions with any of its officers, directors,
employees, and advisors from time to time as reasonably requested by the Plan
Sponsor, Claren Road, or the Consenting Senior Noteholders to discuss any
matters regarding the Debtors’ financial affairs, finances, financial condition,
and business operations; and (iii) directing and authorizing all such persons
and entities to fully disclose to the Plan Sponsor, Claren Road, or the
Consenting Senior Noteholders all information requested by the Plan Sponsor,
Claren Road, or the Consenting Senior Noteholders regarding the foregoing.

(b) Each of the Debtors shall:

(i) no later than seven (7) days after the Agreement Effective Date, file with
the Bankruptcy Court the Agreed Restructuring Plan and the Disclosure Statement;

(ii) no later than July 25, 2016, cause the Bankruptcy Court to have entered the
Final Financing Order;

 

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(iii) no later than July 25, 2016, cause the Bankruptcy Court to have entered an
order approving the adequacy of the Disclosure Statement (the “Disclosure
Statement Order”);

(iv) no later September 15, 2016, cause the Bankruptcy Court to have entered the
Confirmation Order;

(v) no later than September 30, 2016, cause the effective date of the Agreed
Restructuring Plan (the “Plan Effective Date”) to occur.

(c) Each of the Parties shall distribute draft copies of all motions,
applications (including retention applications), proposed orders, pleadings, and
other related documents that such Party intends to file with the Bankruptcy
Court to counsel to each of the Debtors, the Plan Sponsor, Claren Road, and the
Initial Consenting Senior Noteholders, at least three (3) Business Days prior to
the date when such Party intends to file such document; provided that with
respect to any such document that is or relates to a Definitive Document, such
document shall be provided at least five (5) Business Days prior to the date
when such Party intends to file such Definitive Document or document related
thereto, and prior to any such filing shall consult in good faith with the other
Parties regarding the form and substance of any such proposed filing; provided,
further, that in the event of exigent circumstances that are not reasonably
foreseen, each of the Parties shall use its best efforts to distribute such
draft copies at the earliest practicable time.

(d) Each of the Debtors shall (i) operate its business in the ordinary course,
including maintaining its accounting methods, using commercially reasonable
efforts to preserve its assets and business relationships, continuing its
billing and collection procedures, using commercially reasonable efforts to
retain key employees, and maintaining its business records in accordance with
its past practices, and (ii) not sell, transfer, or otherwise dispose of any
material portion of its assets, other than hydrocarbons in the ordinary course
of business and other than as permitted in the Interim Financing Order, the
Final Financing Order, and/or the DIP Credit Agreement.

(e) Each of the Parties shall timely file a formal objection to any motion filed
with the Bankruptcy Court by a third party seeking the entry of an order
(i) directing the appointment of a trustee or an examiner with the authority to
operate the Debtors’ businesses pursuant to section 1104 of the Bankruptcy Code,
(ii) converting the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy
Code, or (iii) dismissing the Chapter 11 Cases.

(f) Each of the Parties shall timely file a formal objection to any motion filed
with the Bankruptcy Court by a third party seeking the entry of an order
modifying or terminating the Debtors’ exclusive right to file and/or solicit
acceptances of a chapter 11 plan; provided that nothing in this Agreement shall
prohibit or restrict the rights of the Parties to seek to have the Agreed
Restructuring Plan confirmed.

 

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(g) Each of the Debtors shall not enter into a new employment agreement or
amend, restate, or otherwise change the compensation for any member of
management prior to the consummation of the Restructuring without the prior
written consent of the Plan Sponsor.

(h) Each of the Debtors shall not assume, assume and assign, or reject any
executory contracts or unexpired leases without the prior written consent of the
Plan Sponsor.

Section 4. Representations and Warranties.

4.01. Mutual Representations and Warranties. Each of the Parties, severally and
not jointly, represents and warrants to each other Party, as of the date of this
Agreement, as follows (each of which is a continuing representation and
warranty):

(a) It is validly existing and in good standing under the laws of the state of
its organization, and this Agreement is a legal, valid, and binding obligation
of such Party, enforceable against it in accordance with its terms, except as
enforcement may be limited by applicable laws relating to or limiting creditor’s
rights generally or by equitable principles relating to enforceability;

(b) Except as expressly provided in this Agreement, it has all requisite power
and authority to enter into this Agreement and to carry out the Restructuring
and otherwise perform its obligations under this Agreement;

(c) The execution and delivery by such Party of this Agreement and the
performance of its obligations hereunder have been duly authorized by all
necessary action on its part; and

(d) It has been represented by legal counsel of its choosing in connection with
this Agreement and the transactions contemplated hereby, has had the opportunity
to review this Agreement with its legal counsel and has not relied on any
statements made by any other Party or its legal counsel as to the meaning of any
term or condition contained herein or in deciding whether to enter into this
Agreement or the transactions contemplated hereby.

4.02. Representations of Each Consenting First Lien Facility Claims Holder. Each
Consenting First Lien Facility Claims Holder represents and warrants that, as of
the Agreement Effective Date:

(a) such Consenting First Lien Facility Claims Holder, together with its
affiliates that are parties hereto, is the beneficial owner of the entire
principal amount of the First Lien Facility Claims, or is the nominee,
investment manager, advisor, and/or sub-advisor for the beneficial holders or
otherwise has the ability to vote or cause to be voted such First Lien Facility
Claims;

 

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(b) other than pursuant to this Agreement, such First Lien Facility Claims are
free and clear of any pledge, lien, security interest, charge, claim, equity,
option, proxy, voting restriction, right of first refusal or other limitation on
disposition, or encumbrances of any kind, that would adversely affect in any way
such Consenting First Lien Facility Claims Holder’s performance of its
obligations contained in this Agreement at the time such obligations are
required to be performed; and

(c) such Consenting First Lien Facility Claims Holder has the direct or indirect
authority to act on behalf of, cause to be voted or vote and consent to matters
concerning such First Lien Facility Claims and to dispose of, exchange, assign
and transfer such rights with respect to such First Lien Facility Claims.

4.03. Representations of the Consenting Second Lien Facility Claims Holders.
Each Consenting Second Lien Facility Claims Holder represents and warrants that,
as of the Agreement Effective Date:

(a) such Consenting Second Lien Facility Claims Holder, together with its
affiliates that are parties hereto, is the beneficial owner of the entire
principal amount of the Second Lien Facility Claims, or is the nominee,
investment manager, advisor, and/or sub-advisor for the beneficial holders or
otherwise has the ability to vote or cause to be voted such Second Lien Facility
Claims;

(b) other than pursuant to this Agreement, such Second Lien Facility Claims are
free and clear of any pledge, lien, security interest, charge, claim, equity,
option, proxy, voting restriction, right of first refusal or other limitation on
disposition, or encumbrances of any kind, that would adversely affect in any way
such Consenting Second Lien Facility Claims Holder’s performance of its
obligations contained in this Agreement at the time such obligations are
required to be performed; and

(c) such Consenting Second Lien Facility Claims Holder has the direct or
indirect authority to act on behalf of, cause to be voted or vote and consent to
matters concerning such Second Lien Facility Claims and to dispose of, exchange,
assign and transfer such rights with respect to such Second Lien Facility
Claims.

4.04. Representations of the Consenting Senior Noteholders. Each Consenting
Senior Noteholder, severally and not jointly, represents and warrants that, as
of the Agreement Effective Date:

(a) it is the beneficial owner of the principal amount of the Senior Notes
Claims (and the Senior Notes to which such Senior Notes Claim relate), stated in
the signature block to this Agreement of such Consenting Senior Noteholder, or
is the nominee, investment manager, advisor, and/or sub-advisor for the
beneficial holders or otherwise has the ability to vote or cause to be voted
such Senior Notes Claims;

(b) other than pursuant to this Agreement, such Senior Notes Claims (and the
Senior Notes to which such Senior Notes Claim relate) are free and clear of any
pledge, lien, security interest, charge, claim, equity, option, proxy, voting
restriction, right of first refusal or other limitation on disposition, or
encumbrances of any kind, that would adversely affect in any way such Consenting
Senior Noteholder’s performance of its obligations contained in this Agreement
at the time such obligations are required to be performed; and

 

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(c) it has the direct or indirect authority to act on behalf of, cause to be
voted or vote and consent to matters concerning the Senior Notes Claims and to
dispose of, exchange, assign and transfer such rights with respect to the Senior
Notes Claims.

4.05. Representation of the Company Regarding General Unsecured Claims. The
Company, after reasonable due diligence, investigation and analysis, has
determined that aggregate prepetition general unsecured claims (other than
prepetition general unsecured claims on account of or related to the First Lien
Facility Claims, Second Lien Facility Claims, Senior Note Claims, and/or the
Citrus Earn Out Claim) asserted against any Debtor are not reasonably likely to
exceed $35,000,000.

Section 5. Termination Events.

5.01. Plan Sponsor Termination Events. The Plan Sponsor may terminate its
obligations and liabilities under this Agreement upon three (3) Business Days’
prior written notice (in accordance with Section 9.10 hereof) to the Debtors,
Claren Road, and counsel to the Required Consenting Senior Noteholders of the
occurrence of any of the following events (each, a “Plan Sponsor Termination
Event”):

(a) any of the events listed in Section 3.02(b) hereof does not occur by the
dates set forth therein;

(b) a Termination Date (as defined in the Interim Financing Order (until entry
of the Final Financing Order), the Final Financing Order, or the DIP Credit
Agreement, as applicable) occurs;

(c) the breach in any respect by any Debtor, Claren Road, or the Required
Consenting Senior Noteholders of (or failure to satisfy) any of their respective
obligations, representations, warranties, or covenants set forth in this
Agreement (excluding those set forth in Section 3.02(b) hereof) and failure to
cure such breach within five (5) Business Days of the Debtors, Claren Road, or
the Required Consenting Senior Noteholders, respectively, receiving written
notice from the Plan Sponsor of such breach in accordance with Section 9.10
hereof;

(d) the Debtors, Claren Road, or the Required Consenting Senior Noteholders file
any motion, pleading, any Definitive Document, or related document with the
Bankruptcy Court in a manner that is inconsistent in any respect with this
Agreement, the Restructuring Term Sheet, the Final Financing Order, or the DIP
Credit Agreement, and such motion, pleading, or related document has not been
withdrawn after three (3) Business Days of the Debtors, Claren Road, and the
Required Consenting Senior Noteholders, receiving written notice in accordance
with Section 9.10 hereof from the Plan Sponsor that such motion, pleading, or
related document is a Plan Sponsor Termination Event pursuant to this
Section 5.01(d);

 

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(e) the Bankruptcy Court enters an order approving debtor-in-possession
financing or exit financing that is inconsistent with the Restructuring Term
Sheet and otherwise not agreed to by the Plan Sponsor;

(f) any of the Definitive Documents, the Interim Financing Order, the Final
Financing Order, or any other order entered by the Bankruptcy Court related
thereto shall have been modified, abrogated, terminated, or otherwise is not in
full force and effect, without the consent of the Plan Sponsor;

(g) the issuance by any governmental authority, including any regulatory
authority or court of competent jurisdiction, of any ruling or order enjoining
the consummation of the Restructuring in a way that cannot be reasonably
remedied by the Debtors in a manner that does not prevent or diminish in a
material way compliance with the terms of this Agreement, the Restructuring Term
Sheet, the Final Financing Order, or the DIP Credit Agreement; provided that the
Debtors shall have ten (10) Business Days after receiving such ruling or order
to cure any breach in a manner that does not prevent or diminish in a material
way compliance with the terms of this Agreement, the Restructuring Term Sheet,
the Final Financing Order, or the DIP Credit Agreement;

(h) the Bankruptcy Court enters an order (A) directing the appointment of an
examiner with expanded powers to operate the Debtors’ businesses pursuant to
section 1104 of the Bankruptcy Code or a trustee in any of the Chapter 11 Cases,
(B) converting any of the Chapter 11 Cases to cases under chapter 7 of the
Bankruptcy Code, or (C) dismissing any of the Chapter 11 Cases;

(i) the Bankruptcy Court enters an order terminating the Debtors’ exclusive
right to file a chapter 11 plan pursuant to section 1121 of the Bankruptcy Code;
provided that the Plan Sponsor must provide notice (in accordance with
Section 9.10 hereof) of its intention to terminate its obligations and
liabilities under this Agreement with respect to the foregoing no more than 10
days following entry of any such order terminating the Debtors’ exclusive right
to file a chapter 11 plan pursuant to section 1121 of the Bankruptcy Code; or

(j) the board of directors (or the members of any other governing body
performing a similar function) of any Debtor determines, after consultation with
its legal counsel, that proceeding with the transactions contemplated by this
Agreement would be inconsistent with the continued exercise of their fiduciary
duties (including by filing a motion or other document in the Bankruptcy Court
seeking approval of a Superior Proposal).

5.02. Claren Road Termination Events. Claren Road may terminate its obligations
and liabilities under this Agreement upon three (3) Business Days’ prior written
notice (in accordance with Section 9.10 hereof) to the Debtors, the Plan
Sponsor, and counsel to the Required Consenting Senior Noteholders of the
occurrence of any of the following events (each, a “Claren Road Termination
Event”):

(a) any of the events listed in Section 3.02(b) hereof does not occur by the
dates set forth therein;

 

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(b) a Termination Date (as defined in the Interim Financing Order (until entry
of the Final Financing Order), the Final Financing Order, or the DIP Credit
Agreement, as applicable) occurs;

(c) the breach in any respect by the Plan Sponsor, the Required Consenting
Senior Noteholders or any Debtor of (or failure to satisfy) any of their
respective obligations, representations, warranties, or covenants set forth in
this Agreement (excluding those set forth in Section 3.02(b) hereof) and failure
to cure such breach within five (5) Business Days of the Plan Sponsor, the
Required Consenting Senior Noteholders or the Debtors, respectively, receiving
written notice from counsel to Claren Road of such breach in accordance with
Section 9.10 hereof;

(d) the Debtors, the Required Consenting Senior Noteholders or the Plan Sponsor
file any motion, pleading, any Definitive Document or related document with the
Bankruptcy Court in a manner that is inconsistent in any respect with this
Agreement, the Restructuring Term Sheet, the New Warrants Term Sheet, the Final
Financing Order, or the DIP Credit Agreement, and such motion, pleading, or
related document has not been withdrawn after three (3) Business Days of the
Debtors, the Required Consenting Senior Noteholders and the Plan Sponsor
receiving written notice in accordance with Section 9.10 hereof from counsel to
Claren Road that such motion, pleading, or related document is a Claren Road
Termination Event pursuant to this Section 5.02(d);

(e) the Bankruptcy Court enters an order approving debtor-in-possession
financing or exit financing that is materially inconsistent with the
Restructuring Term Sheet and otherwise not agreed to by Claren Road (which
consent shall not be unreasonably withheld);

(f) any of the Definitive Documents, the Final Financing Order or any other
order entered by the Bankruptcy Court related thereto shall have been modified,
abrogated terminated, or otherwise is not in full force and effect, without the
consent of Claren Road (which consent shall not be unreasonably withheld);

(g) the issuance by any governmental authority, including any regulatory
authority or court of competent jurisdiction, of any ruling or order enjoining
the consummation of the Restructuring in a way that cannot be reasonably
remedied by the Debtors in a manner that does not prevent or diminish in a
material way compliance with the terms of this Agreement, the Restructuring Term
Sheet, the Final Financing Order, or the DIP Credit Agreement; provided that the
Debtors shall have ten (10) Business Days after receiving such ruling or order
to cure any breach in a manner that does not prevent or diminish in a material
way compliance with the terms of this Agreement, the Restructuring Term Sheet,
the Final Financing Order, or the DIP Credit Agreement;

(h) the Bankruptcy Court enters an order (A) directing the appointment of an
examiner with expanded powers to operate the Debtors’ businesses pursuant to

 

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section 1104 of the Bankruptcy Code or a trustee in any of the Chapter 11 Cases,
(B) converting any of the Chapter 11 Cases to cases under chapter 7 of the
Bankruptcy Code, or (C) dismissing any of the Chapter 11 Cases; or

(i) the board of directors (or the members of any other governing body
performing a similar function) of any Debtor determines, after consultation with
its legal counsel, that proceeding with the transactions contemplated by this
Agreement would be inconsistent with the continued exercise of their fiduciary
duties (including by filing a motion or other document in the Bankruptcy Court
seeking approval of a Superior Proposal).

5.03. Required Consenting Senior Noteholder Termination Events. The Required
Consenting Noteholders may terminate the respective obligations and liabilities
of the Consenting Senior Noteholders under this Agreement upon three (3)
Business Days’ prior written notice (in accordance with Section 9.10 hereof) to
the Plan Sponsor, Claren Road or Debtors, as applicable, of the occurrence of
any of the following events (each, an “Required Consenting Noteholder
Termination Event,” and, together with the Plan Sponsor Termination Events, the
Claren Road Termination Events and the Debtor Termination Events,
the “Termination Events”):

(a) any of the events listed in Section 3.02(b) hereof does not occur by the
dates set forth therein;

(b) a Termination Date (as defined in the Interim Financing Order (until entry
of the Final Financing Order), the Final Financing Order, or the DIP Credit
Agreement, as applicable) occurs;

(c) the breach in any respect by the Plan Sponsor, Claren Road, or any Debtor of
(or failure to satisfy) any of their respective obligations, representations,
warranties, or covenants set forth in this Agreement (excluding those set forth
in Section 3.02(b) hereof) and failure to cure such breach within five (5)
Business Days of the Plan Sponsor, Claren Road, or the Debtors, respectively,
receiving written notice from counsel to the Required Consenting Senior
Noteholders of such breach in accordance with Section 9.10 hereof;

(d) the Debtors, Claren Road, or the Plan Sponsor file any motion, pleading, any
Definitive Document or related document with the Bankruptcy Court in a manner
that is inconsistent in any respect with this Agreement, the Restructuring Term
Sheet, the Final Financing Order, or the DIP Credit Agreement, and such motion,
pleading, or related document has not been withdrawn after three (3) Business
Days of the Debtors, Claren Road, and the Plan Sponsor receiving written notice
in accordance with Section 9.10 hereof from counsel to the Required Consenting
Senior Noteholders that such motion, pleading, or related document is a Required
Consenting Noteholder Termination Event pursuant to this Section 5.03(d);

(e) the Bankruptcy Court enters an order approving debtor-in-possession
financing or exit financing that is materially inconsistent with the
Restructuring Term Sheet and otherwise not agreed to by the Required Consenting
Senior Noteholders (which consent shall not be unreasonably withheld);

 

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(f) any of the Definitive Documents, the Interim Financing Order, the Final
Financing Order, or any other order entered by the Bankruptcy Court related
thereto shall have been modified, abrogated terminated, or otherwise is not in
full force and effect, without the consent of the Required Consenting Senior
Noteholders (which consent shall not be unreasonably withheld);

(g) the issuance by any governmental authority, including any regulatory
authority or court of competent jurisdiction, of any ruling or order enjoining
the consummation of the Restructuring in a way that cannot be reasonably
remedied by the Debtors in a manner that does not prevent or diminish in a
material way compliance with the terms of this Agreement, the Restructuring Term
Sheet, the Interim Financing Order, the Final Financing Order, or the DIP Credit
Agreement; provided that the Debtors shall have ten (10) Business Days after
receiving such ruling or order to cure any breach in a manner that does not
prevent or diminish in a material way compliance with the terms of this
Agreement, the Restructuring Term Sheet, the Interim Financing Order, the Final
Financing Order, or the DIP Credit Agreement;

(h) the Bankruptcy Court enters an order (A) directing the appointment of an
examiner with expanded powers to operate the Debtors’ businesses pursuant to
section 1104 of the Bankruptcy Code or a trustee in any of the Chapter 11 Cases,
(B) converting any of the Chapter 11 Cases to cases under chapter 7 of the
Bankruptcy Code, or (C) dismissing any of the Chapter 11 Cases; or

(i) the board of directors (or the members of any other governing body
performing a similar function) of any Debtor determines, after consultation with
its legal counsel, that proceeding with the transactions contemplated by this
Agreement would be inconsistent with the continued exercise of their fiduciary
duties (including by filing a motion or other document in the Bankruptcy Court
seeking approval of a Superior Proposal).

5.04. Debtor Termination Events. The Debtors may terminate their obligations and
liabilities under this Agreement upon three (3) Business Days’ prior written
notice (in accordance with Section 9.10 hereof) to the Plan Sponsor, counsel to
Claren Road, and counsel to the Required Consenting Senior Noteholders, as
applicable, of the occurrence of any of the following events (each, a “Debtor
Termination Event”):

(a) the material breach by the Plan Sponsor, Claren Road or the Required
Consenting Senior Noteholders of any of their respective representations,
warranties, or covenants set forth in this Agreement that remains uncured for a
period of five (5) Business Days after it receives written notice of such breach
from any of the Debtors;

(b) the issuance by any governmental authority, including any regulatory
authority or court of competent jurisdiction, of any final, non-appealable
ruling or order that would have a material adverse effect on the consummation of
the Restructuring (taken as a whole); or

 

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(c) the board of directors (or the members of any other governing body
performing a similar function) of any Debtor determines, after consultation with
its legal counsel, that proceeding with the transactions contemplated by this
Agreement would be inconsistent with the continued exercise of their fiduciary
duties (including by filing a motion or other document in the Bankruptcy Court
seeking approval of a Superior Proposal).

5.05. Unclean Hands. Notwithstanding any provision in this Agreement to the
contrary, no Party shall be entitled to terminate this Agreement if such Party
is in material breach of any provision hereof.

5.06. Mutual Termination. This Agreement may be terminated by mutual, written
agreement signed by each Debtor, the Plan Sponsor, Claren Road, and the Required
Consenting Senior Noteholders.

5.07. Effect of Termination. Upon the termination of this Agreement under
Section 5.01, 5.02, 5.03 or 5.04 hereof, (a) except with respect to the
continuing obligations relating to the fees and expenses specified in
Section 3.01 hereof, this Agreement shall be of no further force and effect and
each Party shall be released from its commitments, undertakings, and agreements
under or related to this Agreement and shall have the rights and remedies that
it would have had it not entered into this Agreement, and shall be entitled to
take all actions, whether with respect to the Restructuring or otherwise, that
it would have been entitled to take had it not entered into this Agreement, and
(b) any and all consents tendered by the Plan Sponsor, Claren Road or any
Consenting Senior Noteholder prior to such termination shall be deemed, for all
purposes, to be null and void ab initio, shall not be considered or otherwise
used in any manner by the Parties in connection with the Restructuring and this
Agreement or otherwise, and such consents may be changed or resubmitted
regardless of whether the applicable voting deadline has passed (without the
need to seek an order from the Bankruptcy Court or consent from the Debtors
allowing such change or resubmission). Notwithstanding the foregoing, other than
in the case of mutual termination under Section 5.06 hereof, any claim for
breach of this Agreement that accrued prior to the date of a Party’s termination
or termination of this Agreement (as the case may be) and all other rights and
remedies of the Parties hereto shall not be prejudiced as a result of
termination.

5.08. Termination Upon Consummation of the Restructuring. This Agreement shall
terminate automatically without any further required action or notice on the
Plan Effective Date.

Section 6. Transfer of Debt Claims.

6.01. Each Consenting Debt Claims Holder shall not directly or indirectly
(a) grant any proxies to any person, in connection with its Debt Claims, to vote
on the Restructuring, or (b) Transfer any Debt Claims, except (i) to a
transferee that is a Consenting Debt Claims Holder, (ii) an affiliate,
subsidiary, related fund, or managed account of such Consenting Debt Claims
Holder (provided that such affiliate, subsidiary, related fund or managed
account shall automatically be deemed party to this Agreement), or (iii) to such
other person or entity that first

 

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agrees in writing by executing a Joinder to be subject to the terms and
conditions of this Agreement as a Consenting Debt Claims Holder and promptly
delivering such Joinder to the Company at its address in set forth in
Section 9.10 hereof. Each Consenting Debt Claims Holder that Transfers a Debt
Claim shall notify the Company and Stroock in writing of such Transfer
(identifying the Transferee and the settlement date of such Transfer) within two
Business Days after the settlement of such Transfer. Any Transfer of any Debt
Claim that does not comply with this Agreement shall be deemed void ab initio.
Notwithstanding anything contained herein to the contrary, nothing in this
Agreement shall prohibit or preclude any Consenting Debt Claims Holder or an
affiliate of a Consenting Debt Claims Holder from (A) acquiring additional Debt
Claims; provided, however, that any such additional Debt Claims acquired by a
Consenting Debt Claims Holder or an affiliate of a Consenting Debt Claims Holder
shall, upon acquisition, automatically be deemed to be subject to all the terms
of this Agreement, or (B) granting any liens or encumbrances on any Debt Claims
in favor of a bank or broker-dealer holding custody of such claims in the
ordinary course of business and which lien or encumbrance is released upon
Transfer of such claims.

6.02. Notwithstanding anything herein to the contrary, (i) any Consenting Debt
Claims Holder may Transfer any of its Debt Claims to an entity that is acting in
its capacity as a Qualified Marketmaker (as defined below) without the
requirement that the Qualified Marketmaker be or become a Party; provided,
however, that the Qualified Marketmaker subsequently Transfers all right, title
and interest in such Debt Claims to a Transferee that is or becomes a Party as
provided above, and the Transfer documentation between the transferring Party
and such Qualified Marketmaker shall contain a requirement that provides as such
(the transferring Party shall use commercially reasonable efforts to allow the
Company to be an explicit third party beneficiary of such requirement), and
(ii) to the extent any Party is acting in its capacity as a Qualified
Marketmaker, it may Transfer any Debt Claims that it acquires from a holder of
such Debt Claims that is not a Party hereto without the requirement that the
Transferee be or become a Party. Notwithstanding the foregoing, if, at the time
of the proposed Transfer of such Debt Claims to the Qualified Marketmaker, such
Debt Claims (x) may be voted on the Agreed Restructuring Plan, the proposed
transferor Party must first vote such Debt Claims in accordance with and subject
to the requirements of Section 3.01(b) hereof, or (y) have not yet been and may
not yet be voted on the Agreed Restructuring Plan, and such Qualified
Marketmaker does not Transfer such Debt Claims to a subsequent Transferee prior
to the fifth (5th) business day prior to the expiration of the voting deadline
(such date, the “Qualified Marketmaker Joinder Date”), such Qualified
Marketmaker shall be required to (and the Transfer documentation to the
Qualified Marketmaker shall have provided that it shall), on the first business
day immediately following the Qualified Marketmaker Joinder Date, become a Party
with respect to such Debt Claims in accordance with the terms hereof (provided
that the Qualified Marketmaker shall automatically, and without further notice
or action, no longer be a Party with respect to such Debt Claims at such time
that the Transferee of such Debt Claims becomes a Party with respect to such
Debt Claims). For these purposes, “Qualified Marketmaker” means an entity that
(X) holds itself out to the market as standing ready in the ordinary course of
business to purchase from and sell to customers’ Debt Claims, or enter with
customers into long and/or short positions in Debt Claims, in its capacity as a
dealer or market maker in such Debt Claims; and (Y) is in fact regularly in the
business of making a market in claims, interests and/or securities of issuers or
borrowers.

 

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Section 7. Amendments. Except as otherwise provided herein, any modification,
amendment, supplement or waiver of (a) this Agreement shall require the prior
written consent (which consent shall not be withheld unreasonably) of each of
the Debtors, the Plan Sponsor, Claren Road, and the Required Consenting Senior
Noteholders, (b) the Final Financing Order or the DIP Credit Agreement,
including any annexes to either of such instruments, shall require the prior
written consent of (i) the Debtors, (ii) the Plan Sponsor, (iii) to the extent
such modification, amendment, supplement or waiver adversely affects the rights,
interests, protections or recoveries of Claren Road, in their capacities as
creditors of the Debtors and the Debtors’ estates, whether under this Agreement,
the Restructuring Term Sheet, the Agreed Restructuring Plan or otherwise, Claren
Road, and (iv) to the extent such modification, amendment, supplement or waiver
adversely affects the rights, interests, protections or recoveries of the Senior
Noteholders, in their capacities as general unsecured creditors of the Debtors
and the Debtors’ estates, whether under this Agreement, the Restructuring Term
Sheet, the Agreed Restructuring Plan or otherwise, the Required Consenting
Senior Noteholders, or (c) the Restructuring Term Sheet or the New Warrants Term
Sheet shall require (i) the prior written consent of the Debtors and the Plan
Sponsor and (ii) if such modification, amendment, supplement or waiver is
adverse to Claren Road, the prior written consent of Claren Road (which consent
shall not be withheld unreasonably) (provided that any such modification or
amendment of the Restructuring Term Sheet or the New Warrants Term Sheet that
affects the nature, form, substance, amount or timing of the treatment,
distributions or recoveries to Claren Road or the rights and protections of
minority stockholders as set forth in the Restructuring Term Sheet or the New
Warrants Term Sheet as of the date hereof, or that adversely affects the value
of the New Common Equity or the New Warrants, shall require the prior written
consent of Claren Road in its sole discretion) and (iii) if such modification,
amendment, supplement or waiver is adverse to the Consenting Senior Noteholders,
the prior written consent of the Required Consenting Senior Noteholders (which
consent shall not be withheld unreasonably) (provided that any such modification
or amendment of the Restructuring Term Sheet or the New Warrants Term Sheet that
affects the nature, form, substance, amount or timing of the treatment,
distributions or recoveries to holders of the Senior Notes or the rights and
protections of minority stockholders as set forth in the Restructuring Term
Sheet or the New Warrants Term Sheet as of the date hereof, or that adversely
affects the value of the New Common Equity or the New Warrants, shall require
the prior written consent of the Required Consenting Senior Noteholders in their
sole discretion).

Section 8. No Solicitation. Notwithstanding anything to the contrary, this
Agreement is not and shall not be deemed to be (a) a solicitation of consents to
the Agreed Restructuring Plan, or any other chapter 11 plan, or (b) an offer for
the issuance, purchase, sale, exchange, hypothecation, or other transfer of
securities or a solicitation of an offer to purchase or otherwise acquire
securities for purposes of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. The acceptance of the Plan Sponsor,
any Consenting Second Lien Facility Claims Holder, and any Consenting Senior
Noteholder of the Agreed Restructuring Plan, or any other chapter 11 plan, shall
not be solicited until the Plan Sponsor, any such Consenting Second Lien
Facility Claims Holder, and any such Consenting Senior Noteholder, as
applicable, have received the Disclosure Statement and related ballot and
solicitation materials, each as approved by the Bankruptcy Court.

 

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Section 9. Miscellaneous.

9.01. Good-Faith Cooperation; Further Assurances. The Parties shall cooperate
with each other in good faith in respect of matters concerning the
implementation and consummation of the Restructuring. Subject to the other terms
of this Agreement, the Parties agree to execute and deliver such other
instruments and perform such acts, in addition to the matters herein specified,
as may be reasonably appropriate or necessary, from time to time, to effectuate
the Restructuring in a manner materially consistent with the terms set forth in
this Agreement, the Restructuring Term Sheet, the Interim Financing Order, and
the DIP Credit Agreement, as applicable.

9.02. Complete Agreement. This Agreement and the exhibits and annexes hereto
represent the entire agreement between the Parties with respect to the subject
matter hereof and supersede all prior agreements, oral or written, between the
Parties with respect thereto. No claim of waiver, modification, consent, or
acquiescence with respect to any provision of this Agreement shall be made
against any Party, except on the basis of a written instrument executed by or on
behalf of such Party.

9.03. Parties; Assignment. This Agreement shall be binding upon, and inure to
the benefit of, the Parties. Except as provided expressly herein or in a Joinder
entered into in compliance with the terms hereof, no rights or obligations of
any Party under this Agreement may be assigned or transferred to any other
person or entity, and any purported assignment in violation hereof shall be null
and void ab initio.

9.04. Headings. The headings of all Sections of this Agreement are inserted
solely for the convenience of reference and are not a part of and are not
intended to govern, limit, or aid in the construction or interpretation of any
term or provision hereof.

9.05. Governing Law; Submission to Jurisdiction; Selection of Forum; Waiver of
Trial by Jury. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York. Each Party agrees that it shall bring
any action or proceeding in respect of any claim arising out of or related to
this Agreement, to the Bankruptcy Court. Solely in connection with claims
arising under this Agreement, each Party (a) irrevocably submits to the
exclusive jurisdiction of the Bankruptcy Court, (b) waives any objection to
laying venue in any such action or proceeding in the Bankruptcy Court, and
(c) waives any objection that the Bankruptcy Court is an inconvenient forum or
does not have jurisdiction over any Party hereto with respect to any claims
arising under this Agreement. Each Party hereto irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereunder.

9.06. Execution of Agreement. This Agreement may be executed and delivered (by
facsimile, electronic mail, or otherwise) in any number of counterparts, each of
which, when executed and delivered, shall be deemed an original, and all of
which together shall constitute the same agreement.

9.07. Interpretation. This Agreement is the product of negotiations between the
Parties, and in the enforcement or interpretation hereof, is to be interpreted
in a neutral manner, and any presumption with regard to interpretation for or
against any Party by reason of that Party having drafted or caused to be drafted
this Agreement, or any portion hereof, shall not be effective in regard to the
interpretation hereof.

 

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9.08. Successors and Assigns. Subject to Section 6 hereof, this Agreement is
intended to bind and inure to the benefit of the Parties and their respective
successors, permitted assigns, heirs, executors, administrators, and
representatives, other than a trustee or similar representative appointed in a
bankruptcy case.

9.09. Acknowledgements. Notwithstanding anything herein to the contrary, this
Agreement shall not be construed to limit the Debtors or any member of the
Debtors’ boards of directors’ exercise (in their sole discretion) of its
fiduciary duties to any person, including those arising from the Debtors’ status
as debtors or debtors in possession under the Bankruptcy Code or under other
applicable law, and any such exercise of such fiduciary duties shall not be
deemed to constitute a breach of the terms of this Agreement. Nothing in this
Agreement shall limit in any way the right of the Parties to participate in the
Chapter 11 Cases; provided that such participation does not violate and is not
inconsistent with the terms of this Agreement, the Restructuring Term Sheet, the
Interim Financing Order, or the DIP Credit Agreement, as applicable.

9.10. Notices. All notices hereunder shall be deemed given if in writing and
delivered, if sent in portable document format (pdf) by electronic mail, or by
courier, or by registered or certified mail (return receipt requested) to the
following addresses (or at such other addresses as shall be specified by like
notice):

 

(a)    if to the Debtors, to:    11 Greenway Plaza, Suite 3050    Houston, Texas
77046    Attention:    James A. Watt    E-mail:    jawatt@warrenresources.com   
with copies (which shall not constitute notice) to:    Andrews Kurth LLP    600
Travis, Suite 4200    Houston, Texas 77002    Attention:    Henry Havre      
Timothy A. Davidson II    E-mail:    henryhavre@andrewskurth.com      
taddavidson@andrewskurth.com (b)    if to the Plan Sponsor, to:    GSO /
Blackstone Debt Funds Management LLC    345 Park Avenue    31st Floor    New
York, New York 10154    Attention:    Brad Marshall       Valerie Kritsberg   
E-mail:    brad.marshall@gsocap.com       valerie.kritsberg@gsocap.com

 

26

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   with copies (which shall not constitute notice) to:    Franklin Square
Capital Partners    201 Rouse Boulevard    Philadelphia, PA 19112    Attention:
   Stephen S. Sypherd    E-mail:    stephen.sypherd@franklinsquare.com    with
copies (which shall not constitute notice) to:    Kirkland & Ellis LLP    300
North LaSalle Street    Chicago, Illinois 60654    Attention:    Patrick J.
Nash, Jr., P.C.       Gregory F. Pesce    E-mail:    patrick.nash@kirkland.com
      gregory.pesce@kirkland.com (c)    if to Claren Road, to:    Claren Road
Asset Management LLC    51 Astor Place, 12th Floor    New York, NY 10003   
Attention:    Albert Marino       Ben Kozinn    E-mail:    marino@clarenroad.com
      Kozinn@clarenroad.com    with copies (which shall not constitute notice)
to:    Bracewell LLP    CityPlace I, 34th Floor    185 Asylum Street   
Hartford, Connecticut 06103-3458    Attention:    Kurt A. Mayr       David L.
Lawton    E-mail:    kurt.mayr@bracewelllaw.com      
david.lawton@bracewelllaw.com (d)    if to the Required Consenting Senior
Noteholders, to:    Stroock Stroock & Lavan LLP    180 Maiden Lane    New York,
New York 10038    Attention:    Jayme Goldstein       Erez Gilad    E-mail:   
jgoldstein@stroock.com       egilad@stroock.com      

 

27

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Any notice given by hand delivery, electronic mail, mail, or courier shall be
effective when received.

9.11. Access. The Debtors shall afford the Plan Sponsor and the Consenting
Supporting Noteholders and each of their respective attorneys, consultants,
accountants, and other authorized representatives reasonable access, upon
reasonable notice during normal business hours, to all properties, books,
contracts, commitments, records, management personnel, lenders, and advisors of
the Debtors.

9.12. Waiver. Except as expressly provided in this Agreement, nothing herein is
intended to, or does, in any manner waive, limit, impair, or restrict any right
of the Parties or the ability of the Parties to protect and preserve its rights,
remedies, and interests, including its claims against or interests in the
Debtors, including under the First Lien Facility, the Second Lien Facility, the
Senior Note Indenture and applicable law. If the Restructuring is not
consummated, or if this Agreement is terminated for any reason, the Parties
fully reserve any and all of their rights.

9.13. Several, Not Joint, Obligations. The agreements, representations, and
obligations of the Parties under this Agreement are, in all respects, several
and not joint. It is understood and agreed that each of the Parties (as
applicable) may trade in its First Lien Facility Claims, Second Lien Facility
Claims, Senior Notes or other debt or equity securities of the Debtors, without
the consent of the Debtors, subject to (a) applicable laws, if any, (b) the
First Lien Facility, (c) the Second Lien Facility, and (d) Section 6 hereof.

9.14. Remedies Cumulative. All rights, powers, and remedies provided under this
Agreement, or otherwise available in respect hereof at law or in equity, shall
be cumulative and not alternative, and the exercise of any such right, power, or
remedy by any Party shall not preclude the simultaneous or later exercise of any
other such right, power, or remedy by such Party.

9.15. No Third-Party Beneficiaries. Unless expressly stated herein, this
Agreement shall be solely for the benefit of the Parties, and no other person or
entity shall be a third-party beneficiary hereof.

9.16. Automatic Stay. The Parties are each authorized to take any steps
necessary to effectuate the reimbursement of fees and expenses hereunder or
termination of this Agreement, as applicable, including sending any applicable
notices to the Debtors, notwithstanding section 362 of the Bankruptcy Code or
any other applicable law, and no cure period contained in this Agreement, the
Interim Financing Order, the Final Financing Order, or the DIP Credit Agreement
shall be extended pursuant to sections 108 or 365 of the Bankruptcy Code, or any
other applicable law.

 

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9.17. Survival of Agreement. The Parties acknowledge and agree that this
Agreement is being executed in connection with negotiations concerning a
possible financial restructuring of the Debtors and in contemplation of possible
chapter 11 filings by the Debtors, and (a) the rights granted in this Agreement
are enforceable by each signatory hereto without approval of the Bankruptcy
Court, and (b) the Debtors waive any rights to assert that the exercise of such
rights violate the automatic stay or any other provisions of the Bankruptcy
Code.

9.18. Settlement Discussions. This Agreement, the Restructuring Term Sheet, the
New Warrants Term Sheet, the Interim Financing Order, and the DIP Credit
Agreement and all related documents and agreements are part of a proposed
settlement of matters that could otherwise be the subject of litigation among
the Parties hereto. Nothing herein shall be deemed an admission of any kind. If
this Agreement is terminated, or if the transactions contemplated herein or in
the Restructuring Term Sheet are not consummated, nothing contained herein or
therein (including any terms, conditions, stipulations or assumptions reflected
herein or therein) shall be binding upon any Party, nor be construed as a waiver
by any Party of any or all of such Party’s rights and remedies and the Parties
expressly reserve any and all of such respective rights and remedies. Pursuant
to rule 408 of the Federal Rules of Evidence and any other applicable rules of
evidence, this Agreement and all negotiations relating thereto shall not be
admissible into evidence in any proceeding, other than a proceeding to enforce
the terms hereof.

9.19. Consideration. The Parties hereby acknowledge that no consideration, other
than that specifically described in this Agreement, the Restructuring Term
Sheet, the New Warrants Term Sheet, the Interim Financing Order, and the DIP
Credit Agreement, shall be due or paid to any Party for its agreement to vote to
accept the Agreed Restructuring Plan in accordance with the terms and conditions
hereof.

9.20. Disclosure. Prior to any disclosure, the Debtors shall submit to the Plan
Sponsor (with a copy to Kirkland & Ellis LLP, counsel for the Plan Sponsor),
Claren Road (with a copy to Bracewell LLP, counsel to Claren Road), and the
Initial Consenting Supporting Noteholders (with a copy to Stroock), all press
releases, announcements, and public documents that constitute the initial
disclosure of the existence or terms of this Agreement or any amendment or
modification to the terms hereof at least two (2) business days prior to such
disclosure, and shall provide each such Party with a reasonable opportunity
under the circumstances to comment on such documents and disclosures and shall
incorporate any such reasonable comments in good faith. No Party or its
representatives shall use the name of the Plan Sponsor, Claren Road, or the
Initial Consenting Supporting Noteholders in any public manner or disclose to
any person or entity (including, for the avoidance of doubt, other Parties)
other than to the Debtors and their advisors, the principal amount or percentage
of any Debt Claims held by any Party, in each case, without such Party’s prior
written consent; provided, however, that (i) if such disclosure is required by
law, subpoena, or other legal process or regulation, the disclosing Party shall
afford the relevant Party a reasonable opportunity to review and comment in
advance of such disclosure and shall take all reasonable measures to limit such
disclosure and (ii) the foregoing shall not prohibit the disclosure of the
aggregate percentage or the aggregate principal amount of Debt Claims held by
any group or class of Parties, collectively. Notwithstanding the provisions in
this Section 9.20, (x) any Party hereto may disclose the identities of the
Parties hereto in any action to enforce this Agreement or in any action for
damages as a result of any breaches hereof, and (y) any party hereto may
disclose, to the extent expressly consented to in writing by a Party, such
Party’s identity and individual holdings.

 

29

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(Signatures on Following Pages)

 

30

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
delivered by their respective duly authorized officers or other agents, solely
in their respective capacity as officers or other agents of the undersigned and
not in any other capacity, as of the date first set forth above.

 

WARREN RESOURCES, INC. By:  

/s/ James A. Watt

Name:   James A. Watt Title:   President, Chief Executive Officer and   Chief
Restructuring Officer WARREN E&P, INC. By:  

/s/ James A. Watt

Name:   James A. Watt Title:   President WARREN RESOURCES OF CALIFORNIA, INC.
By:  

/s/ James A. Watt

Name:   James A. Watt Title:   President WARREN MANAGEMENT CORP. By:  

/s/ James A. Watt

Name:   James A. Watt Title:   President WARREN ENERGY SERVICES, LLC By:  
WARREN E&P, INC., its sole manager By:  

/s/ James A. Watt

Name:   James A. Watt Title:   President

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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WARREN MARCELLUS LLC By: WARREN RESOURCES, INC., its sole member By:  

/s/ James A. Watt

Name:   James A. Watt Title:   President, Chief Executive Officer and   Chief
Restructuring Officer

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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FS INVESTMENT CORPORATION FS INVESTMENT CORPORATION II FS INVESTMENT CORPORATION
III By:   GSO/Blackstone Debt Funds Management LLC Its:   Sub-Advisor By:  

/s/ Marisa Beeney

Name:   Marisa Beeney Title:   Authorized Signatory FS ENERGY AND POWER FUND By:
  GSO Capital Partners LP Its:   Sub-Advisor By:  

/s/ Marisa Beeney

Name:   Marisa Beeney Title:   Authorized Signatory RACE STREET FUNDING LLC By:
  FS Investment Corporation Its:   Sole Member By:   GSO/Blackstone Debt Funds
Management LLC Its:   Sub-Advisor By:  

/s/ Marisa Beeney

Name:   Marisa Beeney Title:   Authorized Signatory

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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COBBS CREEK LLC

LEHIGH RIVER LLC

JUNIATA RIVER LLC

GREEN CREEK LLC

By:   FS Investment Corporation II Its:   Sole Member By:   GSO/Blackstone Debt
Funds Management LLC Its:   Sub-Advisor By:  

/s/ Marisa Beeney

Name:   Marisa Beeney Title:   Authorized Signatory JEFFERSON SQUARE FUNDING LLC
By:   FS Investment Corporation III Its:   Sole Member By:   GSO/Blackstone Debt
Funds Management LLC Its:   Sub-Advisor By:  

/s/ Marisa Beeney

Name:   Marisa Beeney Title:   Authorized Signatory

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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CLAREN ROAD CREDIT MASTER FUND, LTD. CLAREN ROAD CREDIT OPPORTUNITIES MASTER
FUND, LTD. By:   CLAREN ROAD ASSET MANAGEMENT, LLC Its:   investment advisor By:
 

/s/ Albert Marino

Name:   Albert Marino Title:   Chief Operating Officer

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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HOTCHKIS AND WILEY HIGH YIELD FUND By:   Hotchkis and Wiley Capital Management,
LLC (H&W) Its:   investment advisor By:  

/s/ Anna Marie Lopez

Name:   Anna Marie Lopez Title:   Chief Operating Officer of H&W AGGREGATE
PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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SAN DIEGO COUNTY EMPLOYEES RETIREMENT ASSOCIATION By:   Hotchkis and Wiley
Capital Management, LLC (H&W) Its:   investment advisor By:  

/s/ Anna Marie Lopez

Name:   Anna Marie Lopez Title:   Chief Operating Officer of H&W AGGREGATE
PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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HOTCHKIS AND WILEY CAPITAL INCOME FUND By:   Hotchkis and Wiley Capital
Management, LLC (H&W) Its:   investment advisor By:  

/s/ Anna Marie Lopez

Name:   Anna Marie Lopez Title:   Chief Operating Officer of H&W AGGREGATE
PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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SANTA BARBARA COUNTY EMPLOYEES RETIREMENT SYSTEM By:   Hotchkis and Wiley
Capital Management, LLC (H&W) Its:   investment advisor By:  

/s/ Anna Marie Lopez

Name:   Anna Marie Lopez Title:   Chief Operating Officer of H&W AGGREGATE
PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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NATIONAL ELEVATOR INDUSTRY PENSION PLAN By:   Hotchkis and Wiley Capital
Management, LLC (H&W) Its:   investment advisor By:  

/s/ Anna Marie Lopez

Name:   Anna Marie Lopez Title:   Chief Operating Officer of H&W AGGREGATE
PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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TEXAS COUNTY AND DISTRICT RETIREMENT SYSTEM By:   Hotchkis and Wiley Capital
Management, LLC (H&W) Its:   investment advisor By:  

/s/ Anna Marie Lopez

Name:   Anna Marie Lopez Title:   Chief Operating Officer of H&W AGGREGATE
PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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GOVERNMENT OF GUAM RETIREMENT FUND By:   Hotchkis and Wiley Capital Management,
LLC (H&W) Its:   investment advisor By:  

/s/ Anna Marie Lopez

Name:   Anna Marie Lopez Title:   Chief Operating Officer of H&W AGGREGATE
PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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UNIVERSITY OF DAYTON By:   Hotchkis and Wiley Capital Management, LLC (H&W) Its:
  investment advisor By:  

/s/ Anna Marie Lopez

Name:   Anna Marie Lopez Title:   Chief Operating Officer of H&W AGGREGATE
PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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NOMURA US ATTRACTIVE YIELD CORPORATE BOND FUND MOTHER FUND By:   Nomura
Corporate Research and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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BARCLAYS MULTI-MANAGER FUND PLC By:   Nomura Corporate Research and Asset
Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM By:   Nomura Corporate Research
and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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HIGH YIELD CORPORATE BOND OPEN MOTHER FUND By:   Nomura Corporate Research and
Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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KAPITALFORENINGEN INDUSTRIENS PENSION PORTFOLIO, HIGH YIELD OBLIGATIONER III By:
  Nomura Corporate Research and Asset Management Inc. Its:   Investment Advisor
By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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NOMURA FUNDS IRELAND PLC – US HIGH YIELD BOND FUND By:   Nomura Corporate
Research and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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L-3 COMMUNICATIONS CORPORATION MASTER TRUST By:   Nomura Corporate Research and
Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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LOUISIANA STATE EMPLOYEES’ RETIREMENT SYSTEM By:   Nomura Corporate Research and
Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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MONTGOMERY COUNTY EMPLOYEES’ RETIREMENT SYSTEM By:   Nomura Corporate Research
and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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NOMURA CORPORATE RESEARCH AND ASSET MANAGEMENT INC. By:   Nomura Corporate
Research and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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NOMURA FUNDS IRELAND PLC – GLOBAL HIGH YIELD BOND FUND By:   Nomura Corporate
Research and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

NOMURA HIGH YIELD FUND By:   Nomura Corporate Research and Asset Management Inc.
Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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NOMURA MULTI MANAGERS FUND – GLOBAL BOND By:   Nomura Corporate Research and
Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

NOMURA MULTI MANAGERS FUND – GLOBAL HIGH YIELD BOND By:   Nomura Corporate
Research and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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NOMURA MULTI MANAGERS FUND II – US HIGH YIELD BOND By:   Nomura Corporate
Research and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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NOMURA US HIGH YIELD BOND INCOME By:   Nomura Corporate Research and Asset
Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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PHILADELPHIA INDEMNITY INSURANCE COMPANY By:   Nomura Corporate Research and
Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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PINNACOL ASSURANCE By:   Nomura Corporate Research and Asset Management Inc.
Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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STICHTING PENSIOENFONDS TNO By:   Nomura Corporate Research and Asset Management
Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA By:   Nomura Corporate Research and
Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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KAPITALFORENINGEN UNIPENSION INVEST, HIGH YIELD OBLIGATIONER V By:   Nomura
Corporate Research and Asset Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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SAFETY NATIONAL CASUALTY CORPORATION By:   Nomura Corporate Research and Asset
Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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STICHTING PENSIOENFONDS HOOGOVENS By:   Nomura Corporate Research and Asset
Management Inc. Its:   Investment Advisor By:  

/s/ David Crall

Name:   David Crall Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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PCM FUND, INC. By:   Pacific Investment Management Company LLC,   as its
Investment Advisor By:  

/s/ Andrew Jessop

Name:   Andrew Jessop Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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STATE TEACHERS RETIREMENT SYSTEM OF OHIO By:   Pacific Investment Management
Company LLC,   as its Investment Advisor By:  

/s/ Andrew Jessop

Name:  

Andrew Jessop

Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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KAPITALFORENINGEN ATP INVEST, HOJRISIKO OBLIGATIONER By:   Pacific Investment
Management Company LLC,   as its Investment Advisor By:  

/s/ Andrew Jessop

Name:   Andrew Jessop Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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PIMCO GLOBAL INCOME OPPORTUNITIES FUND By:   Pacific Investment Management
Company LLC,   as its Investment Advisor By:  

/s/ Andrew Jessop

Name:   Andrew Jessop Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

PIMCO HIGH INCOME FUND By:   Pacific Investment Management Company LLC,   as its
Investment Advisor By:  

/s/ Andrew Jessop

Name:   Andrew Jessop Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

PIMCO FUNDS: PIMCO HIGH YIELD SPECTRUM FUND By:   Pacific Investment Management
Company LLC,   as its Investment Advisor By:  

/s/ Andrew Jessop

Name:   Andrew Jessop Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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UNIPENSION INVEST F.M.B.A., HIGH YIELD OBLIGATIONER III By:   Pacific Investment
Management Company LLC,   as its Investment Advisor By:  

/s/ Andrew Jessop

Name:   Andrew Jessop Title:   Managing Director AGGREGATE PRINCIPAL AMOUNT OF
DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

PINE RIVER DEERWOOD FUND LTD. By:   Pine River Capital Management L.P. Its:  
Investment Manager By:  

/s/ Nick Nusbaum

Name:   Nick Nusbaum Title:   Chief Financial Officer AGGREGATE PRINCIPAL AMOUNT
OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

PINE RIVER FIXED INCOME MASTER FUND LTD. By:   Pine River Capital Management
L.P. Its:   Investment Manager By:  

/s/ Nick Nusbaum

Name:   Nick Nusbaum Title:   Chief Financial Officer AGGREGATE PRINCIPAL AMOUNT
OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

PINE RIVER MASTER FUND LTD. By:   Pine River Capital Management L.P. Its:  
Investment Manager By:  

/s/ Nick Nusbaum

Name:   Nick Nusbaum Title:   Chief Financial Officer AGGREGATE PRINCIPAL AMOUNT
OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

LMA SPC FOR AND ON BEHALF OF MAP 89 SEGREGATED PORTFOLIO By:   Pine River
Capital Management L.P. Its:   Investment Manager By:  

/s/ Nick Nusbaum

Name:   Nick Nusbaum Title:   Chief Financial Officer AGGREGATE PRINCIPAL AMOUNT
OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

REDWOOD MASTER FUND, LTD. By:   Redwood Capital Management, LLC, Its  
Investment Manager By:  

/s/ Ruben Kliksberg

Name:   Ruben Kliksberg Title:   Authorized Signatory AGGREGATE PRINCIPAL AMOUNT
OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

WHITEBOX MULTI-STRATEGY PARTNERS, LP By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   General Counsel & Chief Operating Officer  
Whitebox Advisors LLC AGGREGATE PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

WHITEBOX CREDIT PARTNERS, LP By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   General Counsel & Chief Operating Officer  
Whitebox Advisors LLC AGGREGATE PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

WHITEBOX RELATIVE VALUE PARTNERS, LP By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   General Counsel & Chief Operating Officer  
Whitebox Advisors LLC AGGREGATE PRINCIPAL AMOUNT OF DEBT CLAIMS:

 

(Signature pages to Amended and Restated Restructuring Support Agreement)

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

Exhibit A

Restructuring Term Sheet

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RESTRUCTURING TERM SHEET

JULY 11, 2016

 

 

Capitalized terms used but not defined in this Restructuring Term Sheet (this
“Term Sheet”) have the respective meanings assigned to such term in the Amended
and Restated Restructuring Support Agreement, dated as of July 11, 2016 (as
amended and restated, the “RSA”), to which this Restructuring Term Sheet is
annexed as Exhibit A.

 

Overview Debt to be Restructured    Indebtedness that will be treated under the
Agreed Restructuring Plan includes, among other things, the following:       (a)
   approximately $1.636 million in principal amount of 12% Convertible Secured
Debentures (the “Secured Debentures”);       (b)    approximately $234.67
million of principal amounts outstanding under the First Lien Facility (plus all
accrued but unpaid interest and all other fees, expenses, and amounts due
thereunder (including any Repayment Premium (as defined in the credit agreement
for the First Lien Facility)), in each case, as of the Petition Date;       (c)
   approximately $51 million of principal amounts outstanding under the Second
Lien Facility (plus all accrued but unpaid interest and all other fees,
expenses, and amounts due thereunder (including any Repayment Premium (as
defined in the credit agreement for the Second Lien Facility)), in each case, as
of the Petition Date;       (d)    approximately $167.27 million of principal
amounts outstanding under the Senior Notes (plus all accrued but unpaid
interest, plus all fees, expenses and other amounts due thereunder or under the
Senior Notes Indenture), in each case, as of the Petition Date;       (e)    all
prepetition general unsecured trade claims related to the Debtors’ ordinary
course business operations (collectively, excluding the Citrus Earn Out Claim,
if any, the “Unsecured Trade Claims”);       (f)    any earn out claim held by
Citrus Appalachia, LLC (“Citrus”) under the Purchase and Sale Agreement, dated
as of July 6, 2014, between Warren, Citrus, TLK Energy LLC, an Oklahoma limited
liability company, and Troy Energy Investments, LLC, an Oklahoma limited
liability company, of not more than $8.5 million, solely to the extent such
claim is allowed as a general unsecured claim by final non-appealable order
(collectively, the “Citrus Earn Out Claim”); and       (g)    all other
non-priority general unsecured claims, including miscellaneous litigation claims
(collectively, excluding the Citrus Earn Out Claim, if any, the “Other Unsecured
Claims”).

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

Deficiency Claims and Senior Notes Claims    The First Lien Facility Claims, the
Second Lien Claims, and the Senior Notes Claims shall be allowed as follows.   
   •    First Lien Secured Claims: The First Lien Facility Claims shall be
allowed in an amount equal to $248,014,432.14, of which approximately $160
million to approximately $180 million shall be allowed as first-priority secured
claims (the “First Lien Secured Claims”).       •    First Lien Deficiency
Claims: The general unsecured deficiency claims on account of the First Lien
Facility Claims (stipulated to be approximately $68 million to approximately $88
million shall be allowed as prepetition general unsecured claims for voting
purposes only (the “First Lien Deficiency Claims”).       •    Second Lien
Deficiency: No secured Second Lien Facility Claim shall be allowed under the
Plan or otherwise. The Second Lien Facility Claims shall be allowed solely as
general unsecured claims (the “Second Lien Deficiency Claims”). The Second Lien
Deficiency Claims shall be allowed in the amount of approximately $56.7 million.
      •    Senior Notes Claims. The Senior Notes Claims shall be allowed against
each of the Debtors in the principal amount of approximately $167.27 million,
plus all accrued but unpaid interest and all other fees, expenses, and amounts
due thereunder or under the Senior Notes Indenture as of the Petition Date. DIP
Financing and Use of Cash Collateral   

On the Petition Date, the Debtors shall file a motion seeking entry of the
Interim Financing Order and the Final Financing Order, as well as approval of
the DIP Facility on the terms set forth in the DIP Agreement attached as an
exhibit to the RSA (it being understood that the DIP Facility shall be approved
pursuant to the Final Financing Order).

 

As of the Plan Effective Date, the outstanding principal amount of the DIP
Facility shall not total more than $20 million.

New Common Equity    On the Plan Effective Date, all existing equity interests
(including preferred and common stock, options, warrants or other loans or
securities exercisable or convertible into equity interests) in the Parent
Debtor shall be cancelled, and the Parent Debtor, as reorganized under the Plan,
shall issue new common equity interests (the “New Common Equity”) as set forth
herein. The New Common Equity shall be subject to dilution only by the New
Warrants and the MIP (as defined below). The reorganized Parent Debtor will
appoint a qualified third party transfer agent for the New Common Equity.
General Equity Pool    Holders of the First Lien Deficiency Claims will forego
any distribution on account of the First Lien Deficiency Claims. Holders of the
Second Lien Deficiency Claims shall be entitled to share in the Claren Road
Supplemental Equity Distribution (as defined below). Holders of the Second Lien
Deficiency Claims, the Senior Notes Claims, and at the Plan Sponsor’s sole
option, the Citrus Earn Out Claims, shall be entitled to share pro rata in 17.5
percent (17.5%) of the New Common Equity that shall be issued and outstanding on
the Plan Effective Date (the “General Equity Pool”). For

 

2

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   the avoidance of doubt, the General Equity Pool and the Claren Road
Supplemental Equity Distribution shall be subject to dilution by the New
Warrants and the MIP. New Warrants    On the Plan Effective Date the Parent
Debtor, as reorganized under the Plan, shall issue to holders of claims in Class
2B five-year warrants (the “New Warrants”) to purchase up to five percent (5%)
of the New Common Equity (subject to dilution by the MIP). The New Warrants
shall be issued pursuant to a warrant agreement consistent with the terms and
conditions set forth in the term sheet pertaining thereto attached as an exhibit
to the RSA (the “New Warrants Term Sheet”). New First Lien Term Loan Facility   

On the Plan Effective Date, the Reorganized Debtors shall enter into a new term
loan credit facility (the “New First Lien Facility”) in the aggregate principal
amount of not more than $130 million, plus, at the Plan Sponsor’s sole
discretion, the then-outstanding principal amount of the DIP Facility (up to an
amount of $20 million, to the extent the Plan Sponsor determines, in its sole
discretion, to exchange or roll into the New First Lien Facility on the Plan
Effective Date). The New First Lien Facility shall be secured by a
first-priority lien on substantially all of the Debtors’ assets.

 

The New First Lien Facility shall mature on May 22, 2020, and shall accrue
interest at LIBOR + 900 bps, with 100 bps LIBOR floor, per annum, paid in cash,
plus 100 bps, paid in kind (i.e., added to principal). The terms of the New
First Lien Facility will be set forth in the Definitive Documents.

Total Enterprise Value    The total enterprise value of the Reorganized Debtors
is stipulated to be in the range of approximately $160 million to approximately
$180 million. Plan Effectiveness Conditions    Except with the prior consent of
the Debtors, the Plan Sponsor, Claren Road, and the Required Consenting Senior
Noteholders, the Plan Effective Date shall not occur unless:       (a)    the
Bankruptcy Court shall have entered the Confirmation Order;       (b)    all
actions, documents, certificates, and agreements necessary or appropriate to
implement the Plan, including the Definitive Documents (including, without
limitation, the documents governing the New First Lien Facility, the New
Warrants, and the Shareholder Agreement (defined below)), shall have been
effected or executed and delivered, as the case may be, to the required parties
and, to the extent required, filed with the applicable governmental units in
accordance with applicable laws, and all such documents, certificates and
agreements shall be reasonably acceptable to the Debtors, the Plan Sponsor,
Claren Road, and the Required Consenting Senior Noteholders;       (c)    all
authorizations, consents, regulatory approvals, rulings, or documents that are
necessary or appropriate to implement and effectuate the Plan shall have been
received; and       (d)    the Debtors shall have paid in full in cash all of
the fees and expenses of each of the indenture trustee for the Senior Notes (to
the extent payable under the Senior Notes Indenture), the Plan Sponsor, Claren
Road, and the Consenting Senior Noteholders.

 

3

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Unclassified Claims DIP Facility Claims   

Treatment. On the Plan Effective Date, the Debtors shall, at the Plan Sponsor’s
option: (a) repay the DIP Facility; (b) refinance the DIP Facility; or (c) roll
the DIP Facility into the New First Lien Facility.

 

Voting. Not classified; non-voting.

Administrative Claims

 

Priority Tax Claims

 

Other Priority Claims

 

Other Secured Claims

 

Secured Debentures

  

Treatment. Customary treatment provisions for each of these classes to render
the claims unimpaired. The Agreed Restructuring Plan shall provide that holders
of the Secured Debentures shall receive payment in full in cash or such other
treatment to render the holders of such claims unimpaired; provided that the
Secured Debentures, to the extent reinstated, shall not be convertible into the
New Common Equity. The Agreed Restructuring Plan shall also provide that any
adequate protection claim under the Interim Financing Order and the Final
Financing Order that has not been paid in full in cash during the Chapter 11
Cases, other than any accrued but unpaid professional fees and expenses, shall
be waived on the Plan Effective Date.

 

Voting. Not classified or unimpaired, as applicable; non-voting.

Classified Claims and Interests

Class 1:

 

First Lien Secured Claims

   Treatment. On the Plan Effective Date, except to the extent that a holder of
an allowed First Lien Secured Claim agrees to a less favorable treatment, in
full and final satisfaction, compromise, settlement, release, and discharge of
and in exchange for each First Lien Secured Claim, each such holder shall
receive its respective pro rata share of:       •    the New First Lien
Facility; and       •   

100% of the New Common Equity, reduced by General Equity Pool and the Claren
Road Supplemental Equity Distribution. The New Common Equity will be subject to
dilution by the MIP and the New Warrants.

   Voting. Impaired; voting.

Class 2A:

 

•       First Lien Deficiency Claims

 

•       Senior Notes Claims

 

•       Citrus Earn Out Claim

  

Allowance. The First Lien Deficiency Claims, Senior Notes Claims, and Citrus
Earn Out Claim shall be allowed in the manner set forth in the section of this
Term Sheet entitled “Debt to be Restructured.”

 

Treatment. On the Plan Effective Date, except to the extent that a holder of an
allowed Senior Notes Claim (and allowed Citrus Earn Out Claim, which allowed
amount shall not exceed $8.5 million), agrees to a less favorable treatment, in
full and final satisfaction, compromise, settlement, release, and discharge of
and in exchange for each such claim, (i) holders of allowed First Lien
Deficiency Claims will forego any distribution on account of such First Lien
Deficiency Claims, and (ii) holders of allowed Senior Notes Claims (and any
allowed Citrus Earn Out Claim, to the extent applicable) shall be entitled to
receive such holders’ respective pro rata portion of the General Equity Pool.
The pro rata calculation of the portion of the General Equity Pool shall be
calculated by grouping the Second Lien Deficiency Claims together with the Class
2A claims.

   Voting: Impaired; voting.

 

4

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Class 2B:

 

Second Lien Deficiency Claims

  

Allowance. The Second Lien Deficiency Claims shall be allowed in the manner set
forth in the section of this Term Sheet entitled “Debt to be Restructured.”

 

Treatment. On the Plan Effective Date, except to the extent that a holder of an
allowed Second Lien Deficiency Claim agrees to a less favorable treatment, in
full and final satisfaction, compromise, settlement, release, and discharge of
and in exchange for each such claim, each holder of allowed Second Lien
Deficiency Claims shall be entitled to receive such holder’s pro rata portion of
(a) the New Warrants, (b) the General Equity Pool, and (c) the Claren Road
Supplemental Equity Distribution. “Claren Road Supplemental Equity Distribution”
means an amount of New Common Equity equal to the difference between (x) the
aggregate amount of the General Equity Pool distributed to holders of allowed
Second Lien Deficiency Claims and (y) an amount of New Common Equity that is
7.55% of all the issued and outstanding New Common Equity on the Plan Effective
Date. The pro rata calculation of the portion of the General Equity Pool shall
be calculated by grouping the Second Lien Deficiency Claims together with the
Class 2A claims; provided, that the pro rata calculation of the portion of the
New Warrants shall be calculated based on the issuance of all the New Warrants
solely to holders of allowed Second Lien Deficiency Claims and provided,
further, that the pro rata calculation of the portion of the Claren Road
Supplemental Equity Distribution shall be calculated based on the distribution
of all the Claren Road Supplemental Equity Distribution solely to holders of
allowed Second Lien Deficiency Claims.

 

Voting: Impaired; voting.

Class 2C:

 

Unsecured Trade Claims and Other Unsecured Claims.

  

Treatment. Except to the extent that a holder of an allowed Unsecured Trade
Claim or allowed Other Unsecured Claim agrees to a less favorable treatment, in
full and final satisfaction, compromise, settlement, release, and discharge of
and in exchange for each claim, each such holder, at the Plan Sponsor’s option,
shall receive cash or an unsecured note issued pursuant to the Agreed
Restructuring Plan (in each case without interest), in each case, in an amount
equal to the same economic recovery provided to holders of allowed Class 2A
claims, on the Plan Effective Date or, if such claim is not allowed as of the
Plan Effective Date, as soon as practicable after such claim becomes allowed.

 

Voting: Impaired; voting.

Class 3:

 

Intercompany Claims

  

Treatment. Each allowed Intercompany Claim shall be, at the option of the Plan
Sponsor, either reinstated or canceled and released without any distribution on
account of such claims.

 

Voting. Impaired; non-voting.

Class 4:

 

Intercompany Interests

  

Treatment. Each allowed Intercompany Interest shall be, at the option of the
Plan Sponsor, either reinstated or canceled and released without any
distribution on account of such interests.

 

Voting. Impaired; non-voting.

 

5

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Class 5:

 

Section 510(b) Claims

  

Treatment. Claims arising under section 510(b) of the Bankruptcy Code, if any,
shall be cancelled without any distribution, and such holders of such claims
will receive no recovery under the Plan.

 

Voting. Impaired; non-voting.

Class 6:

 

Existing Equity Interests in the Parent Debtor

  

Treatment. On the Plan Effective Date, all existing equity interests (including
preferred and common stock, options, warrants, or other securities exercisable
or convertible into equity interests) in the Parent Debtor shall be cancelled
and shall be deemed canceled and extinguished, and shall be of no further force
and effect, whether surrendered for cancelation or otherwise, and there shall be
no distribution to holders of existing equity interests in the Parent Debtor on
account of any such existing equity interests.

 

Voting. Impaired; non-voting.

Other General Provisions Management Equity Incentive Plan   

Promptly after the Plan Effective Date, the reorganized Parent Debtor’s equity
compensation plan or plans (such plan or plans being referred to herein as the
“MIP”) will be approved by the new board of directors or managers, as
applicable, of the reorganized Parent Debtor (the “New Board”) and will provide
for equity-based compensation to management (including directors and officers)
and employees, comprising an aggregate of up to 6% of the New Common Equity,
with equity interests comprising 2 percentage points (or one-third) of such 6%
of the New Common Equity being issued under the MIP promptly on the Plan
Effective Date, and the remaining equity interests being issued over a
three-year period following the Plan Effective Date.

 

Individual allocations of equity incentive awards under the MIP shall be
proposed by the Chief Executive Officer of the reorganized Parent Debtor (the
“CEO”), and shall be subject to approval by the compensation committee of the
New Board (the “Compensation Committee”). All grants under the MIP shall consist
solely of restricted shares, and such restricted shares shall be subject to 50%
time-based and 50% performance-based vesting; provided that any amount of such
restricted shares granted to the CEO after the initial grant on the Plan
Effective Date may be subject to performance-based vesting, as determined by the
Compensation Committee. All performance criteria applicable to vesting of
restricted share grants shall be established by the Compensation Committee after
review of the CEO’s proposed targets.

 

Equity interests granted under the MIP shall dilute the New Common Equity and
the New Warrants issued on the Plan Effective Date on a pro rata basis.

Employment Agreements, Other Compensation, & Benefit Plans    The Definitive
Documents shall include details regarding key executive employment agreements
and enterprise-wide benefits plans to the extent different from existing
compensation and benefit plans. New Board; Reorganized Debtors’ Key Management
   The Definitive Documents shall identify the chief officers of the Reorganized
Debtors and the members of the New Board. The CEO shall serve as the Chairman of
the New Board.

 

6

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Cancellation of Instruments, Certificates, and Other Documents    On the Plan
Effective Date, except to the extent otherwise provided herein, all instruments,
certificates, and other documents evidencing debt or equity interests in the
Debtors shall be cancelled, and the obligations of the Debtors thereunder, or in
any way related thereto, shall be discharged. Issuance of New Common Equity   
The issuance of the New Common Equity under the Agreed Restructuring Plan will
be exempt from registration with the U.S. Securities and Exchange Commission
(the “SEC”) under section 1145 of the Bankruptcy Code. The New Common Equity
shall be deemed fully paid and non-assessable, and shall not be subject to any
transfer restrictions under securities laws (except to the extent held by
affiliates). SEC Reporting Status    The Plan Sponsor, in consultation with the
Debtors or the Reorganized Debtors (as applicable), Claren Road, and the
Required Consenting Senior Noteholders, will determine whether, on and after the
Plan Effective Date, the reorganized Parent Debtor will continue to file reports
with the SEC and, if the Plan Sponsor elects to so continue, whether the New
Common Equity may be eligible for listing on a U.S. national securities exchange
(i.e., Nasdaq or NYSE). In the event that the Plan Sponsor reasonably determines
prior to the Plan Effective Date, in good faith, after consultation with the
Debtors, Claren Road, and the Required Consenting Senior Noteholders, that the
New Common Equity is unlikely to be eligible to be listed on a U.S. national
securities exchange, then the Debtors or the Reorganized Debtors (as applicable)
will use reasonable best efforts to cause the New Common Equity to be eligible
for trading and quoting on the highest-available “tier” or “level” of an
established OTC marketplace reasonably acceptable to Claren Road and the
Required Consenting Senior Noteholders and the Reorganized Debtors within a
reasonable period of time after the Plan Effective Date; provided that the
foregoing shall not under any circumstances require the Debtors to file any
reports, or register as a public company, with the SEC. The Reorganized Debtors
will use commercially reasonable effort to arrange for one or more nationally
known registered broker-dealer firms to act as market makers with respect to the
New Common Equity; provided that the foregoing shall not under any circumstances
require the Debtors to file any reports, or register as a public company, with
the SEC. Claren Road and the Consenting Senior Noteholders acknowledge that the
Reorganized Debtors do not intend to incur any material cost or materially
increased disclosure obligation in connection therewith associated with any
reporting or disclosure obligations greater than those set forth below. D&O
Indemnification and Insurance    All existing directors and officers insurance
coverage and indemnification obligations shall survive the Restructuring and
continue in effect during and after the Restructuring process, and shall not be
cancelled, terminated or amended in any manner than would decrease or eliminate
the benefit provided thereby to any officer, manager, or director. Corporate
Headquarters and Governance   

On or before or within a reasonable period of time after the Plan Effective
Date, the CEO shall select the location of the principal executive office of the
reorganized Parent Debtor, but only after consultation with the Plan Sponsor
regarding such selection.

 

The reorganized Parent Debtor shall either be a corporation or treated as a
corporation for tax purposes.

 

7

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

  

The Debtors’ existing organizational documents shall be amended and restated for
the Reorganized Debtors in a manner consistent with section 1123(a)(6) of the
Bankruptcy Code and acceptable to the Plan Sponsor, the Debtors, Claren Road,
and the Required Consenting Senior Noteholders.

 

Upon and following the Plan Effective Date, the New Board will consist of five
(5) members, initially comprised of (a) the CEO (who shall serve as Chairman of
the New Board), (b) three (3) members who are either selected by, or acceptable
to, the Plan Sponsor, and (c) one member selected by the Required Consenting
Senior Noteholders and Claren Road and reasonably acceptable to the Plan Sponsor
and the Debtors (the “Minority Director”), it being understood and agreed that
the Required Consenting Senior Noteholders and Claren Road have agreed to select
Eugene I. Davis but that such selection remains subject to being reasonably
acceptable to the Plan Sponsor and the Debtors. Each person selected or
appointed to be a member of the New Board (as described in the preceding clauses
(b) and (c)) shall make himself or herself available to meet, either in person
or via teleconference, with the CEO regarding serving as a member of the New
Board, and the Plan Sponsor (in the case of directors mentioned in clause (b)
above) or the Required Consenting Senior Noteholders and Claren Road (in the
case of the Minority Director) shall have consulted with the CEO regarding the
person being selected or appointed to serve as a member of the New Board and
duly considered the opinion expressed by the CEO as to the suitability of such
person as a member of the New Board.

 

Furthermore, in so selecting persons to serve as members of the New Board, each
of the Plan Sponsor on the one hand and the Required Consenting Senior
Noteholders and Claren Road on the other hand, shall take into consideration and
consider as a positive attribute, any reasonable levels of experience in the oil
and gas exploration and production industry possessed by such persons, with the
understanding that the best interests of the Reorganized Debtors would be served
by having a majority of the members of the New Board comprised by individuals
who do possess such experience.

 

Meetings of the New Board may be called by any member of the New Board.

 

The Shareholder Agreement (as defined below) will contain a voting agreement
obligating the Plan Sponsor to vote its New Common Equity for the election of
the Minority Director. To the extent the Plan Sponsor sells or transfers any New
Common Equity, the transferee(s) will be required to agree to comply with the
voting agreement. The Shareholder Agreement shall further provide that (a) the
right of the Required Consenting Senior Noteholders to participate in the
designation of (or to designate, if Claren Road does not share such designation
right) the Minority Director shall continue for so long as the entities that
comprise the Consenting Senior Noteholders (together with their respective
affiliates, subsidiaries and related funds or accounts) collectively hold at
least 75% percent of the New Common Equity held by the Consenting Senior
Noteholders in the aggregate as of the Plan Effective Date, and (b) the right of
Claren Road to participate in the designation of (or to designate, if the
Required Consenting Senior Noteholders do not share such designation right) the
Minority Director shall continue for so long as Claren Road (together with their
respective affiliates, subsidiaries and related funds or accounts) collectively
holds at least 75% percent of the New Common Equity held by Claren Road in the
aggregate as of the Plan Effective Date.

 

8

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  On the Plan Effective Date, the Plan Sponsor, Claren Road, the Consenting
Senior Noteholders, and the Reorganized Debtors shall enter into a shareholder
agreement, in form and substance reasonably acceptable to the Debtors, the Plan
Sponsor, Claren Road and the Required Consenting Senior Noteholders (the
“Shareholder Agreement”).   The Shareholder Agreement shall provide, among other
things, as follows:     (a)    Until the earliest to occur of (X) a sale of all
or substantially all of the assets of the Company and its subsidiaries, (Y) the
first public offering of New Common Equity registered with the Securities and
Exchange Commission (an “IPO”), and (Z) the reorganized Parent Debtor otherwise
commencing to file periodic reports with the SEC, each Significant Interest
Holder (as defined below) will be entitled to receive or participate in (as
applicable):           i.    quarterly unaudited financial statements, as well
as management discussion and analysis materials regarding the financial
condition and results of operations with respect to such financial statements,
which management’s discussion and analysis materials shall be in a manner
substantially consistent in all material respects with the management’s
discussion and analysis materials prepared by other similarly situated companies
listed or quoted on the same tier or level of an established OTC marketplace on
which the reorganized Parent Debtor is listed or quoted (“Acceptable MD&A”),
within 45 days after the end of each of the Reorganized Debtors’ first three
fiscal quarters during each fiscal year or, if later, such time as delivered to
the lenders under the New First Lien Facility (or any other senior credit
facility of the Reorganized Debtors), but in no event later than 60 days after
the end of each of the Reorganized Debtors’ first three fiscal quarters during
each fiscal year;           ii.    audited annual financial statements and
Acceptable MD&A within 90 days after the end of the Reorganized Debtors’ fiscal
year or, if later, such time as delivered to the lenders under the New First
Lien Facility (or any other senior credit facility of the Reorganized Debtors),
but in no event later than 120 days after the end of the Reorganized Debtors’
fiscal year;           iii.    any information otherwise that is consistent with
the information required to be timely disclosed in a Form 8K filed with the SEC
by other similarly situated OTC-registered entities that are not registered with
the SEC;           iv.    an informational telephonic conference call each
fiscal quarter (at which conference call the Reorganized Debtors’ officers shall
present a narrative overview of, and provide a brief commentary on, the
information described in clauses (i), (ii), and (iii) above, and holders
(including prospective holders and analysts) shall be permitted to ask questions
(and receive answers) relating to the reorganized Parent Debtor’s and its
subsidiaries’ businesses, operations, assets, liabilities, finances and
prospects); and

 

9

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       all of the information required under this clause (a) shall be posted on
a publicly-available website (without the need to enter any password or make any
certification) maintained by the Reorganized Debtors, and Claren Road and the
Consenting Senior Noteholders acknowledge and agree that the posting of such
information in the foregoing manner shall satisfy in all respects the reporting
obligations set forth above. Prior to the Plan Effective Date, the Plan Sponsor,
Claren Road, and counsel to the Required Consenting Noteholders will consult
regarding the form of the Acceptable MD&A. As used herein, the term “Significant
Interest Holder” means, at the time of determination, (a) Claren Road (including
its respective affiliates, subsidiaries and related funds or accounts), for so
long as Claren Road holds at least 75% of the New Common Equity held by Claren
Road as of the Plan Effective Date, and (b) each Consenting Senior Noteholder
(including each of its respective affiliates, subsidiaries and related funds or
accounts), so long as such Consenting Senior Noteholder holds at least 75% of
the New Common Equity held by such Consenting Senior Noteholder as of the Plan
Effective Date.     (b)    Tag-Along Rights: Prior to the earlier to occur of
(i) a sale of all or substantially all of the assets of the reorganized Parent
Debtor’s and its subsidiaries, or (ii) an initial public offering (“IPO”), and
for so long as the New Common Equity is not listed on a U.S. national securities
exchange, in connection with any transfer (or a series of related transfers) by
one or more holders (“Selling Interest Holders”) of more than 20% of the
outstanding New Common Equity of the Reorganized Debtors to a purchaser (a
“Tag-Along Sale”), each Significant Interest Holder that is party to the
Shareholder Agreement (collectively, the “Tag-Along Interest Holders”) shall
have the option to include in such Tag-Along Sale a corresponding percentage of
the New Common Equity owned by such Tag-Along Interest Holder. Tag-Along
Interest Holders shall receive the same form and amount of consideration per
share of New Common Equity that is being paid to the Selling Interest Holders in
connection with the Tag-Along Sale. The terms and conditions applicable to the
Tag-Along Interest Holder in connection with the Tag-Along Sale shall not be
less favorable than those terms and conditions applicable to the Selling
Interest Holders (provided that in no event will the Tag-Along Interest Holders
be required to provide an indemnity that exceeds their net proceeds from the
sale of their New Common Equity or to agree to any non-compete covenant).    
(c)    Drag Rights: After the Plan Effective Date, and prior to the earlier to
occur of (i) a sale of all or substantially all of the assets of the reorganized
Parent Debtor and its subsidiaries, and (ii) an IPO, holders of the New Common
Equity that own more than 50% of the then outstanding New Common Equity (the
“Drag-Along Seller”) may elect to require the reorganized Parent Debtor to
commence a process for, and require the reorganized Parent Debtor and the
Significant Interest Holders to cooperate with and consummate, a sale of the
reorganized Parent Debtor or all or substantially all of the

 

10

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       assets of the reorganized Parent Debtor and its Subsidiaries (a
“Drag-Along Sale”). Each Significant Interest Holder will consent to, vote in
favor of, raise no objection to and waive any appraisal rights in connection
with such Drag-Along Sale. If a Drag-Along Sale involves a sale or exchange of
the New Common Equity (including pursuant to a merger), then each Significant
Interest Holder will transfer its New Common Equity on the same terms and
conditions applicable to the Drag-Along Seller. In connection with a Drag-Along
Sale involving a sale of all or substantially all of the assets of the
reorganized Parent Debtor and its Subsidiaries, the reorganized Parent Debtor
and its Subsidiaries will enter into such agreements and arrangements with the
purchaser of such assets in a form and on terms and conditions acceptable to the
Drag-Along Seller consistent with the foregoing (provided that in no event will
the dragged Significant Interest Holders be required to provide an indemnity
that exceeds their net proceeds from the sale of their New Common Equity or to
agree to any non-compete covenant).     (d)    Pre-Emptive Rights: If, after the
Plan Effective Date, and prior to the earlier to occur of (i) a sale of all or
substantially all of the assets of the Reorganized Debtors and their
subsidiaries, and (ii) an IPO, any Reorganized Debtor issues (other than
pursuant to a management incentive plan and/or the exercise of the New Warrants
(if issued)) shares of New Common Equity or other equity securities (or any
options, warrants or other securities (including debt, whether in the form of
loans, notes or securities) that are convertible into, or exchangeable or
exercisable for, New Common Equity or other equity securities), then each
Significant Interest Holder that is party to the Shareholder Agreement shall be
entitled to participate in such issuance on a pro rata basis at the same
purchase price and subject to the same terms.     (e)    Registration Rights:
The Plan Sponsors will be entitled to unlimited demand registration rights. Each
Significant Interest Holder will have the right to participate on a pro rata
basis in any registered public offering initiated by the Reorganized Debtors (or
by parties exercising demand registration rights, including the Plan Sponsors),
subject to underwriter cutbacks, lockups and other customary exceptions or
limitations to be agreed upon by Claren Road and the Required Consenting Senior
Noteholders.     (f)    No Transfer Restrictions: The New Common Equity shall
not be subject to any transfer restrictions under the Shareholder Agreement or
the reorganized Parent Debtor’s organizational documents, other than customary
requirements, such as (i) transfers must be in compliance with securities laws,
(ii) transfers must not result in the reorganized Parent Debtor or any holder
becoming subject to regulation under the Investment Company Act or the
Investment Advisors Act and (iii) all permitted transferees hereunder must
deliver a joinder to the Shareholder Agreement. For the avoidance of any doubt,
the rights of any Significant Interest Holder under the Shareholder Agreement
are not transferrable to any entity other than an affiliate of such Significant
Interest Holder or an account or fund managed, advised, or sub-advised by such
Significant Interest Holder.

 

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    (g)    Affiliate Transactions: The Reorganized Debtors may enter into
transactions with affiliates of the Plan Sponsor or related party transactions
that are on arms-length terms; provided that for any transactions involving
$15,000,000 or more, a majority of the disinterested directors on the New Board
shall have determined that such transactions are on arm’s length terms.     (h)
   Amendments to Shareholder Agreement: Any material amendments to the
Shareholder Agreement or the organizational documents of the reorganized Parent
Debtor or its subsidiaries will require (i) majority approval of the New Board
of the reorganized Parent Debtor, and (ii) holders of a majority of the
then-issued and outstanding New Common Equity; provided that any amendments that
materially and disproportionately adversely affect the obligations or rights of
any holder of New Common Equity relative to other holders of New Common Equity
will require the consent of holders representing a majority of the New Common
Equity so adversely affected; provided, further, that any amendment that amends
or adversely affects the specific rights described in this section entitled
“Corporate Headquarters and Governance” will require the consent of holders
representing at least 60% of the New Common Equity held by the Significant
Interest Holders in the aggregate as of such date.   The terms and conditions of
the Shareholder Agreement shall be consistent with this Term Sheet and shall
contain such other terms and conditions that are reasonably acceptable to Claren
Road, the Required Consenting Senior Noteholders, the Plan Sponsor and the
Parent Debtor. It is agreed that any of the terms described above need not be
included in the Shareholder Agreement to the extent such terms are included in
the reorganized Parent Debtor’s organizational documents. Representative   The
Reorganized Debtors reserve the right to require any holders (other than the
Plan Sponsor and the Significant Interest Holders), at their sole cost and
expense, to designate a representative or engage a third party to act on behalf
of such other holders in connection with the administration of their respective
rights under the Shareholder Agreement. Avoidance Actions, Commercial Tort
Claims   Avoidance actions arising under Chapter 5 of the Bankruptcy Code and
commercial tort claims against any and all vendors with which the Restructured
Debtors will have an ongoing relationship shall vest in the applicable
Restructured Debtor. Tax Issues   Subject to the terms hereof, the Restructuring
shall be structured to preserve favorable tax attributes to the extent
practicable (including structuring the Restructuring for tax purposes as an
asset sale, a recapitalization, or other tax-free reorganization), which
structure shall be acceptable to the Plan Sponsor and the Debtors, and
reasonably acceptable to Claren Road and the Required Consenting Senior
Noteholders. Fees and Expenses   The Agreed Restructuring Plan will provide for
payment of all accrued and unpaid professional fees and expenses for the legal
and financial advisors of the following entities in cash on or prior to the Plan
Effective Date: (a) the

 

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  Plan Sponsor; (b) the Debtors; (c) Stroock & Stroock & Lavan LLP, as counsel,
and Haynes and Boone, LLP, as local counsel, to the Initial Consenting Senior
Noteholders; and (d) Bracewell LLP, as counsel, and Opportune, as financial
advisor, to Claren Road. Executory Contracts and Unexpired Leases   The
treatment (e.g., assumption, assumption and assignment, and/or rejection) of all
executory contracts and unexpired leases (including, for the avoidance of doubt,
midstream agreements) to which the Debtors are party shall be acceptable to the
Plan Sponsor and the Debtors. Releases, Discharge, Exculpation, and Injunction
Provisions Discharge of Claims and Termination of Interests   Pursuant to
section 1141(d) of the Bankruptcy Code, and except as otherwise specifically
provided in the Agreed Restructuring Plan or in any contract, instrument, or
other agreement or document created pursuant to the Agreed Restructuring Plan,
the distributions, rights, and treatment that are provided in the Agreed
Restructuring Plan shall be in complete satisfaction, discharge, and release,
effective as of the Plan Effective Date, of claims (including any intercompany
claims resolved or compromised after the Plan Effective Date by the Reorganized
Debtors), interests, and causes of action of any nature whatsoever, including
any interest accrued on claims or interests from and after the Petition Date,
whether known or unknown, against, liabilities of, liens on, obligations of,
rights against, and interests in, the Debtors or any of their assets or
properties, regardless of whether any property shall have been distributed or
retained pursuant to the Agreed Restructuring Plan on account of such claims and
interests, including demands, liabilities, and causes of action that arose
before the Plan Effective Date, any liability (including withdrawal liability)
to the extent such claims or interests relate to services performed by employees
of the Debtors before the Plan Effective Date and that arise from a termination
of employment, any contingent or noncontingent liability on account of
representations or warranties issued on or before the Plan Effective Date, and
all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the
Bankruptcy Code, in each case whether or not: (a) a proof of claim based upon
such debt or right is filed or deemed filed pursuant to section 501 of the
Bankruptcy Code; (b) a claim or interest based upon such debt, right, or
interest is allowed pursuant to section 502 of the Bankruptcy Code; or (c) the
holder of such a claim or interest has accepted the Agreed Restructuring Plan.
Any default or “event of default” by the Debtors or affiliates with respect to
any claim or interest that existed immediately before or on account of the
filing of the Chapter 11 Cases shall be deemed cured (and no longer continuing)
as of the Plan Effective Date. The Confirmation Order shall be a judicial
determination of the discharge of all claims and interests subject to the Plan
Effective Date occurring. Release of Liens   Except as otherwise specifically
provided in the Agreed Restructuring Plan, the documents evidencing the New
First Lien Facility or in any contract, instrument, release, or other agreement
or document created pursuant to the Agreed Restructuring Plan, on the Plan
Effective Date and concurrently with the applicable distributions made pursuant
to the Agreed Restructuring Plan and, in the case of a secured claim,
satisfaction in full of the portion of the secured claim that is allowed as of
the Plan Effective Date, all mortgages, deeds of trust, liens, pledges, or other
security interests against any property of the estates shall be fully released
and discharged, and all of the right, title,

 

13

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  and interest of any holder of such mortgages, deeds of trust, liens, pledges,
or other security interests shall revert to the Reorganized Debtors and their
successors and assigns, in each case, without any further approval or order of
the Bankruptcy Court and without any action or filing being required to be made
by the Debtors. In addition, the First Lien Facility Agent and the Second Lien
Facility Agent shall execute and deliver all documents reasonably requested by
the Debtors, Reorganized Debtors, or administrative agent(s) for the New First
Lien Facility to evidence the release of such mortgages, deeds of trust, liens,
pledges, and other security interests and shall authorize the Reorganized
Debtors to file UCC-3 termination statements (to the extent applicable) with
respect thereto. Release by the Debtors   Pursuant to section 1123(b) of the
Bankruptcy Code, and except as otherwise specifically provided in the Agreed
Restructuring Plan, on and after the Plan Effective Date, each Released Party
(as defined below) is deemed expressly, unconditionally, generally, and
individually and collectively, acquitted, released, and discharged by the
Debtors, the Reorganized Debtors, and the Estates, each on behalf of itself and
its predecessors, successors and assigns, subsidiaries, affiliates, current and
former officers, directors, principals, shareholders, members, partners,
advisers, sub-advisers, employees, agents, advisory board members, financial
advisors, attorneys, accountants, investment bankers, consultants,
representatives, management companies, fund advisors and other professionals,
from any and all claims and causes of action, any claims asserted or assertable
on behalf of any holder of any claim against or interest in the Debtors and any
claims asserted or assertable on behalf of any other entity, whether known or
unknown, foreseen or unforeseen, matured or unmatured, existing or hereinafter
arising, in law, equity, contract, tort or otherwise, by statute or otherwise,
that such releasing party (whether individually or collectively), ever had, now
has or hereafter can, shall or may have, based on or relating to, or in any
manner arising from, in whole or in part, the Debtors, the Debtors’
restructuring efforts, the Debtors’ intercompany transactions (including
dividends paid), any preference or avoidance claim pursuant to sections 544,
547, 548, and 549 of the Bankruptcy Code, the purchase, sale, or rescission of
the purchase or sale of, or any other transaction relating to any security of
the Debtors, the subject matter of, or the transactions or events giving rise
to, any claim or interest that is affected by or classified in the Agreed
Restructuring Plan, the business or contractual arrangements between the
Debtors, on the one hand, and the consenting creditors, on the other hand, the
restructuring of claims and interests before or during the restructuring
transactions implemented by the Agreed Restructuring Plan or any other
transaction or other arrangement with the Debtors whether before or during such
restructuring transactions, the negotiation, formulation or preparation of such
restructuring transactions, the RSA, the Agreed Restructuring Plan, the Plan
Supplement, the Disclosure Statement, or any related agreements, any asset
purchase agreement, instruments or other documents (including, for the avoidance
of doubt, providing any legal opinion requested by any entity regarding any
transaction, contract, instrument, document, or other agreement contemplated by
the Agreed Restructuring Plan or the reliance by any Released Party on the
Agreed Restructuring Plan or the Confirmation Order in lieu of such legal
opinion) created or entered into in connection with the RSA, the Disclosure
Statement, the Agreed Restructuring Plan, the Chapter 11 Cases, the Filing of
the Chapter 11 Cases, the pursuit of Confirmation, the

 

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pursuit of consummation, the administration and implementation of the Agreed
Restructuring Plan, including the issuance or distribution of securities
pursuant to the Agreed Restructuring Plan, or the distribution of property under
the Agreed Restructuring Plan or any other related agreement, or upon any other
act or omission, transaction, agreement, event, or other occurrence taking place
or arising on or before the Plan Effective Date related or relating to any of
the foregoing.

 

“Released Party” means each of the following in their capacity as such: (a)
holders of First Lien Facility Claims; (b) the First Lien Facility Agent; (c)
holders of Second Lien Deficiency Claims and the Second Lien Facility Agent; (d)
the Consenting Senior Noteholders, holders of Senior Notes Claims and the
indenture trustee under the Senior Notes; (e) the trustee, and holders of claims
arising, under the Secured Debentures; (f) with respect to each of the Debtors,
the Reorganized Debtors, and each of the foregoing entities in clauses (a)
through (e), each such entity’s current and former predecessors, successors,
affiliates (regardless of whether such interests are held directly or
indirectly), subsidiaries, funds, portfolio companies, management companies; (g)
with respect to the Debtors and the Reorganized Debtors and each of the
foregoing entities in clauses (a) through (e), each of their respective current
and former directors, officers, members, employees, partners, advisers,
sub-advisers, managers, independent contractors, agents, representatives,
principals, professionals, consultants, financial advisors, attorneys,
accountants, investment bankers, and other professional advisors (with respect
to clause (g), each solely in their capacity as such); provided that any holder
of a claim or interest that opts out of the releases contained in the Agreed
Restructuring Plan shall not be a “Released Party.”

Release by Holders of Claims and Interests   Except as otherwise provided in the
Agreed Restructuring Plan, as of the Plan Effective Date and to the fullest
extent permissible under applicable law, each Releasing Party (as defined below)
expressly, unconditionally, generally, and individually and collectively
releases, acquits, and discharges the Debtors, Reorganized Debtors, and Released
Parties from any and all claims, obligations, rights, suits, damages, causes of
action, remedies and liabilities whatsoever, including any derivative claims
asserted or assertable on behalf of the Debtors, any claims asserted or
assertable on behalf of any holder of any claim against or interest in the
Debtors and any claims asserted or assertable on behalf of any other entity,
whether known or unknown, foreseen or unforeseen, matured or unmatured, existing
or hereinafter arising, in law, equity, contract, tort or otherwise, by statute
or otherwise, that such Releasing Party (whether individually or collectively),
ever had, now has or hereafter can, shall or may have, based on or relating to,
or in any manner arising from, in whole or in part, the Debtors, the Debtors’
restructuring efforts, the Debtors’ intercompany transactions (including
dividends paid), any preference or avoidance claim pursuant to sections 544,
547, 548, and 549 of the Bankruptcy Code, the purchase, sale, or rescission of
the purchase or sale of any security of the Debtors, or any other transaction
relating to any security of the Debtors, or any other transaction or other
arrangement with the Debtors whether before or during the restructuring
transactions implemented by the Agreed Restructuring Plan, the subject matter
of, or the transactions or events giving rise to, any claim or interest that is
affected by or classified in the Agreed Restructuring Plan, the business or
contractual arrangements between the Debtors, on the one hand, and the
consenting creditors on the other hand, the restructuring of claims

 

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and interests before or during the restructuring transactions implemented by the
Agreed Restructuring Plan, the negotiation, formulation, or preparation of such
restructuring transactions, the RSA, the Agreed Restructuring Plan, the Plan
Supplement, the Disclosure Statement, or any related agreements, any asset
purchase agreement, instruments, or other documents (including, for the
avoidance of doubt, providing any legal opinion requested by any entity
regarding any transaction, contract, instrument, document, or other agreement
contemplated by the Agreed Restructuring Plan or the reliance by any Released
Party on the Agreed Restructuring Plan or the Confirmation Order in lieu of such
legal opinion) created or entered into in connection with the RSA, the
Disclosure Statement, the Agreed Restructuring Plan, the Chapter 11 Cases, the
filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of
consummation, the administration and implementation of the Agreed Restructuring
Plan, including the issuance or distribution of securities pursuant to the
Agreed Restructuring Plan, or the distribution of property under the Agreed
Restructuring Plan, or any other related agreement, or upon any other act or
omission, transaction, agreement, event, or other occurrence taking place or
arising on or before the Plan Effective Date related or relating to any of the
foregoing; provided that nothing in the foregoing shall result in any of the
Debtors’ officers and directors waiving any indemnification claims against the
Debtors or any of their insurance carriers or any rights as beneficiaries of any
insurance policies, which indemnification obligations and insurance policies
shall be assumed by the Reorganized Debtors, except to the extent provided for
in the Agreed Restructuring Plan.

 

“Releasing Party” means each of the following in their capacity as such: (a)
holders of First Lien Facility Claims; (b) the First Lien Facility Agent; (c)
holders of Second Lien Deficiency Claims and the Second Lien Facility Agent; (d)
the Consenting Senior Noteholders, holders of Senior Notes Claims and the
indenture trustee under the Senior Notes; (e) the trustee, and holders of claims
arising, under the Secured Debentures; (f) with respect to each of the Debtors,
the Reorganized Debtors, and each of the foregoing entities in clauses (a)
through (e), each such entity’s current and former predecessors, successors,
affiliates (regardless of whether such interests are held directly or
indirectly), subsidiaries, funds, portfolio companies, management companies; (g)
with respect to each of the foregoing entities in clauses (a) through (e), each
of their respective current and former directors, officers, members, employees,
partners, advisers, sub-advisers, managers, independent contractors, agents,
representatives, principals, professionals, consultants, financial advisors,
attorneys, accountants, investment bankers, and other professional advisors
(with respect to clause (g), each solely in their capacity as such); (h) all
holders of claims and interests that are deemed to accept the Agreed
Restructuring Plan; (i) all holders of claims and interests who vote to accept
the Agreed Restructuring Plan; and (j) all holders in voting classes who abstain
from voting on the Agreed Restructuring Plan and who do not opt out of the
releases provided by the Agreed Restructuring Plan.

Exculpation   Except as otherwise specifically provided in the Agreed
Restructuring Plan, no Exculpated Party (as defined below) shall have or incur,
and each Exculpated Party is hereby released and exculpated from, any cause of
action for any claim related to any act or omission in connection with, relating
to, or arising out of, the Chapter 11 Cases, the formulation, preparation,

 

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dissemination, negotiation, filing, or termination of the RSA and related
prepetition transactions, the Disclosure Statement, the Agreed Restructuring
Plan, or any restructuring transaction implemented by the Agreed Restructuring
Plan, contract, instrument, release or other agreement or document (including
providing any legal opinion requested by any entity regarding any transaction,
contract, instrument, document, or other agreement contemplated by the Agreed
Restructuring Plan or the reliance by any Exculpated Party on the Agreed
Restructuring Plan or the Confirmation Order in lieu of such legal opinion)
created or entered into in connection with the Disclosure Statement or the
Agreed Restructuring Plan, the filing of the Chapter 11 Cases, the pursuit of
Confirmation, the pursuit of Consummation, the administration and implementation
of the Agreed Restructuring Plan, including the issuance of securities pursuant
to the Agreed Restructuring Plan, or the distribution of property under the
Agreed Restructuring Plan or any other related agreement, except for claims
related to any act or omission that is determined in a final order to have
constituted actual fraud, willful misconduct, or gross negligence, but in all
respects such entities shall be entitled to reasonably rely upon the advice of
counsel with respect to their duties and responsibilities pursuant to the Agreed
Restructuring Plan. The Exculpated Parties have, and upon completion of the
Agreed Restructuring Plan shall be deemed to have, participated in good faith
and in compliance with the applicable laws with regard to the solicitation of,
and distribution of, consideration pursuant to the Agreed Restructuring Plan
and, therefore, are not, and on account of such distributions shall not be,
liable at any time for the violation of any applicable law, rule, or regulation
governing the solicitation of acceptances or rejections of the Agreed
Restructuring Plan or such distributions made pursuant to the Agreed
Restructuring Plan.

 

“Exculpated Party” means, collectively, and in each case in its capacity as
such: (a) the Debtors; (b) the Plan Sponsor; (c) Claren Road; (d) the Consenting
Senior Noteholders; and (e) with respect to each of the foregoing, such entity
and its current and former affiliates, and such entity’s and its current and
former affiliates’ current and former equity holders (regardless of whether such
interests are held directly or indirectly), members, subsidiaries, officers,
directors, managers, principals, employees, agents, advisory board members,
financial advisors, partners, advisers, sub-advisers, attorneys, accountants,
investment bankers, consultants, representatives, and other professionals, each
in their capacity as such.

Injunction   Except as otherwise expressly provided in the Agreed Restructuring
Plan or for obligations issued or required to be paid pursuant to the Agreed
Restructuring Plan or Confirmation Order, all entities who have held, hold, or
may hold claims or interests that have been released pursuant to the Agreed
Restructuring Plan, discharged pursuant to the Agreed Restructuring Plan, or are
subject to exculpation pursuant to the Agreed Restructuring Plan, are
permanently enjoined, from and after the Plan Effective Date, from taking any of
the following actions against, as applicable, the Debtors, any non-Debtor
subsidiary, the Reorganized Debtors, the Released Parties, or the Exculpated
Parties: (a) commencing or continuing in any manner any action or other
proceeding of any kind on account of or in connection with or with respect to
any such claims or interests; (b) enforcing, attaching, collecting, or
recovering by any manner or means any judgment, award, decree, or order against
such Entities on account of or in connection with or with respect to

 

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  any such claims or interests; (c) creating, perfecting, or enforcing any lien
or encumbrance of any kind against such entities or the property or the estates
of such entities on account of or in connection with or with respect to any such
claims or interests; (d) asserting any right of setoff, subrogation, or
recoupment of any kind against any obligation due from such entities or against
the property of such entities on account of or in connection with or with
respect to any such Claims or Interests; and (e) commencing or continuing in any
manner any action or other proceeding of any kind on account of or in connection
with or with respect to any such claims or interests released or settled
pursuant to the Agreed Restructuring Plan.

 

18

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Exhibit B

DIP Credit Agreement

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

DEBTOR-IN-POSSESSION CREDIT AGREEMENT

DATED AS OF [●], 2016

AMONG

WARREN RESOURCES, INC.,

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Administrative Agent

AND

THE LENDERS

FROM TIME TO TIME PARTY HERETO

GSO CAPITAL PARTNERS LP,

as Sole Lead Arranger and Sole Bookrunner

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

TABLE OF CONTENTS

 

         Page  

ARTICLE 1 DEFINITIONS

     1   

Section 1.1

 

Certain Defined Terms.

     1   

Section 1.2

 

Accounting Terms and Determinations.

     29   

Section 1.3

 

Other Definitional Provisions and References.

     30   

ARTICLE 2 LOANS

     30   

Section 2.1

 

Loans and Borrowings; Commitments.

     30   

Section 2.2

 

Advancing Loans; Minimum Amounts.

     31   

Section 2.3

 

Mandatory Prepayments.

     31   

Section 2.4

 

All Prepayments.

     32   

Section 2.5

 

Optional Prepayments of Loans.

     32   

Section 2.6

 

Termination, Reduction or Increase of Commitments.

     33   

Section 2.7

 

Interest, Interest Calculations and Certain Fees.

     33   

Section 2.8

 

Notes; Commitments Several.

     36   

Section 2.9

 

[Reserved].

     36   

Section 2.10

 

General Provisions Regarding Payment.

     36   

Section 2.11

 

Loan Account.

     37   

Section 2.12

 

Maximum Interest.

     37   

Section 2.13

 

Taxes.

     38   

Section 2.14

 

Capital Adequacy.

     41   

Section 2.15

 

Mitigation Obligations.

     42   

Section 2.16

 

[Reserved].

     42   

Section 2.17

 

Defaulting Lenders.

     42   

Section 2.18

 

Priority and Liens.

     43   

ARTICLE 3 REPRESENTATIONS AND WARRANTIES

     45   

Section 3.1

 

Existence and Power.

     45   

Section 3.2

 

Organization and Governmental Authorization; No Contravention.

     45   

Section 3.3

 

Binding Effect.

     45   

Section 3.4

 

Capitalization.

     46   

Section 3.5

 

Financial Information.

     46   

Section 3.6

 

Litigation.

     46   

Section 3.7

 

Ownership of Property.

     46   

Section 3.8

 

No Default.

     47   

Section 3.9

 

Labor Matters.

     47   

Section 3.10

 

Regulated Entities.

     47   

Section 3.11

 

Margin Regulations.

     47   

Section 3.12

 

Compliance With Laws; Anti-Terrorism Laws.

     47   

Section 3.13

 

Taxes.

     48   

Section 3.14

 

Compliance with ERISA.

     48   

Section 3.15

 

Brokers.

     49   

Section 3.16

 

Environmental Compliance.

     49   

Section 3.17

 

Intellectual Property.

     49   

 

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TABLE OF CONTENTS (CONT’D)

 

         Page  

Section 3.18

 

Bankruptcy Orders.

     49   

Section 3.19

 

Full Disclosure.

     49   

Section 3.20

 

Reserve Reports, Imbalances and Marketing Matters.

     50   

Section 3.21

 

Maintenance and Development of Properties.

     51   

Section 3.22

 

Security Documents.

     51   

ARTICLE 4 AFFIRMATIVE COVENANTS

     52   

Section 4.1

 

Financial Statements and Other Reports.

     52   

Section 4.2

 

Payment and Performance of DIP Obligations.

     57   

Section 4.3

 

Maintenance of Existence.

     57   

Section 4.4

 

Maintenance of Property; Insurance.

     58   

Section 4.5

 

Compliance with Laws.

     59   

Section 4.6

 

Inspection of Property, Books and Records.

     59   

Section 4.7

 

Use of Proceeds.

     59   

Section 4.8

 

Lenders’ Meetings.

     60   

Section 4.9

 

Hazardous Materials; Remediation.

     60   

Section 4.10

 

Further Assurances.

     60   

Section 4.11

 

Post-Closing Obligations.

     63   

Section 4.12

 

Production Report and Lease Operating Statements.

     63   

Section 4.13

 

Cash Management and Certain Prepetition Obligations.

     63   

Section 4.14

 

Contracts and Leases.

     63   

Section 4.15

 

Milestones.

     64   

ARTICLE 5 NEGATIVE COVENANTS

     64   

Section 5.1

 

Debt.

     64   

Section 5.2

 

Liens.

     65   

Section 5.3

 

Contingent Obligations.

     66   

Section 5.4

 

Restricted Payments.

     67   

Section 5.5

 

Restrictive Agreements.

     67   

Section 5.6

 

Swap Contracts.

     68   

Section 5.7

 

Consolidations, Mergers and Sales of Assets.

     68   

Section 5.8

 

Investments.

     69   

Section 5.9

 

Transactions with Affiliates.

     70   

Section 5.10

 

Modification of Certain Documents; Limitation on Repayment of Debt; Restriction
on Adequate Protection Payments.

     70   

Section 5.11

 

Fiscal Year.

     71   

Section 5.12

 

Conduct of Business.

     71   

Section 5.13

 

Capital Stock.

     71   

Section 5.14

 

Limitation on Sale and Leaseback Transactions.

     71   

Section 5.15

 

Bank Accounts.

     71   

Section 5.16

 

Compliance with Anti-Corruption Laws.

     72   

Section 5.17

 

Compliance with Anti-Terrorism Laws.

     72   

Section 5.18

 

Subsidiaries.

     73   

Section 5.19

 

Prepetition Secured Obligations.

     73   

 

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TABLE OF CONTENTS (CONT’D)

 

         Page  

Section 5.20

 

Changes to DIP Orders.

     73   

Section 5.21

 

[Reserved].

     73   

Section 5.22

 

Superpriority Administrative Expense Claims.

     73   

Section 5.23

 

Use of DIP Facility Proceeds.

     73   

Section 5.24

 

Rejection of Oil and Gas Leases.

     73   

Section 5.25

 

Section 506(c) Claims.

     73   

Section 5.26

 

Budget Covenant; Permitted Variances

     74   

Section 5.27

 

Capital Expenditures.

     74   

Section 5.28

 

Material Contracts.

     74   

ARTICLE 6 [RESERVED]

     75   

ARTICLE 7 CONDITIONS

     75   

Section 7.1

 

Conditions Precedent to Effectiveness.

     75   

Section 7.2

 

Conditions Precedent to Availability of Loans.

     75   

Section 7.3

 

Conditions to Extensions of Credit.

     77   

ARTICLE 8 EVENTS OF DEFAULT

     78   

Section 8.1

 

Events of Default.

     78   

Section 8.2

 

Acceleration and Suspension or Termination of Loans and Commitments.

     81   

Section 8.3

 

[Reserved].

     81   

Section 8.4

 

Default Rate of Interest and Suspension of LIBOR Rate Options.

     81   

Section 8.5

 

Set-off Rights.

     81   

Section 8.6

 

Application of Proceeds.

     82   

ARTICLE 9 EXPENSES AND INDEMNITY

     82   

Section 9.1

 

Expenses.

     82   

Section 9.2

 

Indemnity.

     84   

ARTICLE 10 ADMINISTRATIVE AGENT

     85   

Section 10.1

 

Appointment and Authorization.

     85   

Section 10.2

 

Administrative Agent and Affiliates.

     85   

Section 10.3

 

Action by Administrative Agent.

     85   

Section 10.4

 

Consultation with Experts; Delegation of Duties.

     86   

Section 10.5

 

Liability of Administrative Agent.

     87   

Section 10.6

 

Indemnification.

     87   

Section 10.7

 

Right to Request and Act on Instructions.

     88   

Section 10.8

 

Credit Decision.

     88   

Section 10.9

 

Collateral Matters.

     88   

Section 10.10

 

Agency for Perfection.

     89   

Section 10.11

 

Notice of Default.

     90   

Section 10.12

 

Successor Administrative Agent.

     90   

Section 10.13

 

Disbursements of Loans; Payment and Sharing of Payment.

     91   

Section 10.14

 

Right to Perform, Preserve and Protect.

     93   

Section 10.15

 

Additional Titled Agents.

     93   

Section 10.16

 

Administrative Agent May File Proof of Claim.

     93   

 

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TABLE OF CONTENTS (CONT’D)

 

         Page  

ARTICLE 11 MISCELLANEOUS

     94   

Section 11.1

 

Survival.

     94   

Section 11.2

 

No Waivers.

     94   

Section 11.3

 

Notices.

     94   

Section 11.4

 

Severability.

     96   

Section 11.5

 

Amendments and Waivers.

     96   

Section 11.6

 

Assignments; Participations; Replacement of Lenders.

     97   

Section 11.7

 

Headings.

     100   

Section 11.8

 

Confidentiality.

     100   

Section 11.9

 

Waiver of Consequential and Other Damages.

     101   

Section 11.10

 

Marshaling; Payments Set Aside.

     101   

Section 11.11

 

GOVERNING LAW; SUBMISSION TO JURISDICTION.

     101   

Section 11.12

 

WAIVER OF JURY TRIAL.

     102   

Section 11.13

 

Publication; Advertisement.

     102   

Section 11.14

 

Counterparts; Integration.

     103   

Section 11.15

 

No Strict Construction.

     103   

Section 11.16

 

USA PATRIOT Act Notification.

     103   

Section 11.17

 

[Reserved].

     103   

Section 11.18

 

[Reserved].

     103   

Section 11.19

 

Acknowledgement and Consent to Bail-In of EEA Financial Institutions.

     103   

 

iv

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ANNEXES, EXHIBITS AND SCHEDULES

 

ANNEXES

    

Annex A

  -   

Commitment Amounts (as of Closing Date)

EXHIBITS

    

Exhibit A

  -   

Assignment Agreement

Exhibit B

  -   

Compliance Certificate

Exhibit C

  -   

Notice of Borrowing

Exhibit D

  -   

[Reserved]

Exhibit E-1

  -   

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

Exhibit E-2

  -   

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

Exhibit E-3

  -   

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

Exhibit E-4

  -   

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

Exhibit F

  -   

Note

Exhibit G

  -   

[Reserved]

Exhibit H

  -   

[Reserved]

Exhibit I

  -   

Initial Budget

 

SCHEDULES

    

Schedule 3.1

  -   

Organization

Schedule 3.4

  -   

Capitalization

Schedule 3.6

  -   

Litigation

Schedule 3.15

  -   

Brokers

Schedule 3.16

  -   

Environmental Compliance

Schedule 3.20

  -   

Defensible Title

Schedule 3.21

  -   

Maintenance/Permits

Schedule 4.11

  -   

Post-Closing Obligations

Schedule 5.1

  -   

Debt

Schedule 5.2

  -   

Liens

Schedule 5.3

  -   

Contingent Obligations

Schedule 5.5

  -   

Restrictive Agreements

Schedule 5.8

  -   

[Reserved]

Schedule 5.9

  -   

Transactions with Affiliates

Schedule 5.12

  -   

Business Description

 

v

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DEBTOR-IN-POSSESSION CREDIT AGREEMENT

DEBTOR-IN-POSSESSION CREDIT AGREEMENT dated as of [●], 2016 among Warren
Resources, Inc., a Maryland corporation (the “Borrower”), the financial
institutions or other entities from time to time parties hereto, each as a
lender (collectively, the “Lenders” and individually, a “Lender”), and
Wilmington Trust, National Association, as administrative agent for the Lenders
(in such capacity, together with its successors in such capacity, the
“Administrative Agent”).

RECITALS:

WHEREAS, on June 2, 2016 (the “Petition Date”), the Debtors (as hereinafter
defined) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code (as hereinafter defined) in the Bankruptcy Court (as hereinafter defined);

WHEREAS, the Borrower has requested that the Lenders provide it with a
debtor-in-possession delayed draw term loan facility (the “DIP Facility”), to be
used during the Chapter 11 Cases (as hereinafter defined), with an aggregate
principal amount of up to $20,000,000 available for borrowings on or after the
Availability Date (as hereinafter defined), in each case, subject to the terms
set out herein (including the covenant in Section 5.26 in respect of the Budget
(as hereinafter defined)) and the other Financing Documents (as hereinafter
defined) and in the DIP Orders (as hereinafter defined);

WHEREAS, the Guarantors (as hereinafter defined) have agreed to guarantee the
DIP Obligations (as hereinafter defined) of the Borrower hereunder and the
Borrower and each Guarantor have agreed to secure all of the DIP Obligations
hereunder by granting to the Administrative Agent, for the benefit of the
Secured Parties (as hereinafter defined), a Lien (as hereinafter defined) on
substantially all of their assets pursuant to and on the terms set forth in the
DIP Orders; and

WHEREAS, pursuant to the terms of the DIP Orders, all DIP Obligations will be
secured by valid perfected Liens on substantially all of the Borrower’s and each
Guarantor’s assets, having the priorities set forth in the DIP Orders and in all
cases, subject to Permitted Liens (as hereinafter defined) and the Carve Out (as
hereinafter defined).

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

ARTICLE 1

DEFINITIONS

Section 1.1 Certain Defined Terms.

The following terms have the following meanings:

“13-Week Budget” means a thirteen-week rolling operating budget and cash flow
forecast, in form and substance reasonably acceptable to the Lead Lenders, which
shall reflect the Borrower’s good-faith projection of all weekly cash receipts
and disbursements in connection with the operation of the Credit Parties’ and
their respective Subsidiaries’ business during such

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

thirteen-week period, including but not limited to, collections, payroll,
capital expenditures and other major cash outlays, as such budget and forecast
may be updated from time to time as required under Section 4.1(q).

“Accepting Lenders” has the meaning set forth in Section 2.3(f).

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

“Adequate Protection” shall have the meaning assigned to such term in the DIP
Orders.

“Adequate Protection Liens” has the meaning ascribed to such term in the Interim
Financing Order or, upon entry of the Final DIP Order, in the Final DIP Order,
as applicable.

“Adequate Protection Payments” means the adequate protection payments to the
Prepetition First Lien Secured Parties pursuant to the terms of the DIP Orders.

“Administrative Agent” has the meaning specified in the introductory paragraph
hereto.

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

“Aggregate Commitment Amount” means $20,000,000, as reduced from time to time
pursuant to the terms hereof.

“Agreed Restructuring Plan” means an amended joint chapter 11 plan of
reorganization (including all annexes, exhibits or supplements thereto) that
amends and restates the Preliminary Restructuring Plan.

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

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

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

“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Commitment Amount represented by such Lender’s Commitment Amount;

 

2

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provided that for purposes of Section 2.17 when a Defaulting Lender shall exist,
“Applicable Percentage” shall mean the percentage of the Aggregate Commitment
Amount (disregarding any Defaulting Lender’s Commitment Amount) represented by
such Lender’s Commitment Amount. If the Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Commitment Amounts
most recently in effect, giving effect to any assignments and to any Lender’s
status as a Defaulting Lender at the time of determination.

“Approved Fund” means any (i) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business or (ii) any Person (other than a natural
person) that temporarily warehouses loans for any Lender or any entity described
in the preceding clause (i) and that, with respect to each of the preceding
clauses (i) and (ii), is administered, managed, advised or sub-advised by (a) a
Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural
person) or an Affiliate of a Person (other than a natural person) that
administers, manages, advises or sub-advises a Lender.

“Arranger” means GSO Capital Partners LP.

“Asset Disposition” means any sale, lease, license, transfer, assignment or
other consensual disposition by any Credit Party of any asset, but excluding
(i) dispositions of inventory or used, obsolete, worn-out or surplus equipment,
all in the Ordinary Course of Business, (ii) dispositions of Permitted
Investments, (iii) sales, transfers and other dispositions of accounts
receivable in connection with the compromise, settlement or collection thereof
in the Ordinary Course of Business, but, in any event, not in connection with
any receivables financing or factoring arrangement, (iv) the lease, assignment,
license, sub-license or sub-lease of any personal property or office lease in
the Ordinary Course of Business to the extent the same does not materially
interfere with the business of the Borrower or any Subsidiary, (v) [reserved],
(vi) the sale in the Ordinary Course of Business of Hydrocarbons produced from
any of the Credit Parties’ Hydrocarbon Interests, (vii) the creation of a
Permitted Lien and (viii) the surrender or waiver of contract rights or the
disposition, settlement, release or surrender of contract, tort or other claims
of any kind.

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

“Availability Date” has the meaning specified therefor in Section 7.2.

“Availability Period” means the period commencing on the Availability Date and
ending on the Termination Date.

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

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

 

3

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

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

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

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

“Borrower” has the meaning specified in the introductory paragraph hereto.

“Borrowing” shall mean Loans made on the same date and as to which a single
Interest Period is in effect.

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

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

“Budget” shall have the meaning assigned to such term in Section 4.1(q).

“Business Day” means any day except a Saturday, Sunday or other day on which
either the New York Stock Exchange is closed, or on which commercial banks in
New York City are authorized by Law to close and, in the case of a Business Day
that relates to a LIBOR Loan, a day on which dealings are carried on in the
London interbank eurodollar market.

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

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

“Carry Forward Amount” means the amount of (i) any projected Operating
Disbursements not expended in a given Testing Period or (ii) any total net
Receipts exceeding projected Receipts, each of which shall carry forward into,
and be available for use in, future Testing Periods.

 

4

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“Carve Out” shall have the meaning assigned to such term in the Interim
Financing Order and the Final DIP Order, as applicable.

“Casualty Event” means any loss, casualty or other insured damage to, or any
taking under power of eminent domain or by condemnation or similar proceeding
of, any Property or asset of the Borrower or any Subsidiary that was included in
the most recent Reserve Report.

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

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

“Change in Control” means: (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934, as amended, and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof),
of Capital Stock representing more than 50% of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of the Borrower;
(b) occupation of a majority of the seats (other than vacant seats) on the board
of directors of the Borrower by Persons who were neither (i) nominated by the
board of directors of the Borrower, nor (ii) appointed by directors so
nominated; (c) the occurrence of a “Change in Control” (or any other defined
term having a similar purpose) as defined in the documentation governing the
Prepetition Senior Notes; (d) a change of control or similar event shall occur
as provided in any other credit agreement, indenture or other agreement
governing Debt issued by any Credit Party to the extent the aggregate principal
amount of the Debt evidenced thereby equals or exceeds $10,000,000; or (e) an
Asset Disposition by the Borrower or a Subsidiary pursuant to which the Borrower
or any Subsidiary sells, leases, licenses, transfers, assigns or, by other
consensual disposition, in one or a series of related transactions, conveys more
than 50% of the properties or assets of the Borrower and its Subsidiaries as
determined by reference to the Borrower’s and its Subsidiaries’ financial
statements on the last day of the most recently ended Fiscal Quarter, determined
on a consolidated basis in accordance with GAAP.

“Chapter 11 Cases” means the voluntary cases of the Debtors filed under Chapter
11 of the Bankruptcy Code in the Bankruptcy Court.

“Closing Date” means the date of this Agreement.

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

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

 

5

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

“Commitment” means, as to each Lender, the commitment of such Lender to make
Loans, expressed as an amount representing the maximum aggregate amount of such
Lender’s Loans hereunder; provided that such Lender’s Commitment shall never
exceed the lesser of (x) such Lender’s Commitment Amount and (y) such Lender’s
Applicable Percentage of the Aggregate Commitment Amount, in each case, as such
amounts may be adjusted from time to time in accordance with this Agreement

“Commitment Amount” means, with respect to each Lender, as applicable, the
amount set forth opposite such Lender’s name on Annex A or in the Assignment
Agreement pursuant to which such Lender shall have assumed its Commitment (or as
set forth opposite such Lender’s name on Annex A, plus (minus) any amounts
assumed (assigned) pursuant to an Assignment Agreement). The amount of each
Lender’s Commitment Amount as of the Closing Date is set forth on Annex A.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. §1 et seq.),
as amended from time to time, and any successor statute, or any rule, regulation
or order of the U.S. Commodity Futures Trading Commission promulgated thereunder
(or the application or official interpretation of any thereof).

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

“Confirmation Order” has the meaning assigned to such term in the definition of
“Milestones”.

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

“Contingent Obligation” means, with respect to any Person, any direct or
indirect liability of such Person: (i) with respect to any debt, lease, dividend
or other obligation of another Person if the purpose or intent of such Person
incurring such liability, or the effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreement relating thereto will be complied with, or that any holder of
such liability will be protected, in whole or in part, against loss with respect
thereto; (ii) with respect to any undrawn portion of any letter of credit issued
for the account of such Person or as to which such Person is otherwise liable
for the reimbursement of any drawing; (iii) under any

 

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Swap Contract, to the extent not yet due and payable; (iv) to make take-or-pay
or similar payments if required regardless of nonperformance by any other party
or parties to an agreement; or (v) for any obligations of another Person
pursuant to any agreement to purchase, repurchase or otherwise acquire any
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to preserve the solvency,
financial condition or level of income of another Person. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if not a fixed and determinable amount,
the maximum amount so guaranteed or otherwise supported. Contingent Obligation
shall exclude any obligation arising pursuant to an Excluded Property Leaseback.

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

“Debt” of a Person means at any date, without duplication, (i) all obligations
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all obligations
of such Person to pay the deferred purchase price of property or services,
except trade accounts payable, accrued expenses and deferred compensation and
other pension benefit and welfare expenses, in each case arising in the Ordinary
Course of Business and not overdue by more than sixty (60) days, (iv) all
Capital Leases of such Person, (v) all non-contingent obligations of such Person
to reimburse any bank or other Person in respect of amounts paid under a letter
of credit, banker’s acceptance or similar instrument, (vi) all obligations of
such Person under conditional sale or other title retention agreements relating
to property acquired by such Person, (vii) all Debt secured by a Lien on any
asset of such Person, regardless of whether such Debt is otherwise Debt of such
Person (other than a Lien described in clause (g) of Section 5.2), (viii) all
Debt of others Guaranteed by such Person, and (ix) obligations to deliver
Hydrocarbons, in consideration of one or more advance payments for periods in
excess of 180 days prior to the day of delivery, other than sales of
Hydrocarbons, firm transportation contracts, take or pay contracts, gas
balancing arrangements and similar obligations in the ordinary course of
business. Without duplication of any of the foregoing, Debt of the Borrower
shall include (x) any and all Loans and (y) any and all Prepetition Senior
Notes, Prepetition First Lien Debt and Prepetition Second Lien Debt.

“Debtors” means (i) the Borrower, (ii) Warren Energy Services, LLC, a Delaware
limited liability company, (iii) Warren E&P, Inc., a New Mexico corporation,
(iv) Warren Marcellus LLC, a Delaware limited liability company, (v) Warren
Resources of California, Inc., a California corporation, and (vi) Warren
Management Corp., a Delaware corporation.

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

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

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

 

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“Defaulting Lender” means, subject to Section 2.17(b), any Lender that (a) has
failed to (i) fund all or any portion of its Loans hereunder within two
(2) Business Days of the date such Loans were required to be funded hereunder
unless such Lender notifies the Administrative Agent and the Borrower in writing
that such failure is the result of such Lender’s determination that one or more
conditions precedent to funding (each of which conditions precedent, together
with any applicable default, shall be specifically identified in such writing)
has not been satisfied, or (ii) pay to the Administrative Agent any amount
required to be paid by it hereunder within two (2) Business Days of the date
when due, (b) has notified the Borrower or the Administrative Agent in writing
that it does not intend to comply with its funding obligations hereunder, or has
made a public statement to that effect (unless such writing or public statement
relates to such Lender’s obligation to fund a Loan hereunder and states that
such position is based on such Lender’s determination that a condition precedent
to funding (which condition precedent, together with any applicable default,
shall be specifically identified in such writing or public statement) cannot be
satisfied), (c) has failed within three (3) Business Days after written request
by the Administrative Agent or the Borrower to confirm in writing to the
Administrative Agent and the Borrower that it will comply with its prospective
funding obligations hereunder (provided that such Lender shall cease to be a
Defaulting Lender pursuant to this clause (c) upon receipt of such written
confirmation by the Administrative Agent and the Borrower), or (d) has, or has a
direct or indirect parent company that has, (i) become the subject of a
proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver,
custodian, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its
business or assets, including the Federal Deposit Insurance Corporation or any
other state or federal regulatory authority acting in such a capacity; provided
that a Lender shall not be a Defaulting Lender solely by virtue of the ownership
or acquisition of any equity interest in that Lender or any direct or indirect
parent company thereof by a Governmental Authority so long as such ownership
interest does not result in or provide such Lender with immunity from the
jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Lender (or such
Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts
or agreements made with such Lender, or (iii) become the subject of a Bail-In
Action; provided that a Lender shall not be a Defaulting Lender solely by virtue
of the ownership or acquisition of any equity interest in that Lender or any
direct or indirect parent company thereof by a governmental authority so long as
such ownership interest does not result in or provide such Lender with immunity
from the jurisdiction of courts within the United States or from the enforcement
of judgments or writs of attachment on its assets or permit such Lender (or such
governmental authority) to reject, repudiate, disavow or disaffirm any contracts
or agreements made with such Lender. Any determination by the Administrative
Agent that a Lender is a Defaulting Lender under any one or more of clauses (a)
through (d) above shall be conclusive and binding absent manifest error, and
such Lender shall be deemed to be a Defaulting Lender (subject to
Section 2.17(b)) upon delivery of written notice of such determination to the
Borrower and each Lender.

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

 

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

“DIP Facility” has the meaning specified in the recitals hereto.

“DIP Obligations” means all obligations, liabilities of every nature of any
Credit Party from time to time owed to the Administrative Agent or the Lenders
under this Agreement and any other Financing Document, in each case, whether for
principal, interest, funding indemnification amounts, fees, expenses,
indemnification or otherwise; provided that the definition of “DIP Obligations”
shall not include Excluded Swap Obligations.

“DIP Orders” means the Interim Financing Order and, upon entry thereof, the
Final DIP Order.

“Discharge of DIP Obligations” means (a) the indefeasible payment in full in
cash of all DIP Obligations (other than contingent indemnity obligations for
which no claim for payment has been made (which indemnity obligations continue
to survive as expressly provided in this Agreement or in any other Financing
Document), (b) termination or expiration of all Commitments and (c) termination
of this Agreement other than indemnity and reimbursement obligations that
expressly survive the termination hereof.

“Disclosure Statement” means a disclosure statement that amends and restates the
Disclosure Statement to Accompany Plan of Reorganization of Warren Resources,
Inc. and its Affiliated Debtors, dated as of June 20, 2016 [Docket No. 114] in
its entirety.

“Disclosure Statement Order” has the meaning assigned to such term in the
definition of “Milestones”.

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

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

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

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

“Eligible Assignee” means (i) a Non-Defaulting Lender, (ii) an Affiliate of a
Non-Defaulting Lender, (iii) an Approved Fund, and (iv) any other Person (other
than a natural person) approved by (A) the Administrative Agent (at the
direction of the Lead Lenders) and (B) unless an Event of Default pursuant to
Section 8.1(a), (f) or (g) has occurred and is continuing, the Borrower (such
approval not to be unreasonably withheld, and shall be deemed

 

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provided unless expressly withheld by the Borrower within five (5) Business Days
of request therefor); provided that notwithstanding the foregoing, Eligible
Assignee shall not include the Borrower or any of the Borrower’s Affiliates or
Subsidiaries.

“Eligible Contract Participant” means, with respect to any Swap, a Person that
is an “eligible contract participant”, as defined in the Commodity Exchange Act,
with respect to such Swap.

“Eligible Secured Swap Counterparty” means (a) any Lender and/or any Affiliate
of any Lender that (i) either (A) is party to a Swap Contract permitted
hereunder with the Borrower or any Subsidiary on the Closing Date or (B) at any
time it occupies such role or capacity enters into a Swap Contract permitted
hereunder with the Borrower or any Subsidiary and (ii) in the case of a Lender
or an Affiliate of a Lender (other than an Affiliate of the Administrative
Agent), maintains a reporting system acceptable to the Lead Lenders with respect
to Swap Contract exposure and agrees with the Lead Lenders to provide regular
reporting to the Administrative Agent and the Lead Lenders in form and substance
reasonably satisfactory to the Lead Lenders, with respect to such exposure, and
(b) any other counterparty reasonably acceptable to the Lead Lenders (provided
that it is understood and agreed that Cargill and any other counterparty with an
Investment Grade Rating at the time such Swap Contract is entered into shall be
deemed reasonably acceptable to the Lead Lenders) that enters into a swap
intercreditor agreement. In addition thereto, any Affiliate of a Lender shall,
upon the Lead Lender’s request, execute and deliver to the Administrative Agent
and the Lead Lenders a letter agreement pursuant to which such Affiliate
designates the Administrative Agent as its agent and agrees to share, pro rata,
all expenses relating to liquidation of the Collateral for the benefit of such
Affiliate.

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

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

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

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

 

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

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

“ERISA Event” means (a) any “reportable event” as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the thirty (30) day notice period is waived); (b) the failure by
the Borrower or any of its ERISA Affiliates to make any required contribution to
a Multiemployer Plan pursuant to Sections 431 or 432 of the Code; (c) the filing
pursuant to Section 412(c) of the Code or Section 303(c) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate or reorganize
any Plan or Plans or to appoint a trustee to administer any Plan; (f) the
incurrence by Borrower or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal of the Borrower or any ERISA
Affiliate from any Plan or Multiemployer Plan; (g) a lien has been imposed under
the Code or ERISA on the assets of the Borrower or any ERISA Affiliate under
Section 303(k) or 4068 of ERISA or 430(k) of the Code with respect to any Plan
maintained by Borrower or any ERISA Affiliate; (h) the receipt by Borrower or
any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from
Borrower or any ERISA Affiliate of any notice, concerning the imposition upon
Borrower or any ERISA Affiliate of Withdrawal Liability or a determination that
a Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
in “endangered” or “critical” status, or terminated within the meaning of
Section 431 or 432 of the Code or Sections 304 and 305 of ERISA; (i) the
occurrence of a non-exempt prohibited transaction with respect to any Plan
maintained or contributed to by any Borrower (within the meaning of Section 4975
of the Code or Section 406 of ERISA) which could reasonably be expected to
result in material liability to the Borrower, (j) the imposition of liability on
Borrower or any ERISA Affiliate pursuant to Section 4062(e) or 4069 of ERISA or
by reason of the application of Section 4212(c) of ERISA; (k) the occurrence of
an act or omission which could reasonably be expected to give rise to the
imposition on Borrower or any ERISA Affiliate of fines, penalties, taxes or
related charges under Chapter 43 of the Code or under Section 409,
Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Plan; or
(l) receipt from the IRS of notice of the failure of any Plan intended to be
qualified under Section 401(a) of the Code to qualify under Section 401(a) of
the Code, or the failure of any trust forming part of any Plan to qualify for
exemption from taxation under Section 501(a) of the Code.

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

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

 

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“Excluded Property” means such assets defined in the Security Documents and
Collateral Documents.

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

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap
Obligation if, and to the extent that, all or a portion of the guaranty by such
Guarantor of, or the grant by such Guarantor of a security interest or lien to
secure, or the provision by such Guarantor of other support of, such Swap
Obligation is or becomes illegal under the Commodity Exchange Act by virtue of
such party’s failure for any reason to constitute an Eligible Contract
Participant at the time such guaranty, grant of security interest or lien or
provision of support of, such Swap Obligation becomes effective. If a Swap
Obligation arises under a master agreement governing more than one Swap, such
exclusion shall apply only to the portion of such Swap Obligation that is
attributable to Swaps for which such guaranty, grant of security interest or
lien to secure or provision of other support is or becomes illegal.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient, (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in a Loan pursuant to a law in
effect on the date on which (i) such Lender acquires such interest in the Loan
(other than pursuant to an assignments request by the Borrower under
Section 11.6(c)) or (ii) such Lender changes its lending office, except in each
case to the extent that, pursuant to Section 2.13(a), amounts with respect to
such Taxes were payable either to such Lender’s assignor immediately before such
Lender became a party hereto or to such Lender immediately before it changed its
lending office, (c) Taxes attributable to such Recipient’s failure to comply
with Section 2.13(f), and (d) any U.S. withholding Taxes imposed under FATCA.

“Exit Fee” has the meaning set forth in Section 2.7(d).

“Extraordinary Receipts” means any proceeds of insurance received by any Credit
Party (net of any actual and reasonable costs incurred by such Credit Party in
connection with the adjustment or settlement of any claims of such Credit Party
in respect thereof), including any insurance proceeds resulting from a Casualty
Event, property insurance proceeds, life insurance proceeds, any award or other
compensation as a result of a Casualty Event, and any settlement or other
litigation proceeds, and any similar extraordinary cash receipts.

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

 

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“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day and (ii) if no such rate is so published on such
next preceding Business Day, the Federal Funds Rate for such day shall be the
average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
quoted to U.S. national selected by Administrative Agent on such day on such
transactions as determined by Administrative Agent.

“Final DIP Order” means the Final Order entered by the Bankruptcy Court
(a) authorizing the Debtors to (i) obtain post-petition secured financing
pursuant to this Agreement and (ii) use cash collateral during the pendency of
the Chapter 11 Cases, and (b) granting certain related relief, as the same may
be amended, modified or supplemented from time to time with the prior written
consent of the Administrative Agent and the Lead Lenders.

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

“Financing Documents” means this Agreement, any Notes, the Security Documents,
the Collateral Documents, any fee letter between Wilmington Trust, National
Association or GSO Capital Partners LP, as applicable, and the Borrower relating
to the transactions contemplated hereby, and all other documents, instruments
and agreements (other than any Swap Contract) contemplated herein or thereby and
heretofore executed, executed concurrently herewith or executed at any time and
from time to time hereafter, as any or all of the same may be amended,
supplemented, restated or otherwise modified from time to time.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

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

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

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

“Funding Fee” has the meaning set forth in Section 2.7(b).

 

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

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

“GSO Lenders” means funds and accounts managed, advised or sub-advised by GSO
Capital Partners LP or its Affiliates, including without limitation FS
Investment Corporation, FS Investment Corporation II, FS Investment Corporation
III, FS Energy and Power Fund, Cobbs Creek LLC, Race Street Funding LLC, Lehigh
River LLC, Juniata River LLC, Green Creek LLC and Jefferson Square Funding LLC.

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

“Guarantee” by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep well, to purchase assets, goods, securities or services, to
take or pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include (x) endorsements for collection or deposit in the
Ordinary Course of Business or (y) any Lien described in item (m) of the
definition of “Permitted Encumbrances”. The term “Guarantee” used as a verb has
a corresponding meaning.

“Guarantor” means (i) initially, Warren Energy Services, LLC, a Delaware limited
liability company, Warren E&P, Inc., a New Mexico corporation, Warren Management
Corp., a Delaware corporation, Warren Marcellus LLC, a Delaware limited
liability company, and Warren Resources of California, Inc., a California
corporation, and (ii) each other Subsidiary that hereafter executes and delivers
to Administrative Agent and the Lenders a Guaranty, in each case until such
Person ceases to be a Guarantor in accordance with the terms hereof; provided,
that Warren Development Corp., a Delaware corporation, shall be required to
become a Guarantor to the extent that it is not formally liquidated or dissolved
on or prior to the Availability Date.

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

 

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

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

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

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

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

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

“Initial Budget” means the 13-Week Budget prepared by the Borrower and furnished
to the Lenders on the Closing Date in the form of Exhibit I, which weekly cash
budget includes detail on a line-item basis as to (a) Receipts, (b) Operating
Disbursements, (c) restructuring disbursements (which shall otherwise include
Professional Fees and the Adequate Protection Payments) and (d) debt service
(which shall otherwise include interest and fees under this Agreement).

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

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

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

 

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“Interest Payment Date” means the last day of each Interest Period applicable to
the Borrowing.

“Interest Period” means the period commencing on the date of Borrowing, and
thereafter on the last calendar day of each month, and ending on the last
calendar day of each calendar month; provided that, no Interest Period for any
Loan shall extend beyond the maturity date of such Loan. Interest shall accrue
from and including the first day of an Interest Period to but excluding the last
day of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date specified in the Notice of Borrowing and thereafter
shall be the effective date of the most recent continuation of such Borrowing.

“Interim Financing Order” means the interim order entered by the Bankruptcy
Court (a) Authorizing Use of Cash Collateral On An Interim Basis and Final
Basis, (b) Granting Liens and Providing Superpriority Administrative Expense
Status, (c) Granting Adequate Protection, (d) Modifying Automatic Stay and
(e) Scheduling a Final Hearing [Docket No. 48].

“Interim Period” means the period commencing on the date that the Interim
Financing Order is entered into and ending on the earlier to occur of (a) the
Availability Date and (b) the Termination Date.

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

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

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

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

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

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

“Lead Lenders” mean (i) on the Closing Date and at any time thereafter so long
as the GSO Lenders hold in the aggregate 50% or more of the sum of (A) the
aggregate Commitment Amounts of all Lenders as of such date and (B) the then
aggregate outstanding principal balance of the Loans, the GSO Lenders, and
(ii) on any date after the Closing Date on which the GSO Lenders hold in the
aggregate less than 50% of the sum of (A) the aggregate Commitment Amounts of
all Lenders as of such date and (B) the then aggregate outstanding

 

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principal balance of the Loans, the Required Lenders; provided that the
Commitment Amount of, and the portion of the aggregate outstanding principal
balance of the Loans held or deemed held by, any Defaulting Lender shall be
excluded for purposes of making a determination of Lead Lenders.

“Lender” has the meaning specified in the introductory paragraph hereto and
includes each Eligible Assignee that becomes a party hereto pursuant to
Section 11.6 and the respective successors of all of the foregoing, and
“Lenders” means all of the foregoing.

“LIBOR Loans” means any Loans that accrue interest by reference to the LIBOR
Rate, in accordance with the terms of this Agreement.

“LIBOR Base Rate” means in determining LIBOR Rate, the inter-bank offered rate
in effect from time to time for delivery of funds for three (3) months in
amounts approximately equal to the principal amount of the applicable Loans set
forth on the Reuters Reference LIBOR1 page as the London Interbank Offered Rate,
for deposits in Dollars at 11:00 a.m. (London, England time) two (2) Business
Days before the first day of the applicable Interest Period and for a period
equal to such Interest Period; provided that, if such quotation is not available
for any reason, LIBOR Base Rate shall then be the rate determined by the Lead
Lenders to be the rate at which deposits in Dollars for delivery on the first
day of such Interest Period in immediately available funds in the approximate
amount of the Loans being made or continued by the Lenders and with a term
equivalent to such Interest Period would be offered by the London branch of a
financial institution chosen by the Lead Lenders to major banks in the London or
other offshore interbank market for Dollars at their request at approximately
11:00 a.m. (London, England time) two (2) Business Days prior to the
commencement of such Interest Period.

“LIBOR Rate” means, with respect to any LIBOR Loan for any Interest Period, a
rate per annum equal to the greater of (x) 1.00% and (y) the LIBOR Base Rate.

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

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

“Loan” or “Loans” has the meaning set forth in Section 2.1.

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

 

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

“Material Adverse Effect” means, with respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, regardless of whether related, a
material adverse change in, or a material adverse effect upon, any of (i) the
business, assets, properties, liabilities (actual or contingent), operations, or
financial condition of the Borrower and its Subsidiaries taken as a whole,
(ii) the rights and remedies of the Administrative Agent or the Lenders under
any Financing Document, or the ability of any Credit Party to perform any of its
obligations under any Financing Document to which it is a party, (iii) the
legality, validity or enforceability of any Financing Document, or (iv) the
existence, perfection or priority of any security interest granted in any
Financing Document; provided that, Material Adverse Effect shall expressly
exclude (a) any matters Publicly Disclosed on or prior to the date hereof,
(b) the effect of filing the Chapter 11 Cases and any action required to be
taken under the Financing Documents, the Interim Financing Order or the Final
DIP Order and (c) the direct effect of any action taken by the Administrative
Agent or the Lenders with respect to the Loans or with respect to the Credit
Parties (including through such Persons’ participation in the Chapter 11 Cases).

“Material Contract” means (a) any contract or agreement, written or oral, of any
Credit Party involving monetary liability of or to any Person in an amount in
excess of $1,000,000 per annum or (b) any other contract or agreement of any
Credit Party, the breach, non-performance, cancellation or failure to renew of
which could reasonably be expected to have a Material Adverse Effect.

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

“Milestones” shall mean the following milestones relating to the Chapter 11
Cases:

(a) no later than seven (7) days after July 11, 2016 (or such later date as the
Lead Lenders may agree in writing with the Borrower), the Debtors shall have
filed with the Bankruptcy Court (i) the Agreed Restructuring Plan, which shall
be in form and substance satisfactory to the Lead Lenders, and (ii) the
Disclosure Statement, which shall be in form and substance acceptable to the
Lead Lenders;

(b) no later than July 25, 2016 (or such later date as the Lead Lenders may
agree in writing with the Borrower), the Bankruptcy Court shall have entered the
Final DIP Order, authorized the Debtors to entered into the DIP Facility and
approved the Budget on a final basis;

(c) no later than July 25, 2016 after filing the Disclosure Statement (or such
later date as the Lead Lenders may agree in writing with the Borrower), the
Bankruptcy Court shall have entered an order (the “Disclosure Statement Order”)
approving the adequacy of the Disclosure Statement;

 

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(d) no later than September 15, 2016 (or such later date as the Lead Lenders may
agree in writing with the Borrower), the Bankruptcy Court shall have entered an
order (the “Confirmation Order”) confirming the plan of reorganization; and

(e) no later than September 30, 2016 (or such later date as the Lead Lenders may
agree in writing with the Borrower), the Agreed Restructuring Plan shall become
effective.

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

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

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

“Net Cash Proceeds” means, with respect to any transaction or event, an amount
equal to the cash proceeds received by the Borrower or any Subsidiary from or in
respect of such transaction or event (including proceeds of any non-cash
proceeds of such transaction), less (i) any underwriting discounts and
out-of-pocket expenses paid to a Person that are reasonably incurred by the
Borrower or such Subsidiary in connection therewith (including, without
limitation, actual and reasonable documented broker’s fees or commissions, legal
fees, transfer or sales taxes) and (ii) in the case of an Asset Disposition, the
amount of any Debt secured by a Lien on the related asset and discharged from
the proceeds of such Asset Disposition and any taxes paid or reasonably
estimated by the Borrower or the applicable Subsidiary to be payable by such
Person in respect of such Asset Disposition (provided that, if the actual amount
of taxes paid is less than the estimated amount, the difference shall
immediately constitute Net Cash Proceeds).

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

“Non-Primed Excepted Liens” means (a) valid, perfected and unavoidable liens in
existence as of the Petition Date or (b) valid and unavoidable liens in
existence for amounts outstanding as of the Petition Date that are perfected
after the Petition Date as permitted by Section 546(b) of the Bankruptcy Code,
but in each case under the foregoing clause (a) and (b), only to the extent such
valid, perfected and unavoidable liens are senior by operation of law in
priority to the Prepetition Liens.

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

 

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

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

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

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

“Operating Disbursements” means disbursements (including, for the avoidance of
doubt, capital expenditures), other than disbursements on account of
Professional Fees, income Taxes, deposits made to utilities pursuant to an order
of the Bankruptcy Court, checks outstanding on the Petition Date that are
re-issued in accordance with an order of the Bankruptcy Court, Adequate
Protection paid to the Prepetition First Lien Lenders in accordance with the DIP
Orders, and interest and fees paid in accordance with this Agreement.

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

“Organizational Documents” means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity) and which relate to the
internal governance of such Person (such as by-laws, a partnership agreement or
an operating, limited liability company or members agreement).

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

“Other Taxes” means all present or future stamp, documentary, intangible,
recording, filing taxes or any other similar taxes arising from any payment made
hereunder or under any other Financing Document or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Financing Document, except any such Taxes that are Other Connection Taxes
imposed with respect to an assignment (other than an assignment made pursuant to
Section 11.6(c)).

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

 

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

“Payment Account” means the account specified on the signature pages hereof into
which all payments by or on behalf of the Borrower to the Administrative Agent
under the Financing Documents shall be made, or such other account as the
Administrative Agent shall from time to time specify by notice to the Borrower.

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

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

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

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

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

(b) Liens of landlords, vendors, carriers, warehousemen, mechanics, materialmen,
repairmen and other like Liens or charges imposed by law, or otherwise, arising
in the Ordinary Course of Business for amounts not yet delinquent (including any
amounts being withheld) or securing obligations that are not overdue by more
than sixty (60) days or are being contested in compliance with Section 4.2;

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

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

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

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

 

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

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

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

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

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

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

“Permitted Investments” means:

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

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

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

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

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

 

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

“Permitted Variances” has the meaning set forth in Section 5.26(b).

“Person” means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, regardless of whether a legal
entity, and any Governmental Authority.

“Petition Date” has the meaning specified in the recitals hereto.

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

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

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

“Preliminary Restructuring Plan” means, collectively, (a) the Plan of
Reorganization of Warren Resources, Inc. And Its Affiliated Debtors, dated as of
June 16, 2016 [Docket No. 97], and (b) the Plan of Reorganization of Warren
Resources, Inc. And Its Affiliated Debtors, dated as of June 20, 2016 [Docket
No. 115], in each case, including all annexes, exhibits or supplements thereto.

“Prepetition” means the time period prior to the Petition Date.

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

“Prepetition First Lien Collateral” means the assets and Property subject to a
valid, perfected and non-avoidable lien as of the Petition Date (including any
such liens securing obligations under the Prepetition First Lien Loan
Documents).

“Prepetition First Lien Credit Agreement” means that certain Credit Agreement,
dated as of May 22, 2015, among the Borrower, the lenders from time to time
party thereto (the “Prepetition First Lien Lenders”) and the Prepetition First
Lien Agent (as amended, restated, amended and restated, modified, supplemented,
or replaced from time to time).

“Prepetition First Lien Lenders” shall have the meaning assigned to such term in
the definition of “Prepetition First Lien Credit Agreement”.

 

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

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

“Prepetition First Lien Secured Parties” means the “Secured Parties” (as defined
in the Prepetition First Lien Credit Agreement).

“Prepetition Liens” mean the Liens securing the Prepetition First Lien
Obligations and the Prepetition Second Lien Obligations.

“Prepetition Second Lien Credit Agreement” means that certain Second Lien Credit
Agreement, dated as of October 22, 2015, among the Borrower, the financial
institutions or other entities from time to time parties thereto (the
“Prepetition Second Lien Lenders”) and Cortland Products Corp., as
administrative agent.

“Prepetition Second Lien Debt” means Debt incurred pursuant to the Prepetition
Second Lien Credit Agreement.

“Prepetition Second Lien Lenders” shall have the meaning assigned to such term
in the definition of “Prepetition Second Lien Credit Agreement”.

“Prepetition Second Lien Obligations” means the “Obligations” (as defined in the
Prepetition Second Lien Credit Agreement).

“Prepetition Second Lien Secured Parties” means the “Secured Parties” (as
defined in the Prepetition Second Lien Credit Agreement).

“Prepetition Secured Obligations” means the Prepetition First Lien Obligations
and the Prepetition Second Lien Obligations.

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

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

“Professional Fees” means attorneys’ fees and expenses and the fees and expenses
of any other professionals.

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

 

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“Property” of a Person means any and all property or assets, whether real,
personal, or mixed, tangible or intangible, of such Person.

“Pro Rata Share” means (i) with respect to a Lender’s commitment to make Loans,
the Applicable Percentage of such Lender, (ii) with respect to a Lender’s right
to receive payments of principal and interest with respect to Loans, such
Lender’s Loan Exposure with respect thereto and (iii) for all other purposes
(including without limitation the indemnification obligations arising under
Section 10.6) with respect to any Lender, the percentage obtained by dividing
(a) the sum of such Lender’s then existing Commitment Amount and the principal
amount of such Lender’s then outstanding Loans by (b) the sum of all Lenders’
then existing Commitment Amounts and the aggregate principal amount of all
Lenders’ then outstanding Loans.

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

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

“Publicly Disclosed” means any disclosure by the Borrower in a filing with the
United States Securities and Exchange Commission or a widely disseminated press
release.

“PV-10 Value” means the net present value, discounted at 10% per annum, of the
future net revenues expected to accrue to the Borrower and its Subsidiaries’
collective interests in Proved Developed Producing Reserves expected to be
produced from Oil and Gas Properties during the remaining expected economic
lives of such reserves. Each calculation of such expected future net revenues
shall be made in accordance with the then existing standards of the Society of
Petroleum Engineers (or any generally recognized successor), provided that in
any event (a) appropriate deductions shall be made for severance and ad valorem
Taxes, and for operating, gathering, transportation and marketing costs required
for the production and sale of such reserves, (b) appropriate adjustments shall
be made for hedging operations, provided that Swap Contracts with non-investment
grade counterparties shall not be taken into account to the extent that such
Swap Contracts improve the position of or otherwise benefit the Borrower or any
of its Subsidiaries and (c) the pricing assumptions used in determining PV-10
Value for any particular reserves shall be: (i) for natural gas, the quotation
for deliveries of natural gas for each such year from the New York Mercantile
Exchange for Henry Hub, provided that with respect to quotations for calendar
years after the third (3rd) calendar year, the quotation for the third (3rd)
calendar year shall be applied, (ii) for crude oil, the quotation for deliveries
of West Texas Intermediate crude oil for each such calendar year from the New
York Mercantile Exchange for Cushing, Oklahoma, provided that with respect to
quotations for calendar years after the third (3rd) calendar year, the quotation
for the third (3rd) calendar year shall be applied and (iii) for natural gas
liquids, the quotation for deliveries of natural gas liquids for each such
calendar year from December 31, 2014, provided that with respect to quotations
for calendar

 

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years after the third (3rd) calendar year, the quotation for the third (3rd)
calendar year shall be applied; provided that future net revenues calculated
using the pricing assumptions set forth in this clause (c) shall be further
adjusted to account for the projected average basis differential for the periods
utilized for such pricing assumptions based upon market based quotations
reasonably determined by the Borrower, with such supporting quotations or data
as may be reasonably acceptable to the Lead Lenders.

“Receipts” shall mean all cash or other collections received from operations in
the ordinary course of business, other than cash proceeds or collections from
Asset Dispositions, Casualty Events (including insurance proceeds or
condemnation awards), Extraordinary Receipts or the proceeds of any Loans.

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

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

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

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

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

“Required Lenders” means, subject to the provisions of Section 10.13(d), at any
time Lenders holding in the aggregate greater than fifty percent (50%) of the
sum of (A) the outstanding Commitment Amounts of the Lenders and (B) the then
aggregate outstanding principal balance of the Loans; provided that the
Commitment Amount of, and the portion of the aggregate outstanding principal
balance of the Loans held or deemed held by any Defaulting Lender shall be
excluded for purposes of making a determination of Required Lenders.

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

“Reserve Report” means the report regarding the Proved Reserves of the Credit
Parties provided pursuant to Section 4.1(i) or (j).

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

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

 

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“Restricted Payment” means as to any Person (i) any dividend or other
distribution (whether in cash, Capital Stock or other property) on any equity
interest in such Person (except those payable solely in Capital Stock of the
same class), (ii) any payment by such Person on account of (A) the purchase,
redemption, retirement, defeasance, surrender, cancellation, termination or
acquisition of any Capital Stock in such Person or any claim respecting the
purchase or sale of any equity interest in such Person or (B) any option,
warrant or other right to acquire any Capital Stock in such Person or (iii) any
optional or voluntary payment, purchase, redemption, retirement, defeasance,
surrender, cancellation, termination or acquisition of the Prepetition Senior
Notes or any Prepetition Second Lien Debt.

“RSA” means the Amended and Restated Restructuring Support Agreement dated as of
July 11, 2016, among the Debtors, certain holders of the Prepetition Senior
Notes, the Prepetition First Lien Lenders party thereto and the Prepetition
Second Lien Lenders party thereto, and all exhibits thereto, as amended in
accordance with the terms thereof.

“Scheduled Maturity Date” means October 31, 2016; provided, that such date may
be extended as agreed in writing by the Credit Parties and each Lender for an
additional period not to exceed three (3) months without further approval of the
Bankruptcy Court.

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

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

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

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

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

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

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

“Subsidiary” means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Capital Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Capital Stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with

 

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respect to which any such Person has the right to vote or designate the vote of
more than 50% of such Capital Stock whether by proxy, agreement, operation of
Law or otherwise, and (ii) any partnership or limited liability company in which
such Person and/or one (1) or more Subsidiaries of such Person shall have an
interest (whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or may exercise the powers of a general partner. Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary of
the Borrower. Notwithstanding the foregoing, Warren Development Corp. shall not
be deemed a Subsidiary of the Borrower unless it has yet to be liquidated or
dissolved at the Availability Date.

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

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

“Swap Obligation” means any obligation to pay or perform under any Swap, whether
as a party to such Swap or by providing any guarantee of or provision of support
for such Swap.

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

“Termination Date” means the earliest to occur of (a) the Scheduled Maturity
Date, (b) the date that is 120 days from the entry of the Interim Financing
Order unless the Final DIP Order has been entered by the Bankruptcy Court on or
before such date, (c) the effective date of a Chapter 11 plan in the Chapter 11
Cases, (d) the consummation of a sale of all or substantially all of the assets
of the Credit Parties (unless done pursuant to a confirmed Chapter 11 plan),
(e) the conversion of any Chapter 11 Case to a case under Chapter 7 of the
Bankruptcy Code or the entry of an order by the Bankruptcy Court dismissing any
of the Chapter 11 Cases, (f) the date of the payment in full in cash by the
Credit Parties of all DIP Obligations and the termination of all Commitments in
accordance with the terms hereof or (g) the date of termination of the
Commitments and/or the acceleration of all of the DIP Obligations under the DIP
Facility following the occurrence and during the continuance of an Event of
Default in accordance with Section 8.2.

“Testing Date” shall have the meaning assigned to such term in Section 4.1(q).

“Testing Period” means the two week period ending on the Testing Date; provided,
however, that in order to allow for timing variances associated with the receipt
of hydrocarbon revenues, upon the Borrower providing the Administrative Agent
and the Lead Lenders with notice at least one (1) Business Day prior to the
delivery of a Variance Report, the Borrower may, in its sole discretion, extend
the Testing Period applicable to such Variance Report so as to take into
consideration the Operating Disbursements made and Receipts received during the
two (2) Business Days immediately following the Testing Date.

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

 

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“Transactions” means the transactions contemplated by this Agreement to occur on
the Closing Date and the payment of fees and expenses incurred in connection
with the foregoing.

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

“United States” means the United States of America.

“Unused Commitment” means, with respect to each Lender at any time, such
Lender’s Commitment at such time, minus the amount of Loans funded prior to such
time by such Lender.

“Unused Commitment Fee” has the meaning set forth in Section 2.7(c).

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

“Variance Report” shall have the meaning assigned to such term in
Section 4.1(q).

“Warren Energy Services Pipeline Assets” means the midstream assets owned by
Warren Energy Services, Inc., a Delaware corporation, including, but not limited
to, the ownership interest in gathering and pressuring equipment and a 59-mile
pipeline in the Atlantic Rim Area of the Washlake Basin in Wyoming that
transports gas from the gathering systems throughout the Spyglass Hill Unit area
to the Wyoming Interstate Company interstate gas transportation pipeline.

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

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

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

Section 1.2 Accounting Terms and Determinations.

Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder (including without
limitation determinations made pursuant to the exhibits hereto) shall be made,
and all financial statements required to be delivered hereunder shall be
prepared on a consolidated basis in accordance with GAAP applied on a basis
consistent with the most recent audited consolidated financial statements of the

 

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Borrower and its Consolidated Subsidiaries delivered to the Administrative Agent
and the Lenders. If at any time any change in GAAP would affect the computation
of any financial ratio or financial requirement set forth in any Financing
Document, and either the Borrower or the Required Lenders shall so request, the
Administrative Agent, the Lenders and the Borrower shall negotiate in good faith
to amend such ratio or requirement to preserve the original intent thereof in
light of such change in GAAP (subject to the approval of the Required Lenders);
provided that, until so amended, (i) such ratio or requirement shall continue to
be computed in accordance with GAAP prior to such change therein and (ii) the
Borrower shall provide to the Administrative Agent and the Lenders financial
statements and other documents required under this Agreement which include a
reconciliation between calculations of such ratio or requirement made before and
after giving effect to such change in GAAP.

Section 1.3 Other Definitional Provisions and References.

References in this Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits” or
“Schedules” shall be to Articles, Sections, Annexes, Exhibits or Schedules of or
to this Agreement unless otherwise specifically provided. Any term defined
herein may be used in the singular or plural. “Include”, “includes” and
“including” shall be deemed to be followed by “without limitation”. Except as
otherwise specified or limited herein, references to any Person include the
successors and assigns of such Person. References “from” or “through” any date
mean, unless otherwise specified, “from and including” or “through and
including”, respectively. The words “assets” and “property” shall be construed
to have the same meaning and to refer to any and all tangible and intangible
asset and properties any type. Unless otherwise specified herein, the settlement
of all payments and fundings hereunder between or among the parties hereto shall
be made in lawful money of the United States and in immediately available funds.
Time is of the essence in the Borrower’s and each other Credit Party’s
performance under this Agreement and all other Financing Documents. All amounts
used for purposes of financial calculations required to be made herein shall be
without duplication. References to any statute or act shall include all related
current regulations and all amendments and any successor statutes, acts and
regulations. References to any statute or act, without additional reference,
shall be deemed to refer to federal statutes and acts of the United States.
References to any agreement, instrument or document shall include all schedules,
exhibits, annexes and other attachments thereto.

ARTICLE 2

LOANS

Section 2.1 Loans and Borrowings; Commitments.

(a) Subject the terms and conditions contained in this Agreement and the DIP
Orders and relying on the representations and warranties contained in this
Agreement, each Lender severally agrees to make loans denominated in dollars to
or for the benefit of the Borrower (the “Loans” and each, a “Loan”) during the
Availability Period; provided, however, that (i) the aggregate principal amount
of all Loans actually funded by such Lender shall not exceed such Lender’s
Commitment and (ii) the aggregate principal amount of all Loans funded by the
Lenders shall not exceed the Aggregate Commitment Amount. Amounts borrowed under
this Section 2.1 and repaid or prepaid may not be reborrowed.

 

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Section 2.2 Advancing Loans; Minimum Amounts.

The Borrower shall deliver to the Administrative Agent a Notice of Borrowing
with respect to each proposed Borrowing, such Notice of Borrowing to be
delivered no later than noon (Central time) on the fifth (5th) Business Day
prior to such proposed Borrowing. Once given, a Notice of Borrowing shall be
irrevocable and the Borrower shall be bound thereby. Each request for a Loan
shall be in a minimum amount of $1,000,000 and, if in excess of such amount, in
an integral multiple of $1,000,000 in excess thereof.

Section 2.3 Mandatory Prepayments.

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

(b) Indebtedness and Equity Interests. In addition to any other mandatory
prepayment pursuant to this Section 2.3, within one (1) Business Days after each
date on or after the Closing Date upon which the Borrower or any Subsidiary
receives any proceeds from any issuance or incurrence by the Borrower or any
Subsidiary of Debt (other than Debt permitted to be issued or incurred pursuant
to Section 5.1) or Equity Interests, an amount equal to 100% of the Net Cash
Proceeds of the respective incurrence of Debt or issuance of Equity Interests
shall be applied on such date as a mandatory prepayment in accordance with the
requirements of Sections 2.3(e), 2.3(f), 2.4 and 8.6.

(c) Asset Dispositions and Casualty Proceeds. In addition to any other mandatory
prepayment pursuant to this Section 2.3, within five (5) Business Days after
each date on or after the Closing Date upon which any Credit Party receives any
Casualty Proceeds or proceeds from any Asset Disposition, an amount equal to
100% of the Net Cash Proceeds therefrom shall be applied on such date as a
mandatory prepayment in accordance with the requirements of Sections 2.3(e),
2.3(f), 2.4 and 8.6.

(d) Extraordinary Receipts. In addition to any other mandatory prepayment
pursuant to this Section 2.3, within five (5) Business Days after each date on
or after the Closing Date upon which any Credit Party receives any Extraordinary
Receipts (whether from a single event or a related series of events and whether
as one payment or a series of payments), an amount equal to 100% of the amount
of Extraordinary Receipts shall be applied on such date as a mandatory
prepayment in accordance with the requirements of Sections 2.3(e), 2.3(f), 2.4
and 8.6.

(e) Certificates and Notices. The Borrower shall deliver to the Administrative
Agent, (i) at the time of each prepayment required under this Section 2.3, a
certificate signed by a Responsible Officer of the Borrower setting forth in
reasonable detail the calculation of the amount of such prepayment and (ii) not
later than noon, Central time, at least two (2) Business Days before the date of
such prepayment, prior written notice of such prepayment (which such notice
shall be delivered by the Administrative Agent to each Lender on the Business
Day of receipt (or the immediately following Business Day if received after
noon, Central time, on any Business Day)) (a “Notice of Prepayment”). Each
Notice of Prepayment shall specify the prepayment date and the principal amount
of each Loan (or portion thereof) to be prepaid. All prepayments pursuant to
this Section 2.3 shall be without premium or penalty.

 

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(f) Declining Lenders. Each Lender may reject all or part of its applicable
share of any mandatory prepayment of Loans required to be made pursuant to this
Section 2.3 by providing written notice (each, a “Rejection Notice”) to the
Administrative Agent no later than 5:00 p.m. (Central time) one Business Day
after the date of such Lender’s receipt of the applicable Notice of Prepayment
(any such Lender, a “Declining Lender”); provided, that, if a Lender fails to
deliver a Rejection Notice to the Administrative Agent within the time frame
specified above, such failure will be deemed an acceptance by such Lender of the
total amount of such mandatory prepayment of Loans. On such date, the
Administrative Agent shall then provide written notice (the “Second Offer”) to
Lenders other than the Declining Lenders (such Lenders, the “Accepting Lenders”)
of the additional amount available (due to such Declining Lenders’ declining
such prepayment) to prepay Loans owing to such Accepting Lenders, with such
available amount to be allocated on a pro rata basis among the Accepting Lenders
that accept the Second Offer. Any Lenders declining prepayment pursuant to such
Second Offer shall give written notice thereof to the Administrative Agent by
5:00 p.m. (Central time) no later than one (1) Business Day after the date of
such notice of a Second Offer; provided, that, if a Lender fails to deliver a
Rejection Notice to the Administrative Agent within the time frame specified
above, such failure will be deemed an acceptance of such Lender’s pro rata share
of the Second Offer. The Borrower shall prepay the applicable Loans within
one (1) Business Day after its receipt of notice from the Administrative Agent
of the aggregate amount of such prepayment. Amounts remaining after the
allocation to Accepting Lenders as set forth above shall be retained by the
Borrower.

Section 2.4 All Prepayments.

Any prepayment of a Loan on a day other than the last day of an Interest Period
therefor shall include accrued and unpaid interest on the principal amount being
prepaid and shall be subject to Section 2.7(g)(iv). Prepayments made in
accordance with Section 2.3 or Section 2.5 shall be applied in the following
order: first, at all times, to the prepayment of the outstanding principal
amount of the Loans and any other amounts then due and payable under this
Agreement until paid in full; second, at any time after the date on which the
Bankruptcy Court issues the Final DIP Order, to the outstanding DIP Obligations
in the order specified in this Agreement, until paid in full.

Section 2.5 Optional Prepayments of Loans.

(a) Subject to the provisions of Section 2.7(g)(iv), the Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part, without premium or penalty; provided that any such partial prepayment of
the Loans shall be in an amount equal to $1,000,000 or a higher integral
multiple of $500,000; provided, further, that such prepayments shall require
written notice to the Administrative Agent not later than noon, Central time, at
least two (2) Business Days prior to the date of prepayment.

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

(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Loan (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such borrowing by the amount
stated therein, together with interest then accrued and unpaid on such principal
amount on the date stated therein (and all such amounts

 

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shall become due and payable for all purposes hereunder on such date); provided
that, if a notice of prepayment is given in connection with a conditional notice
of termination of the Commitments pursuant to Section 2.6, then such notice of
prepayment may be revoked if such notice of termination is revoked in accordance
with Section 2.6. Promptly following receipt of any such notice of prepayment,
the Administrative Agent shall advise the Lenders of the contents thereof.

Section 2.6 Termination, Reduction or Increase of Commitments.

(a) Termination or Reduction of Commitments. The Borrower shall have the right
to terminate or permanently reduce the amount of the Commitment Amount, at any
time, or from time to time, upon notice given to the Administrative Agent (which
shall promptly notify the Lenders) by noon, Central time, not less than three
(3) Business Days prior to the date of termination or reduction, which notice
shall specify the effective date thereof and the amount of any such reduction
(which shall not be less than $1,000,000 or any whole multiple of $500,000 in
excess thereof for any reduction of the Commitment Amount). Any such notice
given shall be irrevocable and effective only upon receipt by the Administrative
Agent; provided that a notice of termination of the Commitments delivered by the
Borrower may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied. Any reduction of the
Commitments shall be applied to each Lender according to its Applicable
Percentage, and the Commitment Amount of any Lender, once terminated or reduced,
may not be reinstated.

(b) [Reserved].

Section 2.7 Interest, Interest Calculations and Certain Fees.

(a) Interest. From and following the Closing Date, the Loans and the other DIP
Obligations shall bear interest at the LIBOR Rate plus 11.0% per annum.

(b) Funding Fee. Upon the advancement of the initial Borrowing on or after the
Availability Date, the Borrower agrees to pay to the Administrative Agent from
the proceeds of such initial Borrowing, for the account of each Lender
(excluding any Defaulting Lenders) in proportion to its Pro Rata Share of the
Aggregate Commitment Amount, an upfront fee (the “Funding Fee”) of 3.0%
multiplied by the Aggregate Commitment Amount. The Funding Fee shall be due and
payable on the date such initial Borrowing is advanced to the Borrower.

(c) Unused Commitment Fee. Subject to the provisions of Section 2.17, the
Borrower agrees to pay to the Administrative Agent, for the account of each
Lender (excluding any Defaulting Lenders), an unused commitment fee (the “Unused
Commitment Fee”) equal to 1.0% multiplied by the daily average of each such
Lender’s Unused Commitment. Such Unused Commitment Fee shall be calculated on
the basis of a year consisting of 360 days and shall be payable in arrears on
the last day of each calendar month and on the Termination Date for any period
then ending for which the Unused Commitment Fee shall not have been previously
paid. In the event the Commitments terminate on any date other than the last day
of a calendar month, the Borrower agrees to pay to the Administrative Agent, for
the account of each Lender (excluding any Defaulting Lenders), on the date of
such termination, each such Lender’s Unused Commitment Fee due for the period
from the last day of the immediately preceding calendar month to the date such
termination occurs.

 

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(d) Exit Fee. The Borrower agrees to pay to the Administrative Agent, for the
account of each Lender (excluding any Defaulting Lenders) in proportion to its
Pro Rata Share of the Aggregate Commitment Amount, an exit fee (the “Exit Fee”)
upon the earlier of (i) prepayment of any portion of the DIP Facility in an
amount equal to 2.0% of the principal amount of the DIP Facility so prepaid and
(ii) the Termination Date in an amount equal to 2.0% of the aggregate principal
amount of the DIP Facility less any amount amounts paid under the immediately
preceding clause (i) above; provided, that such Exit Fee shall be waived by the
Lenders if the repayment, regardless of whether pursuant to clause (i) or
clause (ii) of this Section 2.7(d), is made in cash.

(e) Agent’s Fees. The Borrower shall pay to the Administrative Agent fees in
such amounts and at such times as set forth in that certain letter agreement
dated June 2, 2016 among the Administrative Agent and the Borrower, as amended
from time to time.

(f) Computation of Interest and Related Fees. Interest shall be computed on the
basis of a year of 360 days, in each case for the actual number of days elapsed
in the period during which it accrues. In computing interest on any Loan, the
date of the making of such Loan shall be included, and the date of payment of
such Loan shall be excluded. Interest on each Loan shall be due and payable on
each Interest Payment Date; provided that (i) interest accrued pursuant to
Section 8.4 shall be payable on demand and (ii) in the event of any prepayment
of any Loan pursuant to Section 2.3 or Section 2.5, accrued interest on the
principal amount prepaid shall be due and payable on the date of such
prepayment. All fees pursuant to the foregoing provisions of this Section 2.7
shall be paid on the dates due, in immediately available funds to the
Administrative Agent for appropriate distribution. Once paid, none of the fees
shall be refundable under any circumstances, except in the case of any
overpayment due to erroneous calculation or invoicing thereof.

(g) LIBOR Provisions.

(i) [Reserved].

(ii) Inability to Determine LIBOR. If prior to commencement of any Interest
Period relating to a LIBOR Loan, (x) the Lead Lenders shall have determined
(which determination shall be conclusive and binding absent manifest error) that
adequate and reasonable methods do not exist for ascertaining LIBOR for such
Interest Period or (y) the Administrative Agent shall have been notified by the
Required Lenders that LIBOR as determined for such Interest Period (by reason of
any changes arising on or after the Closing Date affecting the interbank LIBOR
market) will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) or making or maintaining their affected
Loans during such Interest Period, the Administrative Agent shall promptly
provide notice of such determination to the Borrower and the Lenders (which
shall be conclusive and binding on the Borrower and the Lenders). In such event
the Lenders may make loans based on each Lender’s “prime” lending rate (which
determination shall be conclusive and binding absent manifest error).

 

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(iii) Illegality. Notwithstanding any other provisions hereof, if any Law shall
make it unlawful for any Lender to make, fund or maintain LIBOR Loans, such
Lender shall promptly give notice of such circumstances to the Administrative
Agent, the Borrower and the other Lenders. In such an event, the Lenders may
make loans based on each Lender’s “prime” lending rate (which determination
shall be conclusive and binding absent manifest error).

(iv) LIBOR Breakage Fee. Upon (A) any default by the Borrower in making any
borrowing of any LIBOR Loan following the Borrower’s delivery to the
Administrative Agent of any applicable Notice of Borrowing or (B) any payment of
a LIBOR Loan on any day that is not the last day of the Interest Period
applicable thereto (regardless of the source of such prepayment and whether
voluntary, by acceleration or otherwise), the Borrower shall promptly pay the
Administrative Agent, for the benefit of all Lenders that funded or were
prepared to fund any such LIBOR Loan, an amount equal to the amount of any
losses, expenses and liabilities (including, without limitation, any loss
(including interest paid) in connection with the re-employment of such funds)
that any Lender may sustain as a result of such default or such payment. For
purposes of calculating amounts payable to a Lender under this paragraph, each
Lender shall be deemed to have actually funded its relevant LIBOR Loan through
the purchase of a deposit bearing interest at LIBOR in an amount equal to the
amount of that LIBOR Loan and having a maturity and repricing characteristics
comparable to the relevant Interest Period; provided, however, that each Lender
may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this subsection. A certificate of any Lender setting forth any amount or amounts
that such Lender is entitled to receive pursuant to this Section shall be
delivered to the Borrower (with a copy thereof furnished to the Administrative
Agent) and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within fifteen
(15) days after receipt thereof.

(h) [Reserved].

(i) [Reserved].

(ii) [Reserved].

(iii) [Reserved].

(iv) [Reserved].

(v) Increased Costs. If, after the Closing Date, the adoption or taking effect
of, or any change in, any Law, or any change in the interpretation,
administration or application of any Law by any Governmental Authority, central
bank or comparable agency charged with the interpretation, administration or
application thereof, or compliance by any Lender with any request, guideline or
directive (regardless of whether having the force of Law) of any such authority,
central bank or comparable agency: (A) shall impose, modify or deem applicable
any reserve (including any reserve imposed by the Board of Governors of the
Federal Reserve System, or any successor thereto, but excluding any reserve
included in the determination of the LIBOR pursuant to the provisions of this
Agreement), special deposit, compulsory loan, insurance charge or similar
requirement against assets of, deposits with or for the account of, or credit
extended or participated in by any Lender; (B) shall subject any Lender or the
Administrative Agent to any Taxes (other than (i) Indemnified Taxes, (ii) Taxes
described in

 

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clauses (b) through (d) of the definition of Excluded Taxes, and
(iii) Connection Income Taxes) on its loans, loan principal, letters of credit,
commitments, or other obligations, or its deposits, reserves, other liabilities
or capital attributable thereto; or (C) shall impose on any Lender any other
condition affecting its LIBOR Loans, any of its Notes (if any) or its obligation
to make LIBOR Loans; and the result of anything described in clauses (A),
(B) and (C) above is to increase the cost to (or to impose a cost on) such
Lender of making or maintaining any LIBOR Loan, or to reduce the amount of any
sum received or receivable by such Lender under this Agreement or under any of
its Notes (if any) with respect thereto, then within fifteen (15) days after
demand by such Lender (which demand shall be accompanied by a statement setting
forth the basis for such demand and a calculation of the amount thereof in
reasonable detail, a copy of which shall be furnished to the Administrative
Agent), the Borrower shall promptly pay directly to such Lender such additional
amount as will compensate such Lender for such increased cost or such reduction,
so long as such amounts have accrued on or after the day which is 180 days prior
to the date on which such Lender first made demand therefore; provided that, if
such adoption, taking effect, or change is given retroactive effect, then the
180-day period referred to above shall be extended to include the retroactive
effect thereof. Notwithstanding anything herein to the contrary, (x) the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives thereunder or issued in connection therewith and
(y) all requests, rules, guidelines or directives promulgated by the Bank for
International settlements, the Basel Committee on Banking Supervision (or any
successor or similar authority) or the United States regulatory authorities, in
each case pursuant to Basel III, shall in each case be deemed to be a “change in
law”, regardless of the date enacted, adopted or issued.

Section 2.8 Notes; Commitments Several.

(a) The portion of the Loans made by each Lender shall be evidenced, if so
requested by such Lender, by a Note executed by the Borrower in an original
principal amount equal to the sum of (i) such Lender’s Loans and (ii) such
Lender’s Pro Rata Share of the Lenders’ Commitment outstanding at the time of
such execution.

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

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

Section 2.9 [Reserved].

Section 2.10 General Provisions Regarding Payment.

All payments to be made by the Borrower under any Financing Document, including
payments of principal and interest made hereunder and pursuant to any other
Financing Document, and all fees, expenses, indemnities and reimbursements,
shall be paid into the

 

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

Section 2.11 Loan Account.

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

Section 2.12 Maximum Interest.

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

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

(c) Application of Excess Interest. In no event shall the total interest
received by any Lender exceed the amount which it could lawfully have received
had the interest been calculated for the full term hereof at the Maximum Lawful
Rate. If, notwithstanding the prior sentence, any

 

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Lender has received interest hereunder in excess of the Maximum Lawful Rate,
such excess amount shall be applied to the reduction of the principal balance of
the Loans or to other amounts (other than interest) payable hereunder, and if no
such principal or other amounts are then outstanding, such excess or part
thereof remaining shall be paid to the Borrower. In computing interest payable
with reference to the Maximum Lawful Rate applicable to any Lender, such
interest shall be calculated at a daily rate equal to the Maximum Lawful Rate
divided by the number of days in the year in which such calculation is made.

Section 2.13 Taxes.

(a) Gross Up for Taxes. All payments of principal and interest on the Loans and
all other amounts payable hereunder or under any Financing Document shall be
made without deduction or withholding for any Taxes, except as required by
applicable law. If any applicable law requires the deduction or withholding of
any Tax from any payment to be made by a Credit Party hereunder, then such
Credit Party shall be entitled to make such deduction or withholding and shall
timely pay the full amount deducted or withheld to the relevant Governmental
Authority in accordance with applicable law and, if such Tax is an Indemnified
Tax, then the sum payable by the applicable Credit Party shall be increased as
necessary so that after such deduction or withholding has been made (including
such deductions and withholdings of Indemnified Taxes applicable to additional
sums payable under this Section) the applicable Recipient receives an amount
equal to the sum it would have received had no such deduction or withholding
been made.

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

(c) Indemnification by the Borrower. Without limiting (or duplication of) the
provisions of subsection (a) or (b) above, the Borrower shall, and does hereby,
indemnify each Recipient, and shall make payment in respect thereof within
ten (10) days after demand therefor, for the full amount of any Indemnified
Taxes (including Indemnified Taxes imposed or asserted on or attributable to
amounts payable under this Section) payable or paid by such Recipient or
required to be withheld or deducted from a payment to such Recipient, and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, regardless of whether such Indemnified Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of any such payment or liability delivered to the Borrower by a
Lender (with a copy furnished to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

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

 

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correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to any
Lender by the Administrative Agent shall be conclusive absent manifest error.
Each Lender hereby authorizes the Administrative Agent to set-off and apply any
and all amounts at any time owing to such Lender under any Financing Document or
otherwise payable by the Administrative Agent to the Lender from any other
source against any amount due to the Administrative Agent under this
paragraph (d).

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

(f) Status of Lenders / Administrative Agent.

(i) Any Lender that is entitled to an exemption from or reduction of withholding
Tax with respect to payments made under any Financing Document shall deliver to
the Borrower and the Administrative Agent, at the time or times reasonably
requested by the Borrower or the Administrative Agent, such properly completed
and executed documentation reasonably requested by the Borrower or the
Administrative Agent as will permit such payments to be made without withholding
or at a reduced rate of withholding. In addition, any Lender, if reasonably
requested by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether such Lender is subject to backup
withholding or information reporting requirements. Notwithstanding anything to
the contrary in the preceding two sentences, the completion, execution and
submission of such documentation (other than the documentation described in
Section 2.13(f)(ii)A, (ii)B and (ii)C, below) shall not be required if in the
Lender’s reasonable judgment the completion, execution or delivery of such
documentation would subject such Lender to any material unreimbursed cost or
expense or would materially prejudice the legal or commercial position of such
Lender.

(ii) Without limiting the generality of the foregoing,

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

B. each Foreign Lender that is entitled under the Code or any applicable treaty
to an exemption from or reduction of withholding Tax with respect to payments
hereunder or under any other Financing Document shall deliver to the Borrower
and the Administrative Agent (in such number of copies as shall be requested by
the recipient) on or prior to the date on which such Foreign Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the request
of the Borrower or the Administrative Agent, but only if such Foreign Lender is
legally entitled to do so), whichever of the following is applicable:

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

 

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

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

(4) to the extent a Foreign Lender is not the beneficial owner, executed
originals of Internal Revenue Service Form W-8IMY and accompanied by Internal
Revenue Service Form W-8ECI, Internal Revenue Service Form W-8BEN or W-8BEN-E
(as applicable), a U.S. Tax Compliance Certificate substantially in the form of
Exhibit E-2 or Exhibit E-3, Internal Revenue Service Form W-9, and/or other
certification documents from each beneficial owner, as applicable; provided that
if the Foreign Lender is a partnership and one or more direct or indirect
partners of such Foreign Lender are claiming the portfolio interest exemption,
such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially
in the form of Exhibit E-4 on behalf of each such direct and indirect partner.

C. If a payment made to a Lender or the Administrative Agent under any Financing
Document would be subject to United States federal withholding Tax imposed by
FATCA if such Lender or the Administrative Agent were to fail or were unable to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower and the Administrative Agent or the Administrative
Agent shall deliver to the Borrower 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 or the Administrative
Agent has complied with such Lender’s or the Administrative Agent’s obligations
under FATCA or to determine the amount to deduct and withhold from such payment.
Solely for purposes of this clause (C), “FATCA” shall include any amendments
made to FATCA after the date of this Agreement.

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

(iii) On or before the date of this Agreement (or, in the case of any successor
or replacement Administrative Agent, the date on which such person becomes the
Administrative

 

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

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

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

Section 2.14 Capital Adequacy.

If any Lender shall reasonably determine that the adoption or taking effect of,
or any change in, any applicable Law regarding capital or liquidity
requirements, in each instance, after the Closing Date, or any change after the
Closing Date in the interpretation, administration or application thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation, administration or application thereof, or the compliance by any
Lender or any Person controlling such Lender with any request, guideline or
directive regarding capital or liquidity requirements (regardless of whether
having the force of Law) of any such Governmental Authority, central bank or
comparable agency adopted or otherwise taking effect

 

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after the Closing Date, has or would have the effect of reducing the rate of
return on such Lender’s or such controlling Person’s capital as a consequence of
such Lender’s obligations hereunder to a level below that which such Lender or
such controlling Person could have achieved but for such adoption, taking
effect, change, interpretation, administration, application or compliance
(taking into consideration such Lender’s or such controlling Person’s policies
with respect to capital adequacy or liquidity) then from time to time, within
fifteen (15) days after demand by such Lender (which demand shall be accompanied
by a statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to the
Administrative Agent), the Borrower shall promptly pay to such Lender such
additional amount as will compensate such Lender or such controlling Person for
such reduction, so long as such amounts have accrued on or after the day which
is 180 days prior to the date on which such Lender first made demand therefor;
provided that, if such adoption, taking effect or change is given retroactive
effect, then the 180-day period referred to above shall be extended to include
the retroactive effect thereof. Notwithstanding anything herein to the contrary,
(x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by
the Bank for International settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States
regulatory authorities, in each case pursuant to Basel III, shall in each case
be deemed to be a “change in law”, regardless of the date enacted, adopted or
issued.

Section 2.15 Mitigation Obligations.

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

Section 2.16 [Reserved].

Section 2.17 Defaulting Lenders.

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

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

 

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(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or
other amounts received by the Administrative Agent for the account of such
Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to
Article 8 or otherwise) or received by the Administrative Agent from a
Defaulting Lender pursuant to Section 8.5 shall be applied at such time or times
as may be determined by the Administrative Agent as follows: first, to the
payment of any amounts owing by such Defaulting Lender to the Administrative
Agent hereunder; second, as the Borrower may request (so long as no Default or
Event of Default exists), to the funding of any Loan in respect of which such
Defaulting Lender has failed to fund its portion thereof as required by this
Agreement, as determined by the Administrative Agent; third, if so determined by
the Administrative Agent and the Borrower, to be held in a deposit account and
released pro rata in order to satisfy such Defaulting Lender’s potential future
funding obligations with respect to Loans under this Agreement; fourth, to the
payment of any amounts owing to the Lenders as a result of any judgment of a
court of competent jurisdiction obtained by any Lender against such Defaulting
Lender as a result of such Defaulting Lender’s breach of its obligations under
this Agreement; fifth, so long as no Default or Event of Default exists, to the
payment of any amounts owing to the Borrower as a result of any judgment of a
court of competent jurisdiction obtained by the Borrower against such Defaulting
Lender as a result of such Defaulting Lender’s breach of its obligations under
this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by
a court of competent jurisdiction; provided that if (x) such payment is a
payment of the principal amount of any Loans in respect of which such Defaulting
Lender has not fully funded its appropriate share, and (y) such Loans were made
at a time when the conditions set forth in Section 7.2 or Section 7.3, as
applicable, were satisfied or waived, such payment shall be applied solely to
pay the Loans of all Non-Defaulting Lenders on a pro rata basis prior to being
applied to the payment of any Loans of such Defaulting Lender until such time as
all Loans are held by the Lenders pro rata in accordance with the Commitment
Amounts. Any payments, prepayments or other amounts paid or payable to a
Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting
Lender pursuant to this Section 2.17(a)(ii) shall be deemed paid to and
redirected by such Defaulting Lender, and each Lender irrevocably consents
hereto.

(b) Defaulting Lender Cure. If the Borrower and the Administrative Agent agree
in writing that a Lender is no longer a Defaulting Lender, the Administrative
Agent will so notify the parties hereto, whereupon as of the effective date
specified in such notice and subject to any conditions set forth therein (which
may include arrangements with respect to any cash collateral), that Lender will,
to the extent applicable, purchase at par that portion of outstanding Loans of
the other Lenders or take such other actions as the Administrative Agent may
determine to be necessary to cause the Loans to be held pro rata by the Lenders
in accordance with the Commitment Amounts, whereupon such Lender will cease to
be a Defaulting Lender; provided that no adjustments will be made retroactively
with respect to fees accrued or payments made by or on behalf of the Borrower
while that Lender was a Defaulting Lender; and provided, further, that except to
the extent otherwise expressly agreed by the affected parties, no change
hereunder from Defaulting Lender to Lender will constitute a waiver or release
of any claim of any party hereunder arising from that Lender’s having been a
Defaulting Lender.

Section 2.18 Priority and Liens.

(a) The Borrower, on behalf of itself and each of its Subsidiaries, hereby
covenants, represents and warrants that, upon entry of the DIP Orders and the
delivery and execution of this

 

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Agreement, and subject to the terms of the DIP Orders, the DIP Obligations of
the Borrower and the Guarantors shall at all times:

(i) pursuant to section 364(c)(1) of the Bankruptcy Code, be entitled to joint
and several super-priority administrative expense claims status in the
Chapter 11 Cases senior to all administrative expenses of the kind specified in
sections 503(b) and 507(b) of the Bankruptcy Code, subject only to (A) the Carve
Out and (B) except with respect to Property that is otherwise deemed to be
unencumbered in accordance with the applicable DIP Orders), the Adequate
Protection in favor of the Prepetition First Lien Agent and the Prepetition
First Lien Lenders as set forth in the DIP Orders;

(ii) pursuant to section 364(c)(3) of the Bankruptcy Code, be secured by a
perfected second priority Lien on the Prepetition First Lien Collateral, subject
to (A) Permitted Liens and (B) the Carve Out; and

(iii) pursuant to section 364(c)(2) of the Bankruptcy Code, be secured by a
perfected first priority Lien on any and all owned and hereafter acquired
personal Property, real Property and all other assets of the Debtors and their
estates, together with any proceeds thereof, that is not Prepetition First Lien
Collateral, subject to (A) Permitted Liens and (B) the Carve Out.

(b) All of the Liens described in this Section 2.18 shall be effective and
perfected upon entry of the Interim Financing Order or Final Order, as
applicable, without the necessity of the execution, recordation of filings by
the Debtors of mortgages, security agreements, control agreements, pledge
agreements, financing statements or other similar documents or notices, or the
possession, control or other acts by the Administrative Agent of, or over, any
Collateral, as set forth in the Interim Financing Order or Final Order, as
applicable. The Lenders, or the Administrative Agent on behalf of the Lenders,
shall be permitted, but not required, to make or authorize the making of any
filings, deliver any notices or take any other acts as may be desirable under
state law in order to reflect the perfection and priority of the Lenders’ claims
described herein.

(c) Subject in all respects to the priorities set forth in Section 2.18(a) above
and the terms of the DIP Orders, the Borrower and the Guarantors hereby grant to
the Administrative Agent on behalf of the Secured Parties a security interest
in, and mortgage on, all of the right, title and interest of the Borrower and
the Guarantors in all real Property owned or leased by the Borrower or any
Guarantor, together in each case with all of the right, title and interest of
the Borrower or such Guarantor in and to all buildings, improvements, and
fixtures related thereto, any lease or sublease thereof, all general intangibles
relating thereto and all proceeds thereof. The Borrower and the Guarantors
hereby acknowledge that, pursuant to the DIP Orders, the Liens in favor of the
Administrative Agent on behalf of the Secured Parties in all of such real
Property owned or leased by the Borrower or any Guarantor shall be perfected
without the recordation of any instruments of mortgage or assignment and the
Administrative Agent and the other Secured Parties shall have the benefits of
the DIP Orders.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES

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

Section 3.1 Existence and Power.

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

Section 3.2 Organization and Governmental Authorization; No Contravention.

Subject to the entry of the DIP Orders and subject to any restrictions arising
on account of the Borrower’s or any Subsidiary’s status as a “debtor” under the
Bankruptcy Code, the execution, delivery and performance by each Credit Party of
the Financing Documents to which it is a party are within its powers, have been
duly authorized by all necessary action pursuant to its Organizational
Documents, require no further action by or in respect of, or filing with, any
Governmental Authority (except the filing of the Mortgages and financing
statements) and do not violate, conflict with or cause a breach or a default
under (i) any Law or any of the Organizational Documents of any Credit Party or
(ii) any agreement or instrument binding upon it, except for (a) the Prepetition
Second Lien Credit Agreement and related financing documents or the indenture
governing the Prepetition Senior Notes and (b) such violations, conflicts,
breaches or defaults as could not, with respect to this clause (ii), reasonably
be expected to have a Material Adverse Effect.

Section 3.3 Binding Effect.

Subject to the entry of the DIP Orders and subject to any restrictions arising
on account of the Borrower’s or any Subsidiary’s status as a “debtor” under the
Bankruptcy Code, each of the Financing Documents to which any Credit Party is a
party constitutes a valid and

 

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

Section 3.4 Capitalization.

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

Section 3.5 Financial Information.

(a) Audited Statements. The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 2015, and the related consolidated
statements of operations, stockholders’ equity (or comparable calculation, if
such Person is not a corporation) and cash flows for the fiscal year then ended,
reported on by Grant Thornton LLP, copies of which have been delivered to the
Initial Lenders, fairly present in all material respects, in conformity with
GAAP, the consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations,
changes in stockholders’ equity (or comparable calculation) and cash flows for
such period.

(b) No Material Adverse Effect. Since the Petition Date, there has been no
event, development or circumstance that has had or could reasonably be expected
to have a Material Adverse Effect.

Section 3.6 Litigation.

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

Section 3.7 Ownership of Property.

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

 

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Section 3.8 No Default.

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

Section 3.9 Labor Matters.

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

Section 3.10 Regulated Entities.

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

Section 3.11 Margin Regulations.

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

Section 3.12 Compliance With Laws; Anti-Terrorism Laws.

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

(b) Anti-Terrorism Laws. None of the Borrower nor the other Credit Parties and,
to the knowledge of the Credit Parties, none of their Affiliates nor agents
acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement (i) is in violation of or has engaged in any
conduct that would be sanctionable under any Anti-Terrorism Law,

 

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(ii) engages in or conspires to engage in any transaction that evades or avoids,
or has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or
is controlled by a Blocked Person, (iv) is acting or will act for or on behalf
of a Blocked Person, (v) is associated with, or will become associated with, a
Blocked Person or (vi) is providing, or will provide, material, financial or
technical support or other services to or in support of acts of terrorism of a
Blocked Person. No Credit Party nor, to the knowledge of any Credit Party, any
of its Affiliates or agents acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement, (A) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (B) deals in, or otherwise
engages in any transaction relating to, any property or interest in property
blocked pursuant to Executive Order No. 13224, any similar executive order or
other Anti-Terrorism Law. The Borrower and each of the Credit Parties has
adopted, maintains and enforces policies, procedures and controls designed to
ensure compliance with Anti-Terrorism Laws and intended to ensure no dealings or
transactions with any Blocked Person.

Section 3.13 Taxes.

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

Section 3.14 Compliance with ERISA.

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

 

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Section 3.15 Brokers.

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

Section 3.16 Environmental Compliance.

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

Section 3.17 Intellectual Property.

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

Section 3.18 Bankruptcy Orders.

(a) On and after the entry of the Interim Financing Order and prior to the entry
of the Final DIP Order, the Interim Financing Order is in full force and effect,
and has not been reversed, vacated, stayed or modified, and on and after the
entry of the Final DIP Order, the Final DIP Order is in full force and effect,
and has not been reversed, vacated, stayed or modified, in each case, without
the prior written consent of the Lead Lenders.

(b) No order has been entered in the Chapter 11 Cases (i) for the appointment of
a Chapter 11 trustee, (ii) for the appointment of an examiner with enlarged
powers (beyond those set forth in Sections 1106(a)(3) and (4) of the Bankruptcy
Code) under Section 1106(b) of the Bankruptcy Code or (iii) to convert any
Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code or to dismiss
any Chapter 11 Case, in each case, without the prior written consent of the Lead
Lenders.

Section 3.19 Full Disclosure.

None of the written information (financial or otherwise) furnished by or on
behalf of any Credit Party to the Administrative Agent or any Lender in
connection with the

 

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consummation of the transactions contemplated by the Financing Documents
(excluding projections, estimates, and engineering reports), taken as a whole,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading
on the date such information is dated or certified in light of the circumstances
under which such statements were made. To the best knowledge of the Borrower,
the engineering reports delivered to the Administrative Agent and/or the Lenders
in connection with this Agreement do not contain any material inaccuracies
and/or omissions. The said engineering reports, however, are based upon
professional opinions, estimates and projections and the Borrower does not
warrant that such opinions, estimates and projections will ultimately prove to
have been accurate. All other financial projections and estimates delivered to
the Administrative Agent and the Lenders have been prepared on the basis of the
assumptions stated therein. Such projections and estimates represent as of such
time the Borrower’s best estimate of the Borrower’s future financial performance
and such assumptions were as of such time believed by the Borrower to be fair
and reasonable in light of then current business conditions; provided that the
Borrower can give no assurance that such projections will be attained.

Section 3.20 Reserve Reports, Imbalances and Marketing Matters.

(a) Except as set forth on Schedule 3.20, the Borrower and each Guarantor has
Defensible Title to each Mortgaged Property having a book cost in excess of
$2,000,000 (except to the extent that (1) such assets have thereafter been
disposed of in compliance with this Agreement or (2) leases for such property
have expired pursuant to their terms), in each case free and clear of all Liens,
except (i) Permitted Liens, (ii) obligations or duties to any municipality or
public authority with respect to any franchise, grant, license or permit and all
applicable laws, rules, regulations and orders of any Governmental Authority,
(iii) all lessors’ royalties, overriding royalties, net profits interests,
production payments, carried interests, reversionary interests and other burdens
on or deductions from the proceeds of production, (iv) the terms and conditions
of joint operating agreements and other oil and gas contracts, (v) all rights to
consent by required notices to, and filing with or other actions by governmental
or tribal entities, if any, in connection with the change of ownership or
control of an interest in federal, state, tribal or other domestic governmental
oil and gas leases, if the same are customarily obtained in connection with such
change of ownership or control, but only insofar as such consents, notices,
filings and other actions relate to the transactions permitted by this
Agreement, (vi) any preferential purchase rights, (vii) required third party
consents to assignment, (viii) conventional rights of reassignment prior to
abandonment and (ix) the terms and provisions of oil and gas leases, unit
agreements, pooling agreements, and other documents creating interests
comprising the Oil and Gas Properties, Hydrocarbons and Hydrocarbon Interests;
provided, however, the exceptions described in clauses (i) through
(viii) inclusive above are qualified to include only those exceptions in each
case which do not operate to (A) materially reduce the net revenue interest of
the Borrower or any Guarantor below that set forth in the Reserve Report,
(B) materially increase the proportionate share of costs and expenses of
leasehold operations attributable to or to be borne by the working interest of
the Borrower or any Guarantor above that set forth in the Reserve Report without
a proportionate increase in the net revenue interest of the Borrower or such
Guarantor or (C) materially increase the working interest of the Borrower or any
Guarantor above that set forth in the Reserve Report without a proportionate
increase in the net revenue interest of the Borrower or such Guarantor, and
provided further that the foregoing defects, limitations, liens and
encumbrances, whether individually material or not, do not in the aggregate
create a Material Adverse Effect (the categories of exceptions in clauses (i)
through (ix), as so qualified and as any such exceptions may exist from time to
time, being referred to as the “Designated Title Exceptions”).

 

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

Section 3.21 Maintenance and Development of Properties.

Except as set forth on Schedule 3.21, as of the effective date of each Reserve
Report with respect to the Oil and Gas Properties reflected in such Reserve
Report, the Oil and Gas Properties (and all properties unitized therewith) are
being maintained, operated and developed in a good and workmanlike manner, in
accordance with prudent industry standards and in conformity with (i) all
applicable Laws, (ii) all oil, gas or other mineral leases and other contracts
and agreements forming a part of such Oil and Gas Properties and (iii) with any
Permitted Liens burdening such Oil and Gas Properties, except to the extent the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 3.16, each Credit Party has all
governmental licenses and permits necessary or appropriate to own and operate
the Oil and Gas Properties, except where a failure to have such licenses or
permits could not reasonably be expected to have a Material Adverse Effect, and
no Credit Party has received notice of any violations in respect of any such
licenses or permits which violation could reasonably be expected to have a
Material Adverse Effect.

Section 3.22 Security Documents.

Subject to the entry of the DIP Orders and subject to any restrictions arising
on account of the Borrower’s or any Subsidiary’s status as a “debtor” under the
Bankruptcy Code, the Security Documents are effective to create in favor of the
Administrative Agent, for the benefit of the Secured Parties, a legal, valid and
enforceable security interest in the Collateral described therein and proceeds
thereof. When stock certificates representing Collateral are delivered to the
Administrative Agent (together with a properly completed and signed stock power
or endorsement), and in the case of the other Collateral (other than the
Mortgages described below), when financing statements are filed in the
appropriate offices, the Security Documents shall constitute a fully perfected
Lien on, and security interest in, all right, title and

 

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interest of the Credit Parties in such Collateral (to the extent such Collateral
can be perfected by the actions described above) and the proceeds thereof, as
security for the DIP Obligations, in each case prior and superior in right to
any other Person (subject only to Permitted Liens). Each of the Mortgages is
effective to create in favor of the Administrative Agent, for the benefit of the
Secured Parties, a legal, valid and enforceable Lien on the Mortgaged Properties
described therein and proceeds thereof, and when the Mortgages are filed in the
appropriate offices, each such Mortgage shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the Credit
Parties in the Mortgaged Properties and the proceeds thereof, as security for
the DIP Obligations, in each case prior and superior in right to any other
Person (subject only to Permitted Liens).

ARTICLE 4

AFFIRMATIVE COVENANTS

The Borrower agrees that:

Section 4.1 Financial Statements and Other Reports.

The Borrower will maintain and will cause each Credit Party to maintain a system
of accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with GAAP
and to provide the information required to be delivered to the Administrative
Agent and the Lenders hereunder, and will deliver to the Administrative Agent
and each Lender, upon such Lender’s request, it being understood that certain
Lenders may elect not to receive any material non-public information of the
Borrower, all of the following deliveries:

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

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

 

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

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

(e) Notices of Material Events. Promptly upon any Responsible Officer of any
Credit Party obtaining knowledge of (i) the existence of any Event of Default or
Default, or becoming aware that the holder of any Debt of any Credit Party in
excess of $2,500,000 has given any notice or taken any other action with respect
to a claimed default thereunder, (ii) the institution of any Litigation seeking
equitable relief or involving an alleged liability of any Credit Party equal to
or greater than $2,500,000 above insurance coverage or any adverse determination
in any Litigation involving equitable relief or a potential liability of any
Credit Party equal to or greater than $2,500,000 above insurance coverage,
(iii) the institution of any dispute, litigation, investigation, proceeding or
suspension by any Governmental Authority in respect of any Credit Party or any
property of any Credit Party that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect, (iv) any loss, damage or destruction
of any Collateral having a fair market value in excess of $2,500,000, regardless
of whether covered by insurance, or (v) any other development that results in or
could reasonably be expected to have a Material Adverse Effect, a certificate of
a Responsible Officer specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
holder or Person and the nature of such claimed default (including any Event of
Default or Default), event or condition, and what action the applicable Credit
Party has taken, is taking or proposes to take with respect thereto.

(f) ERISA Notices. The Borrower or an ERISA Affiliate shall provide, promptly
following receipt thereof, copies of any documents described in Sections 101(k)
or 101(l) of ERISA that the Borrower or any ERISA Affiliate may request with
respect to any Multiemployer Plan or any documents described in Section 101(f)
of ERISA that the Borrower or any ERISA Affiliate may request with respect to
any Plan; provided, that if the relevant Borrower or ERISA Affiliates have not
requested such documents or notices from the administrator or sponsor of the

 

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applicable Multiemployer Plans, then, upon reasonable request of the
Administrative Agent, such Borrower or the ERISA Affiliate shall promptly make a
request for such documents or notices from such administrator or sponsor and the
Borrower shall provide copies of such documents and notices to the
Administrative Agent promptly after receipt thereof.

(g) Environmental Notices. Promptly upon any Responsible Officer of any Credit
Party obtaining knowledge of any written complaint, order, citation, notice or
other written communication from any Person delivered to any Credit Party with
respect to, or if any Responsible Officer of any Credit Party becomes aware of
(i) the existence or alleged existence of a violation by any Credit Party of any
applicable Environmental Law, which could reasonably be expected to have a
Material Adverse Effect, (ii) any release by any Credit Party of any Hazardous
Materials into the environment which could reasonably be expected to have a
Material Adverse Effect, (iii) the commencement by any Credit Party of any
cleanup of any Hazardous Materials, which could reasonably be expected to result
in costs to a Credit Party in excess of $2,500,000 above insurance coverage,
(iv) any pending legislative or threatened governmental proceeding for the
termination, suspension or non-renewal of any Permit of any Credit Party
required under any applicable Environmental Law, which termination, suspension
or non-renewal could reasonably be expected to have a Material Adverse Effect,
or (v) any property of any Credit Party that is or will be subject to a Lien
imposed pursuant to any Environmental Law, a certificate of a Responsible
Officer specifying the nature and period of existence of any such condition or
event, or specifying the notice given or action taken by such holder or Person,
and what action the applicable Credit Party has taken, is taking or proposes to
take with respect thereto.

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

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

(j) Interim Reserve Report. (i) Prior to October 1 of each year, commencing the
first such day after the Closing Date, a Reserve Report effective as of the
preceding June 30 by

 

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petroleum engineers who are employees of the Borrower (or, at the Borrower’s
option, by independent engineers as specified above), in the same form and scope
as the report in Section 4.1(i), which report shall be accompanied by updates,
if any, to the most recent reports specified in Section 4.1(i) to the extent
necessary for such reports to be accurate in all material respects on the date
of the applicable Reserve Report provided pursuant to this Section 4.1(j).

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

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

(m) Credit Party Information. With reasonable promptness, such other information
and data with respect to any Credit Party as from time to time may be reasonably
requested by the Administrative Agent or any Lender.

(n) Prepetition Second Lien Credit Agreement. Any amendment, or modification or
waiver of the Prepetition Second Lien Credit Agreement.

(o) Monthly Financial Statements. As soon as practicable and in any event within
twenty-five (25) days after the end of each calendar month (or such later date
as the Administrative Agent and the Lead Lenders shall reasonably agree in their
sole discretion), a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of and at the end of such month and the related
consolidated statements of operations and cash flows for such month, and for the
portion of the Fiscal Year ended at the end of such month setting forth in each
case in, all in reasonable detail and certified by a Responsible Officer as
fairly presenting in all material respects the financial condition and results
of operations of the Borrower and its Consolidated Subsidiaries and as having
been prepared in accordance with GAAP applied on a basis consistent with the
audited financial statements of the Borrower, subject to changes resulting from
audit and normal year-end adjustments and the absence of footnote disclosures.

(p) Telephone Conferences. The Borrower shall participate in telephone
conferences with the Prepetition First Lien Agent and the Administrative Agent
and their respective professionals no less than once per week and more
frequently during normal business hours as requested by the Prepetition First
Lien Agent and Administrative Agent (or their respective professionals) in
writing (including via electronic mail) upon at least one (1) Business Day’s
notice.

 

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(q) Budget and Variance Report. As soon as available and in any event (i) on the
fourth Business Day of each fourth week, commencing with June 9, 2016, a 13-Week
Budget, in form and substance reasonably acceptable to the Lead Lenders and the
Administrative Agent (such budget, together with the Initial Budget, the
“Budget”), which shall reflect the Borrower’s good-faith projection of all
weekly cash receipts and disbursements in connection with the operation of the
Credit Parties’ and their respective Subsidiaries’ business during such
thirteen-week period, including but not limited to, (x) the ad valorem,
severance and production taxes and lease operating expenses attributable to Oil
and Gas Properties and incurred for such thirteen-week period (including
transportation, gathering and marketing costs) and all categories of applicable
expenses, and (y) other capital expenditures, collections, payroll, and other
material cash outlays, and (ii) on the fourth Business Day of each week,
commencing with June 23, 2016, a variance report (a “Variance Report”), in form
and substance consistent with the format of the form of Initial Budget set forth
in Exhibit I and reasonably acceptable to the Lead Lenders, detailing the
following: (A) the aggregate Receipts of the Borrower and its Subsidiaries
during the Testing Period and the aggregate Operating Disbursements and other
disbursements, in each case made by the Borrower and its Subsidiaries during
such Testing Period; and (B) any variance (whether plus or minus and expressed
as a percentage) (1) between the aggregate Receipts of the Borrower and its
Subsidiaries during such Testing Period against the aggregate Receipts set forth
in the most recently delivered Budget for such Testing Period (excluding in each
case, any joint interest Receipts) and (2) between the aggregate Operating
Disbursements made during such Testing Period by the Borrower and its
Subsidiaries against the aggregate Operating Disbursements set forth in the most
recently delivered Budget for such Testing Period. For purposes of the
foregoing, the “Testing Date” shall mean the last Business Day of every week
occurring after the Closing Date, which initial Testing Date shall be on
June 17, 2016.

(r) Motions and Pleadings. The Borrower shall deliver to the Administrative
Agent and the Lead Lenders and give the Administrative Agent and the Lead
Lenders the opportunity to comment on all motions, pleadings, statements,
applications, notices and other documents to be filed by the Debtors in the
Chapter 11 Cases no less than two (2) Business Days prior to filing (or, if not
reasonably practicable, as soon as practicable under the circumstances).

(s) Adverse Motions. The Borrower shall contest, if requested by the
Administrative Agent or the Lead Lenders, any motion seeking entry of an order,
and entry of an order, that is materially adverse to the interests of the
Administrative Agent or the Lenders or their respective material rights and
remedies under the DIP Facility.

(t) Updates. The Borrower shall deliver to the Administrative Agent and the
Lenders bi-weekly updates with respect to asset sales and periodic updates on
other matters reasonably requested by the Administrative Agent and the Required
Lenders.

(u) Plans and Disclosure Statements. The Borrower shall deliver to the
Administrative Agent and the Lenders and their legal counsel, as soon as
practicable in advance of filing with the Bankruptcy Court, any plan of
reorganization or liquidation and/or any disclosure statement related to such
plan (each of which must be in form and substance satisfactory to the
Administrative Agent and the Required Lenders).

(v) Final Order. The Borrower shall deliver to the Administrative Agent and the
Lenders and their counsel, as soon as practicable in advance of filing with the
Bankruptcy Court, the proposed form of Final DIP Order (which must be in form
and substance satisfactory to the

 

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Administrative Agent and the Required Lenders) and all other proposed material
orders and pleadings related to the DIP Facilities (which must be in form and
substance satisfactory to the Administrative Agent and the Required Lenders).

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

Section 4.2 Payment and Performance of DIP Obligations.

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

Section 4.3 Maintenance of Existence.

The Borrower will, and will cause each of its Subsidiaries to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
(a) its legal existence and (b) except where the failure to do so could not
reasonably be expected to result in a Material Adverse Effect, the rights,
licenses, permits, privileges and franchises material to the conduct of its
business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 5.17.

 

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Section 4.4 Maintenance of Property; Insurance.

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

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

(c) Right to Purchase Insurance. In the event the Borrower fails to provide the
Administrative Agent with evidence of the insurance coverage required by this
Agreement within three (3) Business Days after request therefor, the
Administrative Agent may after twenty (20) days’ notice to the Borrower,
purchase insurance at the Borrower’s expense to protect the Administrative
Agent’s interests in the Collateral. This insurance may, but need not, protect
the Borrower’s interests. The coverage purchased by the Administrative Agent may
not pay any claim made by the Borrower or any claim that is made against the
Borrower in connection with the Collateral. The Borrower may later cancel any
insurance purchased by the Administrative Agent, but only after providing the
Administrative Agent with evidence that the Borrower has obtained insurance as
required by this Agreement. If the Administrative Agent purchases insurance for
the Collateral, the Borrower will be responsible for the costs of that insurance
to the fullest extent provided by Law, including interest and other charges
imposed by the Administrative Agent in connection with the placement of the
insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the DIP Obligations. The
costs of the insurance may be more than the cost of insurance that the Borrower
is able to obtain on its own.

 

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Section 4.5 Compliance with Laws.

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

Section 4.6 Inspection of Property, Books and Records.

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

Section 4.7 Use of Proceeds.

(a) The proceeds of the Loans will be used by the Borrower only for the
following purposes: (i) to pay certain costs, fees and expenses related to the
Chapter 11 Cases, including without limitation any Professional Fees, (ii) to
pay Adequate Protection Payments and (iii) to fund the working capital needs,
capital improvements and expenditures of the Credit Parties during the
Chapter 11 Cases.

(b) The proceeds of the Loans shall be applied by the Borrower for uses solely
to the extent that any such application of proceeds shall be in compliance with
the covenant set forth in Section 5.26, including the Permitted Variances.

 

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(c) The proceeds of the Loans shall not be used (i) to permit the Borrower, any
Guarantor or any of their representatives to challenge or otherwise contest or
institute any proceeding to determine (x) the validity, perfection or priority
of security interests in favor of any of the Lenders or the Prepetition First
Lien Lenders, or (y) the enforceability of the obligations of the Borrower or
any Guarantor under this Agreement or the Prepetition First Lien Credit
Agreement, (ii) to investigate, commence, prosecute or defend any claim, motion,
proceeding or cause of action against any of the Lenders or the Prepetition
First Lien Secured Parties, each in such capacity, and their respective agents,
attorneys, advisors or representatives, including, without limitation, any
lender liability claims or subordination claims, or (iii) to fund acquisitions,
capital expenditures, capital leases, or any other expenditure other than as set
forth in the Budget or the Carve Out.

(d) No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the regulations
of the Federal Reserve Board, including Regulations T, U and X.

Section 4.8 Lenders’ Meetings.

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

Section 4.9 Hazardous Materials; Remediation.

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

Section 4.10 Further Assurances.

(a) General. The Borrower will, and will cause each other Credit Party, at its
own cost and expense, to promptly and duly take, execute, acknowledge and
deliver all such further acts, documents and assurances as the Administrative
Agent or the Lead Lenders may from time to time reasonably request in order to
carry out the intent and purposes of the Financing

 

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Documents and the transactions contemplated thereby, including all such actions
to establish, create, preserve, protect and perfect a first priority Lien
(subject only to Permitted Liens) in favor of the Administrative Agent for the
benefit of the Secured Parties on the Collateral (including Collateral acquired
after the date hereof), including on any and all assets of each Credit Party,
whether now owned or hereafter acquired. Notwithstanding anything in this
Agreement or any Security Document to the contrary, no Guarantor shall be
required to guarantee (or grant a Lien to support, as applicable) any Excluded
Swap Obligations of such Guarantor for purposes of determining any obligations
of such Guarantor.

(b) New Subsidiaries. Without limiting the generality of the foregoing, in the
event the Borrower or any of its Subsidiaries shall form any new Subsidiary
after the date hereof, the Borrower or the respective Subsidiary will cause such
new Subsidiary, within five (5) Business Days following such formation, (i) to
execute a Guarantee (in form and substance reasonably acceptable to the
Administrative Agent and the Lead Lenders) guaranteeing payment and performance
of all of the DIP Obligations and to execute a joinder to the Security Agreement
and to take such other action (including, without limitation, authorizing the
filing of such UCC financing statements and delivering certificates in respect
of the Capital Stock of such Subsidiary) as shall be necessary or appropriate to
establish, create, preserve, protect and perfect a first priority Lien (subject
only to Permitted Liens) in favor of the Administrative Agent for the benefit of
the Secured Parties to the extent required by Section 4.10(e), (ii) to execute
such other Security Documents and Collateral Documents, in form and substance
reasonably acceptable to the Administrative Agent and the Lead Lenders, as may
be required or requested by the Administrative Agent and the Lead Lenders in
connection with the actions contemplated hereby and (iii) to deliver such proof
of corporate (or comparable) action, incumbency of officers, opinions of counsel
and other documents as the Administrative Agent and the Lead Lenders shall have
reasonably required or requested.

(c) Capital Stock. The Borrower will, and will cause each of its Subsidiaries,
to take such action from time to time as shall be necessary to ensure that each
of its Subsidiaries is a Wholly-Owned Subsidiary and that the Administrative
Agent shall have, for the benefit of the Secured Parties, a first priority Lien
on all Capital Stock of each Subsidiary. Subject to the foregoing limitations,
in the event that any additional Capital Stock shall be issued by any
Subsidiary, the Borrower shall or shall cause each of its Subsidiaries to,
promptly following such issuance, deliver to the Administrative Agent, to the
extent required by the applicable Financing Documents, the certificates
evidencing such Capital Stock, accompanied by undated powers executed in blank
and to take such other action as the Administrative Agent shall request to
perfect the security interest created therein pursuant to such Financing
Documents.

(d) Mortgage of Oil and Gas Property. Prior to March 1 and September 1 of each
calendar year, the Borrower shall review the Reserve Report and the list of
current Mortgaged Properties to ascertain whether the Mortgaged Properties
represent substantially all (but in any event at least 95%) of the total PV-10
Value of Proved Reserves attributable to the Oil and Gas Properties evaluated in
the most recently completed Reserve Report after giving effect to any
exploration and production activities, acquisitions, dispositions and
production. In the event that the Mortgaged Properties do not represent at least
95% of such total PV-10 Value, then on or prior to such March 1 or September 1,
as applicable, the Borrower shall, and shall cause its Subsidiaries to, grant to
the Administrative Agent as security for the DIP Obligations a first-priority
Lien (subject only to Permitted Liens) under the Mortgages on additional Oil and
Gas

 

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Properties not already subject to such a Lien under the Mortgages such that
after giving effect thereto, the Mortgaged Properties will represent at least
95% of the total PV-10 Value of Proved Reserves attributable to the Oil and Gas
Properties evaluated by the relevant Reserve Report. Notwithstanding the
foregoing, it is understood and agreed that the Borrower shall use commercially
reasonable efforts to ensure that the Mortgaged Properties represent
substantially all of the total PV-10 Value of Proved Reserves attributable to
the Oil and Gas Properties evaluated in the most recently completed Reserve
Report after giving effect to any exploration and production activities,
acquisitions, dispositions and production.

(e) Other Collateral. Upon the Administrative Agent’s request, the Borrower
will, and will cause its Subsidiaries to, grant Liens as security for the DIP
Obligations on (i) assets and interests related to the Mortgaged Properties,
including related operating equipment, accounts, inventory, contract rights and
all products, proceeds and other interests related to the ownership, operation
and or production of the Mortgaged Properties and (ii) all other material
facilities (including gathering, transportation, compression, processing,
treating and storage facilities) and other material real and personal property
owned by it from time to time (excluding any Excluded Property (as defined in
the Mortgages)); provided, further, that notwithstanding anything to the
contrary, the Collateral shall include any assets of the Debtors that were
excluded from or did not constitute Collateral under the Prepetition First Lien
Credit Agreement (including, without limitation, the Warren Energy Services
Pipeline Assets).

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

(g) Title Information. Promptly upon request of the Administrative Agent given
at the direction of the Required Lenders, the Borrower will deliver title
information in form and substance reasonably acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties evaluated in the most
recently delivered Reserve Report, so that the Administrative Agent shall have
received, together with title information previously delivered to the
Administrative Agent in connection with previous Reserve Reports or otherwise,
title information evidencing the Credit Parties have Defensible Title on at
least 70% of the total PV-10 value of Proved Reserves attributable to the Oil
and Gas Properties evaluated by such Reserve Report. If the Borrower has
provided title information for Oil and Gas Properties under the preceding
sentence, the Borrower shall, within sixty (60) days of notice from the
Administrative Agent or the Lead Lenders that material title defects or
exceptions exist with respect to such Oil

 

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and Gas Properties such that the Credit Parties do not have Defensible Title to
at least 70% of the PV-10 value of Proved Reserves attributable to the Oil and
Gas Properties evaluated by such Reserve Report, either (1) cure any such
material title defects or exceptions (including defects or exceptions as to
priority) raised by such information, (2) substitute acceptable Mortgaged
Properties having at least an equivalent value such that the Credit Parties do
have Defensible Title to at least 70% of the PV-10 value of Proved Reserves
attributable to the Oil and Gas Properties evaluated by such Reserve Report, or
(3) deliver title information in form and substance acceptable to the
Administrative Agent or the Lead Lenders so that the Administrative Agent shall
have received, together with title information previously delivered to the
Administrative Agent, title information evidencing that the Credit Parties have
Defensible Title on at least 70% of the PV-10 value of Proved Reserves
attributable to the Oil and Gas Properties evaluated by such Reserve Report.

Section 4.11 Post-Closing Obligations.

The Credit Parties will cause each obligation specified on Schedule 4.11 hereto
to be completed no later than the date set forth with respect to such
obligations on such schedule, or such later date as the Administrative Agent and
the Lead Lenders shall reasonably agree.

Section 4.12 Production Report and Lease Operating Statements.

Within sixty (60) days after the end of each calendar month, commencing with the
calendar month ending May 31, 2016, the Borrower shall deliver to the
Administrative Agent and the Lead Lenders a report certified by a Responsible
Officer setting forth, for each calendar month during the then current fiscal
year to date, 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.

Section 4.13 Cash Management and Certain Prepetition Obligations.

The Borrower and its Subsidiaries shall be permitted to maintain their cash
management system as it existed prior to the Petition Date for the benefit of
the entire DIP Facility and to honor any prepetition obligations related to the
use thereof, with such changes as may be required by an order of the Bankruptcy
Court and/or as may be made with the consent of the Administrative Agent and the
Lead Lenders; provided that the Borrower and its Subsidiaries shall not be
permitted to honor prepetition checks outstanding as of the Petition Date other
than checks for prepetition payments authorized by the Bankruptcy Court,
including, for the avoidance of doubt, any payments authorized under the order
granting the motion (if any) filed by the Credit Parties in the Chapter 11 Cases
for authority to pay working interest disbursements, royalty payments and
similar payments and disbursements in the ordinary course of business, which
shall be in form and substance satisfactory to the Required Lenders.

Section 4.14 Contracts and Leases.

Neither the Borrower nor any of its Subsidiaries shall, except as otherwise
permitted pursuant to the DIP Orders, any Agreed Restructuring Plan or a motion
filed by or after consultation of the Administrative Agent and the Lead Lenders
or a motion to assume the RSA, assume, assume and assign or reject any executory
contract or unexpired lease not assumed, assumed and assigned or rejected on or
before the date hereof.

 

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Section 4.15 Milestones.

The Credit Parties shall comply with and achieve each of the Milestones (as the
same may be extended from time to time with the consent of the Administrative
Agent and the Lead Lenders).

ARTICLE 5

NEGATIVE COVENANTS

Until the Discharge of DIP Obligations, the Credit Parties covenant and agree
with the Lenders that:

Section 5.1 Debt.

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

(a) Debt incurred under the Financing Documents;

(b) Debt outstanding on the date of this Agreement and set forth on Schedule
5.1, including, for the avoidance of doubt, Debt outstanding under the
Prepetition First Lien Credit Agreement and the Prepetition Second Lien Credit
Agreement and the aggregate principal amount of the Prepetition Senior Notes, in
each case, on the date of this Agreement;

(c) Intercompany Debt arising from loans made by (i) the Borrower to any
Guarantor, (ii) any Guarantor to the Borrower, or (iii) any Guarantor to any
other Guarantor; provided, however, that upon the request of the Administrative
Agent at any time, any such Debt shall be evidenced by promissory notes having
terms reasonably satisfactory to the Administrative Agent and the Lead Lenders,
and the sole originally executed counterparts of which shall be pledged and
delivered to the Administrative Agent, for the benefit of the Secured Parties,
as security for the DIP Obligations;

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

(e) Debt of the Borrower or any Subsidiary incurred to finance the acquisition,
construction or improvement of any fixed or capital assets, including Capital
Lease Obligations and any Debt assumed in connection with the acquisition of any
such assets or secured by a Lien on any such assets prior to the acquisition
thereof, and extensions, renewals and replacements of any such Debt that do not
increase the outstanding principal amount thereof; provided that the aggregate
principal amount of Debt permitted by this clause (e) shall not exceed
$1,000,000 at any time outstanding;

(f) Debt, if any, arising under Swap Contracts, to the extent permitted under
Section 5.6;

 

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(g) [reserved];

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

(i) [reserved];

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

(k) [reserved];

(l) any Contingent Obligation permitted by Section 5.3;

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

(n) Debt incurred under Bonds;

(o) Debt constituting letters of credit and bank guaranties, to the extent that
such letters of credit and bank guaranties are fully cash collateralized, in an
aggregate principal amount not exceeding $2,000,000 at any time outstanding.

Section 5.2 Liens.

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

(a) Liens created by the Security Documents;

(b) Permitted Encumbrances;

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

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

 

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

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

(g) [reserved];

(h) [reserved];

(i) [reserved];

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

(k) Prepetition Liens;

(l) Adequate Protection Liens;

(m) Liens arising under the DIP Orders; and

(n) any Non-Primed Excepted Liens.

Section 5.3 Contingent Obligations.

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

(a) Contingent Obligations arising in respect of the Debt under the Financing
Documents;

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

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

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

 

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

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

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

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

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

Section 5.4 Restricted Payments.

The Borrower will not, and will not permit any other Credit Party to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Payment; provided that the foregoing shall not restrict or prohibit
(a) dividends or distributions made by any Subsidiary, directly or indirectly,
to the Borrower or to any Subsidiary that is a Wholly-Owned Subsidiary of the
Borrower and (b) dividends declared and paid by Subsidiaries ratably with
respect to their Capital Stock (or on a basis more favorable to the Borrower and
its Subsidiaries). The Borrower will not, and will not permit any other Credit
Party to, issue preferred Capital Stock providing for Restricted Payments not
permitted by this Section 5.4.

Section 5.5 Restrictive Agreements.

The Borrower will not, and will not permit any other Credit Party to, directly
or indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its property or assets (other than (1) other investments in
Capital Stock of joint ventures permitted under Section 5.8 and (2) investments
permitted under Section 5.8(j) if such restriction or conditions apply only to
the property or assets that are the subject of such investment), or (b) the
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its capital stock or to make or repay loans or advances to the
Borrower or any other Subsidiary or to Guarantee Debt of the Borrower or any
other Subsidiary; provided that (i) the foregoing shall not apply to
restrictions and conditions imposed by law or by this Agreement, (ii) the
foregoing shall not apply to restrictions and conditions existing on the date
hereof identified on Schedule 5.5 (but shall apply to any extension or renewal
of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary or other assets pending such sale, provided such restrictions and
conditions apply only to the Subsidiary or other assets that is to be sold and
such sale is permitted hereunder, (iv) paragraph (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Debt permitted by this Agreement if such restrictions or conditions apply only
to the property or assets securing such Debt, (v) paragraph (a) of the foregoing
shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof, (vi) existing restrictions with respect to a
Person acquired by the Borrower or any of its Subsidiaries (except to the extent
such restrictions were put in place in connection with or in contemplation of
such acquisition), which

 

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restrictions are not applicable to any Person, or the properties or assets of
any Person other than the Person, or the property or assets of the Person, so
acquired, (vii) restrictions contained in any agreement or instrument relating
to Swap Contracts to the extent, in the good faith judgment of the Borrower,
such restrictions, at the time such Debt is incurred, either (A) are on
customary market terms for Debt of such type, so long as the Borrower has
determined in good faith that such restrictions would not reasonably be expected
to impair in any material respect the ability the Borrower and the other
Subsidiaries to meet their ongoing payment obligations under the Financing
Documents, or (B) are not materially more restrictive, taken as a whole with
respect to the Borrower and the other Subsidiaries, than the restrictions in the
Financing Documents, (viii) customary supermajority voting provisions and other
customary provisions with respect to the disposition or distribution of assets,
each contained in corporate charters, bylaws, stockholders’ agreements, limited
liability company agreements, partnership agreements, joint venture agreements
and other similar agreements entered into in the Ordinary Course of Business of
the Borrower and its Subsidiaries, and (ix) non-material, ordinary course of
business provisions and conditions contained in the existing operating units,
farmout exchange, joint exploration, transportation and related oil and gas
agreements executed in the ordinary course of business.

Section 5.6 Swap Contracts.

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

Section 5.7 Consolidations, Mergers and Sales of Assets.

(a) The Borrower will not, and will not permit any other Credit Party to,
directly or indirectly consolidate or merge with or into any other Person. Any
Subsidiary may liquidate or dissolve if the Borrower determines in good faith
that such liquidation or dissolution is in the best interests of the Borrower
and is not materially disadvantageous to the Lenders.

 

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(b) Except as otherwise consented to in writing by the Lead Lenders, the
Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, consummate any Asset Disposition (including, without limitation, any
Asset Disposition under Section 363 of the Bankruptcy Code or under a chapter 11
plan and the entry into any overriding royalty interest, net profit interest,
volumetric production payment or similar transactions or amending any such
existing agreements in a manner that would increase or extend any obligations
thereunder).

Section 5.8 Investments.

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

(a) Permitted Investments;

(b) [reserved];

(c) [reserved];

(d) Guarantees constituting Debt permitted by Section 5.1;

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

(f) [reserved];

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

(h) [reserved];

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

(j) [reserved];

(k) [reserved];

(l) [reserved];

 

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

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

(o) any other investments in any Person having an aggregate fair market value
(measured on the date each such investment was made and without giving effect to
subsequent changes in value), when taken together will all other investments
made pursuant to this clause (o) do not exceed $1,000,000 outstanding at any
time;

(p) [reserved];

(q) [reserved];

(r) [reserved]; and

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

Section 5.9 Transactions with Affiliates.

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

Section 5.10 Modification of Certain Documents; Limitation on Repayment of Debt;
Restriction on Adequate Protection Payments.

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

(b) The Borrower will not, directly or indirectly, amend or modify, or permit
the amendment or modification of, any provision of any agreement governing
(i) the Prepetition Second Lien Debt except for such amendments or other
modifications that are not materially

 

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adverse to the interest of the Administrative Agent or any Lender and which, in
each instance, are fully disclosed to the Administrative Agent and the Lead
Lenders or (ii) the Prepetition Senior Notes (other than to amend or delete any
covenant, event of default, mandatory prepayment or obligation to offer to
purchase Prepetition Senior Notes, in each case, that are favorable to the
interests of the Administrative Agent and any Lenders).

(c) The Borrower will not, directly or indirectly, make (or give any notice in
respect of) any voluntary or optional payment or prepayment on or redemption or
acquisition for value of, or any prepayment or redemption as a result of any
asset sale, change of control or similar event of, any Debt for borrowed money,
including, for the avoidance of doubt, any Prepetition Second Lien Debt or
Prepetition Senior Notes.

(d) The Borrower will not, and will not permit any other Credit Party to, make
any adequate protection payments to, or otherwise provide adequate protection
payments for, the Prepetition Second Lien Secured Parties except as permitted by
the DIP Orders.

Section 5.11 Fiscal Year.

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

Section 5.12 Conduct of Business.

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

Section 5.13 Capital Stock.

The Borrower will not, and will not cause or permit any Subsidiary to, permit a
Lien (other than a Lien created under a Financing Document, a Lien securing
Prepetition Second Lien Debt or an involuntary Permitted Lien) to be placed on
any of the Capital Stock owned by the Borrower or such Subsidiary in any other
Person.

Section 5.14 Limitation on Sale and Leaseback Transactions.

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

Section 5.15 Bank Accounts.

The Borrower will not, and will not permit any other Credit Party to, directly
or indirectly, establish any new bank account (excluding any account established
after notice to the

 

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Administrative Agent exclusively for payroll or petty cash) without the prior
written consent of the Administrative Agent, and provided that in each case, the
Administrative Agent, the Borrower or such other Credit Party and the bank at
which the account is to be opened enter into a control agreement regarding such
bank account pursuant to which such bank acknowledges the security interest of
the Administrative Agent in such bank account, agrees to comply with
instructions originated by the Administrative Agent directing disposition of the
funds in such bank account without further consent from the Borrower, and agrees
to subordinate and limit any security interest such bank may have in such bank
account on terms reasonably satisfactory to the Administrative Agent.

Section 5.16 Compliance with Anti-Corruption Laws.

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

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

Section 5.17 Compliance with Anti-Terrorism Laws.

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

 

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Section 5.18 Subsidiaries.

The Borrower shall not, and shall not permit any of its Subsidiaries to, create,
acquire or permit to exist (a) any Foreign Subsidiary or (b) any Subsidiary that
is not a Wholly-Owned Subsidiary.

Section 5.19 Prepetition Secured Obligations.

Until Discharge of DIP Obligations, the Borrower will not, and will not permit
any Credit Party to, use the proceeds of the Loans or cash collateral to pay
Prepetition Secured Obligations, except as permitted by the DIP Orders or this
Agreement.

Section 5.20 Changes to DIP Orders.

Without the consent of the Administrative Agent and the Lead Lenders, none of
the Debtors shall file a motion (or support any motion) seeking to amend or
otherwise modify any DIP Order in any manner adverse to the Lenders.

Section 5.21 [Reserved].

Section 5.22 Superpriority Administrative Expense Claims.

The Borrower will not, and will not permit any other Credit Party to, create or
permit to exist any other superpriority administrative expense claim or “claim”
that is pari passu with or senior to the claims of the Lenders under the DIP
Facility (in each case, other than the Carve Out and certain hedging obligations
to be approved by the Required Lenders).

Section 5.23 Use of DIP Facility Proceeds.

Borrower will not, and will not permit any other Credit Party to, use any
proceeds of the DIP Facility for purposes other than those described in this
Agreement and contained in the Interim Financing Order and Final Order.

Section 5.24 Rejection of Oil and Gas Leases.

The Borrower will not, and will not permit any other Credit Party to, reject any
oil and gas lease without the prior written consent of the Lead Lenders or
permit any oil and gas lease to expire without prior consultation with the
Required Lenders at least thirty (30) days before the filing of any motion for
rejection or the deemed rejection of any oil and gas lease.

Section 5.25 Section 506(c) Claims.

The Borrower will not, and will not permit any other Credit Party to, make any
claims under Section 506(c) of the Bankruptcy Code. Furthermore, the Borrower
will waive the applicability of Section 506(c) of the Bankruptcy Code against
the GSO Lenders, as Prepetition First Lien Lenders.

 

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Section 5.26 Budget Covenant; Permitted Variances

(a) The Budget shall be tested on a weekly basis (of Monday through Sunday,
beginning on Monday at 12:01 a.m., Central Time, on June 6, 2016) on the last
Business Day of each week as required under Section 4.1(q). Any deviation from
the Budget in excess of the Permitted Variances (as described below in
Section 5.26(b)) shall constitute non-compliance with the Budget and the terms
of the Financing Documents; provided that the Lead Lenders shall have the
authority to provide written pre-approval for any deviations in excess of the
Permitted Variances.

(b) As of any Testing Date, for the Testing Period ending on such Testing Date,
the Borrower shall not allow (i) the aggregate Operating Disbursements made by
the Credit Parties during such Testing Period (reduced by any applicable accrued
and unused Carry Forward Amounts) to be greater than 115% of the aggregate
Operating Disbursements for the Credit Parties set forth in the Budget for such
Testing Period or (ii) the aggregate Receipts received by the Credit Parties
during such Testing Period (increased by any applicable accrued and unused Carry
Forward Amounts) to be less than 85% of the aggregate Receipts for the Credit
Parties set forth in the Budget for such Testing Period (the variance in
Operating Disbursements described in the foregoing clause (i) and the variance
in Receipts described in the foregoing clause (ii), the “Permitted Variances”).
Notwithstanding the foregoing provisions of this Section 5.26(b), joint interest
Receipts shall be excluded in calculating both the aggregate Receipts received
by the Credit Parties during any Testing Period and the aggregate Receipts for
the Credit Parties set forth in the Budget for any Testing Period, and thus
shall not factor into the calculation of the variance in Receipts set forth in
clause (ii) of the preceding sentence.

Section 5.27 Capital Expenditures.

The Borrower shall not allow the aggregate capital expenditures (excluding
capitalized interest and internal costs and net of amounts to be billed to
working interest partners) incurred by the Borrower and its Subsidiaries to
exceed $2,500,000; provided, that it is understood and agreed that expenditures
incurred in connection with (i) plugging and abandonment activities and
(ii) workover activities shall not be deemed to be capital expenditures for
purposes of this Section 5.27.

Section 5.28 Material Contracts.

Without the consent of the Lead Lenders, none of the Debtors shall amend any
Material Contracts, including any Swap Contracts.

 

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ARTICLE 6

[RESERVED]

ARTICLE 7

CONDITIONS

Section 7.1 Conditions Precedent to Effectiveness.

This Agreement shall not become effective until the date on which the following
condition is satisfied, which such condition shall be the sole and exclusive
condition to the effectiveness of this Agreement:

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

Section 7.2 Conditions Precedent to Availability of Loans.

The obligation of the Lenders to make the Loans shall commence as of the
Business Day (the “Availability Date”) when each of the following conditions
precedent shall have been satisfied in a manner satisfactory to the
Administrative Agent and the Lenders in their sole discretion:

(a) the Petition Date shall have occurred;

(b) the Interim Financing Order authorizing and approving the use of cash
collateral during the Interim Period shall have been entered by the Bankruptcy
Court and such Interim Financing Order shall not have been reversed, vacated or
stayed and shall not have been amended, supplemented or otherwise modified
without the prior written consent of the Administrative Agent and the Lead
Lenders;

(c) the Debtors shall have entered into the RSA;

(d) the Final Order authorizing and approving the DIP Facility and the
transactions contemplated hereby, shall have been entered by the Bankruptcy
Court not later than forty-five (45) days after the entry of the Interim
Financing Order and such Final Order shall not have been reversed, vacated or
stayed and shall not have been amended, supplemented or otherwise modified
without the prior written consent of the Administrative Agent and the Lead
Lenders;

(e) the Administrative Agent and the Lenders shall have received duly executed
and delivered counterparts of this Agreement and the other Financing Documents;

(f) the Administrative Agent and the Lenders shall have received a certificate
of the Secretary, Assistant Secretary or a Responsible Officer with similar
responsibilities of each Credit Party, or in the event that such Credit Party is
a limited partnership, of such Credit Party’s general partner, certifying as of
the Availability Date: (i) resolutions of its board of directors, managers or
members authorizing the transactions contemplated hereby; (ii) the names and
genuine signatures of the Responsible Officers of such Person, authorized to
execute, deliver and

 

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perform, as applicable, this Agreement, any notes, the Guaranty, the Security
Documents, and all other Financing Documents to be delivered by such Person;
(iii) the Organizational Documents of such Person as in effect as of the
Availability Date; (iv) the good standing certificate for such Person, from its
state of incorporation, formation or organization, as applicable, dated as of a
recent date; and (v) as may be reasonably required by the Administrative Agent
and the Lead Lenders, certificate(s) of authority for such Person from states
wherein such Person is required to be qualified to conduct business, evidencing
such Person’s qualification to do business in such state, dated as of a recent
date, provided that, if requested by the Borrower, the certificates described in
this clause (v) may be provided within a reasonable period of time after the
Availability Date, such period of time to be agreed by the Borrower, the
Administrative Agent and the Lead Lenders;

(g) the Administrative Agent and Lenders shall have received a written legal
opinion addressed to the Administrative Agent and the Lenders in form and
substance reasonably satisfactory to the Administrative Agent and the Lead
Lenders from Andrews Kurth LLP, special counsel to the Credit Parties (the
Borrower, the other Credit Parties and the Administrative Agent hereby instruct
such counsel to deliver such legal opinion);

(h) all first-day motions filed by the Credit Parties (including any motions
related to any critical vendor or supplier motions) and related orders entered
by the Bankruptcy Court in the Chapter 11 Cases shall be in form and substance
reasonably satisfactory to the Administrative Agent and the Lead Lenders. All
motions related to the DIP Facility and cash management shall be in form and
substance satisfactory to the Administrative Agent and the Lead Lenders in their
sole discretion;

(i) all governmental and third-party consents and approvals, in each case,
necessary in connection with the DIP Facility shall have been obtained and
remain in effect;

(j) the making of the Loans shall not violate any Requirement of Law and shall
not have been enjoined, whether temporarily, preliminarily, or permanently;

(k) all fees, expenses and other amounts due (including the reasonable and
documented fees and expenses of counsel) required to be paid to the
Administrative Agent and the Lenders on or before the Availability Date shall
have been paid (or will be paid with the proceeds of any Borrowing);

(l) the Administrative Agent and the Lead Lenders shall have received the
Initial Budget, together with a certificate of a Responsible Officer of the
Borrower stating that such Initial Budget has been prepared on a reasonable
basis and in good faith and is based on assumptions believed by the Borrower and
each other Credit Party to be reasonable at the time made and from the best
information then available to the Borrower and each other Credit Party;

(m) the Administrative Agent and the Lead Lenders shall have received the
results of lien, judgment and other customary UCC searches as of a recent date
prior to the Closing Date in each jurisdiction requested by the Administrative
Agent and the Lenders and such search results shall reveal no Liens on any of
the assets of the Credit Parties except for (a) Permitted Liens or (b) Liens
discharged on or prior to the Closing Date pursuant to documentation reasonably
satisfactory to the Administrative Agent and the Lead Lenders;

 

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

(o) the Administrative Agent and the Lenders shall have a valid and perfected
first priority lien on and security interest in the Collateral, including, but
not limited to the Collateral that secured the Prepetition First Lien
Obligations, and all filing and recording fees and taxes with respect to such
liens and security interests shall have been duly paid; and

(p) the Administrative Agent shall have received, at least two (2) Business Days
prior to the Closing Date, all documentation and other information required by
regulatory authorities under applicable “know your customer” and anti-money
laundering rules and regulations, including the PATRIOT Act, that is requested
by the Administrative Agent or any Initial Lender in writing at least five (5)
Business Days prior to the Closing Date.

For purposes of determining compliance with the conditions specified in this
Section 7.2, 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
notice from such Lender prior to the proposed Availability Date specifying its
objection thereto.

Section 7.3 Conditions to Extensions of Credit.

The obligation of each Lender to make any Loan during the Availability Period is
subject to the satisfaction of the following conditions precedent:

(a) the Administrative Agent shall have received a Notice of Borrowing pursuant
to Section 2.2;

(b) at the time of and immediately after giving effect to such Borrowing, no
Default or Event of Default shall exist; and

(c) the Final DIP Order shall be in full force and effect and shall not have
been reversed, modified, stayed or amended, unless such reversal, modification,
stay or amendment is acceptable to the Administrative Agent and the Lead Lenders
in accordance with the terms of the Financing Documents.

Each Notice of Borrowing submitted by the Borrower hereunder shall constitute a
representation and warranty by the Borrower on the date thereof that the
conditions in Section 7.3 are (or will be) satisfied on and as of the date of
the applicable Borrowing.

 

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ARTICLE 8

EVENTS OF DEFAULT

Section 8.1 Events of Default.

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

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

(b) the Borrower shall fail to observe or perform any covenant contained in
Sections 4.1(e), 4.1(f), 4.3, 4.7, 4.11, 4.13, 4.14, 4.15 or Article 5,
provided, however, the imposition of a lien under Section 303(k) or 4068 of
ERISA or under Section 430(k) of the Code shall not be regarded as a failure to
perform the covenants contained in Article 5 unless such lien or liens could
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect;

(c) any Credit Party defaults in the performance of or compliance with any term
contained in this Agreement or in any other Financing Document (other than
occurrences described in other provisions of this Section 8.1 for which a
different grace or cure period is specified or for which no grace or cure period
is specified and thereby constitute immediate Events of Default) and such
default is not remedied or waived within five (5) Business Days after the
earlier of (i) receipt by the Borrower of notice from the Administrative Agent
or the Lead Lenders of such default or (ii) the actual knowledge of the Borrower
or any other Credit Party of such default;

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

(e) (i) failure of any Credit Party to pay when due or within any applicable
grace period any principal, interest or other amount on Debt (other than the
Loans) or Prepetition Senior Notes or in respect of any Swap Contract, or the
occurrence of any breach, default, condition or event with respect to any Debt
(other than the Loans) or in respect of any Prepetition Senior Notes or in
respect of any Swap Contract if the effect of such occurrence is (A) to cause or
to permit the holder or holders of any such Debt or Prepetition Senior Notes, or
the counterparty under any such Swap Contract, to cause Debt, Prepetition Senior
Notes or other liabilities to become or be declared immediately due and payable
or (B) to require any mandatory payment, purchase, redemption, retirement,
defeasance, surrender, cancellation or acquisition of Debt or Prepetition Senior
Notes or to require any Credit Party to offer to pay, purchase, redeem, retire,
defease, surrender, cancel or acquire Debt or Prepetition Senior Notes, in the
case of any or all of the foregoing under this clause (i) in respect of Debt,
Prepetition Senior Notes or Swap Contracts having an individual principal amount
in excess of $10,000,000 (or any amount, solely with respect to Swap Contracts)
or having an aggregate principal amount

 

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in excess of $10,000,000 (or any amount, solely with respect to Swap Contracts);
provided that this paragraph (e) shall not apply to (x) secured Debt that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Debt or (y) any payment, purchase, redemption, retirement,
defeasance, surrender, cancellation or acquisition of Debt or Prepetition Senior
Notes satisfied by the conversion, exchange or issuance of Capital Stock
permitted to be issued hereunder; or (ii) the occurrence of any event requiring
the prepayment of any subordinated Debt prior to the repayment of the DIP
Obligations;

(f) the occurrence of any Material Adverse Effect;

(g) [reserved];

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

(i) one or more judgments or orders for the payment of money (not paid or fully
covered by insurance maintained in accordance with the requirements of this
Agreement and as to which the relevant insurance company has not denied
coverage) aggregating in excess of $5,000,000 shall be rendered against the
Borrower or any or all Credit Parties and either (i) enforcement proceedings
shall have been commenced by any creditor upon any such judgments or orders or
(ii) there shall be any period of thirty (30) consecutive days during which a
stay of enforcement of any such judgments or orders, by reason of a pending
appeal, bond or otherwise, shall not be in effect;

(j) a Change in Control shall occur;

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

(l) any Debtor files, or supports a motion that has been filed, to reject the
RSA;

(m) an order shall be entered dismissing a Chapter 11 Case or converting a
Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code;

(n) an order with respect to any of the Chapter 11 Cases shall be entered
appointing, or any Credit Party shall file an application for an order with
respect to any of the Chapter 11 Cases seeking the appointment of, in either
case without the prior written consent of the Lead Lenders, (i) a trustee under
Section 1104 of the United States Bankruptcy Code or (ii) an examiner or any
other Person with enlarged powers relating to the operation of the business of
any Credit Party (i.e., powers beyond those set forth in Sections 1104(d) and
1106(a)(3) and (4) of the United States Bankruptcy Code) under
Section 1106(b)(3) and 1106(b)(4) of the United States Bankruptcy Code;

(o) an order shall be entered that is not stayed pending appeal granting relief
from the automatic stay under the Chapter 11 Cases to any creditor of a Credit
Party with respect to any claim against any property of such Credit Party that,
when taken together with all other such

 

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claims with respect to which orders entered on the docket of the Bankruptcy
Court that are not stayed pending appeal granting relief from the automatic stay
under the Chapter 11 Cases with respect to the Credit Parties’ Collateral,
exceeds $250,000;

(p) an order shall be entered with respect to the Chapter 11 Cases, without the
prior written consent of the Lead Lenders, (i) to revoke, reverse, stay, vacate
or otherwise modify the DIP Orders or this Agreement in a manner adverse to any
Secured Party or in a manner inconsistent with the Financing Documents, (ii) to
permit any administrative expense or any claim (now existing or hereafter
arising, of any kind or nature whatsoever) to have administrative priority equal
or superior to the priority of the Secured Parties in respect of the DIP
Obligations, or the Prepetition First Lien Secured Parties in respect of the
Prepetition First Lien Obligations, in each case other than the Carve Out and
the Non-Primed Excepted Liens (to the extent, and only to the extent, set forth
in the DIP Orders), (iii) to terminate or deny use of cash collateral by the
Credit Parties, or (iv) to grant or permit the grant of a lien that is equal in
priority with or senior to the Liens securing the DIP Obligations or the
Prepetition First Lien Obligations other than the Carve Out and the Non-Primed
Excepted Liens (to the extent, and only to the extent, set forth in the DIP
Orders);

(q) failure of the Credit Parties to comply with the DIP Orders in any material
respect;

(r) any material portion of the Collateral purported to be covered thereby,
ceases to be, or otherwise fails to be, covered by any Lien or super-priority
claim granted with respect to this Agreement, the Interim Financing Order or the
Final DIP Order to be valid, perfected and enforceable in all respects with the
priority described herein;

(s) an application for an order described in clause (r) above shall be made by
(i) a Credit Party or (ii) a Person other than a Credit Party and such
application is not contested on a timely basis, by the Credit Parties in good
faith, in each case, other than any such application made in contemplation of
the Discharge of DIP Obligations, provided that concurrently therewith the
Discharge of DIP Obligations occurs;

(t) the commencement of any adversary proceeding, contested matter or other
action by any Credit Party asserting in writing any claims or defenses against
any of the Prepetition First Lien Agent or the Prepetition First Lien Secured
Parties with respect to the obligations of any Credit Party thereunder or the
Liens granted to Prepetition First Lien Agent or Prepetition First Lien Secured
Parties to secure the Prepetition First Lien Obligations, except as permitted
under the Interim Financing Order or the Final DIP Order;

(u) failure to timely comply with any of the Milestones, except to the extent
such Milestone is extended to a later date with the consent of the Lead Lenders;

(v) the Interim Financing Order or the Final DIP Order, as the case may be, is
stayed, amended, modified, reversed, or vacated in any manner adverse to the
Lenders;

(w) an order is entered by the Bankruptcy Court that dismisses one of more of
the Chapter 11 Cases and that does not provide for termination of the DIP
Facility and payment in full in cash of all DIP Obligations;

 

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(x) an order is entered by the Bankruptcy Court charging any of the Liens,
including under Section 506(c) or Section 552(b) of the Bankruptcy Code, or the
commencement of other actions adverse to the Lenders or their rights and
remedies under the DIP Facility in any Chapter 11 Case; or

(y) the Debtors take any action in support of any of the conditions or events
set forth in Sections 8.1(f), 8.1(n), 8.1(o), 8.1(p), 8.1(u), 8.1(v), 8.1(w) or
8.1(x), including failing to contest any application or request by another party
in support of any of the foregoing.

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

Upon the occurrence and during the continuance of an Event of Default, the
Administrative Agent may, and shall, if so requested by Lead Lenders, (i) by
notice to the Borrower suspend or terminate the Commitment and the obligations
of the Administrative Agent and the Lenders with respect thereto, in whole or in
part (and, if in part, such reduction shall be pro rata among the Lenders)
and/or (ii) by notice to the Borrower declare all or any portion of the DIP
Obligations to be, and such DIP Obligations shall thereupon become, immediately
due and payable, with accrued interest thereon, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower and the Borrower will pay the same.

Section 8.3 [Reserved].

Section 8.4 Default Rate of Interest and Suspension of LIBOR Rate Options.

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

Section 8.5 Set-off Rights.

During the continuance of any Event of Default, each Lender is hereby authorized
by the Borrower at any time or from time to time, with reasonably prompt
subsequent notice to the Borrower (any prior or contemporaneous notice being
hereby expressly waived) to set-off and to appropriate and to apply any and all
(i) balances held by such Lender or any of such Lender’s Affiliates at any of
its offices for the account of the Borrower or any of its Subsidiaries
(regardless of whether such balances are then due to the Borrower or its
Subsidiaries), and (ii) other property at any time held or owing by such Lender
to or for the credit or for the account of the Borrower or any of its
Subsidiaries, against and on account of any of the DIP Obligations; except that
no Lender shall exercise any such right without the prior written consent of the
Administrative Agent. Any Lender exercising a right to set-off shall purchase
for cash (and the other Lenders shall sell) interests in each of such other
Lender’s Pro Rata Share of the DIP Obligations as would be necessary to cause
all Lenders to share the amount so set-off with each other Lender in accordance
with their respective Pro Rata Share of the DIP Obligations. The Borrower
agrees, to the fullest extent permitted by Law, that any Lender or any of such
Lender’s Affiliates may exercise its right to set-off with respect to the DIP
Obligations as provided in this Section 8.5. In the event that any Defaulting
Lender shall exercise any such right of set-off,

 

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(x) all amounts so set-off shall be paid over immediately to the Administrative
Agent for further application in accordance with the provisions of Section 2.17
and, pending such payment, shall be segregated by such Defaulting Lender from
its other funds and deemed held in trust for the benefit of the Secured Parties,
and (y) the Defaulting Lender shall provide promptly to the Administrative Agent
a statement describing in reasonable detail the DIP Obligations owing to such
Defaulting Lender as to which it exercised such right of set-off.

Section 8.6 Application of Proceeds.

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

(b) After Event of Default. Following the occurrence and continuance of an Event
of Default, the Administrative Agent shall apply any and all payments received
by the Administrative Agent in respect of the DIP Obligations, and any and all
proceeds of Collateral received by the Administrative Agent, in the following
order: first, to all fees, costs, indemnities, liabilities, obligations and
expenses incurred by or owing to the Administrative Agent with respect to this
Agreement, the other Financing Documents or the Collateral, second, to all fees,
costs, indemnities and expenses incurred by or owing to any Lender with respect
to this Agreement, the other Financing Documents or the Collateral, third, to
accrued and unpaid interest on the DIP Obligations, fourth, to the principal
amount of the DIP Obligations outstanding, and fifth, to any other indebtedness
or obligations of the Borrower owing to the Administrative Agent or any Lender
under the Financing Documents.

(c) [Reserved].

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

ARTICLE 9

EXPENSES AND INDEMNITY

Section 9.1 Expenses.

The Borrower hereby agrees to promptly pay (a) (i) all reasonable and invoiced
out-of-pocket costs and expenses of the Administrative Agent and the Lead
Lenders (with respect to counsel, limited to fees, disbursements and other
charges for one counsel to each of (x) the Administrative Agent and its
respective Affiliates and (y) the Lenders; and if reasonably

 

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requested by the Administrative Agent or the Lead Lenders, special regulatory
counsel to each of (x) the Administrative Agent and (y) the Lenders (taken as a
whole) and one local counsel in any relevant jurisdiction to each of (x) the
Administrative Agent and (y) the Lenders (taken as a whole)) in connection with
the examination, review, due diligence investigation, documentation,
negotiation, closing and syndication of the transactions contemplated by the
Financing Documents, (ii) reasonable and invoiced out-of-pocket costs and
expenses of the Administrative Agent and the Lead Lenders (with respect to
counsel, limited to fees, disbursements and other charges for one counsel to
each of (x) the Administrative Agent and its respective Affiliates and (y) the
Lenders; and if reasonably requested by the Administrative Agent or the Lead
Lenders, special regulatory counsel to each of (x) the Administrative Agent and
(y) the Lenders (taken as a whole) and one local counsel in any relevant
jurisdiction to each of (x) the Administrative Agent and (y) the Lenders (taken
as a whole)) in connection with the performance by the Administrative Agent or
the Lead Lenders of their rights and remedies under the Financing Documents and
in connection with the continued administration of the Financing Documents
including (A) any amendments, modifications, consents and waivers to and/or
under any and all Financing Documents and (B) any periodic public record
searches conducted by or at the request of the Administrative Agent or the Lead
Lenders (including, without limitation, title investigations, UCC searches,
fixture filing searches, judgment, pending litigation and tax lien searches and
searches of applicable corporate, limited liability, partnership and related
records concerning the continued existence, organization and good standing of
certain Persons), (b) without limitation of the preceding clause (a), all
reasonable and invoiced out-of-pocket costs and expenses of the Administrative
Agent and the Lead Lenders (with respect to counsel, limited to fees,
disbursements and other charges for one counsel to each of (x) the
Administrative Agent and its respective Affiliates and (y) the Lenders; and if
reasonably requested by the Administrative Agent or the Lead Lenders, special
regulatory counsel to each of (x) the Administrative Agent and (y) the Lenders
(taken as a whole) and one local counsel in any relevant jurisdiction to each of
(x) the Administrative Agent and (y) the Lenders (taken as a whole)) in
connection with the creation, perfection and maintenance of Liens pursuant to
the Financing Documents, (c) without limitation of the preceding clause (a), all
reasonable and invoiced out-of-pocket costs and expenses of the Administrative
Agent and the Lead Lenders (with respect to counsel, limited to fees,
disbursements and other charges for one counsel to each of (x) the
Administrative Agent and its respective Affiliates and (y) the Lenders; and if
reasonably requested by the Administrative Agent or the Lead Lenders, special
regulatory counsel to each of (x) the Administrative Agent and (y) the Lenders
(taken as a whole) and one local counsel in any relevant jurisdiction to each of
(x) the Administrative Agent and (y) the Lenders (taken as a whole)) in
connection with protecting, storing, insuring, handling, maintaining or selling
any Collateral, (d) without limitation of the preceding clause (a), all
reasonable and invoiced out-of-pocket costs and expenses of the Administrative
Agent and the Lead Lenders in connection with the Administrative Agent’s or Lead
Lenders’ reservation of funds in anticipation of the funding of the initial
Loans to be made hereunder, provided that the Borrower or any Affiliate has
requested or consented to such reservation of funds and (e) all reasonable and
invoiced out-of-pocket costs and expenses incurred by the Administrative Agent
and the Lenders (with respect to counsel, limited to fees, disbursements and
other charges for one counsel to each of (x) the Administrative Agent and its
respective Affiliates and (y) the Lenders; and if reasonably requested by the
Administrative Agent or the Lead Lenders, special regulatory counsel to each of
(x) the Administrative Agent and (y) the Lenders (taken as a whole) and one
local counsel in any relevant jurisdiction to each of (x) the Administrative
Agent and (y) the Lenders (taken as a whole); and, solely in the case of an
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of interest, one additional counsel for the Administrative Agent or Lender
affected by such conflict) in connection with any claim, litigation, dispute,
suit, investigation or proceeding relating to the Transactions, any Financing
Document and in connection with any workout, collection, bankruptcy, insolvency
and other enforcement proceedings under any and all Financing Documents.

Section 9.2 Indemnity.

The Borrower hereby agrees to indemnify, pay and hold harmless the
Administrative Agent, the Lenders and their respective Affiliates and the
officers, directors, employees, trustees, agents, investment advisors,
collateral managers, servicers, and counsel of the Administrative Agent, the
Lenders and their respective Affiliates (collectively called the “Indemnitees”)
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the reasonable fees and
disbursements of counsel for such Indemnitee) in connection with any
investigative, response, remedial, administrative or judicial matter or
proceeding, whether or not such Indemnitee shall be designated a party thereto
and including any such proceeding initiated by or on behalf of a Credit Party,
and the reasonable expenses of investigation by engineers, environmental
consultants and similar technical personnel and any commission, fee or
compensation claimed by any broker (other than any broker retained by the
Administrative Agent or Lenders) asserting any right to payment for the
transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby or by the other Financing Documents (including
(i)(A) as a direct or indirect result of the presence on or under, or escape,
seepage, leakage, spillage, discharge, emission or release from, any property
now or previously owned, leased or operated by the Borrower, any other Credit
Party or any other Person of any Hazardous Materials or any Hazardous Materials
Contamination, (B) arising out of or relating to the offsite disposal of any
materials generated or present on any such property or (C) arising out of or
resulting from the environmental condition of any such property or the
applicability of any governmental requirements relating to Hazardous Materials,
whether or not occasioned wholly or in part by any condition, accident or event
caused by any act or omission of the Borrower or any other Credit Party,
(ii) the Transactions and (iii) proposed and actual extensions of credit under
this Agreement) and the use or intended use of the proceeds of the Loans;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such liabilities, losses, damages, claims or out-of-pocket
expenses resulted from the gross negligence or willful misconduct of such
Indemnitee or of any of its Related Indemnified Persons (as determined by a
final non-appealable judgment of a court of competent jurisdiction). To the
extent that the undertaking set forth in the immediately preceding sentence may
be unenforceable, the Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable Law to the payment and
satisfaction of all such indemnified liabilities incurred by the Indemnitees or
any of them. For purposes of this paragraph, “Related Indemnified Person” shall
mean, with respect to an Indemnitee, (1) any controlling Person or controlled
Affiliate of such Indemnitee, (2) the respective directors, officers, or
employees of such Indemnitee or any of its controlling Persons or controlled
Affiliates and (3) the respective trustees, agents, investment advisors,
collateral managers, servicers and counsel of such Indemnitee or any of its
controlling Persons or controlled Affiliates.

 

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ARTICLE 10

ADMINISTRATIVE AGENT

Section 10.1 Appointment and Authorization.

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

Section 10.2 Administrative Agent and Affiliates.

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

Section 10.3 Action by Administrative Agent.

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

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

 

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

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

Without limiting the generality of the foregoing, the use of the term “agent” in
this Agreement with reference to the Administrative Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term us used merely as a
matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties. Each party
to this Agreement acknowledges and agrees that the Administrative Agent and the
Lead Lenders or the Required Lenders may use an outside service provider for the
tracking of all UCC financing statements or similar statements under the laws of
any other jurisdiction required to be filed pursuant to the Financing Documents
and notification to the Administrative Agent, the Lead Lenders or the Required
Lenders, as the case may be, of, among other things, the upcoming lapse or
expiration thereof.

Section 10.4 Consultation with Experts; Delegation of Duties.

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

 

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Section 10.5 Liability of Administrative Agent.

Neither the Administrative Agent, any Lender nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
not taken by it in connection with the Financing Documents, except that the
Administrative Agent shall be liable with respect to its specific duties set
forth hereunder, but only to the extent of its own gross negligence or willful
misconduct in the discharge thereof as determined by a final non-appealable
judgment of a court of competent jurisdiction. Neither the Administrative Agent,
any Lead Lender nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
any Financing Document or any borrowing hereunder, (ii) the performance or
observance of any of the covenants or agreements specified in any Financing
Document, (iii) the satisfaction of any condition specified in any Financing
Document, (iv) the validity, effectiveness, sufficiency or genuineness of any
Financing Document, any Lien purported to be created or perfected thereby or any
other instrument or writing furnished in connection therewith, (v) the existence
or non-existence of any Default or Event of Default; (vi) the contents of any
certificate, report or other document delivered hereunder or thereunder or in
connection herewith or therewith, or (vii) the financial condition of any Credit
Party. Neither the Administrative Agent nor any Lead Lender shall incur any
liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile or
electronic transmission or similar writing) believed by it to be genuine or to
be signed by the proper party or parties. The Administrative Agent shall not be
liable for any apportionment or distribution of payments made by it in good
faith and if any such apportionment or distribution is subsequently determined
to have been made in error the sole recourse of any Lender to whom payment was
due but not made, shall be to recover from other Lenders any payment in excess
of the amount to which they are determined to be entitled (and such other
Lenders hereby agree to return to such Lender any such erroneous payments
received by them). In addition, the Administrative Agent shall not be liable for
any action taken or not taken by it (x) with the consent or at the request of
the Lead Lenders or Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as the Administrative Agent shall believe in
good faith shall be necessary, under the circumstances as provided in
Section 11.5), or (y) in the absence of its own gross negligence or willful
misconduct as determined by a court of competent jurisdiction by final and
non-appealable judgment.

Section 10.6 Indemnification.

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

 

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Section 10.7 Right to Request and Act on Instructions.

The Administrative Agent and the Lead Lenders may at any time request
instructions from the Lenders with respect to any actions or approvals which by
the terms of this Agreement or of any of the Financing Documents Administrative
Agent is permitted or desires to take or to grant, and if such instructions are
promptly requested, the Administrative Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Financing Documents until it shall
have received such instructions from Lead Lenders or all or such other portion
of Lenders as shall be prescribed by this Agreement. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against
Administrative Agent or Lead Lender as a result of the Administrative Agent or
Lead Lender, as applicable, acting or refraining from acting under this
Agreement or any of the other Financing Documents in accordance with the
instructions of the Lead Lenders (or all or such other portion of Lenders as
shall be prescribed by this Agreement) and, notwithstanding the instructions of
Lead Lenders (or such other applicable portion of Lenders), the Administrative
Agent shall have no obligation to take any action if it believes, in good faith,
that such action would violate applicable Law or exposes Administrative Agent to
any liability for which it has not received satisfactory indemnification in
accordance with the provisions of Section 10.6, including for the avoidance of
doubt any action that may be in violation of the automatic stay under any Debtor
Relief Law or that may effect a forfeiture, modification or termination of
property of a Defaulting Lender in violation of any Debtor Relief Law.

Section 10.8 Credit Decision.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.

Section 10.9 Collateral Matters.

(a) The Lenders irrevocably authorize the Administrative Agent, at its option
and in its discretion, to (i) release any Lien granted to or held by the
Administrative Agent under any Security Document (A) upon termination of the
Commitment and payment in full of all DIP Obligations or (B) constituting
property sold or disposed of as part of or in connection with any disposition
permitted under any Financing Document (it being understood and agreed that the
Administrative Agent may conclusively rely without further inquiry on a
certificate of a Responsible Officer as to the sale or other disposition of
property being made in full compliance with the provisions of the Financing
Documents), (ii) release or subordinate any Lien granted to or held by the
Administrative Agent under any Security Document constituting property described
in Section 5.2(d) (it being understood and agreed that Administrative Agent may
conclusively rely without further inquiry on a certificate of a Responsible
Officer as to the identification of any property described in Section 5.2(d)),
and (iii) release any Guarantor from the Guaranty (and release any Lien granted
to or held by Administrative Agent on the assets of such Guarantor and the
equity interests in such Guarantor) at such time as such Guarantor ceases

 

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to be a Subsidiary as a result of a transaction permitted under this Agreement.
Upon request by Administrative Agent at any time, Lenders will confirm
Administrative Agent’s authority to release and/or subordinate particular types
or items of Collateral pursuant to this Section 10.9.

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

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

Section 10.10 Agency for Perfection.

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

 

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Section 10.11 Notice of Default.

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

Section 10.12 Successor Administrative Agent.

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

 

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taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting or was continuing to act as the Administrative Agent. Any
successor Administrative Agent shall provide the applicable documentation
described in Section 2.13(f)(iii) to the Borrower on or prior to the date on
which it becomes the Administrative Agent hereunder.

Section 10.13 Disbursements of Loans; Payment and Sharing of Payment.

(a) Loan Advances, Payments and Settlements; Interest and Fee Payments.

(i) Unless the Administrative Agent shall have been notified by telephone,
confirmed in writing, by any Lender by 5:00 p.m. (Central time) on the day prior
to the date of a proposed borrowing of Loans, that such Lender will not make
available the amount that would constitute its applicable percentage of such
borrowing on the date specified therefor, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent and,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. Each Lender shall reimburse the Administrative Agent on demand, in
accordance with the provisions of the immediately following paragraph, for all
funds disbursed on its behalf by the Administrative Agent pursuant to the first
sentence of this clause (i), or if the Administrative Agent so requests, each
Lender will remit to the Administrative Agent its Pro Rata Share of any Loan
before the Administrative Agent disburses the same to the Borrower. If the
Administrative Agent elects to require that each Lender make funds available to
the Administrative Agent, prior to a disbursement by the Administrative Agent to
the Borrower, the Administrative Agent shall advise each Lender by telephone,
facsimile or e-mail of the amount of such Lender’s Pro Rata Share of the Loan
requested by the Borrower no later than noon, Central time, on the date of
funding of such Loan, and each such Lender shall pay the Administrative Agent on
such date such Lender’s Pro Rata Share of such requested Loan, in same day
funds, by wire transfer to the Payment Account, or such other account as may be
identified by the Administrative Agent to Lenders from time to time. If any
Lender fails to pay the amount of its Pro Rata Share within one (1) Business Day
after the Administrative Agent’s demand, the Administrative Agent shall promptly
notify the Borrower, and the Borrower shall immediately repay such amount to the
Administrative Agent. Any repayment required by the Borrower pursuant to this
Section 10.13 shall be accompanied by accrued interest thereon from and
including the date such amount is made available to the Borrower to but
excluding the date of payment at the LIBOR Rate then applicable to Loans.
Nothing in this Section 10.13 or elsewhere in this Agreement or the other
Financing Documents shall be deemed to require the Administrative Agent to
advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights that
the Administrative Agent or the Borrower may have against any Lender as a result
of any default by such Lender hereunder.

(ii) On the Closing Date, the Administrative Agent, on behalf of Lenders, may
elect to advance to the Borrower the full amount of the initial Loans to be made
on the Closing Date prior to receiving funds from Lenders, in reliance upon each
Lender’s commitment to make its Pro Rata Share of such Loans to the Borrower in
a timely manner on such date. If the Administrative Agent elects to advance the
initial Loans to the Borrower in such manner, the Administrative Agent shall be
entitled to receive all interest that accrues on the Closing Date on each
Lender’s Pro Rata Share of such Loans unless Administrative Agent receives such
Lender’s Pro Rata Share of such Loans by 3:00 p.m., Central time, on the Closing
Date.

 

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(iii) The provisions of this Section 10.13(a) shall be deemed to be binding upon
the Administrative Agent and the Lenders notwithstanding the occurrence of any
Default or Event of Default, or any insolvency or bankruptcy proceeding
pertaining to the Borrower or any other Credit Party.

(b) [Reserved].

(c) Return of Payments.

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

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

(d) Defaulting Lenders. The failure of any Defaulting Lender to make any Loan or
any payment required by it hereunder shall not relieve any other Lender of its
obligations to make such Loan or payment, but neither any other Lender nor the
Administrative Agent shall be responsible for the failure of any Defaulting
Lender to make a Loan or make any other payment required hereunder.
Notwithstanding anything set forth herein to the contrary, a Defaulting Lender
shall not have any voting or consent rights under or with respect to any
Financing Document or constitute a “Lender” (or be included in the calculation
of “Lead Lenders” or “Required Lenders” hereunder) for any voting or consent
rights under or with respect to any Financing Document except that neither the
Commitment Amount of such Lender may be increased or extended without the
consent of such Lender.

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

 

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return or recovery, without interest. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this clause (e) may,
to the fullest extent permitted by Law, exercise all its rights of payment
(including pursuant to Section 8.5) with respect to such participation as fully
as if such Lender were the direct creditor of Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
Law, any Lender receives a secured claim in lieu of a set-off to which this
clause (e) applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this clause (e) to share in the benefits of any
recovery on such secured claim.

Section 10.14 Right to Perform, Preserve and Protect.

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

Section 10.15 Additional Titled Agents.

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

Section 10.16 Administrative Agent May File Proof 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 Subsidiary, Administrative
Agent (irrespective of whether the principal of any Loan shall then be due and
payable as herein expressed or by declaration or otherwise and

 

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irrespective of whether Administrative Agent shall have made any demand on the
Borrower) shall be entitled and empowered, by intervention in such proceeding or
otherwise to:

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

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

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

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

ARTICLE 11

MISCELLANEOUS

Section 11.1 Survival.

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

Section 11.2 No Waivers.

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

Section 11.3 Notices.

(a) All notices, requests and other communications to any party hereunder shall
be in writing (including prepaid overnight courier, facsimile transmission,
e-mail, electronic submissions or similar writing) and shall be given to such
party at its address, facsimile number

 

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

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

(c) The Borrower hereby acknowledges that (a) the Administrative Agent may make
available to the Lenders materials and/or information provided by or on behalf
of the Borrower hereunder (collectively, the “Borrower Materials”) by posting
the Borrower Materials on Intralinks or another similar electronic system (the
“Platform”), (b) the Administrative Agent may, in its discretion, agree to
accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications, and
(c) certain of the Lenders may be “public-side” Lenders (i.e., Lenders, or
representatives thereof, that do not wish to receive material nonpublic
information with respect to Borrower or its securities) (each, a “Public
Lender”). Borrower hereby agrees that (w) all Borrower Materials that are to be
made available to Public Lenders shall be clearly and conspicuously marked
“PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear
prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC”, the Borrower shall be deemed to have authorized the Administrative
Agent and the Lenders to treat such Borrower Materials as not containing any
material non-public information with respect to the Borrower or its securities
for purposes of United States Federal and state securities laws (provided,
however, that to the extent such Borrower Materials constitute Information, they
shall be treated as set forth in Section 10.12); (y) all Borrower Materials
marked “PUBLIC” are permitted to be made available through a portion of the
Platform designated as “Public Investor”; and (z) the Administrative Agent shall
be entitled to treat any Borrower Materials that are not marked “PUBLIC” as
being suitable only for posting on a portion of the Platform not marked as
“Public Investor”. Notwithstanding the foregoing, the following Borrower
Materials shall be marked “PUBLIC”, unless the Borrower

 

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

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

Section 11.4 Severability.

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

Section 11.5 Amendments and Waivers.

(a) General Provisions. Except as otherwise set forth herein, no provision of
this Agreement or any other Financing Document may be amended, waived or
otherwise modified unless such amendment, waiver or other modification is in
writing and is signed or otherwise approved by the Borrower and the Lead Lenders
(and, if the rights or duties of the Administrative Agent are affected thereby,
by the Administrative Agent); provided that no such amendment, waiver or other
modification shall, unless signed or otherwise approved in writing by all
Lenders directly and adversely affected thereby, (A) reduce the principal of,
rate of interest on or any fees with respect to any Loan or forgive any
principal, interest or fees with respect to any Loan, (B) postpone the date
fixed for, or waive, any payment (other than a payment pursuant to
Section 2.3(b), Section 2.3(c) or Section 2.3(d)) of principal of or interest on
any Loan or any fees hereunder or postpone the date of termination of the
commitment of any Lender hereunder, (C) increase the Commitment Amount of a
Lender (or reinstate any Commitment Amount of a Lender terminated pursuant to
Section 8.2), (D) change the definition of either or both terms

 

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

(b) [Reserved].

Section 11.6 Assignments; Participations; Replacement of Lenders.

(a) Assignments.

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

(ii) From and after the date on which the conditions described above have been
met, (A) such Eligible Assignee shall be deemed automatically to have become a
party hereto and, to the extent of the interests assigned to such Eligible
Assignee pursuant to such Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and (B) the assigning Lender, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, shall be released from its rights and obligations
hereunder (other than those that survive termination pursuant to Section 11.1),
provided, that except to the extent otherwise expressly agreed by the affected
parties, no assignment by a Defaulting Lender will constitute a waiver or
release of any claim of any party hereunder arising from that Lender’s having
been Defaulting Lender. Upon the request of the Eligible Assignee

 

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(and, as applicable, the assigning Lender) pursuant to an effective Assignment
Agreement, the Borrower shall execute and deliver to the Eligible Assignee (and,
as applicable, the assigning Lender) Notes in the aggregate principal amount
equal to the sum of (x) such Eligible Assignee’s Loans and (y) such Eligible
Assignee’s Pro Rata Share of the Commitment outstanding at the time of such
execution (and, as applicable, Notes in the principal amount equal to the sum of
(x) the Loans retained by the assigning Lender and (y) the assigning Lender’s
retained Pro Rata Share of the Commitment). Upon receipt by the assigning Lender
of such Note, the assigning Lender shall return to the Borrower any prior Note
held by it.

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

(iv) Notwithstanding the foregoing provisions of this Section 11.6(a) or any
other provision of this Agreement, any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

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

(vi) Certain Additional Payments. In connection with any assignment of rights
and obligations of any Defaulting Lender hereunder, no such assignment shall be
effective unless and until, in addition to the other conditions thereto set
forth herein, the parties to the assignment shall make such additional payments
to the Administrative Agent in an aggregate amount

 

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sufficient, upon distribution thereof as appropriate (which may be outright
payment, purchases by the assignee of participations or subparticipations, or
other compensating actions, including funding, with the consent of the Borrower
and the Administrative Agent, the applicable pro rata share of Loans previously
requested but not funded by the Defaulting Lender, to each of which the
applicable assignee and assignor hereby irrevocably consent), to (x) pay and
satisfy in full all payment liabilities then owed by such Defaulting Lender to
the Administrative Agent and each other Lender hereunder (and interest accrued
thereon), and (y) acquire (and fund as appropriate) its full pro rata share of
all Loans in accordance with its Applicable Percentage. Notwithstanding the
foregoing, in the event that any assignment of rights and obligations of any
Defaulting Lender hereunder shall become effective under applicable law without
compliance with the provisions of this paragraph, then the assignee of such
interest shall be deemed to be a Defaulting Lender for all purposes of this
Agreement until such compliance occurs.

(b) Participations.

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

 

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Documents (the “Participant Register”); provided that no Lender shall have any
obligation to disclose all or any portion of the Participant Register (including
the identity of any Participant or any information relating to a Participant’s
interest in any commitments, loans, letters of credit or its other obligations
under any Financing Document) to any Person except to the extent that such
disclosure is necessary to establish that such commitment, loan, letter of
credit or other obligation is in registered form under Section 5f.103-1(c) of
the United States Treasury Regulations. The entries in the Participant Register
shall be conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the owner of such
participation for all purposes of this Agreement notwithstanding any notice to
the contrary. For the avoidance of doubt, the Administrative Agent (in its
capacity as Administrative Agent) shall have no responsibility for maintaining a
Participant Register.

(c) First Out, Second Out Tranches. The Borrower and the Administrative Agent
agree to execute and deliver amendments to this Agreement in form and substance
reasonably satisfactory to the Borrower (such approval not to be unreasonably
withheld, delayed or conditioned) and the Administrative Agent within fifteen
(15) days of written request from the Lead Lenders if such amendments act only
to change the priority or allocation of payments by the Borrower among the
Lenders hereunder (or among existing and new Lenders after giving effect to any
permitted assignment under Section 11.6(a)). Notwithstanding the provisions of
Section 11.5, each Lender agrees to execute and deliver such amendments within
fifteen (15) days of written request from the Lead Lenders which do not change
the priority or allocation of payments to such Lender.

(d) Credit Party Assignments.

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

Section 11.7 Headings.

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

Section 11.8 Confidentiality.

The Administrative Agent and each Lender shall hold all non-public information
regarding the Credit Parties and their respective businesses in accordance with
such Person’s customary procedures for handling information of such nature,
except that disclosure of such information may be made (i) to their and their
investment advisers’ and sub-advisers’ respective agents, employees,
Subsidiaries, Affiliates, attorneys, auditors, funding sources, professional
consultants, rating agencies, insurance industry associations and portfolio
management services, (ii) to prospective transferees or purchasers of any
interest in the Loans, and to prospective contractual counterparties (or the
professional advisors thereto) in Swap Contracts permitted hereby, provided that
any such Persons shall have agreed to be bound by the provisions of this
Section 11.8, (iii) as required by Law, subpoena, judicial order or similar
order whether or not in connection with any litigation, (iv) as may be required
in connection with the examination, audit or similar investigation of such
Person and (v) to a Person that is a trustee, investment advisor,

 

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collateral manager, servicer, noteholder or secured party in a Securitization
(as hereinafter defined) in connection with the administration, servicing and
reporting on the assets serving as collateral for such Securitization. For the
purposes of this Section, “Securitization” shall mean a public or private
offering by a Lender or any of its Affiliates or their respective successors and
assigns, of Capital Stock which represent an interest in, or which are
collateralized, in whole or in party, by the Loans. Confidential information
shall not include information that either (A) is in the public domain, or
becomes part of the public domain after disclosure to such Person through no
fault of such Person, or (B) is disclosed to such Person by a Person other than
a Credit Party, provided the Administrative Agent does not have actual knowledge
that such Person is prohibited from disclosing such information. The obligations
of the Administrative Agent and the Lenders under this Section 11.8 shall
supersede and replace the obligations of the Administrative Agent and the
Lenders under any confidentiality agreement in respect of this financing
executed and delivered by the Administrative Agent or any Lender prior to the
date hereof.

Section 11.9 Waiver of Consequential and Other Damages.

To the fullest extent permitted by applicable Law, 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 Financing Document or any agreement or instrument
contemplated hereby or thereby, the transactions contemplated hereby or thereby,
any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Financing Documents or the transactions contemplated hereby or thereby.

Section 11.10 Marshaling; Payments Set Aside.

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

Section 11.11 GOVERNING LAW; SUBMISSION TO JURISDICTION.

EXCEPT AS OTHERWISE SET FORTH IN THE MORTGAGES, THIS AGREEMENT, EACH NOTE AND
EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS RELATING HERETO OR THERETO OR
ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE),
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. THE BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR

 

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FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, STATE
OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO THE ADMINISTRATIVE AGENT’S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.
THE BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. THE BORROWER HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE
OF PROCESS MAY BE MADE UPON THE BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO THE BORROWER AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS
BEEN POSTED.

Section 11.12 WAIVER OF JURY TRIAL.

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

Section 11.13 Publication; Advertisement.

Each Lender and each Credit Party hereby authorizes the Arranger to publish the
name of such Lender and Credit Party, the existence of the financing
arrangements referenced under this Agreement, the primary purpose and/or
structure of those arrangements, the amount of credit extended under each
facility, the title and role of each party to this Agreement, and the total
amount of the financing evidenced hereby in any “tombstone”, comparable
advertisement or press release which the Arranger elects to submit for
publication. In addition, each Lender and each Credit Party agrees that the
Arranger may provide lending industry trade organizations with information
necessary and customary for inclusion in league table measurements after the
Closing Date. With respect to any of the foregoing, the Arranger shall provide
the Borrower with an opportunity to review and confer with the Arranger
regarding the contents of any such tombstone, advertisement or information, as
applicable, prior to its submission for publication and, following such review
period, the Arranger may, from time to time, publish such information in any
media form desired by the Arranger, until such time that the Borrower shall have
requested the Arranger cease any such further publication.

 

102

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Section 11.14 Counterparts; Integration.

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

Section 11.15 No Strict Construction.

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

Section 11.16 USA PATRIOT Act Notification.

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

Section 11.17 [Reserved].

Section 11.18 [Reserved].

Section 11.19 Acknowledgement and Consent to Bail-In of EEA Financial
Institutions.

Notwithstanding anything to the contrary in any Financing Document or in any
other agreement, arrangement or understanding among any such parties, each party
hereto acknowledges that any liability of any EEA Financial Institution arising
under any Financing Document, to the extent such liability is unsecured, may be
subject to the Write-Down and Conversion Powers of an EEA Resolution Authority
and agrees and consents to, and acknowledges and agrees to be bound by

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

(b) the effects of any Bail-in Action on any such liability, including, if
applicable:

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

(ii) a conversion of all, or a portion of, such liability into shares or other
instruments of ownership in such EEA Financial Institution, its parent
undertaking, or a bridge

 

103

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institution that may be issued to it or otherwise conferred on it, and that such
shares or other instruments of ownership will be accepted by it in lieu of any
rights with respect to any such liability under this Agreement or any other
Financing Document; or

(iii) the variation of the terms of such liability in connection with the
exercise of the Write-Down and Conversion Powers of any EEA Resolution
Authority.

 

104

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

 

WARREN RESOURCES, INC. By:  

 

Name:   James A. Watt Title:   President, Chief Executive Officer and   Chief
Restructuring Officer Address:   1331 17th Street   Suite 720   Denver, CO 80202
  Attention: President, Chief Executive   Officer and Chief Restructuring  
Officer Facsimile number: E-mail Address: Taxpayer Identification Number:
11-3024080 with a copy to (which shall not constitute notice): Andrews Kurth LLP
600 Travis, Suite 4200 Houston, TX 77002 Attention: Jeffrey M. Butler Telephone:
(713) 220-4417 E-mail: jeffbutler@andrewskurth.com Borrower’s Account
Designation: JPMorgan Chase Bank One Chase Plaza New York, NY 10081 ABA No.:
021000021 Account No.: 459-1-517471 Account Name: Warren Resources, Inc. 489
Fifth Avenue, 32nd Floor New York, NY 10017

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

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Administrative Agent By:  

 

Address for notices: Wilmington Trust, N.A. 50 South Sixth Street, Suite 1290
Minneapolis, MN 55402 Attention: Meghan McCauley Telephone: (612) 217-5647
Facsimile: (612) 217-5651 E-mail: MMcCauley@WilmingtonTrust.com with a copy to:
Lindquist & Vennum LLP 4200 IDS Center 80 South Eighth Street Minneapolis, MN
55402 Attention: Mark C. Dietzen, Esq. Telephone: (612) 371-2452 Facsimile:
(612) 371-3207 E-mail: MDietzen@Lindquist.com Payment Account: Wilmington Trust,
N.A. Wilmington, DE ABA No.: 031100092 Account No.: 116314-000 Account Name:
Corporate Capital Markets Account Name: Warren Resources, Inc. (DIP)

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

Annex A

Commitment Amounts

(as of the Closing Date)

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

Exhibit A to Credit Agreement

ASSIGNMENT AND ASSUMPTION

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

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

 

 

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

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

3  Select as appropriate.

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

 

Exhibit A – Page 1

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   1.    Assignor[s]:                                        
                                                                        
                                                                               
                          [Assignor [is] [is not] a Defaulting Lender]    2.   
Assignee[s]:                                        
                                                                        
                                                                               
                             [for each Assignee, indicate [Affiliate][Approved
Fund] of [identify Lender]]    3.    Borrower: Warren Resources, Inc. 4.   
Administrative Agent: Wilmington Trust, National Association, as the
administrative agent under the Credit Agreement 5.    Credit Agreement:
Debtor-In-Possession Credit Agreement, dated as of June [●] 2016, among Warren
Resources, Inc. the Lenders from time to time party thereto, and Wilmington
Trust, National Association, as Administrative Agent    6.    Assigned Interest:

 

Assignor[s]5

  

Assignee[s]6

   Aggregate
Amount of
Commitment/Loans
for all Lenders7      Amount of
Commitment
/Loans
Assigned      Percentage
Assigned of
Commitment/
Loans8    

CUSIP

Number

      $                    $                           %          $             
      $                           %          $                    $             
             %   

 

   [7.    Trade Date:                     ]9       Effective Date:             ,
20     [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE
DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

 

 

5  List each Assignor, as appropriate.

6  List each Assignee, as appropriate.

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

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

9  To be completed if the Assignor and the Assignee intend that the minimum
assignment amount is to be determined as of the Trade Date.

 

Exhibit A – Page 2

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

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

 

ASSIGNOR [NAME OF ASSIGNOR] By:  

 

Title:   ASSIGNEE [NAME OF ASSIGNEE] By:  

 

Title:  

 

[Consented to and]10 Accepted: WILMINGTON TRUST, NATIONAL ASSOCIATION, as
  Administrative Agent By:  

 

Title:   WARREN RESOURCES, INC. By:  

 

Title:  

 

 

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

 

Exhibit A – Page 3

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ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1. Assignor. [The][Each] Assignor (a) represents and warrants that (i) it is
the legal and beneficial owner of [the][[the relevant] Assigned Interest,
(ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or
other adverse claim and (iii) it has full power and authority, and has taken all
action necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and (iv) it 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 Financing Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Financing
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Financing Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Financing Document.

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

 

Exhibit A – Page 4

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

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

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

 

Exhibit A – Page 5

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Exhibit B to Credit Agreement

[FORM OF]

COMPLIANCE CERTIFICATE

WARREN RESOURCES, INC.

Date:             ,         

This certificate is given by                     , a Responsible Officer of
Warren Resources, Inc. (“Borrower”), pursuant to Section 4.1(c) of that certain
Debtor-In-Possession Credit Agreement, dated as of June [●], 2016, among
Borrower, Lenders from time to time party thereto and Wilmington Trust, National
Association, as Administrative Agent for Lenders (as such agreement may have
been amended, restated, supplemented or otherwise modified from time to time,
the “Credit Agreement”). Capitalized terms used herein without definition shall
have the meanings set forth in the Credit Agreement.

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

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

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

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

 

Exhibit B – Page 1

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

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

 

WARREN RESOURCES, INC. By  

 

Name:  

 

Title:                                                          of Borrower

 

Exhibit B – Page 2

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

Schedule 1 to

Compliance Certificate

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

 

Exhibit B – Page 3

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

Exhibit C to Credit Agreement

[FORM OF]

Notice of Borrowing

WARREN RESOURCES, INC.

Date:             ,         

This certificate is given by                     , a Responsible Officer of
Warren Resources, Inc. (“Borrower”), on behalf of Borrower pursuant to
Section 2.2 of that certain Debtor-In-Possession Credit Agreement, dated as of
June [●], 2016, among Borrower, Lenders from time to time party thereto and
Wilmington Trust, National Association, as Administrative Agent for Lenders (as
such agreement may have been amended, restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”). Capitalized terms used
herein without definition shall have the meanings set forth in the Credit
Agreement.

The undersigned Responsible Officer hereby gives notice to Administrative Agent
of Borrower’s request to: [complete as appropriate]

(a) on [ date ] borrow $[        ] of [●], which [●] shall be LIBOR Loans having
an Interest Period of one (1) month;

(b) on [ date ] continue $[        ]of the aggregate outstanding principal
amount of the [                    ] Loan, bearing interest at the LIBOR, as a
LIBOR Loan having an Interest Period of one (1) month.

The undersigned officer hereby certifies that except as set forth on Exhibit A
hereto, both before and after giving effect to the request in item (a) above
each of the conditions precedent set forth in [Section 7.2 and Section 7.3] have
been satisfied.

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

 

WARREN RESOURCES, INC. By  

 

Name  

 

Title  

 

 

Exhibit C – Page 1

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

Exhibit E-1 to Credit Agreement

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is made to the Debtor-In-Possession Credit Agreement, dated as of June
[●], 2016 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time) (the “Credit Agreement”), among Warren Resources,
Inc., a Maryland limited partnership (the “Borrower”), the financial
institutions or other entities from time to time parties thereto (collectively,
the “Lenders”), and Wilmington Trust, National Association, as the
Administrative Agent. Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement.

Pursuant to the provisions of Section 2.13(f)(ii)(B)(3) of the Credit Agreement,
the undersigned hereby certifies that (i) it is the sole record and beneficial
owner of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect
of which it is providing this certificate, (ii) it is not a “bank” within the
meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent
shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the
Code, (iv) it is not a “controlled foreign corporation” related to the Borrower
as described in Section 881(c)(3)(C) of the Code, and (v) no payments in
connection with any Financing Document are effectively connected with the
undersigned’s conduct of a U.S. trade or business.

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

[Signature Page Follows]

 

Exhibit E-1 – Page 1

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

[Non-U.S. Lender] By:  

 

Name:   Title:   [Address]

Dated:             , 20[    ]

 

Exhibit E-1 – Page 2

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

Exhibit E-2 to Credit Agreement

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Lenders That Are Partnerships For U.S. Federal Income Tax
Purposes)

Reference is made to the Debtor-In-Possession Credit Agreement, dated as of
June [●], 2016 (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time) (the “Credit Agreement”), among Warren
Resources, Inc., a Maryland limited partnership (the “Borrower”), the financial
institutions or other entities from time to time parties thereto (collectively,
the “Lenders”), and Wilmington Trust, National Association, as the
Administrative Agent. Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement.

Pursuant to the provisions of Section 2.13(f)(ii)(B)(4) of the Credit Agreement,
the undersigned hereby certifies that (i) it is the sole record owner of the
Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of which it
is providing this certificate, (ii) its direct or indirect partners/members are
the sole beneficial owners (within the meaning of Treasury Regulations
Section 1.1441-1(c)(6)) of payments on such Loan(s) (as well as any Note(s)
evidencing such Loan(s)), (iii) neither the undersigned nor any of its direct or
indirect partners/members claiming the benefit of the portfolio interest
exemption is a “bank” within the meaning of Section 881(c)(3)(A) of the Code,
(iv) none of its direct or indirect partners/members claiming the benefit of the
portfolio interest exemption is a ten percent shareholder of the Borrower within
the meaning of Section 871(h)(3)(B) of the Code, (v) none of its direct or
indirect partners/members claiming the benefit of the portfolio interest
exemption is a “controlled foreign corporation” related to the Borrower as
described in Section 881(c)(3)(C) of the Code, and (vi) no payments in
connection with any Financing Document are effectively connected with the
conduct by the undersigned or its direct or indirect partners/members claiming
the benefit of the portfolio interest exemption of a U.S. trade or business (the
certifications stating (iii)-(vi), a “Portfolio Interest Certificate”).

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-8IMY accompanied by (i) an IRS Form W-8IMY from each of its direct or
indirect partners/members that are partnerships and (ii) an IRS Form W-8BEN (or
applicable successor IRS Form) and Portfolio Interest Certificate from each of
its direct or indirect partners/members claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform the Borrower and the Administrative Agent in writing and (2) the
undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding each such
payment.

[Signature Page Follows]

 

Exhibit E-2 – Page 1

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

[Non-U.S. Lender] By:  

 

Name:   Title:   [Address]

Dated:             , 20[    ]

 

Exhibit E-2 – Page 2

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

Exhibit E-3 to Credit Agreement

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

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

Reference is made to the Debtor-In-Possession Credit Agreement, dated as of
June [●], 2016 (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time) (the “Credit Agreement”), among Warren
Resources, Inc., a Maryland limited partnership (the “Borrower”), the financial
institutions or other entities from time to time parties thereto (collectively,
the “Lenders”), and Wilmington Trust, National Association, as the
Administrative Agent. Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement.

Pursuant to the provisions of Section 2.13(f)(ii)(B)(4) and Section 11.6(b) of
the Credit Agreement, the undersigned hereby certifies that (i) it is the sole
record and beneficial owner of the participation in respect of which it is
providing this certificate, (ii) it is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of
the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is
not a “controlled foreign corporation” related to the Borrower as described in
Section 881(c)(3)(C) of the Code, and (v) no payments in connection with any
Financing Document are effectively connected with the undersigned’s conduct of a
U.S. trade or business.

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

[Signature Page Follows]

 

Exhibit E-3 – Page 1

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

[Non-U.S. Participant] By:  

 

Name:   Title:   [Address]

Dated:             , 20[    ]

 

Exhibit E-3 – Page 2

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

Exhibit E-4 to Credit Agreement

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

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

Reference is made to the Debtor-In-Possession Credit Agreement, dated as of June
[●], 2016 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time) (the “Credit Agreement”), among Warren Resources,
Inc., a Maryland limited partnership (the “Borrower”), the financial
institutions or other entities from time to time parties thereto (collectively,
the “Lenders”), and Wilmington Trust, National Association, as the
Administrative Agent. Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement.

Pursuant to the provisions of Section 2.13(f)(ii)(B)(4) and Section 11.6(b) of
the Credit Agreement, the undersigned hereby certifies that (i) it is the sole
record owner of the participation in respect of which it is providing this
certificate, (ii) its direct or indirect partners/members are the sole
beneficial owners (within the meaning of Treasury Regulations
Section 1.1441-1(c)(6)) of payments on such participation, (iii) neither the
undersigned nor any of its direct or indirect partners/members claiming the
benefit of the portfolio interest exemption is a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect
partners/members claiming the benefit of the portfolio interest exemption is a
ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, (v) none of its direct or indirect
partners/members claiming the benefit of the portfolio interest exemption is a
“controlled foreign corporation” related to the Borrower as described in
Section 881(c)(3)(C) of the Code, and (vi) no payments in connection with any
Financing Document are effectively connected with the conduct by the undersigned
or its direct or indirect partners/members claiming the benefit of the portfolio
interest exemption of a U.S. trade or business (the certifications stating
(iii)-(vi), a “Portfolio Interest Certificate”).

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by (i) an IRS Form W-8IMY from each of its direct or indirect
partners/members that are partnerships and (ii) an IRS Form W-8BEN (or
applicable successor IRS Form) and Portfolio Interest Certificate from each of
its direct or indirect partners/members claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender in writing and (2) the undersigned shall have at all times
furnished such Lender with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding each such
payment.

[Signature Page Follows]

 

Exhibit E-4 – Page 1

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[Non-U.S. Participant] By:  

 

Name:   Title:   [Address]

Dated:             , 20[    ]

 

Exhibit E-4 – Page 2

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Exhibit F to Credit Agreement

[FORM OF]

NOTE

FOR VALUE RECEIVED, the undersigned, a Maryland corporation (the “Borrower”),
hereby promises to pay to                      or registered assigns (the
“Lender”), in accordance with the provisions of the Credit Agreement (as
hereinafter defined), the principal amount of each Loan from time to time made
by the Lender to the Borrower under that certain Debtor-In-Possession Credit
Agreement, dated as of June [●], 2016 (as amended, restated, amended and
restated, extended, supplemented or otherwise modified in writing from time to
time, the “Credit Agreement”; the terms defined therein being used herein as
therein defined), among the Borrower, the Lenders from time to time party
thereto and Wilmington Trust, National Association, as the Administrative Agent.

The Borrower promises to pay interest on the unpaid principal amount of each
Loan from the date of such Loan until such principal amount is paid in full, at
such interest rates and at such times as provided in the Credit Agreement. All
payments of principal and interest shall be made to the Administrative Agent for
the ratable account of the Lender in Dollars in immediately available funds by
wire transfer to the Payment Account. If any amount is not paid in full when due
hereunder, such unpaid amount shall bear interest, to be paid upon demand, from
the due date thereof until the date of actual payment (and before as well as
after judgment) computed at the per annum rate set forth in Section 2.7 of the
Credit Agreement. This Note is subject to mandatory prepayments and to voluntary
prepayments and to all other terms and conditions as provided in the Credit
Agreement.

This Note is one of the promissory notes referred to in the Credit Agreement and
is entitled to the benefits thereof. This Note is also entitled to the benefits
of the other Financing Documents and is secured by the Collateral. Upon the
occurrence and continuation of one or more of the Events of Default specified in
the Credit Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided in
the Credit Agreement. Loans made by the Lender shall be evidenced by an account
or accounts maintained by the Lender and by the register and subaccounts
maintained by the Administrative Agent in accordance with the Credit Agreement.
The Lender may also attach schedules to this Note and endorse thereon the date,
amount and maturity of its Loans and payments with respect thereto.

The Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Note.

No failure to exercise and no delay in exercising, on the part of the
Administrative Agent, any right, remedy, power or privilege hereunder or under
the Financing Documents shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. A waiver by the Administrative Agent of
any right,

 

Exhibit F – Page 1

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remedy, power or privilege hereunder or under any Financing Document on any one
occasion shall not be construed as a bar to any right or remedy that the
Administrative Agent would otherwise have on any future occasion. The rights,
remedies, powers and privileges herein provided are cumulative, may be exercised
singly or concurrently and are not exclusive of any rights, remedies, powers and
privileges provided by law.

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

IN WITNESS WHEREOF, this Note is executed as of the date set forth above.

 

WARREN RESOURCES, INC. By:  

 

Name:   Title:  

 

Exhibit F – Page 2

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Exhibit C

Joinder

This Joinder is entered into as of              ,          by the undersigned
(the “Joining Party”) in order to become a party (as a Consenting Debt Claims
Holder) to the Restructuring Support Agreement, dated as of July [    ], 2016
(the “Restructuring Support Agreement”), by and among (i) Warren Resources,
Inc., a Maryland corporation (the “Parent Debtor”), (ii) certain subsidiaries of
the Parent Debtor and (iii) certain creditors of the Parent Debtor named
therein. Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Restructuring Support Agreement.

1. Agreement to be Bound. The Joining Party hereby agrees to be bound by all of
the terms of the Restructuring Support Agreement, which is attached to this
Joinder as Annex I (as the same may be hereafter amended, restated, or otherwise
modified from time to time) as if the Joining Party were an original signatory
to the Restructuring Support Agreement. From and after the date hereof, the
Joining Party shall hereafter be deemed to be a “Consenting Debt Claims Holder”
for all purposes under the Restructuring Support Agreement.

2. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the Joining Party has caused this Joinder to be executed as
of the date first written above.

 

[NAME OF JOINING PARTY] BY:  

 

NAME:   TITLE:  

AGGREGATE PRINCIPAL AMOUNT OF DEBT CLAIMS:

$            

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Exhibit D

Form of

Final Financing Order

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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

 

 

 

In re:

 

WARREN RESOURCES, INC., et al.,1

 

Debtors.

 

 

  

 

)

)

)

)

)

)

)

  

 

 

Chapter 11

 

Case No. 16-32760 (MI)

 

(Jointly Administered)

 

 

FINAL ORDER (A) AUTHORIZING USE OF CASH COLLATERAL,

(B) APPROVING POSTPETITION FINANCING, (C) GRANTING LIENS AND

PROVIDING SUPERPRIORITY ADMINISTRATIVE EXPENSE STATUS, (D)

GRANTING ADEQUATE PROTECTION, AND (E) MODIFYING AUTOMATIC STAY

[This Final Order Relates to the Motion at Docket No. 15

and the Interim Order at Docket No. 48]

 

 

Upon the emergency motion (the “Motion”),2 of the above-captioned debtors and
debtors in possession (each, a “Debtor,” and, collectively, the “Debtors”) in
the above-captioned cases (collectively, the “Chapter 11 Cases”), for entry of
this final order (this “Final Order”) authorizing the use of Cash Collateral
(defined below) on a final basis and entry into the DIP Facility, all as more
fully set forth in the Motion; and the interim hearing on the Motion having been
held before this Court on June 3, 2016 (the “Interim Hearing”); and the final
hearing on the Motion having been held before this Court on July 13, 2016 (the
“Final Hearing,” and together with the Interim Hearing, the “Hearings”); and
this Court having reviewed the Motion, the Declaration of James A. Watt,
President, Chief Executive Officer and Chief Restructuring

 

1  The Debtors in these cases, along with the last four digits of each Debtor’s
federal tax identification number (if any), are: (i) Warren Resources, Inc.
(4080); (ii) Warren E&P, Inc. (4052); (iii) Warren Resources of California, Inc.
(0072); (iv) Warren Marcellus, LLC (0150); (v) Warren Energy Services, LLC
(4748); and (vi) Warren Management Corp. The Debtors’ service address is: 11
Greenway Plaza, Suite 3050, Houston, Texas 77046.

2 

All capitalized terms used but not defined herein shall have the meanings
ascribed to them in the DIP Credit Agreement (as defined herein).

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Officer of Warren Resources, Inc., et al., in Support of Chapter 11 Petitions
and First Day Motions [Docket No. 16] and the evidence submitted or adduced, and
the arguments of counsel made, at the Hearings; and this Court having determined
that the legal and factual bases set forth in the Motion and at Hearings
establish just cause for the relief granted herein; and upon all of the
proceedings had before this Court and after due deliberation and consideration,
and good and sufficient cause appearing therefor, THIS COURT HEREBY FINDS AND
CONCLUDES AS FOLLOWS:3

A. Commencement of Cases. On June 2, 2016 (the “Petition Date”), each of the
Debtors filed with this Court a voluntary petition for relief under chapter 11
of title 11 of the United States Code (the “Bankruptcy Code”). The Debtors are
operating their businesses and managing their properties as debtors in
possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. The
Office of the United States Trustee for the Southern District of Texas (the
“U.S. Trustee”) has not appointed an official committee of unsecured creditors
in the Chapter 11 Cases (such committee, if any, the “Committee”). No party has
requested the appointment of an examiner or trustee in the Chapter 11 Cases.

B. Jurisdiction; Venue. This Court has jurisdiction over the Chapter 11 Cases
and the Motion pursuant to 28 U.S.C. § 1334. Consideration of the Motion
constitutes a core proceeding pursuant to 28 U.S.C. § 157(b)(2). The statutory
predicates for the relief sought herein are sections 105, 361, 362, 363, 364,
502, 506, 507, 510, 546, and 551 of the Bankruptcy Code, rules 2002, 4001, and
9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and
the Court’s Procedures for Complex Chapter 11 Bankruptcy Cases, dated as of
January 20, 2009 (the “Complex Case Procedures”). Venue of the Chapter 11 Cases
in this district is proper pursuant to 28 U.S.C. § 1408.

 

 

3  Pursuant to Bankruptcy Rule 7052, any findings of fact contained herein that
may be construed as matters of law shall be treated as conclusions of law as if
set forth below, and vice versa.

 

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C. DIP Facility. The Debtors seek authority to obtain secured, superpriority
postpetition loans, advances, and other financial accommodations (the “DIP
Facility”), on a final basis, pursuant to the terms and conditions of that
certain Debtor-In-Possession Credit Agreement, a copy of which is annexed hereto
as Exhibit A (as amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the “DIP Credit Agreement,” and,
together with all Financing Documents (as defined in the DIP Credit Agreement),
collectively, the “DIP Credit Documents”), by and among Warren Resources, Inc.
(the “Parent Debtor”), the other borrowers party thereto from time to time, the
guarantors party thereto from time to time, Wilmington Trust, National
Association as administrative agent and collateral agent (solely in such
capacities, collectively, the “DIP Agent”), and the lenders from time to time
party thereto (in such capacity, each, a “DIP Lender,” and, collectively, the
“DIP Lenders”). The DIP Agent, the DIP Lenders, and the other Secured Parties
(as defined under the DIP Credit Agreement) are collectively referred to herein
as the “DIP Secured Parties.”

D. Notice. On the Petition Date, the Debtors filed the Motion with this Court,
and pursuant to Bankruptcy Rules 2002, 4001, and 9014, and the Local Bankruptcy
Rules, the Debtors provided notice of the Motion to the following parties and/or
to their counsel as indicated below (collectively, the “Notice Parties”): (a)
the Office of the United States Trustee for the Southern District of Texas; (b)
counsel for the Prepetition First Lien Lenders and the DIP Lenders; (c) the
Prepetition First Lien Agent and the DIP Agent; (d) counsel for the Prepetition
Second Lien Lenders; (e) the Prepetition Second Lien Agent; (f) counsel for the
ad hoc group of Senior Noteholders; (g) the indenture trustee for the Senior
Notes; (h) the 30 largest unsecured

 

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non-insider creditors of the Debtors (on a consolidated basis); (j) the Internal
Revenue Service; (k) any persons who have filed a request for notice pursuant to
Bankruptcy Rule 2002; and (l) the Securities and Exchange Commission. On June 3,
2016, the Court entered the Interim Order Authorizing Use of Cash Collateral
[Docket No. 48] (the “Interim Order”), which set the Final Hearing (defined
below) and objection deadline for the Motion, and the Interim Order was served
on the Notice Parties. On June [    ], 2016, the Debtors filed the proposed form
of this Final Order [Docket No.     ].

E. Debtors’ Stipulations Regarding Prepetition First Lien Indebtedness. Subject
to paragraphs 21 and 22 of this Final Order, the Debtors admit, stipulate, and
agree as follows:

i. Prepetition First Lien Credit Agreement. The Parent Debtor, as borrower,
Wilmington Trust, N.A., as administrative agent (in its capacity as such, the
“Prepetition First Lien Agent”), and the lenders party thereto (in their
respective capacities as such, the “Prepetition First Lien Lenders”) are parties
to that certain credit agreement dated as of May 22, 2015 (as amended, restated,
supplemented, or otherwise modified from time to time, the “Prepetition First
Lien Credit Agreement,” and, together with all Financing Documents (as defined
in the Prepetition First Lien Credit Agreement), in each case as amended,
restated, supplemented or otherwise modified from time to time, collectively,
the “Prepetition First Lien Credit Documents”). The Debtors, the Prepetition
First Lien Agent, and the Prepetition First Lien Lenders are among the parties
to the Restructuring Support Agreement, dated as of June 2, 2016 (as amended,
modified, or supplemented from time to time in accordance with the terms
thereof, the “RSA”).

ii. Prepetition First Lien Indebtedness. The principal amount of the obligations
owed by the Obligor Debtors (as defined below), on a joint and several basis, to
the

 

4

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Prepetition First Lien Agent and Prepetition First Lien Lenders under the
Prepetition First Lien Credit Agreement, exclusive of accrued but unpaid
interest, costs, fees, and expenses, was not less than $248,014,432.14 as of the
Petition Date. All obligations of the Obligor Debtors arising under or in
connection with the Prepetition First Lien Credit Agreement (including the
“Obligations” as defined in the Prepetition First Lien Credit Agreement) or any
other Prepetition First Lien Credit Document shall collectively be referred to
herein as the “Prepetition First Lien Indebtedness.”

iii. First Lien Guarantee. Pursuant to a Guarantee and Collateral Agreement,
dated as of May 22, 2015, Debtors Warren Resources of California, Inc., Warren
Marcellus LLC, and Warren E&P, Inc. (collectively, the “Debtor Guarantor
Parties” and together with the Parent Debtor, the “Obligor Debtors”) each
unconditionally guaranteed, jointly and severally, to the Prepetition First Lien
Agent and the Prepetition First Lien Lenders the punctual and complete
performance, payment and satisfaction when due and at all times thereafter of
all of the Prepetition First Lien Indebtedness.

iv. Prepetition First Liens, Prepetition Collateral. Pursuant to the Security
Documents and other Financing Documents (as such terms are defined in the
Prepetition First Lien Credit Agreement), the Prepetition First Lien Agent was
granted, for its benefit and the benefit of the Prepetition First Lien Lenders
and the other Secured Parties (as such term is defined in the Prepetition First
Lien Credit Agreement), first-priority and properly perfected continuing liens,
mortgages, and security interests (subject to liens expressly permitted under
the Security Documents and other Financing Documents (as such terms are defined
in the Prepetition First Lien Credit Agreement)) on and in the Prepetition
Collateral (as defined in this sub-paragraph) to secure the repayment of the
Prepetition First Lien Indebtedness. Such liens,

 

5

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mortgages, and security interests of the Prepetition First Lien Agent on and in
the Prepetition Collateral are referred to herein as the “Prepetition First
Liens.” The “Prepetition Collateral” shall mean the “Collateral” (as defined in
the Prepetition First Lien Credit Agreement).

F. Debtors’ Stipulations Regarding Prepetition Second Lien Indebtedness. Without
prejudice to the rights of any other party, but subject to paragraphs 21 and 22
of this Final Order, the Debtors admit, stipulate, and agree as follows:

i. Prepetition Second Lien Credit Agreement. The Parent Debtor, as borrower,
Cortland Products Corp., as administrative agent (in its capacity as such, the
“Prepetition Second Lien Agent”), and the lenders party thereto (in their
respective capacities as such, the “Prepetition Second Lien Lenders”) are
parties to that certain credit agreement, dated as of October 22, 2015 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Prepetition Second Lien Credit Agreement,” and, together with all Financing
Documents (as defined in the Prepetition Second Lien Credit Agreement), in each
case as amended, restated, supplemented, or otherwise modified from time to
time, collectively, the “Prepetition Second Lien Credit Documents” and together
with the Prepetition First Lien Credit Documents, the “Prepetition Indebtedness
Documents”).

ii. Prepetition Second Lien Indebtedness. The principal amount of the
obligations owed by the Obligor Debtors, on a joint and several basis, to the
Prepetition Second Lien Agent and Prepetition Second Lien Lenders under the
Prepetition Second Lien Credit Agreement, exclusive of accrued but unpaid
interest, costs, fees, and expenses, was not less than $52,000,000 as of the
Petition Date. All obligations of the Debtors arising under or in connection
with the Prepetition Second Lien Credit Agreement (including the “Obligations”
as defined in the Prepetition Second Lien Credit Agreement) or any other
Prepetition Second Lien

 

6

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Credit Document shall collectively be referred to herein as the “Prepetition
Second Lien Indebtedness,” and, together with the Prepetition First Lien
Indebtedness, collectively, the “Prepetition Secured Indebtedness.”

iii. Second Lien Guarantee. Pursuant to a Guarantee and Collateral Agreement,
dated as of October 22, 2015, the Debtor Guarantor Parties unconditionally
guaranteed, jointly and severally, to the Prepetition Second Lien Agent and the
Prepetition Second Lien Lenders the punctual and complete performance, payment
and satisfaction when due and at all times thereafter of all of the Prepetition
Second Lien Indebtedness.

iv. Prepetition Second Liens. Pursuant to the Security Documents and other
Financing Documents (as such terms are defined in the Prepetition Second Lien
Credit Agreement), the Prepetition Second Lien Agent was granted, for its
benefit and the benefit of the Prepetition Second Lien Lenders, second priority
and continuing liens, mortgages and security interests (subject to liens
expressly permitted under the Security Documents and other Financing Documents
(as such terms are defined in the Prepetition Second Lien Credit Agreement)) on
and in the Prepetition Collateral, subject to the terms and conditions of the
Prepetition Intercreditor Agreement (as defined herein), to secure the repayment
of the Prepetition Second Lien Indebtedness. Such liens, mortgages and security
interests of the Prepetition Second Lien Agent on and in the Prepetition
Collateral are referred to herein as the “Prepetition Second Liens,” and,
together with the Prepetition First Liens, collectively, the “Prepetition
Liens.” For the avoidance of doubt, nothing contained in this Final Order is a
finding or determination concerning whether or to the extent that any claims of
the Prepetition Second Lien Lenders are secured claims and the parties reserve
all of their rights in respect of same, including, but not limited to, all
rights relating to the value of the Prepetition Collateral.

 

7

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G. Prepetition Intercreditor Agreement. Pursuant to that certain Intercreditor
Agreement, dated as of October 22, 2015 (as amended, restated, supplemented or
otherwise modified from time to time, the “Prepetition Intercreditor
Agreement”), and subject to the terms and conditions therein, the Prepetition
Second Liens are junior and subordinate to the Prepetition First Liens on and in
the Prepetition Collateral, in each case notwithstanding the date, manner or
order of grant, attachment or perfection of any such liens and notwithstanding
any provision of the Uniform Commercial Code or any other applicable law to the
contrary.

H. Cash Collateral. Solely for purposes of this Final Order, “Cash Collateral”
shall mean and include all “cash collateral” as defined by section 363(a) of the
Bankruptcy Code and shall include and consist of all right, title, and interest
in the Debtors’ cash, if any, that constitutes Prepetition Collateral in which
any of the Prepetition First Lien Agent Prepetition First Lien Lenders,
Prepetition Second Lien Agent or Prepetition Second Lien Lenders (together, the
“Prepetition Secured Parties”) or any DIP Credit Party has an interest.

I. Factual Findings Regarding Use of Cash Collateral and the DIP Facility.

i. Good cause has been shown for the entry of this Final Order.

ii. The Debtors are unable to obtain sufficient financing on more favorable
terms from sources other than the DIP Lenders under the DIP Credit Documents and
are unable to obtain adequate unsecured credit allowable under section 503(b)(1)
of the Bankruptcy Code as an administrative expense. The Debtors are also unable
to obtain secured credit allowable under sections 364(c)(1), 364(c)(2), and
364(c)(3) of the Bankruptcy Code without the Debtors granting to the DIP Agent
and the other DIP Secured Parties, subject to the Carve Out as provided for
herein, the DIP Superpriority Claims (as defined herein) and the DIP Liens, as
applicable, under the terms and conditions set forth in this Final Order and in
the DIP Credit

 

8

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Documents. The only source of secured credit available to the Debtors, other
than the use of Cash Collateral, is the DIP Facility. The Debtors require both
financing under the DIP Facility and the continued use of Cash Collateral under
the terms of this Final Order to satisfy their postpetition liquidity needs.

iii. The DIP Agent and the DIP Lenders are willing to provide the DIP Facility,
and the Prepetition First Lien Agent, the Prepetition First Lien Lenders, the
Prepetition Second Lien Agent, and the Prepetition Second Lien Lenders
(collectively, the “Prepetition Secured Parties”) are willing to consent to the
use of their Cash Collateral, subject to the terms and conditions set forth in
the DIP Credit Documents and the provisions of this Final Order, as applicable;
provided that the DIP Liens, the Superpriority Claims, the Adequate Protection
Obligations (as defined below), and other protections granted by this Final
Order and the DIP Credit Documents will not be affected by any subsequent
reversal or modification of this Final Order or any other order, as provided in
section 364(e) of the Bankruptcy Code, which is applicable to the DIP Facility
and the use of Cash Collateral approved by this Final Order. The DIP Agent and
the DIP Lenders have acted in good faith in agreeing to provide the DIP Facility
approved by this Final Order, as further evidenced by the DIP Credit Documents,
and the Prepetition Secured Parties have acted in good faith in consenting to
the Debtors’ use of their Cash Collateral pursuant to the terms of this Final
Order, and their reliance on the assurances referred to above is in good faith.

iv. The DIP Credit Documents, and the DIP Facility provided for thereunder, and
the use of Cash Collateral, each as authorized hereunder, have been negotiated
in good faith and at arm’s length among the Debtors, the DIP Secured Parties,
and the Prepetition Secured Parties, respectively, and the terms of the DIP
Facility and the use of Cash Collateral,

 

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respectively, are fair and reasonable under the circumstances, reflect the
Debtors’ exercise of prudent business judgment consistent with their fiduciary
duties, and are supported by reasonably equivalent value and fair consideration.
All of the obligations and the rights granted in this Final Order, including
without limitation, all loans made to, or guaranties issued by, the Debtors
pursuant to the DIP Credit Documents (all of the foregoing collectively,
the “DIP Obligations”), and the Adequate Protection Obligations, are being
extended or received, as applicable, by the DIP Secured Parties, the Prepetition
Secured Parties, and their affiliates (and the successors and assigns of each of
the foregoing) in good faith, as that term is used in section 364(e) of the
Bankruptcy Code, and in express reliance upon the protections offered by
section 364(e) of the Bankruptcy Code, and shall be entitled to the full
protection of section 364(e) of the Bankruptcy Code in the event that this Final
Order or any provision hereof is vacated, reversed, or modified, on appeal or
otherwise.

v. Consent to Entry of this Final Order. The Prepetition First Lien Agent and
the Prepetition First Lien Lenders, as well as the Prepetition Second Lien Agent
and the Prepetition Second Lien Lenders (which are, pursuant to the Prepetition
Intercreditor Agreement, prohibited from contesting the Debtors’ use of Cash
Collateral and other Prepetition Collateral and the Debtors’ entry into the DIP
Facility, in each case, solely to the extent provided in the Prepetition
Intercreditor Agreement) consent to the Debtors’ use of Cash Collateral and
other Prepetition Collateral and the Debtors’ entry into the DIP Facility on the
terms and conditions set forth in this Final Order (including in accordance with
the Approved Budget, subject to and including any Permitted Variances). Nothing
in this Final Order, including any of the provisions herein with respect to
adequate protection, shall constitute, or be deemed to constitute, a finding or
conclusion of law that the interests of the Prepetition Secured Parties are,
will be, or could be adequately protected with respect to any non-consensual
postpetition financing or use of Cash Collateral.

 

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J. Validity and Allowance of Prepetition Indebtedness. Without prejudice to the
rights of any other non-debtor party, but subject to paragraphs 21 and 22 of
this Final Order, the Debtors admit, stipulate and agree with the Prepetition
First Lien Agent, the Prepetition First Lien Lenders, the Prepetition Second
Lien Agent and the Prepetition Second Lien Lenders that, on and as of the
Petition Date:

i. the Prepetition First Lien Credit Documents and the Prepetition Second Lien
Credit Documents are valid and binding agreements and obligations of the Obligor
Debtors party thereto and will continue in full force and effect notwithstanding
any use of Cash Collateral permitted hereunder;

ii. the Prepetition First Lien Indebtedness is an allowed claim against each of
the Obligor Debtors under section 502(a) of the Bankruptcy Code, without
defense, counterclaim, or offset of any kind, in an aggregate principal amount
of not less than as set forth in this Final Order above, plus all accrued and
hereafter accruing and unpaid interest, costs, fees, and expenses related
thereto (including, for the avoidance of doubt, any Make-Whole Amount (as
defined in the Prepetition First Lien Credit Agreement));

iii. the Prepetition Second Lien Indebtedness is an allowed claim against each
of the Obligor Debtors under section 502(a) of the Bankruptcy Code, without
defense, counterclaim, or offset of any kind, in an aggregate principal amount
of not less than as set forth in this Final Order above (including, for the
avoidance of doubt, any Make-Whole Amount (as defined in the Prepetition Second
Lien Credit Agreement));

 

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iv. the Prepetition First Liens constitute valid, binding, enforceable, and
perfected first priority liens and security interests on and in the Prepetition
Collateral, senior and superior in all respects to the Prepetition Second Liens
(if any) and subject only to the Prior Liens (as defined herein), and are not
subject to avoidance, reduction, disallowance, or subordination pursuant to the
Bankruptcy Code or applicable non-bankruptcy law (except insofar as such liens
are subordinated to the DIP Liens and Carve-Out (as defined herein) in
accordance with the provisions of this Final Order);

v. the Prepetition Second Liens constitute valid, binding, enforceable, and
perfected second priority liens and security interests on and in the Prepetition
Collateral, and subject only to the Prior Liens (as defined herein), and are not
subject to avoidance, reduction, disallowance, or subordination pursuant to the
Bankruptcy Code or applicable non-bankruptcy law (except insofar as such liens
are subordinated to the DIP Liens, the Prepetition First Liens and Carve-Out (as
defined herein) in accordance with the provisions of the Intercreditor Agreement
and this Final Order);

vi. no portion of the Prepetition First Lien Indebtedness, or any amounts
previously paid to the Prepetition First Lien Agent or any Prepetition First
Lien Lender on account of or with respect the Prepetition First Lien
Indebtedness, are subject to avoidance, reduction, disgorgement, disallowance,
offset, impairment, or subordination pursuant to the Bankruptcy Code or
applicable non-bankruptcy law;

vii. other than pursuant to the terms and conditions of the Intercreditor
Agreement and this Final Order, no portion of the Prepetition Second Lien
Indebtedness, or any amounts previously paid to the Prepetition Second Lien
Agent or any Prepetition Second Lien Lender on account of or with respect the
Prepetition Second Lien Indebtedness, are subject to avoidance, reduction,
disgorgement, disallowance, offset, impairment, or subordination pursuant to the
Bankruptcy Code or applicable non-bankruptcy law; and

 

12

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viii. the Debtors have no valid claims (as such term is defined in section
101(5) of the Bankruptcy Code) or causes of action against any of the
Prepetition First Lien Agent or Prepetition First Lien Lenders, Prepetition
Second Lien Agent, Prepetition Second Lien Lenders, or their respective
affiliates, subsidiaries, parents, officers, shareholders, directors, employees,
investment advisers and sub-advisers, attorneys, and/or agents (in each, solely
in their respective capacities as such) with respect to the Prepetition Credit
Documents, whether arising at law or at equity, including any disgorgement,
recharacterization, subordination, avoidance, or otherwise under or pursuant to
the Bankruptcy Code or applicable non-bankruptcy law.

K. Reservation of Rights. Subject to paragraphs 21 and 22 of this Final Order,
none of the foregoing admissions, stipulations, or agreements by the Debtors
shall be binding on any party other than the Debtors and shall not affect the
rights of the Committee (if any) or any non-Debtor person or entity, with
respect to their respective rights to assert, pursue, or otherwise allege any
claims or causes of action against the Prepetition First Lien Agent, Prepetition
First Lien Lenders, the Prepetition Second Lien Agent or the Prepetition Second
Lien Lenders. Notwithstanding anything in this Final Order to the contrary, but
subject to paragraphs 21 and 22 of this Final Order, all non-Debtor persons and
entities reserve all of their respective rights as to the value of the
Prepetition Collateral and may at any time during the Chapter 11 Cases seek and
obtain a determination of this Court under section 506(a) of the Bankruptcy Code
that all or any portion of the Prepetition First Lien Indebtedness and/or
Prepetition Second Lien Indebtedness constitute unsecured deficiency claims.

 

13

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L. Immediate Entry of this Final Order. The Debtors have requested immediate
entry of this Final Order pursuant to, and have complied with, Bankruptcy Rule
4001(b)(2), Local Bankruptcy Rule 4001-2, and the Complex Case Procedures. For
the reasons stated above and as stated on the record at the Hearings, this Court
concludes that immediate entry of this Final Order is in the best interests of
the Debtors’ estates and creditors.

M. Release. Subject to paragraphs 21 and 22 of this Final Order, the Debtors
hereby forever, unconditionally and irrevocably release, discharge and acquit
the Prepetition Secured Parties, and each of their respective successors,
assigns, affiliates, subsidiaries, parents, officers, shareholders, directors,
employees, investment advisers and sub-advisers, attorneys, and agents, past,
present and future, and their respective heirs, predecessors, successors, and
assigns (collectively, the “Releasees”) of and from any and all claims,
controversies, disputes, liabilities, obligations, demands, damages, expenses
(including the fees, costs, and expense of counsel), debts, liens, actions, and
causes of action of any and every nature whatsoever, whether arising in law or
otherwise, and whether or not known or matured, arising out of or relating to,
as applicable, the Prepetition First Lien Credit Agreement, the Prepetition
Second Lien Credit Agreement or the Prepetition Senior Liens and/or the
transactions contemplated under this Final Order including, without limitation,
(i) any “lender liability” or equitable subordination claims or defenses, (ii)
any and all claims and causes of action arising under the Bankruptcy Code, and
(iii) any and all claims and causes of action with respect to the validity,
priority, perfection, or avoidability of the Prepetition First Lien Credit
Agreement, the Prepetition Second Lien Credit Agreement, the Prepetition Secured
Obligations, and the Prepetition Liens. Subject to paragraphs 21 and 22 of this
Final Order, the Debtors further waive and release any defense, right of
counterclaim, right of set-off, or deduction to the payment of the Prepetition
Secured

 

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Obligations that the Debtors now have or may claim to have against the
Releasees, arising out of, connected with, or relating to any and all acts,
omissions, or events occurring prior to the Bankruptcy Court entering this Final
Order

BASED UPON THE FOREGOING FINDINGS, STIPULATIONS, AND CONCLUSIONS, AND UPON THE
RECORD MADE BEFORE THIS COURT AT THE HEARINGS ON THE MOTION, AND GOOD AND
SUFFICIENT CAUSE APPEARING THEREFOR, IT IS HEREBY ORDERED, ADJUDGED AND DECREED
THAT:

1. Motion Granted. The Motion is granted on a final basis as set forth in this
Final Order. Subject to the terms hereof, this Final Order is valid immediately
and is fully effective upon its entry. All objections to the entry of this Final
Order that have not been resolved or withdrawn are hereby overruled. This Court
has and retains exclusive jurisdiction to enforce this Final Order according to
its terms and conditions.

2. Authorization of the DIP Financing and DIP Credit Documents. The Debtors are
expressly and immediately authorized and empowered to (a) execute and deliver
the DIP Credit Documents, (b) incur and to perform the DIP Obligations in
accordance with, and subject to, the terms of this Final Order, the DIP Credit
Documents, and the Budget, subject to any Permitted Variances, (c) deliver all
instruments and documents that may be necessary or required for performance by
the Debtors under the DIP Facility and the creation and perfection of the DIP
Liens described in and provided for by this Final Order and the DIP Credit
Documents. The Debtors are hereby authorized and directed to pay the principal,
interest, fees, expenses, and other amounts (including on account of any
indemnification obligations set forth in the DIP Credit Documents) described in
the DIP Credit Documents as such become due and without need to obtain further
Court approval, including commitment fees, closing fees, administrative fees,
any additional fees

 

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set forth in the DIP Credit Documents, and the fees and disbursements of the DIP
Secured Parties’ attorneys, advisers, accountants, and other consultants,
whether or not the transactions contemplated hereby are consummated, all to the
extent provided in the DIP Credit Documents, including all accrued but unpaid
fees, costs, and expenses of Kirkland & Ellis LLP (without further notice to or
approval by the Court, the U.S. Trustee, or any other party) in connection with
the Chapter 11 Cases incurred prior to the date hereof. All collections and
proceeds, whether from ordinary course collections, asset sales, debt issuances,
insurance recoveries, condemnations, or otherwise, will be deposited and applied
as required by this Final Order and the DIP Credit Documents. Upon execution and
delivery of the DIP Credit Documents, the obligations under the DIP Facility
shall represent valid and binding, and joint and several, obligations of the
Debtors, enforceable against each of the Debtors and their estates in accordance
with their terms.

3. Authorization to Borrow. Until the Termination Date, and subject to the
terms, conditions and limitations on availability set forth in the DIP Credit
Documents, the DIP Facility and this Final Order, and to prevent immediate and
irreparable harm to the Debtors’ estates, the Debtors are hereby authorized, to
request extensions of credit under the DIP Facility up to an aggregate principal
amount of $20,000,000 at any one time outstanding. No DIP Secured Party shall
have any obligation to make any loan or advance under the DIP Credit Documents
unless all applicable conditions precedent under the DIP Credit Documents and
this Final Order have been satisfied in full or waived by such DIP Secured
Party.

4. DIP Obligations. The DIP Credit Documents and this Final Order shall
constitute and evidence the validity and binding effect of all of the
obligations and the rights granted in this Final Order, including all DIP
Obligations, which DIP Obligations shall be enforceable against

 

16

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the Debtors, their estates, and any successors thereto, including any trustee or
other estate representative appointed in the Chapter 11 Cases, or any case under
chapter 7 of the Bankruptcy Code upon the conversion of any of the Chapter 11
Cases (collectively, “Successor Cases”). Upon entry of this Final Order, the DIP
Obligations will include all loans and any other indebtedness or obligations,
contingent or absolute, which may now or from time to time be owing by any of
the Debtors to any of the DIP Secured Parties under the DIP Credit Documents or
this Final Order, including, without limitation, all principal, accrued
interest, costs, fees, expenses, and other amounts owed pursuant to the DIP
Credit Documents, and shall be joint and several obligations of the Debtors in
all respects.

5. DIP Lien Priority. As security for the DIP Obligations, effective and
perfected as of entry of this Final Order and without the necessity of the
execution by the Debtors (or recordation or other filing) of mortgages, security
agreements, control agreements, pledge agreements, financing statements, or
other similar documents, or the possession or control by any DIP Secured Party
of, or over, any DIP Collateral, the following security interests and liens,
hereby are granted by the Debtors to each of the DIP Secured Parties (all
property of the Debtors identified in clauses (a), (b), and (c) below being
collectively referred to as the “DIP Collateral”), subject only to the Carve Out
(all such liens on and security interests in the DIP Collateral granted to the
DIP Secured Parties, pursuant to this Final Order, the DIP Credit Documents,
the “DIP Liens”):

a. First Lien on Any Unencumbered Property. Pursuant to section 364(c)(2) of the
Bankruptcy Code and subject to the Carve Out, a valid, binding, continuing,
enforceable, fully-perfected, first priority senior security interest in and
lien upon all prepetition and postpetition property of the Debtors, whether
existing on the Petition Date or thereafter acquired,

 

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that, on or as of the Petition Date or the date acquired (if acquired after the
Petition Date) is not subject to valid, perfected, and non-avoidable liens, if
any (collectively, “Unencumbered Property”), including (i) any unencumbered cash
of the Debtors (wherever maintained) and any investment of such cash, inventory,
accounts receivable, other rights to payment whether arising before or after the
Petition Date, contracts, properties, plants, equipment, general intangibles,
documents, instruments, interests in leaseholds, real properties, patents,
copyrights, trademarks, trade names, other intellectual property, equity
interests, and any claims and causes of the Debtors; (ii) any claims and causes
of action against any directors or officers of the Debtors as well as including
any proceeds of, or property recovered in connection with, any successful claims
and causes of action against any directors or officers of the Debtors; and
(iii) excluding any claims and causes of action of the Debtors under
sections 544, 545, 547, 548, 549, and 550 of the Bankruptcy Code, or any other
avoidance actions under the Bankruptcy Code or other applicable law
(collectively, the “Avoidance Actions”), but including, solely to the extent
that all other DIP Collateral is insufficient to satisfy the DIP Claims secured
by the DIP Liens as set forth in this Final Order, any proceeds of, or property
recovered in connection with, any successful Avoidance Action (whether by
judgment, settlement or otherwise, and unencumbered or not, the “Avoidance
Proceeds”).

b. Liens Senior to Prepetition Secured Parties’ Liens. Pursuant to
section 364(d)(1) of the Bankruptcy Code and subject to the Carve Out, a valid,
binding, continuing, enforceable, fully-perfected, first priority (subject to
any Permitted Encumbrances, as defined in the DIP Credit Agreement) senior
priming security interest in and lien upon all prepetition and postpetition
property of the Debtors (including any Cash Collateral), whether now existing or
hereafter acquired, of the same nature, scope, and type as the Prepetition
Collateral, excluding any Avoidance Actions but including, solely to the extent
that all other DIP Collateral is insufficient to satisfy the DIP Claims secured
by the DIP Liens as set forth in the Final Order, Avoidance Proceeds. Such
security interests and liens shall be senior in all respects to the interests in
such property of the Prepetition

 

18

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Secured Parties arising from current and future liens of the Prepetition Secured
Parties (including the Adequate Protection First Liens and Adequate Protection
Second Liens granted hereunder) and shall be subject to the Carve Out in all
respects.

c. Liens Junior to Certain Other Liens. Pursuant to section 364(c)(3) of the
Bankruptcy Code and subject to the Carve Out, a valid, binding, continuing,
enforceable, fully-perfected security interest in and lien upon all prepetition
and postpetition property of the Debtors (other than the property described in
clauses (a) or (b) of this paragraph 5, as to which the liens and security
interests in favor of the DIP Agent for the benefit of the DIP Secured Parties,
will be as described in such clauses) excluding any Avoidance Actions but
including, solely to the extent that all other DIP Collateral is insufficient to
satisfy the DIP Claims secured by the DIP Liens as set forth in this Final
Order, Avoidance Proceeds, whether now existing or hereafter acquired, that is
(i) subject to valid, perfected, and unavoidable liens in existence immediately
prior to the Petition Date or (ii) subject to valid and unavoidable liens in
existence immediately prior to the Petition Date that are perfected subsequent
to the Petition Date as permitted by section 546(b) of the Bankruptcy Code,
which security interests and liens in favor of the DIP Secured Parties, are
junior to such valid, perfected, and unavoidable liens.

d. Liens Senior to Certain Other Liens. The DIP Liens shall not be subject or
subordinate to (a) any lien or security interest that is avoided and preserved
for the benefit of the Debtors and their estates under section 551 of the
Bankruptcy Code or (b) any liens arising after the Petition Date including,
without limitation, any liens or security interests granted in favor of any
federal, state, municipal, or other governmental unit, commission, board, or
court for any liability of the Debtors. For the avoidance of doubt, the DIP
Liens shall be subject to the Carve Out in all respects.

 

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e. Superpriority Claims. Pursuant to section 364(c)(1) of the Bankruptcy Code,
all of the DIP Obligations shall constitute allowed senior administrative
expense claims against each of the Debtors with priority over any and all other
administrative expenses, adequate protection claims, diminution claims
(including all Adequate Protection First Liens and Adequate Protection Second
Liens) and all other claims against the Debtors, now existing or hereafter
arising, of any kind or nature whatsoever, including all administrative expenses
of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code, and
over any and all other administrative expenses or other claims arising under
sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546, 726,
1113, or 1114 of the Bankruptcy Code (the “DIP Superpriority Claims”), whether
or not such expenses or claims may become secured by a judgment lien or other
non-consensual lien, levy or attachment, which allowed claims shall for purposes
of section 1129(a)(9)(A) of the Bankruptcy Code be considered administrative
expenses allowed under section 503(b) of the Bankruptcy Code, and which shall be
payable from and have recourse to all pre- and postpetition property of the
Debtors and their estates and all proceeds thereof, excluding Avoidance Actions
(as defined below) but including, solely to the extent that all other DIP
Collateral is insufficient to satisfy the DIP Claims secured by the DIP Liens as
set forth in this Final Order, without limitation, all Avoidance Proceeds (as
defined below), subject only to the Carve Out.

6. Amendments. Without further order of the Court, the Debtors and the DIP
Secured Parties are hereby authorized to implement, in accordance with the terms
of the respective DIP Credit Documents, any modifications to the Budget, any
extension of the maturity subject to the conditions set forth in the DIP Credit
Documents, non-material modifications of the DIP Credit Documents (that do not
shorten the maturity of the extensions of credit thereunder, increase the
commitments thereunder, or otherwise do not materially change the terms of the
DIP Credit Documents in a manner adverse to the interests of the Debtors) or

 

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waivers with respect to the DIP Credit Documents; provided that any material
modification or amendment to the respective DIP Credit Documents not expressly
authorized hereby or pursuant to the DIP Credit Documents shall be subject to
Court approval after notice and a hearing. To the extent any modification,
amendment, supplement or waiver of the DIP Credit Documents adversely affects
the rights, interests, protections or recoveries of the Consenting Senior
Noteholders, in their capacities as general unsecured creditors of the Debtors
and Debtors’ estates, under the RSA, Restructuring Term Sheet (as defined in the
RSA) and Agreed Restructuring Plan (as defined in the RSA), any such
modification, amendment, supplement or waiver shall require written consent of
the Consenting Senior Noteholders in accordance with the terms of the RSA.

7. Authorization to Use Cash Collateral. The Debtors are authorized, subject to
the terms and conditions of the DIP Credit Documents and this Final Order, to
use Cash Collateral, including any Cash Collateral on which the DIP Secured
Parties and the Prepetition Secured Parties hold a lien, in each case, solely in
accordance with and pursuant to the terms and provisions of this Final Order.
The Debtors’ right to use any Cash Collateral shall be in accordance with the
DIP Credit Agreement and the Budget4 (subject to Permitted Variances), and such
right shall terminate automatically upon the earliest of the Scheduled Maturity
Date (as defined in the DIP Credit Agreement) and a Termination Date (as defined
herein); provided that

 

4 

Attached hereto as Exhibit B is a summary of the budget setting forth the
Debtors’ anticipated cash receipts and expenditures during each week through
November 23, 2016 (the “Budget”). The “Budget” shall mean the thirteen-week
budget, in form and substance acceptable to the DIP Agent, acting as the
direction of the Required Lenders (as defined under the DIP Credit Agreement)
(as the same may be modified from time to time consistent with the terms of the
DIP Credit Documents, and subject to such variances as may be permitted
thereby), which shall reflect the Debtors’ good-faith projection of all weekly
cash receipts and disbursements in connection with the operation of the Debtors’
business during such thirteen-week period, delivered on the fourth business day
of each fourth week, commencing with June 9, 2016, delivered by the Debtors to
the DIP Agent, Prepetition First Lien Agent, counsel to the Prepetition First
Lien Lenders, the Prepetition Second Lien Agent, counsel to the Prepetition
Second Lien Lenders, and counsel to the Consenting Senior Noteholders (as
defined in the RSA).

 

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the Debtors reserve all rights, if any, to make a subsequent request for
authority to use Cash Collateral. If the Prepetition First Lien Agent (acting at
the direction of the Prepetition First Lien Lenders (as defined by the
Prepetition First Lien Credit Agreement)) permits the use of Cash Collateral in
excess of any terms and conditions set forth in this Final Order (including the
Budget, subject to and including any Permitted Variance), such uses shall be
entitled to the rights, priorities, benefits, and protections of this Final
Order. Each Debtor shall be deemed to have expended any unencumbered cash of the
Debtors that was available to it as of or after the Petition Date before
expending any Cash Collateral. The Debtors are authorized to use Cash Collateral
in accordance with the Budget in an amount that would not cause
either: (a) Total Operating Disbursements (as defined in the Budget) to exceed
115 percent of the amount expressly budgeted therefor in the Budget for any
Testing Period;5 or (b) the Total Net Cash Flow from Operations, exclusive of
any Royalties (as each such term is defined in the Budget), to exceed a 15
percent unfavorable variance of the amount expressly budgeted therefor in the
Budget for any Testing Period (a “Permitted Variance”). The “Permitted Variance”
shall include any amounts set forth in clauses (a) and (b) of this paragraph
that are not expended in a given Testing Period, and such amounts shall carry
forward into, and be available for use in, future Testing Periods.

8. Accounts. All Cash Collateral, proceeds from the sale, transfer, or other
disposition of any Prepetition Collateral, Postpetition Collateral and/or DIP
Collateral and all other proceeds of such Prepetition Collateral, Postpetition
Collateral, and/or DIP Collateral, of

 

5 

“Testing Period” means the two week period ending on the Testing Date; provided
that to allow for timing variances associated with the receipt of hydrocarbon
revenues, upon the Debtors providing the DIP Agent and the Prepetition First
Lien Agent with notice at least one business day prior to the delivery of a
Variance Report, the Debtors may, in their sole discretion, extend the Testing
Period applicable to such Variance Report so as to take into consideration the
Total Operating Disbursements made and Receipts (as such terms are defined in
the Budget) received during the two business days immediately following the
Testing Date. “Testing Date” shall mean the last business day of every week
occurring after the Petition Date, which initial Testing Date shall be on June
17, 2016.

 

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any kind which is now or shall come into any Debtor’s possession, custody or
control, or to which any Debtor is now or shall become entitled, shall be
promptly deposited in the same bank accounts (other than any “lockbox” or other
restricted accounts) into which the collections and proceeds of the Prepetition
Collateral were deposited or expressly permitted to be deposited under the
Prepetition First Lien Credit Agreement and for which the Prepetition First Lien
Agent has Prepetition First Liens perfected pursuant to deposit account control
agreements (the “Deposit Accounts”).

9. Accounting of Cash Collateral. The Debtors shall, pursuant to section
363(c)(4) of the Bankruptcy Code, account for all Cash Collateral which is now,
and which may hereafter be, in their possession, custody, or control. The
Prepetition Liens on the Prepetition Collateral shall continue to attach to the
Cash Collateral to the same extent and priority as they did before the Petition
Date irrespective of the commingling of the Cash Collateral with other cash of
the Debtors. Any failure by the Debtors on or after the Petition Date to comply
with the segregation requirements of section 363(c)(4) of the Bankruptcy Code in
respect of any Cash Collateral shall not be used as a basis to challenge the
Prepetition First Lien Indebtedness or the Prepetition Second Lien Indebtedness,
or the extent, validity, enforceability, or perfected status of the Prepetition
Liens in the Cash Collateral.

10. Variance Reports; Permitted Variances. On the fourth business day of each
week, the Debtors shall deliver to the DIP Agent, the Prepetition First Lien
Agent, counsel to the Required Lenders (as defined under both the DIP Credit
Agreement and the Prepetition First Lien Credit Agreement), counsel to the
Prepetition Second Lien Lenders and counsel to the Consenting Senior Noteholders
(as defined in the RSA) a variance report (a “Variance Report”), in form and
substance consistent with the format of the form of Budget and acceptable to the
DIP

 

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Agent and the Prepetition First Lien Agent, detailing the following: (i) the
aggregate receipts of the Debtors during the Testing Period and the aggregate
Total Operating Disbursements and other disbursements, in each case made by the
Debtors during such Testing Period; and (ii) any variance (whether plus or minus
and expressed as a percentage) (a) between the aggregate receipts of the Debtors
during such Testing Period against the aggregate receipts set forth in the most
recently delivered Budget for such Testing Period (excluding in each case, any
joint interest receipts) and (a) between the aggregate Total Operating
Disbursements made during such Testing Period by the Debtors against the
aggregate Total Operating Disbursements set forth in the most recently delivered
Budget for such Testing Period.

11. Fees and Expenses of Agents and Lenders. The Debtors shall no later than
fourteen (14) days after the Debtors’ receipt of a summary statement setting
forth the applicable timekeepers, as well as the hours worked by and expenses
incurred by such timekeepers, in connection with the Chapter 11 Cases (with
copies provided via electronic mail to the U.S. Trustee, counsel to the
Prepetition First Lien Lenders, Stroock & Stroock & Lavan LLP, as counsel to the
Consenting Senior Noteholders (as defined in the RSA), Bracewell LLP, as counsel
to the Prepetition Second Lien Lenders and counsel for the Committee, if any,
(collectively, the “Fee Notice Parties”)), indefeasibly pay or reimburse, as and
when due, (i) the DIP Agent, the Required Lenders (as defined by the DIP Credit
Agreement), the Prepetition First Lien Agent, and the Required Lenders (as
defined by the Prepetition First Lien Credit Agreement) for their respective
reasonable fees and out-of-pocket costs, expenses and charges payable or
otherwise reimbursable under the Prepetition First Lien Credit Documents; (ii)
the Prepetition Second Lien Agent and the Prepetition Second Lien Lenders for
their respective reasonable fees and out of pocket costs, expenses and charges
payable or otherwise reimbursable

 

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under the Prepetition Second Lien Credit Documents (collectively, the “Lender
Professional Fees”), including the reasonable prepetition and postpetition fees,
costs, and expenses of Lindquist & Vennum LLP, as counsel to the Prepetition
First Lien Agent and the DIP Agent, Kirkland & Ellis LLP and Zack Clement PLLC,
each as counsel for the Required Lenders (as defined by the DIP Credit
Agreement), the Required Lenders (as defined by the Prepetition First Lien
Credit Agreement), any other advisors or professionals retained by the DIP
Agent, the Required Lenders (as defined by the DIP Credit Agreement), the
Prepetition First Lien Agent, or the Required Lenders (as defined by the
Prepetition First Lien Credit Agreement), and Bracewell LLP, as counsel to the
Prepetition Second Lien Lenders; and (iii) the reasonable and documented fees
and expenses of Stroock & Stroock & Lavan LLP and Haynes & Boone, LLP as counsel
to the Consenting Senior Noteholders in accordance with the terms of the Amended
and Restated Restructuring Support Agreement dated as of July 11, 2016, as
applicable, without the need for prior notice to or approval by the Court. The
Debtors and the Fee Notice Parties may object to the reasonableness of the fees,
costs and expenses included in any such professional fee invoice; provided that,
any such objection shall be barred and deemed waived unless filed with this
Court and served on the applicable professional by 12:00 p.m., prevailing
Central Time, on the date that is no later than fourteen (14) days after the
objecting party’s receipt of the applicable professional fee invoice. If such
objection is timely received, the Debtors shall promptly pay the portion of such
invoice not subject to such objection, and this Court shall determine any such
objection unless otherwise resolved by the applicable parties. Any hearing on an
objection to payment of any fees, costs, and expenses of the DIP Agent, the
Required Lenders (as defined by the DIP Credit Agreement), the Prepetition First
Lien Agent, the Required Lenders (as defined by the Prepetition First Lien
Credit Agreement), the Prepetition Second Lien Agent and the

 

25

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Prepetition Second Lien Lenders set forth in a professional fee invoice shall be
limited to the reasonableness of the particular items or categories of the fees,
costs, and expenses which are the subject of such objection and whether the DIP
Agent, the Required Lenders (as defined by the DIP Credit Agreement), the
Prepetition First Lien Agent, the Required Lenders (as defined by the
Prepetition First Lien Credit Agreement), the Prepetition Second Lien Agent or
the Prepetition Second Lien Lenders are entitled to such fees, costs and
expenses under the Prepetition First Lien Credit Documents, the Prepetition
Second Lien Credit Documents or this Final Order. For the avoidance of doubt,
none of the fees, costs, and expenses of the DIP Agent, the DIP Lenders (as
defined by the DIP Credit Agreement), Prepetition First Lien Agent, the
Prepetition First Lien Lenders (as defined by the Prepetition First Lien Credit
Agreement), the Prepetition Second Lien Agent or the Prepetition Second Lien
Lenders shall be subject to Court approval or U.S. Trustee guidelines, and no
recipient of any such payment shall be required to file with respect thereto any
interim or final fee application with this Court.

12. Swap Contracts. The Debtors will not enter into any Swap Contracts other
than Swap Contracts in respect of commodities (a) with Eligible Swap
Counterparties, (b) with durations not to exceed 120 months at any time, and (c)
the notional volumes for which (when aggregated with other commodity Swap
Contracts then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Contracts) do not exceed, as of the date such Swap
Contract is executed, 85 percent of the Projected Oil and Gas Production from
Proved Developed Producing Reserves attributable to the Oil and Gas Properties
for each month during the period during which such Swap Contract is in effect
for each of crude oil and natural gas, calculated separately; provided that (x)
such limitations in clauses (a) and (b) do not apply to forward agreements
requiring the physical delivery of Hydrocarbons and (y) such limitation in

 

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clause (c) shall not apply to Swap Contracts in respect of commodities that are
floor prices or puts for which no further payment obligation is owed by a Debtor
and not in excess of 100 percent of Proved Developed Producing Reserves
attributable to the Oil and Gas Properties for each month during the period
during which such Swap Contract is in effect for each of crude oil and natural
gas, calculated separately. Not later than thirty (30) days after consummation
of an Asset Disposition in respect of Oil and Gas Properties which, together
with any other Asset Dispositions of Oil and Gas Properties not theretofore
taken into account in connection with this sentence, reduces by more than 5
percent the Debtors’ aggregate Projected Oil and Gas Production from Proved
Developed Producing Reserves, the Debtors will cause the notional volumes of
Swap Contracts maintained by the Debtors in respect of commodities not to exceed
in the aggregate the amounts that would be permitted under clause (c) of the
preceding sentence if such Swap Contracts were entered into immediately after
giving effect to such Asset Disposition.

13. Postpetition Collateral Defined. As used in this Final Order, the term
“Postpetition Collateral” means the Prepetition Collateral and all other
prepetition and postpetition real and personal, tangible and intangible property
and assets of each of the Debtors of any kind or nature whatsoever, wherever
located, whether now existing or hereafter acquired or arising, including all
cash (including all Cash Collateral, wherever held), cash equivalents, bank
accounts, accounts (other than, for the avoidance of doubt, any account
established in connection with the Carve-Out) including all right, title, and
interest of the Debtors, if any, other receivables, chattel paper, contract
rights, Oil and Gas Properties, Hedging Agreements, Hydrocarbons, Hydrocarbon
Interests, Mortgage Properties (each as defined in the Prepetition First Lien
Credit Agreement), oil and gas leasehold interests, inventory, instruments,
documents,

 

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securities (whether or not marketable), equipment, goods, fixtures, real
property interests, intellectual property, general intangibles, investment
property, supporting obligations, letter of credit rights, commercial tort
claims, 100 percent of the capital stock of each Debtor’s direct and indirect
domestic subsidiaries, all intercompany notes held by the Debtors, trademarks,
trade names, licenses, rights to payment including tax refund claims, and causes
of action (including any and all avoidance actions under section 549 of the
Bankruptcy Code in respect of the Prepetition Collateral and related proceeds
and recoveries from such actions), and in each case the proceeds, products,
offspring, rents, and profits of all of the foregoing, including insurance
proceeds. The Postpetition Collateral shall not include any Avoidance Actions;
provided that, upon entry of this Final Order, the Postpetition Collateral shall
include the Avoidance Action Proceeds.

14. Prior Lien Defined. As used in this Final Order, the term “Prior Liens”
means only valid, enforceable, and non-avoidable liens and security interests in
the Prepetition Collateral or any other property or assets of the Debtors that
were perfected prior to the Petition Date (or perfected on or after the Petition
Date to the extent permitted by section 546(b) of the Bankruptcy Code), to the
extent not subject to avoidance, disallowance, or subordination pursuant to the
Bankruptcy Code or applicable non-bankruptcy law and which (a) with respect to
the Prepetition First Liens are senior in priority to the Prepetition First
Liens and (b) with respect to the Prepetition Second Liens are senior in
priority to the Prepetition Second Liens, in each case under applicable law and
after giving effect to any lien release, subordination, or intercreditor
agreements. For the avoidance of doubt, the Prior Liens shall not include, or be
deemed to include, any or all of the Prepetition First Liens, Adequate
Protection First Liens (as defined herein), Prepetition Second Liens, and/or
Adequate Protection Second Liens (as defined herein). All parties retain and
reserve all their rights to dispute the validity, priority, enforceability, and
perfection of any asserted Prior Lien.

 

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15. Adequate Protection First Lien Obligations. As adequate protection for the
Prepetition First Lien Agent’s interest in the Prepetition Collateral, the
Prepetition First Lien Agent and Prepetition First Lien Lenders are hereby
granted the following (but only to the extent of the diminution in the value of
the Prepetition Collateral from and after the Petition Date as provided in this
Final Order):

a. Replacement Liens. Pursuant to sections 361(2), 362, 363(c)(2), and 363(e) of
the Bankruptcy Code, the Prepetition First Lien Agent, for its benefit and the
benefit of the Prepetition First Lien Lenders, is hereby granted by each Debtor
continuing valid, binding, enforceable, and perfected first priority liens and
security interests in and on all of the Postpetition Collateral, including the
Avoidance Action Proceeds (the “Adequate Protection First Liens”). The Adequate
Protection First Liens shall be subordinate only to the DIP Liens, Prepetition
First Liens, the Prior Liens (if any), and the Carve-Out and shall be senior and
superior to the Prepetition Second Liens and Adequate Protection Second Liens
(if any). The Adequate Protection First Liens shall not be subject or junior to
any lien or security interest that is avoided and preserved for the benefit of
the Debtors’ estates under section 551 of the Bankruptcy Code.

b. Adequate Protection First Lien Claim. Pursuant to sections 503(b) and 507(b)
of the Bankruptcy Code, the Prepetition First Lien Agent and the Prepetition
First Lien Lenders shall have an allowed administrative expense claim and such
claim will be a superpriority administrative expense claim in accordance with
section 507(b) of the Bankruptcy Code (the “Adequate Protection First Lien
Claim”) against each Debtor and its respective estate

 

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on a joint and several basis. The Adequate Protection First Lien Claim shall be
subordinate only to the Carve-Out and shall be senior and superior in right of
time and payment to the Prepetition Second Lien Indebtedness and the Adequate
Protection Second Lien Claim (as defined herein). The Adequate Protection First
Lien Claim shall be payable from, and have recourse to, the Postpetition
Collateral, including the Avoidance Action Proceeds.

c. Adequate Protection Payments. The Prepetition First Lien Agent shall receive
additional adequate protection in the form of the following payments: (i) the
current payment of the Lender Professional Fees attributable to it; and (ii)
until repayment in full of the Prepetition First Lien Facility Obligations,
payment of all accrued and unpaid interest at the contractual rate set forth in
Section 8.4 of the Prepetition First Lien Credit Agreement at the time set forth
in the Prepetition First Lien Credit Agreement. If the Court later determines
that the First Lien Claim is undersecured under section 506 of the Bankruptcy
Code, the Court will later determine the recharacterization (if any) of such
payments.

d. Adequate Protection First Lien Obligations. The Adequate Protection First
Liens and the Adequate Protection First Lien Claim shall secure the payment of
the Prepetition First Lien Indebtedness in an amount equal to any diminution in
the value of the Prepetition Collateral from and after the Petition Date
(collectively, the “Adequate Protection First Lien Obligations”) resulting from
the following: (a) the sale, use, or lease by the Debtors of the Prepetition
Collateral, including the Cash Collateral; (b) the imposition of the automatic
stay pursuant to section 362(a) of the Bankruptcy Code; (c) the physical
deterioration, consumption, use, sale, lease, disposition, or shrinkage of the
Prepetition Collateral; or (d) the imposition and use of the Carve-Out (to the
extent that the Carve-Out is funded following the issuance of a Carve-Out
Trigger Notice). Other than the Carve-Out and the Prior Liens (if any), no other
claims,

 

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administrative expenses, liens or security interests, whether for postpetition
financing, adequate protection or otherwise (and whether or not such claims or
administrative expenses may become secured by a judgment lien or other
nonconsensual lien, levy, or attachment), shall be senior or equal to or pari
passu with the Prepetition First Liens, Adequate Protection First Liens or
Adequate Protection First Lien Claims in the Chapter 11 Cases or any Successor
Cases, without the express written consent (including via email) of the
Prepetition First Lien Agent (acting at the direction of the Required Lenders
(as defined by the Prepetition First Lien Credit Agreement)) or further order of
this Court.

16. Adequate Protection Second Lien Obligations. Solely to the extent that the
Prepetition Second Lien Indebtedness is secured, until the indefeasible
repayment in full in cash of the Prepetition Second Lien Indebtedness, as
adequate protection for the Prepetition Second Lien Agent’s interest in the
Prepetition Collateral, the Prepetition Second Lien Agent and Prepetition Second
Lien Lenders are hereby granted the following (but only to the extent of the
diminution in the value of the Prepetition Second Lien Agent’s interests in the
Prepetition Collateral from and after the Petition Date as provided herein):

a. Replacement Liens. Pursuant to sections 361(2), 362, 363(c)(2), and 363(e) of
the Bankruptcy Code, the Prepetition Second Lien Agent, for its benefit and the
benefit of the Prepetition Second Lien Lenders, is hereby granted by each Debtor
continuing valid, binding, enforceable, and perfected second priority liens and
security interests in and on all of the Postpetition Collateral, including the
Avoidance Action Proceeds (the “Adequate Protection Second Liens”). The Adequate
Protection Second Liens shall be junior and subordinate in all respects to the
DIP Liens, the Carve-Out, the Prior Liens (if any), the Prepetition First Liens,
and the Adequate Protection First Liens.

 

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b. Adequate Protection Second Lien Claim. Pursuant to sections 503(b) and 507(b)
of the Bankruptcy Code, the Prepetition Second Lien Agent and the Prepetition
Second Lien Lenders shall have an allowed administrative expense claim and such
claim will be a superpriority administrative expense claim in accordance with
section 507(b) of the Bankruptcy Code (the “Adequate Protection Second Lien
Claim” and together with Adequate Protection First Lien Claim, the “Adequate
Protection Superpriority Claims”) against each Debtor and its respective estate
on a joint and several basis. The Adequate Protection Second Lien Claim shall be
junior and subordinate in right of time and payment to the indefeasible
repayment in full in cash of the Carve-Out, the DIP Claims, the Prepetition
First Lien Indebtedness, and the Adequate Protection First Lien Claim. The
Adequate Protection Second Lien Claim shall be payable from, and have recourse
to, the Postpetition Collateral, including Avoidance Action Proceeds.

c. Adequate Protection Payments. The Prepetition Second Lien Agent and the
Prepetition Second Lien Lenders shall receive additional adequate protection in
the form of the current payment of the Lender Professional Fees attributable to
them.

d. Adequate Protection Second Lien Obligations. The Adequate Protection Second
Liens and Adequate Protection Second Lien Claim shall secure the payment of the
Prepetition Second Lien Indebtedness in an amount equal to any diminution in the
value of the Prepetition Second Lien Agent’s interests in the Prepetition
Collateral from and after the Petition Date (solely to the extent that any
interest of the Prepetition Second Lien Lenders in the Prepetition Collateral is
secured) (collectively, the “Adequate Protection Second Lien Obligations,” and
together with the Adequate Protection First Lien Obligations, collectively the
“Adequate Protection Obligations”) resulting from the following: (i) the sale,
use, or lease by the Debtors of the Prepetition Collateral, including the Cash
Collateral, (ii) the imposition of the automatic stay pursuant to section 362(a)
of the Bankruptcy Code, (iii) the physical deterioration, consumption, use,
sale, lease, disposition, or shrinkage of the Prepetition Collateral or (iv) the
imposition and use of the Carve-Out (to the extent that the Carve-Out is funded
following the issuance of a Carve-Out Trigger Notice).

 

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17. Perfection of the Adequate Protection Superpriority Claims. The Adequate
Protection First Liens and, to the extent applicable, the Adequate Protection
Second Liens, shall be, and they hereby are, deemed duly perfected and recorded
under all applicable federal or state or other laws as of the Petition Date, and
no notice, filing, mortgage recordation, novation, possession, control, further
order, or other act, shall be required to effect such perfection and all liens
on any Deposit Accounts or securities shall, pursuant to this Final Order, and
hereby are deemed to confer “control” for purposes of sections 8-106, 9-104 and
9-106 of the New York Uniform Commercial Code as in effect on the date hereof or
similar applicable laws. The Prepetition First Lien Agent, as applicable, may,
but shall not be required to, file a certified copy of this Final Order in any
filing or recording office in any state, county, or other jurisdiction in which
any Debtor has real or personal property and such filing or recording shall be
accepted and shall constitute sufficient evidence of perfection of such
applicable parties’ interests in the Postpetition Collateral, as applicable, at
the time and on the date of entry of this Final Order, but with the priorities
as set forth herein and notwithstanding the date, manner or order of grant,
attachment or perfection of any such adequate protection liens. The Adequate
Protection First Liens shall be deemed legal, valid, binding, enforceable, and
perfected liens, not subject to subordination, impairment or avoidance, for all
purposes in the Chapter 11 Cases and any Successor Case except as expressly
provided in this Final Order.

18. Preservation of Value; No Priming Liens. To obtain the consent of the
Prepetition First Lien Agent and the Prepetition First Lien Lenders to entry of
this Final Order, the Debtors’ use of Cash Collateral shall be conditioned upon
the Debtors’ observance of and timely

 

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performance with the terms, provisions, covenants, and agreements specified in
the Prepetition First Lien Credit Documents pertaining to the maintenance,
preservation, and inspection of the Prepetition Collateral, other than any
terms, provisions, covenants, and agreements specified in the Prepetition First
Lien Credit Documents related to financial covenants or that are otherwise
materially inconsistent with the covenants set forth in the DIP Credit
Documents. The Debtors shall also continue to timely (after giving effect to any
applicable grace period) comply with the reporting obligations and requirements
set forth in the Prepetition First Lien Credit Documents and Prepetition Second
Lien Credit Documents and, upon written request (including via email) of the
Prepetition First Lien Agent, the Prepetition Second Lien Agent or the
Prepetition Second Lien Lenders, shall use commercially reasonable efforts to
provide such parties (and their respective professionals) with such other
reporting and financial information as may be reasonably available and requested
by the DIP Agent, Prepetition First Lien Agent, the Prepetition Second Lien
Agent, or the Prepetition Second Lien Lenders from time to time. Except to the
extent otherwise permitted by the Prepetition First Lien Credit Agreement or as
expressly set forth in this Final Order or the Budget, subject to and including
any Permitted Variances, the Debtors shall not compromise or discount the
amount, or extend the time for payment, of any of their accounts receivable (by
way of discount, offset or otherwise) without the prior written consent
(including via email) of the Prepetition First Lien Agent (acting at the
direction of the Required Lenders (as defined by the Prepetition First Lien
Credit Agreement)). Except to the extent approved in writing (including via
email) by the DIP Agent and the Prepetition First Lien Agent (acting at the
direction of the Required Lenders (as defined by the Prepetition First Lien
Credit Agreement)), the Debtors shall not grant mortgages, security interests,
or liens on or in the Postpetition Collateral to any party other than the
Prepetition First

 

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Lien Agent (or its designee) if such mortgages, security interests, or liens
would be senior to or otherwise prime, or be pari passu with, the Prepetition
First Liens or Adequate Protection First Liens, whether pursuant to section
364(d) of the Bankruptcy Code, for adequate protection or otherwise, absent
further order of the Court. Except to the extent approved in writing (including
via email) by the Prepetition Second Lien Agent (acting at the direction of the
Required Lenders (as defined by the Prepetition Second Lien Credit Agreement)),
the Debtors shall not grant mortgages, security interests, or liens on or in the
Postpetition Collateral to any party other than the Prepetition Second Lien
Agent (or its designee) if such mortgages, security interests, or liens would be
senior to or otherwise prime, or be pari passu with, the Prepetition Second
Liens or Adequate Protection Second Liens, whether pursuant to section 364(d) of
the Bankruptcy Code, for adequate protection or otherwise, absent further order
of the Court; provided that the Debtors may grant mortgages, security interests,
or liens on or in the Postpetition Collateral to the Prepetition First Lien
Agent without the consent of the Prepetition Second Lien Agent if the Debtors
concurrently therewith grant such mortgages, security interests, or liens on or
in the Postpetition Collateral to the Prepetition Second Lien Agent on a second
priority basis in accordance with the Intercreditor Agreement.

19. No Lien Alteration. The Prepetition Secured Parties shall not be subject to
an “equities of the case” claim under section 552(b) of the Bankruptcy Code with
respect to any of their respective interests in the Prepetition Collateral.
Accordingly, any valid, perfected, and non-avoidable liens created by the
Prepetition First Lien Credit Documents or the Prepetition Second Lien Credit
Documents in any Prepetition Collateral shall attach with the same respective
validity, priority, and perfection in and to any and all proceeds of such
Prepetition Collateral, subject to the Carve-Out and Prior Liens (if any).

 

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20. Section 506(c) Waiver. No costs or expenses of administration or other
charge, lien, assessment or claim incurred at any time (including any expenses
set forth in the Budget) by any Debtor or any other person or entity shall be
imposed against any or all of the Prepetition Secured Parties, their respective
claims, or their respective collateral under section 506(c) of the Bankruptcy
Code or otherwise, and the Debtors, on behalf of their estates, waive any such
rights.

21. Restriction on Use of Cash Collateral and Proceeds of the DIP
Facility. Notwithstanding anything to the contrary herein or in any other order
by this Court, other than as set forth in the last sentence of this paragraph,
none of the proceeds of the Loans and none of the DIP Obligations, the Cash
Collateral, the DIP Collateral, or the Carve Out may be used for the following
purposes, including any fees or expenses incurred by any professional in
connection therewith: (a) an assertion or joinder in (but excluding any
investigation into) any claim, counter-claim, action, proceeding, application,
motion, defense, or other contested matter seeking any order, judgment,
determination or similar relief (i) challenging the legality, validity,
priority, perfection, or enforceability of any amount due under the DIP Credit
Documents, the Prepetition First Lien Indebtedness, the Prepetition Second Lien
Indebtedness, or the Prepetition Indebtedness Documents or the liens, security
interests, or claims granted under this Final Order, the DIP Credit Documents,
or the Prepetition Indebtedness Documents; (ii) invalidating, setting aside,
recharacterizing, avoiding, or subordinating in whole or in part any amount due
under the DIP Credit Documents, the Prepetition First Lien Indebtedness, the
Prepetition Second Lien Indebtedness, or the Prepetition Indebtedness Documents
or the liens, security interests, or claims granted under this Final Order, the
DIP Credit Documents, or the Prepetition Indebtedness Documents;
(iii) challenging or objecting to payment of any amount due under the DIP Credit
Documents, the Prepetition First Lien Indebtedness, the Prepetition Second Lien

 

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Indebtedness, or the Prepetition Indebtedness Documents pursuant to the chapter
11 plan of reorganization in any of the Cases; (iv) preventing, hindering, or
delaying the assertion or enforcement by any of the DIP Secured Parties or the
Prepetition Secured Parties of any of their respective liens, claims, rights, or
security interests or realization upon the Prepetition Collateral, the DIP
Collateral, the DIP Liens, the Prepetition First Lien Indebtedness, the
Prepetition Second Lien Indebtedness, or the DIP Obligations; or (v) seeking to
modify any of the rights granted to any of the DIP Secured Parties or the
Prepetition Secured Parties hereunder or under the DIP Credit Documents or the
Prepetition Indebtedness Documents, in each of the foregoing cases without such
parties’ prior written consent; (b) the commencement or prosecution of any
action or proceeding of any claims, causes of action, or defenses against any of
the DIP Secured Parties or the Prepetition Secured Parties or any of their
respective officers, directors, employees, agents, attorneys, affiliates,
assigns, or successors, including, without limitation, any attempt to recover or
avoid any claim or interest from any of the DIP Secured Parties or the
Prepetition Secured Parties under Chapter 5 of the Bankruptcy Code; or
(c) selling or otherwise disposing of any DIP Collateral, using or seeking to
use any insurance proceeds, or incurring any indebtedness, in each case to the
extent not permitted under the DIP Credit Documents or without the
Administrative Agent’s express prior written consent. Notwithstanding anything
to the contrary, up to $25,000 of the Prepetition Collateral, Cash Collateral or
the Carve Out may be used for the payment or reimbursement of Estate
Professional Fees incurred in connection with, or with respect to, any action,
suit, arbitration, proceeding, application, motion, complaint, adversary
proceeding, or other litigation of any type, kind or nature whatsoever (or in
the investigation, preparation or prosecution of any of the foregoing) against
any of the Prepetition First Lien Agent, Prepetition First Lien Lenders,
Prepetition Second Lien Agent or Prepetition

 

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Second Lien Lenders. For the avoidance of doubt, nothing in this Final Order
shall prohibit or restrict the use of the proceeds of the Loans, Cash Collateral
or the Carve Out by the Debtors in any dispute over the value of the Debtors’
assets and any dispute concerning the extent to which the Prepetition Second
Lien Agent or Prepetition Second Lien Lenders are in fact secured or hold
secured claims.

22. Preservation of Third-Party Rights.

a. Subject to paragraph 23 of this Final Order and the limitations specified in
this paragraph 22 of this Final Order, the stipulations, admissions, releases,
and waivers contained in paragraphs E, F, H, I, K and M of this Final Order
(collectively, the “Challenge Matters”) shall be binding on all Persons,
entities, and parties in interest, including the Committee (if any) and any
subsequent trustee of the Debtors’ estates, whether in the Chapter 11 Cases or
any Successor Case, unless, and solely to the extent that, any such party in
interest with standing and requisite authority, has filed a complaint or other
appropriate pleadings commencing an adversary proceeding challenging or
otherwise contesting the Challenge Matters (a “Challenge Proceeding”) prior to
the “Action Filing Deadline,” which means the date that is the later of 60 days
after the Petition Date (i.e. August 1, 2016) and 45 days after the appointment
of the Committee (if any). For the avoidance of any doubt, the extent to which
the Debtors’ cash constitutes Cash Collateral for purposes of this Final Order
shall not constitute a “Challenge Matter,” and all rights with respect thereto
are fully reserved and preserved. To the extent no such party in interest
obtains standing (if necessary) and timely and properly commences such Challenge
Proceeding prior to the Action Filing Deadline, then, without further notice,
motion, or application to, order of, or hearing before, this Court and without
the need or requirement to file any proof of claim, the Challenge Matters shall
become binding, conclusive, and final on the Committee (if any) and the

 

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Debtors (and any subsequent trustee of the Debtors’ estates) and any other
Person, entity or party in interest in the Chapter 11 Cases and any Successor
Case, and the Prepetition First Lien Indebtedness, the Prepetition First Liens,
the Prepetition Second Lien Indebtedness and the Prepetition Second Liens shall
be deemed enforceable, valid, non-avoidable, and perfected for all purposes in
the Chapter 11 Cases and any Successor Case and shall not be subject to
challenge or objection by any Person, entity, or other party in interest.

b. Notwithstanding anything to the contrary herein, if any such Challenge
Proceeding is properly and timely commenced, the Challenge Matters shall
nonetheless remain binding on all Persons, entities, and parties in interest and
preclusive as provided in the foregoing sub-paragraph above except to the extent
that such Challenge Matters are expressly challenged in such Challenge
Proceeding.

c. Nothing in this Final Order confers standing on any Person, entity, or party
in interest (including the Committee) to assert any claim on behalf of any
Debtor or any estate of any Debtor, or relieves any Person, entity, or party in
interest (including the Committee, if any) from any requirement under the
Bankruptcy Code or otherwise to obtain standing and authorization from this
Court prior to asserting any claim on behalf of any Debtor or any estate of any
Debtor; provided that, if the Committee timely files a motion with this Court
seeking standing to bring such a claim or challenge (the “Standing Action”)
prior to the expiration of the Action Filing Deadline and the Committee
thereafter diligently and in good faith pursues the prompt entry of a final
order regarding such Standing Action, then the Action Filing Deadline with
respect to the Committee only (and no other Person or entity) will be tolled
until ten (10) days after the date on which this Court enters an order granting
or denying the Standing Action.

 

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23. Rights Reserved; No Waiver. The entry of this Final Order is without
prejudice to, and does not expressly or implicitly constitute a waiver of, any
of the following: (a) the right of the Prepetition Secured Parties to seek any
other or supplemental relief in respect of any Debtor, including the right to
seek additional adequate protection; or (b) any of the rights of the Prepetition
Secured Parties under the Bankruptcy Code or under non-bankruptcy law, including
the right to: (i) request modification of the automatic stay of section 362 of
the Bankruptcy Code; (ii) request dismissal of any of the Chapter 11 Cases or a
Successor Case, conversion of any of the Chapter 11 Cases to cases under chapter
7, or appointment of a chapter 11 trustee or examiner with expanded powers; or
(iii) propose, subject to the provisions of section 1121 of the Bankruptcy Code,
a chapter 11 plan or plans. Except as specifically set forth herein regarding
the use of Cash Collateral, nothing contained in this Final Order shall be in
lieu of, or limit, prejudice or otherwise affect, any rights, claims, liens,
security interests or priorities of the Prepetition Secured Parties under the
Prepetition First Lien Credit Documents, the Prepetition Second Lien Credit
Documents, the Prepetition Intercreditor Agreement, or applicable law, and all
such rights, claims, liens, security interests and priorities are
reserved. Nothing in this Final Order shall impair or modify the application of
section 507(b) of the Bankruptcy Code in the event that the adequate protection
provided to the Prepetition Secured Parties hereunder is insufficient during the
Chapter 11 Cases or any Successor Case.

24. Carve-Out.

a. As used in this Final Order, the term “Carve-Out” means the sum, without
duplication, of the following: (i) the unpaid fees payable to the United States
Trustee and Clerk of the Bankruptcy Court pursuant to Section 1930(a) of Title
28 of the United States Code plus interest at the statutory rate (without regard
to the notice set forth in clause (iii) below); (ii) all

 

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reasonable fees and expenses up to an aggregate amount of $50,000 incurred by a
trustee under section 726(b) of the Bankruptcy Code (without regard to the
notice set forth in (iii) below); (iii) subject in all respects to the Budget,
to the extent allowed at any time by order of this Court, whether by interim
order, procedural order, or otherwise, all unpaid fees and expenses (the “Estate
Professional Fees”) incurred by persons or firms retained by the Debtors
pursuant to section 327, 328, or 363 of the Bankruptcy Code (collectively,
the “Debtor Professionals”), including any transaction fee(s) for the Debtors’
financial advisor and reasonable fees and costs for the Debtors’ board of
directors, and the Committee (if any) appointed in the Chapter 11 Cases pursuant
to section 1103 of the Bankruptcy Code (the “Committee Professionals,” and,
together with the Debtor Professionals, the “Professional Persons”), which fees
and expenses were incurred at any time before or on the first business day
following delivery by the Prepetition First Lien Agent of a Carve Out Trigger
Notice (as defined below), whether allowed by order of this Court prior to or
after delivery of a Carve-Out Trigger Notice; (iv) Estate Professional Fees in
an aggregate amount not to exceed $500,000 (plus, solely with respect to the
Debtor Professionals, any unused retainers held by the Debtor Professionals, for
fees and expenses incurred after such date) incurred after the first business
day following delivery by the Prepetition First Lien Agent of the Carve-Out
Trigger Notice, to the extent allowed at any time by order of this Court,
whether by interim order, procedural order, or otherwise (the amount set forth
in this clause (iv) being the “Post-Carve Out Trigger Notice Cap”); and (v)
subject in all respects to the Budget, all unpaid allowed administrative
expenses incurred at any time before or on the first business day following
delivery by the DIP Agent of a Carve-Out Trigger Notice.

b. Carve-Out Trigger Notice. For purposes of the foregoing, “Carve-Out Trigger
Notice” shall mean a written notice delivered by electronic mail (or other
electronic

 

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means) by the DIP Agent to the Debtors, their lead restructuring counsel, and
the Fee Notice Parties, which notice may be delivered following the occurrence
and during the continuation of a Termination Event that is not cured by the
Debtors or otherwise stayed or invalidated by the Court stating that the
Post-Carve-Out Trigger Notice Cap has been invoked. On the day on which a
Carve-Out Trigger Notice is given by the DIP Agent to the Debtors, the Carve-Out
Trigger Notice shall constitute a demand to the Debtors to utilize all cash on
hand as of such date and any available cash thereafter held by any Debtor to
fund a reserve in an amount equal to the then unpaid amount of Estate
Professional Fees and the Post-Carve-Out Trigger Notice Cap. The Debtors shall
deposit and hold such amounts in a segregated account in trust to pay such then
unpaid Professional Fees and the Carve-Out Trigger Notice Cap (the
“Pre-Carve-Out Trigger Notice Reserve”) prior to any and all other claims.

c. Payment of Estate Professional Fees Prior to the Carve-Out Trigger
Notice. Any payment or reimbursement made prior to the delivery of the Carve-Out
Trigger Notice in respect of any Estate Professional Fees shall not reduce the
Carve-Out.

d. Payment of Carve Out On or After Carve Out Trigger Notice. Any payment or
reimbursement made on or after the delivery of the Carve Out Trigger Notice in
respect of any Estate Professional Fees shall permanently reduce the Carve Out
on a dollar-for-dollar basis.

e. Other Related Matters. Any funding or payment of the Carve Out shall be added
to, and made a part of the Prepetition First Lien Indebtedness secured by the
Collateral and shall be otherwise entitled to the protections granted under this
Final Order, the Prepetition First Lien Credit Documents, the Bankruptcy Code,
and applicable law.

 

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f. No Lender Guaranty. None of the Prepetition Secured Parties shall be
responsible for the direct payment or reimbursement of any of the Professional
Persons incurred in connection with the Chapter 11 Cases or any Successor
Case. Nothing contained herein shall be construed: (i) to obligate the
Prepetition Secured Parties in any way to pay compensation to or reimburse
expenses of any Professional Persons or member of the Committee (if any) other
than to allow Cash Collateral to be used in accordance with this Final Order,
including, but not limited to, funding the Carve Out, or to guarantee that the
Debtors have sufficient funds to pay such compensation or reimbursement; or (ii)
as a consent to the allowance of any professional fees or expenses of any Estate
Professionals or shall affect the right of the Prepetition Secured Parties to
object to the allowance and payment of such fees and expenses.

25. No Duty to Monitor Compliance. The Prepetition Secured Parties may assume
the Debtors will comply with this Final Order and the Budget and shall not: (a)
have any obligation with respect to the Debtors’ use of Cash Collateral (other
than its consent to the use of Cash Collateral in accordance with and subject to
terms of this Final Order); (b) be obligated to directly pay any expenses
incurred or authorized to be incurred pursuant to this Final Order (including
any amounts specified in the Budget); or (c) be obligated to ensure or monitor
that sufficient Cash Collateral exists to pay any expenses incurred or
authorized to be incurred pursuant to this Final Order.

26. Survival. The provisions of this Final Order and any actions taken pursuant
hereto shall: (a) survive the Termination Declaration Date and entry of any
order: (i) converting any of the Chapter 11 Cases to a case under chapter 7 of
the Bankruptcy Code; (ii) substantively consolidating any of the Debtors or
their respective estates; or (iii) dismissing or closing any of the Chapter 11
Cases; and (b) shall continue in full force and effect notwithstanding the
Termination Declaration Date or entry of any such order described in this
paragraph.

 

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27. Effect of Modification or Appeal. Any subsequent stay, modification,
reversal, amendment or vacatur of this Final Order shall not alter, modify,
impair, or otherwise affect the validity, priority, perfection or enforceability
of any claim, lien, or security interest of the Prepetition Secured Parties to
the extent authorized, created or granted pursuant to this Final Order and
outstanding or existing immediately prior to the actual receipt of written
notice (including via email) by the Prepetition First Lien Agent and Prepetition
Second Lien Agent of the effective date of such stay, modification, reversal,
amendment or vacatur. Notwithstanding any such stay, modification, reversal,
amendment or vacatur, all uses of Cash Collateral and other Prepetition
Collateral by the Debtors prior to the actual receipt of written notice
(including via email) by the Prepetition First Lien Agent and Prepetition Second
Lien Agent of the effective date of such stay, modification, reversal, amendment
or vacatur, shall be governed in all respects by the original provisions of this
Final Order and the Prepetition Secured Parties shall be entitled to all of the
rights, privileges, remedies, protections and benefits granted herein and all
rights provided by the Bankruptcy Code.

28. No Marshaling. Solely subject to the terms of paragraph 5 of this Final
Order, the DIP Secured Parties, Prepetition First Lien Agent, Prepetition First
Lien Lenders, Prepetition Second Lien Agent, and Prepetition Second Lien Lenders
shall not be subject to the equitable doctrine of “marshaling” with respect to
any of their respective interests in the DIP Collateral, Postpetition Collateral
and Prepetition Collateral.

29. Prepetition Intercreditor Agreement. To the extent provided under section
510 of the Bankruptcy Code and other applicable non-bankruptcy law, the
Prepetition Intercreditor

 

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Agreement (and any other subordination or intercreditor agreement) remains in
full force and effect and is not, and shall not be deemed to be, amended,
altered, impaired, or otherwise modified by this Final Order or by the
consummation of the transactions contemplated hereby. Each of the Prepetition
Secured Parties expressly reserves any and all claims, causes of action,
defenses, rights and remedies it has or may have pursuant to the Prepetition
Intercreditor Agreement or pursuant to any other lien release, inter-creditor or
subordination agreement.

30. No Liability to Third Parties. In making decisions to permit the Debtors to
use Cash Collateral or enter into the DIP Facility, in approving any budget or
in taking any actions permitted by this Final Order, the DIP Secured Parties,
Prepetition First Lien Agent, Prepetition First Lien Lenders, Prepetition Second
Lien Agent, and Prepetition Second Lien Lenders (in their respective capacities
as such) shall not: (a) be deemed to be in control of the operations of any
Debtor or to be acting as a “controlling person,” “responsible person” or “owner
or operator” with respect to the operation or management of any Debtor, and/or
(b) owe any fiduciary duty to any Debtor, its respective creditors or its
respective estate (or have any duty of trust or confidence with any of the
foregoing), and their relationship with each Debtor shall not constitute or be
deemed to constitute a joint venture or partnership with such Debtor.

31. Default Under Other Documents; Non-Bankruptcy Law. Except as otherwise
expressly provided herein, notwithstanding anything to the contrary contained in
any prepetition or postpetition agreement, contract, document, note, or
instrument to which any Debtor is a party or under which any Debtor is obligated
or bound, any provision that restricts, conditions, prohibits, limits or impairs
in any way any Debtor from granting the DIP Secured Parties, Prepetition First
Lien Agent, Prepetition First Lien Lenders, Prepetition Second Lien Agent, or
Prepetition Second Lien Lenders the postpetition security interests or liens
upon any of its assets,

 

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properties or other Postpetition Collateral or otherwise entering into and
complying with all of the terms, conditions and provisions of this Final Order
shall be unenforceable against such Debtor, and therefore, shall not adversely
affect or impair the validity, priority, perfection or enforceability of the
liens, security interests, claims, rights, priorities and/or protections granted
to such parties pursuant to this Final Order. To the extent that any applicable
non-bankruptcy law would otherwise restrict, condition, prohibit, limit or
impair the grant, scope, enforceability, attachment or perfection of the
security interests and liens authorized or created under or in connection with
this Final Order, or otherwise would impose filing or registration requirements
or fees and charges with respect thereto, such law is hereby pre-empted to the
maximum extent permitted by the United States Constitution, the Bankruptcy Code,
applicable federal law, and the judicial power of the United States Bankruptcy
Court; provided that the DIP Agent, Prepetition First Lien Agent, and
Prepetition Second Lien Agent may still take such steps as they wish to perfect
their respective security interests and liens under otherwise applicable state
law without waiving the benefits of this provision of this Final Order.

32. Termination Events; Modification of Automatic Stay.

a. So long as any DIP Obligations are outstanding or the DIP Lenders have any
outstanding Commitments under the DIP Credit Agreement, the Prepetition Secured
Parties shall (a) have no right to and shall take no action to foreclose upon or
recover in connection with the liens granted thereto pursuant to the Prepetition
Indebtedness Documents or this Final Order, or otherwise exercise or seek to
exercise any enforcement rights or remedies against any DIP Collateral without
the prior written consent of the DIP Lenders, except as authorized by a further
order of this Court entered after the date hereof and (b) be deemed to have
consented to any release of DIP Collateral authorized under the DIP Credit
Documents.

 

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b. Immediately upon the occurrence and during the continuation of an Event of
Default under the DIP Credit Agreement (each such event, a “Termination Event”),
the DIP Agent (acting at the direction of the Required Lenders (as defined under
the DIP Credit Agreement)) may deliver a written notice (including via email) of
its intention to declare a termination of the Debtors’ right to make further
borrowing requests under the DIP Facility and rights to use Cash Collateral on
the consensual basis provided in this Final Order (any such declaration, a
“Termination Declaration”), unless such Termination Event is waived in writing
(including via email) by the DIP Agent in its sole discretion (acting at the
direction of the Required Lenders (as defined under the DIP Credit Agreement)).
The Termination Declaration shall be given by electronic mail to counsel to the
Debtors and Fee Notice Parties (the date any such Termination Declaration is
given to each such party shall be referred to herein as the “Termination
Declaration Date”).

c. During the five (5) business days after the Termination Declaration Date (the
“Remedies Notice Period”), the Debtors shall be entitled to continue to use Cash
Collateral in accordance with the terms of this Final Order.

d. On and after the conclusion of the Remedies Notice Period, unless such
Termination Event is waived in writing (including via email) by the DIP Agent in
its sole discretion (acting at the direction of the Required Lenders (as defined
under the DIP Credit Agreement)), cured by the Debtors, or otherwise stayed or
invalidated by this Court (the “Termination Date”), the Debtors’ right to make
further borrowing requests under the DIP Facility and rights to use Cash
Collateral pursuant to this Final Order shall automatically terminate except to
the extent Cash Collateral is needed to fund the Carve Out to the extent
provided in this Final Order.

 

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33. Reservation of Rights Relating to UGI Energy Services, LLC. Notwithstanding
anything to the contrary set forth herein, to the extent that, as of the
Petition Date, UGI Energy Services LLC (“UGI”) had a valid covenant running with
the land or other property interest in the Debtor’s Pennsylvania property under
that certain November 18, 2013 Gas Gathering Agreement, as amended, that was
senior in right or priority to the Prepetition Liens under applicable state law,
nothing in this Order shall affect or impair the interests of UGI, such
interests shall not be subject to priming by the DIP Liens set forth in
Paragraph 5 hereof and all DIP Liens shall be subject and subordinate to such
interests. The Debtors, the Prepetition First Lien Agent, the Prepetition First
Lien Lenders, and other parties in interest reserve their rights to contest any
assertion by UGI regarding the forgoing or otherwise.

34. Strict Compliance. The failure, at any time or times hereafter, of the DIP
Secured Parties, Prepetition First Lien Agent, Prepetition First Lien Lenders,
Prepetition Second Lien Agent, or Prepetition Second Lien Lenders to require
strict performance by the Debtors of any provision of this Final Order shall not
waive, affect or diminish any right of such parties thereafter to demand strict
compliance and performance therewith. No delay on the part of any party in the
exercise of any right or remedy under this Final Order shall preclude any other
or further exercise of any such right or remedy or the exercise of any other
right or remedy. None of the rights or remedies of any party under this Final
Order shall be deemed to have been amended, modified, suspended or waived unless
such amendment, modification, suspension or waiver is in writing and signed by
the party against whom such amendment, modification, suspension or waiver is
sought.

35. Successors and Assigns. The provisions of this Final Order shall be binding
upon and inure to the benefit of the DIP Secured Parties, Prepetition First Lien
Agent, Prepetition First

 

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Lien Lenders, Prepetition Second Lien Agent, Prepetition Second Lien Lenders,
and the Debtors and their respective estates, and their respective successors
and assigns, including any trustee or other fiduciary hereafter appointed as a
legal representative of any of the Debtors or their estates, whether in the
Chapter 11 Cases or in any Successor Case. Except as expressly provided for
herein, this Final Order does not create any rights for the benefit of any
creditor, equity holder, or other Person or entity, or any direct, indirect, or
incidental beneficiary, other than the Prepetition First Lien Agent and the
Prepetition First Lien Lenders (and subject to the Prepetition Intercreditor
Agreement, other than the Prepetition Second Lien Agent and the Prepetition
Second Lien Lenders).

Dated:

            , 2016

Houston, Texas

 

 

HONORABLE MARVIN ISGUR

UNITED STATES BANKRUPTCY JUDGE

 

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Exhibit A

DIP Credit Agreement

[See Docket No. 15-3]

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Exhibit B

Budget

[See Docket No. 15-1]

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Exhibit E

New Warrants Terms Sheet

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NEW WARRANTS TERM SHEET

July 11, 2016

 

 

Capitalized terms used but not defined in this New Warrants Term Sheet (this
“Term Sheet”) have the respective meanings assigned to such term in the Amended
and Restated Restructuring Support Agreement, dated as of July 11, 2016 (as
amended and restated, the “RSA”), to which this New Warrants Term Sheet is
annexed as Exhibit E.

 

Issuer:    Warren Resources, Inc. (the “Issuer”), as reorganized pursuant to the
Agreed Restructuring Plan. Holders:    Claren Road Credit Master Fund, Ltd.;
Claren Road Credit Opportunities Master Fund, Ltd. (the “Holders”). Security:   
Warrants (the “Warrants”) to purchase the New Common Equity representing 5% of
the aggregate number of shares of New Common Equity issued and outstanding (or
deemed to be issued as contemplated by Section 4.03(b) of the Agreed
Restructuring Plan) on the Effective Date fully diluted after giving effect to
the issuance of the Warrants, allocated between the Holders in their sole
discretion. Exercise Price:    The exercise price (as the same may be adjusted
from time to time in accordance with the terms hereof, the “Exercise Price”) for
each share of New Common Equity issuable upon exercise of the Warrants (the
“Warrant Shares”) shall be equal to the quotient of (i) $105,000,000, divided by
(ii) the number of shares of New Common Equity issued under the Agreed
Restructuring Plan. Exercisability:    The Warrants shall be exercisable in
whole or in part at any time on or prior to the Expiration Date, in cash or by
“cashless” exercise based on the fair market value of the New Common Equity at
the time of exercise, as determined in good faith by the Board; provided that
the Holders shall be entitled to object to such determination and require a
third party valuation, at the Holders’ sole cost expense and by a nationally
recognized investment banking or valuation firm reasonably acceptable to the
Board. Transfers:    The Warrants shall be freely transferable, subject only to
applicable securities laws and restrictions on transfers to competitors of the
Issuer, and subject to the transfer restrictions that apply to the shares of New
Common Equity as set forth in the Shareholder Agreement (as defined in the
Restructuring Term Sheet).

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Expiration Date:    Five (5) years from the Effective Date. Voting Rights:   

The Holders shall have no voting rights in respect of the Warrants. Holders of
issued Warrant Shares shall have the same voting rights as other holders of New
Common Equity.

 

Approval of Holders representing a majority of the aggregate number of Warrant
Shares will be required for any amendment, modification or waiver of the
Issuer’s Certificate of Incorporation or Formation, Bylaws or Limited Liability
Company Agreement or other governing documents that would adversely affect the
rights or obligations of the Holders with respect to New Common Equity without
proportionally affecting the rights or obligations of all holders of New Common
Equity having the same rights or obligations with respect to New Common Equity.

Anti-Dilution/Adjustments:    The Exercise Price shall be subject to
anti-dilution protection for (i) dividends and distributions payable in equity
securities of the Issuer and (ii) stock splits and similar events. The issuance
of New Common Equity from the MIP (as defined in the Restructuring Term Sheet)
or other securities pursuant to incentive or benefit plans for employees and
service providers that are approved by the Board shall not result in any
adjustment to the terms of the Warrants. In the event of a reorganization,
recapitalization, merger or similar event in which the New Common Equity is
converted into or exchanged for securities, cash or other property, then, in
connection with such event but subject to the drag rights contained in the
Shareholder Agreement, Holders shall receive upon exercise of the Warrants such
other securities, cash or other property in place of Warrant Shares. Tag-Along
Rights:    Upon exercise of the Warrants, Holders of Warrant Shares will have
tag-along sale rights with respect to a sale of any New Common Equity by any
other equity holder, consistent with the tag-along rights provided to any other
holder of New Common Equity in the Shareholder Agreement. Registration Rights:
   The issuance of the Warrants and the issuance of the Warrant Shares upon
exercise of the Warrants shall be exempt from the registration requirements of
the Securities Act of 1933, as amended, pursuant to Section 1145 of the
Bankruptcy Code, and the Holders of Warrant Shares issued upon exercise of the
Warrants will have piggyback registration rights pari passu with any other
holder of New Common Equity, subject to underwriter cutbacks, lockups and other
customary exceptions or limitations.

 

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Pre-Emptive Rights:    Holders of Warrants or Warrant Shares will have the right
to participate in issuances of equity securities of the Issuer on a pro rata
basis at the same purchase price and subject to the same terms (other than
customary permitted issuances, including issuances pursuant to incentive and
benefit plans, the issuance of Warrant Shares and issuances for cash in
SEC-registered offerings). The pre-emptive rights shall terminate upon the
earlier of a sale of all or substantially all of the assets of the Issuer and
its subsidiaries and an IPO (as defined in the Restructuring Term Sheet).
Information rights/Notices:    The Issuer shall provide to Holders the
information and financial reporting provided to “Significant Interest Holders”
pursuant to the Shareholder Agreement. The information rights shall terminate
upon an IPO. The Issuer shall provide 10 business days prior written notice to
Holders of any date on which the Issuer shall take a record of the holders of
the New Common Equity for purposes of customary equityholder “record date”
events, such as dividends, distributions, recapitalization, merger, to be agreed
and shall provide Holders copies of any other notices provided by the Issuer to
the holders of the New Common Equity generally. Shareholder Agreement:   
Holders will be parties to the Shareholder Agreement; provided that no term of
the Shareholder Agreement with respect to the Warrants or Warrant Shares shall
be inconsistent in any material respect with the terms set forth herein or
adversely affect the rights or obligations of the Holders with respect to New
Common Equity without proportionally affecting the rights or obligations of all
holders of New Common Equity having similar rights or obligations with respect
to New Common Equity; provided further that Holders will be subject to the drag
rights contained in the Shareholder Agreement with respect to the Warrants and
any Warrant Shares to the same extent as all holders of New Common Equity are
subject to with respect to New Common Equity. It is the intent of the parties
that the rights and obligations of the Holders of Warrant Shares be on a
consistent and proportional basis with, and the Holders of Warrant Shares be
treated as the same group as, other holders of New Common Equity having such
rights and obligations and not as a separate group or having separate rights or
obligations or consent requirements. Subject to the two

 

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   preceding sentences, the Warrants and the Warrant Shares, and the rights of
Holders hereunder, will be subject to the terms of the Shareholder Agreement,
including that such rights will be subject to the Holders remaining “Significant
Interest Holders;” provided that so long as Holders or their affiliates continue
to hold a majority of the Warrant Shares (or Warrants that may be exercised for
a majority of the Warrant Shares), such Holders shall be “Significant Interest
Holders;” provided further, for the avoidance of doubt, a waiver of the
“Affiliate Transactions” provision in clause (g) of the section of the RSA Term
Sheet entitled “Corporate Headquarters and Governance” shall constitute an
amendment that is adverse to holders of New Common Equity that are not party to
the Affiliate Transaction for which such waiver is sought and the consent of
holders representing a majority of the New Common Equity held by such holders
shall be required for such waiver. Warrant Agreement:    Holders will become
bound pursuant to the Agreed Restructuring Plan to a Warrant Agreement with the
Issuer setting forth the rights in respect of the Warrants described herein and
other customary terms and conditions as may be agreed among the Holders, the
Issuer and the Plan Sponsor to the extent such rights are not addressed in the
Shareholder Agreement (in each case, subject to the terms and conditions of the
RSA). The Warrant Agreement shall be governed by the laws of the State of
Delaware. The Warrant Agreement shall be drafted by counsel for the Plan
Sponsor.

 

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