Exhibit 10.1
Execution Version

CUSIP: 70456GAA4

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

CREDIT AGREEMENT
 
dated as of

October 28, 2016

Among

PARSLEY ENERGY, LLC,
as Borrower,

PARSLEY ENERGY, INC.,

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent,

JPMORGAN CHASE BANK, N.A.,
as Syndication Agent,

BMO HARRIS BANK, N.A.,
as Documentation Agent,

and

The Lenders Party Hereto
________________________________

WELLS FARGO SECURITIES, LLC
Sole Lead Arranger and Sole Bookrunner
________________________________

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

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

TABLE OF CONTENTS
Page

ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS
1
Section 1.01
Terms Defined Above
1
Section 1.02
Certain Defined Terms
1
Section 1.03
Types of Loans and Borrowings
27
Section 1.04
Terms Generally; Rules of Construction
27
Section 1.05
Accounting Terms and Determinations; GAAP
28
Section 1.06
Designation and Conversion of Restricted and Unrestricted Subsidiaries
28
Section 1.07
Rounding
29
ARTICLE II THE CREDITS
30
Section 2.01
Commitments
30
Section 2.02
Loans and Borrowings
30
Section 2.03
Requests for Borrowings
31
Section 2.04
Interest Elections
32
Section 2.05
Funding of Borrowings
33
Section 2.06
Termination and Reduction of Aggregate Maximum Credit Amounts
33
Section 2.07
Borrowing Base
34
Section 2.08
Letters of Credit
39
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
44
Section 3.01
Repayment of Loans
44
Section 3.02
Interest
44
Section 3.03
Alternate Rate of Interest
45
Section 3.04
Prepayments
45
Section 3.05
Fees
47
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
48
Section 4.01
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
48
Section 4.02
Presumption of Payment by the Borrower
49
Section 4.03
Deductions by the Administrative Agent; Defaulting Lenders
49
Section 4.04
Disposition of Proceeds
51
ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
51
Section 5.01
Increased Costs
51
Section 5.02
Break Funding Payments
52
Section 5.03
Taxes
53
Section 5.04
Mitigation Obligations; Designation of Different Lending Office
56
Section 5.05
Replacement of Lenders
56
Section 5.06
Illegality
57
ARTICLE VI CONDITIONS PRECEDENT
57
Section 6.01
Effective Date
57
Section 6.02
Each Credit Event
60
Section 6.03
Additional Conditions to Credit Events
60
ARTICLE VII REPRESENTATIONS AND WARRANTIES
61
Section 7.01
Organization; Powers
61
Section 7.02
Authority; Enforceability
61

- i-

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

TABLE OF CONTENTS
(continued)
Page

Section 7.03
Approvals; No Conflicts
61
Section 7.04
Financial Condition; No Material Adverse Change
61
Section 7.05
Litigation
62
Section 7.06
Environmental Matters
62
Section 7.07
Compliance with the Laws and Agreements; No Defaults
63
Section 7.08
Investment Company Act
63
Section 7.09
Taxes
64
Section 7.10
ERISA
64
Section 7.11
Disclosure; No Material Misstatements
64
Section 7.12
Insurance
65
Section 7.13
Restriction on Liens
65
Section 7.14
Subsidiaries
65
Section 7.15
Location of Business and Offices
65
Section 7.16
Properties; Titles, Etc
66
Section 7.17
Maintenance of Properties
66
Section 7.18
Gas Imbalances, Prepayments
66
Section 7.19
Marketing of Production
67
Section 7.20
Swap Agreements and Qualified ECP Counterparty
67
Section 7.21
Use of Loans and Letters of Credit
67
Section 7.22
Solvency
67
Section 7.23
International Operations
68
Section 7.24
Anti-Corruption Laws and Sanction
68
Section 7.25
Accounts
68
Article VIII AFFIRMATIVE COVENANTS
68
Section 8.01
Financial Statements; Ratings Change; Other Information
68
Section 8.02
Notices of Material Events
71
Section 8.03
Existence; Conduct of Business
71
Section 8.04
Payment of Obligations
72
Section 8.05
Operation and Maintenance of Properties
72
Section 8.06
Insurance
72
Section 8.07
Books and Records; Inspection Rights
73
Section 8.08
Compliance with Laws
73
Section 8.09
Environmental Matters
73
Section 8.10
Further Assurances
74
Section 8.11
Reserve Reports
74
Section 8.12
Title Information
75
Section 8.13
Additional Collateral; Additional Guarantors
76
Section 8.14
ERISA Compliance
77
Section 8.15
Marketing Activities
77
Section 8.16
Organization; Powers
77
Section 8.17
Authority; Enforceability
78
Section 8.18
Approvals; No Conflicts
78

- ii-

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

TABLE OF CONTENTS
(continued)
Page

Article IX NEGATIVE COVENANTS
78
Section 9.01
Financial Covenants
78
Section 9.02
Debt
79
Section 9.03
Liens
80
Section 9.04
Restricted Payments; Redemption of Senior Notes
80
Section 9.05
Investments, Loans and Advances
81
Section 9.06
Nature of Business; International Operations
82
Section 9.07
Limitation on Leases
82
Section 9.08
Proceeds of Notes
82
Section 9.09
ERISA Compliance
83
Section 9.10
Sale or Discount of Receivables
83
Section 9.11
Mergers, Etc
83
Section 9.12
Sale of Properties
84
Section 9.13
Environmental Matters
85
Section 9.14
Transactions with Affiliates
85
Section 9.15
Subsidiaries
85
Section 9.16
Negative Pledge Agreements; Dividend Restrictions
86
Section 9.17
Gas Imbalances, Take-or-Pay or Other Prepayments
86
Section 9.18
Swap Agreements
86
Section 9.19
New Bank Accounts
87
Section 9.20
Changes in Fiscal Period
87
Section 9.21
Passive Holding Company Status of PEI
87
Section 9.22
Amendment to Certain Documents and Agreements
87
Article X EVENTS OF DEFAULT; REMEDIES
88
Section 10.01
Notices of Material Events
88
Section 10.02
Existence; Conduct of Business
90
Article XI THE AGENTS
91
Section 11.01
Operation and Maintenance of Properties
91
Section 11.02
Insurance
91
Section 11.03
Books and Records; Inspection Rights
91
Section 11.04
Compliance with Laws
92
Section 11.05
Environmental Matters
92
Section 11.06
Resignation or Removal of Administrative Agent
92
Section 11.07
Agents as Lenders
93
Section 11.08
No Reliance
93
Section 11.09
Administrative Agent May File Proofs of Claim
93
Section 11.10
Withholding Tax
94
Section 11.11
Authority of Administrative Agent to Release Collateral and Liens
94
Section 11.12
The Arranger
95
Article XII MISCELLANEOUS
95
Section 12.01
Notices
94

- iii-

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

TABLE OF CONTENTS
(continued)
Page

Section 12.02
Waivers; Amendments
95
Section 12.03
Expenses, Indemnity; Damage Waiver
97
Section 12.04
Successors and Assigns
100
Section 12.05
Survival; Revival; Reinstatement
102
Section 12.06
Counterparts; Integration; Effectiveness
103
Section 12.07
Severability
103
Section 12.08
Right of Setoff
103
Section 12.09
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS             
104
Section 12.10
Headings
105
Section 12.11
Confidentiality
105
Section 12.12
Interest Rate Limitation
105
Section 12.13
EXCULPATION PROVISIONS
106
Section 12.14
Collateral Matters; Swap Agreements; Cash Management Agreements
107
Section 12.15
No Third Party Beneficiaries
107
Section 12.16
USA Patriot Act Notice
107
Section 12.17
Non-Fiduciary Status
107
Section 12.18
Flood Insurance Provisions
107
Section 12.19
Acknowledgement and Consent to Bail-In of EEA Financial Institutions
108

ANNEXES, EXHIBITS AND SCHEDULES
 
 
Annex I
List of Maximum Credit Amounts
 
 
Exhibit A
Form of Note
Exhibit B
Form of Borrowing Request
Exhibit C
Form of Interest Election Request
Exhibit D
Form of Compliance Certificate
Exhibit E
Security Instruments
Exhibit F
Form of Guaranty Agreement
Exhibit G
Form of Assignment and Assumption
Exhibit H
Form of Lender Certificate
Exhibit I
Form of Consolidated Cash Balance Certificate
 
 
Schedule 1.1(a)
Existing Letters of Credit
Schedule 7.03
Consents
Schedule 7.04(c)
Material and Contingent Liabilities
Schedule 7.05
Litigation
Schedule 7.06
Environmental Matters
Schedule 7.07
Compliance with the Laws and Agreements; No Unwaived Defaults
Schedule 7.14
Subsidiaries
Schedule 7.16
Properties and Title
Schedule 7.18
Gas Imbalances; Take or Pay; Other Prepayments
Schedule 7.19
Marketing Agreements
Schedule 7.20
Swap Agreements
Schedule 7.25
Bank Accounts
Schedule 9.05
Investments

- iv-

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

THIS CREDIT AGREEMENT dated as of October 28, 2016, is among Parsley Energy,
LLC, a limited liability company duly formed and existing under the laws of the
state of Delaware (the “Borrower”); each of the Lenders from time to time party
hereto; Wells Fargo Bank, National Association (in its individual capacity,
“Wells Fargo”), as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the “Administrative Agent”);
JPMorgan Chase Bank, N.A., as syndication agent for the Lenders (in such
capacity, together with its successors in such capacity, the “Syndication
Agent”); and BMO Harris Bank, N.A., as documentation agent for the Lenders (in
such capacity, together with its successors in such capacity, the “Documentation
Agent”).
RECITALS
A.The Borrower has requested that the Lenders provide certain loans to and
extensions of credit on behalf of the Borrower.
B.    The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
C.    In consideration of the mutual covenants and agreements herein contained
and of the loans, extensions of credit and commitments hereinafter referred to,
the parties hereto agree as follows:

Article I
DEFINITIONS AND ACCOUNTING MATTERS

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

Section 1.02    Certain Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.
“Additional Lenders” has the meaning ascribed such term in Section 2.07(h)(ii).
“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the LIBO Rate for such Interest Period multiplied
by the Statutory Reserve Rate.
“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.
“Affected Loans” has the meaning assigned to such term in Section 5.06.
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
“Agents” means, collectively, the Administrative Agent, the Syndication Agent
and the Documentation Agent; and “Agent” means either the Administrative Agent,
the Syndication Agent or Documentation Agent, as the context requires.

-1-

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

“Aggregate Elected Borrowing Base Commitments” means (a) on the Effective Date,
$600,000,000, and (b) at any time thereafter, an amount determined in accordance
with Section 2.07(h).
“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06. The initial Aggregate Maximum Credit Amounts of the Lenders is
$2,500,000,000.
“Agreement” means this Credit Agreement, including any schedules and exhibits
hereto.
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one
month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1.00%; provided that, for the avoidance
of doubt, the Adjusted LIBO Rate for any day shall be based on the rate
appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute
page of such service, or any successor to or substitute for such service,
providing rate quotations comparable to those currently provided on such page of
such service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market), rounded upwards, if necessary, to the next
1/100 of 1% at which dollar deposits of $5,000,000 with a one month maturity are
offered at approximately 11:00 a.m., London time, on such day (or the
immediately preceding Business Day if such day is not a Business Day). Any
change in the Alternate Base Rate due to a change in the Prime Rate, the Federal
Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and
including the effective date of such change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate, respectively.
“Anti-Corruption Laws” means all state or federal laws, rules, and regulations
applicable to the Borrower or its Subsidiaries from time to time concerning or
relating to bribery, corruption or money laundering, including the Foreign
Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder.
“Applicable Margin” means, for any day, with respect to any ABR Loan or
Eurodollar Loan, or with respect to the Commitment Fee Rate, as the case may be,
the rate per annum set forth in the Borrowing Base Utilization Grid below based
upon the Borrowing Base Utilization Percentage then in effect:
Borrowing Base Utilization Grid
 
<25%
≥25%, but
<50%
≥50%, but
<75%
≥75%, but
<90%
≥90%
ABR Loans
1.000%
1.250%
1.500%
1.750%
2.000%
Eurodollar Loans
2.000%
2.250%
2.500%
2.750%
3.000%
Commitment Fee Rate
0.375%
0.375%
0.500%
0.500%
0.500%

Notwithstanding the foregoing, if the Consolidated Leverage Ratio as of the last
day of any fiscal quarter or fiscal year of the Borrower, as applicable, exceeds
3.50 to 1.00, then the Applicable Margin set forth in the table above with
respect to ABR Loans and Eurodollar Loans will, in each case, increase by 0.50%
during the period from and including the first day immediately following the
date a Compliance Certificate is delivered pursuant to Section 8.01(c) for such
fiscal quarter or fiscal year, as applicable, through and including the date of
delivery of a Compliance Certificate pursuant to Section 8.01(c) for the
immediately succeeding fiscal quarter. Each change in the Applicable Margin
shall apply during the period commencing on the effective date of such change
and ending on the date immediately preceding the effective date of the next such
change; provided, however, that if at any time the Borrower fails to deliver a
Reserve Report

-2-

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

pursuant to Section 8.11(a), then, if so elected by the Majority Lenders, the
“Applicable Margin” means the rate per annum set forth on the grid when the
Borrowing Base Utilization Percentage is at its highest level.
Notwithstanding anything to the contrary contained above in this definition or
elsewhere in this Agreement, if it is subsequently determined during the term of
this Agreement that the Consolidated Leverage Ratio set forth in any Compliance
Certificate delivered for any period is inaccurate for any reason and the result
thereof is that the applicable Lenders received interest or fees for any period
based on an Applicable Rate that is less than that which would have been
applicable had the Consolidated Leverage Ratio been accurately determined, then,
for all purposes of this Agreement, the “Applicable Rate” for any day occurring
within the affected period covered by such Compliance Certificate shall
retroactively be deemed to be the relevant percentage as based upon the
accurately determined Consolidated Leverage Ratio for such affected period, and
any shortfall in the interest or fees theretofore paid by the Borrower for the
relevant period pursuant to Section 3.02(a), Section 3.02(b), Section 3.02(c),
Section 3.05(a) and Section 3.05(b) as a result of the miscalculation of the
Consolidated Leverage Ratio shall be deemed to be due and payable under the
relevant provisions of Section 3.02(a), Section 3.02(b), Section 3.02(c),
Section 3.05(a) and Section 3.05(b), as applicable, at the time the interest or
fees for such affected period were required to be paid pursuant to said Sections
on the same basis as if the Consolidated Leverage Ratio had been accurately set
forth in such compliance certificate (and shall remain due and payable until
paid in full, together with all amounts owing under Section 3.02(c), in
accordance with the terms of this Agreement) and shall be due and payable on the
date of such subsequent determination.
“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I; provided that if the
Commitments have terminated or expired, each Lender’s Applicable Percentage
shall be determined based upon the Commitments most recently in effect.
“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and
(b) any other Person if such Person or its credit support provider has a long
term senior unsecured debt rating of A-/A3 by S&P or Moody’s (or their
equivalent) or higher.
“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.
“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company Petroleum Consultants, L.P. and (c) any other
independent petroleum engineers reasonably acceptable to the Administrative
Agent.
“Arranger” means Wells Fargo Securities, LLC, in its capacities as the sole lead
arranger and sole bookrunner hereunder.
“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(b)), and accepted by the Administrative Agent, in the form of
Exhibit G or any other form approved by the Administrative Agent.
“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.

-3-

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

“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.
“Bankruptcy Event” means, with respect to any Person, such Person becomes the
subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee, administrator, custodian, assignee for the benefit of
creditors or similar Person charged with the reorganization or liquidation of
its business appointed for it, or, in the good faith determination of the
Administrative Agent, has taken any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any such proceeding or appointment;
provided that a Bankruptcy Event shall not result solely by virtue of any
ownership interest, or the acquisition of any ownership interest, in such Person
by a Governmental Authority or instrumentality thereof; provided, further, that
such ownership interest does not result in or provide such Person with immunity
from the jurisdiction of courts within the United States or from the enforcement
of judgments or writs of attachment on its assets or permit such Person (or such
Governmental Authority or instrumentality) to reject, repudiate, disavow or
disaffirm any contracts or agreements made by such Person; provided that the
appointment of an administrator, provisional liquidator, conservator, receiver,
trustee, custodian or other similar official by a supervisory authority or
regulator with respect to a Person under the Dutch Financial Supervision Act
2007 (as amended from time to time and including any successor legislation)
shall not be deemed a Bankruptcy Event.
“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.
“Borrowing” means Loans of the same Type, made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.
“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 2.07(e), Section 2.07(f), Section 2.07(g) or Section
8.12(c).
“Borrowing Base Deficiency” occurs at any time the total Revolving Credit
Exposures exceeds the lesser of (a) the Borrowing Base then in effect and (b)
the Aggregate Elected Borrowing Base Commitments then in effect.
“Borrowing Base Properties” means the Oil and Gas Properties of the Loan Parties
included in the most recently delivered Reserve Report hereunder.
“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is the
Borrowing Base in effect on such day.
“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Borrowing or
continuation of, a payment or prepayment of principal of or interest on, or a

-4-

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

conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such Borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which
banks are open for dealings in dollar deposits in the London interbank market.
“Capital Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable (whether contingent or otherwise) for
the payment of rent thereunder.
“Cash Equivalents” means, collectively Investments permitted pursuant to
Sections 9.05(c)-(f).
“Cash Management Agreement” means any agreement to provide cash management
services, including treasury, depository, overdraft, credit or debit card,
electronic funds transfer and other cash management services.
“Cash Receipts” means all cash received by or on behalf of the Borrower or any
Restricted Subsidiary, including without limitation: (a) amounts payable under
or in connection with any Oil and Gas Properties; (b) cash representing
operating revenue earned or to be earned by the Borrower or any Restricted
Subsidiary; (c) proceeds from Loans; and (d) any other cash received by or on
behalf of the Borrower or any Restricted Subsidiary from whatever source
(including amounts received in respect of the Liquidation of any Swap Agreement
and amounts received in respect of any disposition of Property).
“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Restricted
Subsidiaries having a fair market value in excess of a dollar amount equal to
two and one-half percent (2.5%) of the then effective Borrowing Base.
“Change in Control” means the occurrence of any of the following: (i) PEI shall
cease to Control the Borrower; (ii) PEI shall cease to own directly,
beneficially and of record, Equity Interests representing at least 51% of the
aggregate issued and outstanding Equity Interests of the Borrower; (iii) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Securities Exchange Act of 1934
and the rules of the SEC thereunder as in effect on the date hereof) other than
the Permitted Holders, of Equity Interests representing more than 30% of the
aggregate ordinary voting power represented by the issued and outstanding Equity
Interests of PEI; (iv) occupation of a majority of the seats (other than vacant
seats) on the board of directors of PEI by Persons who were neither (1)
nominated nor approved by the board of directors of the Borrower nor (2)
appointed by directors so nominated or approved; or (v) the acquisition of
direct or indirect Control of PEI by any Person or group other than the
Permitted Holders.
“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation, implementation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
the Issuing Bank (or, for purposes of Section 5.01(b)), by any lending office of
such Lender or by such Lender’s or the Issuing Bank’s holding company, if any)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement; provided that notwithstanding anything herein to the contrary (i) the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives thereunder or issued in connection therewith, or
in implementation thereof and (ii) all requests, rules, guidelines, requirements
or directives concerning capital adequacy promulgated by the Bank for
International Settlements, the Basel Committee on Banking Regulations and
Supervisory Practices (or any successor or similar authority) or the United
States financial

-5-

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

regulatory authorities, in each case pursuant to Basel III, shall be deemed to
be a “Change in Law”, regardless of the date enacted, adopted, promulgated,
issued or implemented.
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.
“Collateral” means all Property which is subject to a Lien under one or more
Security Instruments.
“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a)
modified from time to time pursuant to Section 2.06, (b) increased or reduced
from time to time pursuant to Section 2.07(h), and (c) modified from time to
time pursuant to assignments by or to such Lender pursuant to Section 12.04(b).
The amount representing each Lender’s Commitment shall at any time be the least
of (i) such Lender’s Maximum Credit Amount, (ii) such Lender’s Applicable
Percentage of the then effective Borrowing Base and (iii) such Lender’s
Applicable Percentage of the then effective Aggregate Elected Borrowing Base
Commitments.
“Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.
“Commodity Account” has the meaning assigned to such term in the UCC.
“Commodity Contract” has the meaning assigned to such term in the UCC.
“Compliance Certificate” has the meaning set forth in Section 8.01(c).
“Consolidated Cash Balance” means, at any time, the aggregate amount of cash and
Cash Equivalents, marketable securities, treasury bonds and bills, certificates
of deposit, investments in money market funds and commercial paper, in each
case, held or owned by (whether directly or indirectly), credited to the account
of, or otherwise reflected as an asset on the balance sheet of, the Borrower and
its Restricted Subsidiaries (other than (i) any cash set aside to pay in the
ordinary course of business amounts of the Borrower and its Subsidiaries then
due and owing to unaffiliated third parties and for which the Borrower or such
Restricted Subsidiary, as applicable, has issued checks or has initiated wires
or ACH transfers in order to pay (or will issue checks or initiate wires or ACH
transfers in order to pay such amounts within five Business Days), (ii) any cash
constituting purchase price deposits held in escrow by or on behalf of any Loan
Party pursuant to a binding and enforceable purchase and sale agreement with an
unaffiliated third party containing customary provisions regarding the payment
and refunding of such deposits, and (iii) any amounts held as cash collateral as
required pursuant to Section 2.08(j)).
“Consolidated Cash Balance Threshold” means, at any time, the greater of (a) 10%
of the Borrowing Base then in effect and (b) $100,000,000.
“Consolidated Leverage Ratio” means, as at the last day of any relevant period,
the ratio of (a) Consolidated Total Debt on such day to (b) EBITDAX for such
period.
“Consolidated Net Income” means with respect to the Borrower and the
Consolidated Restricted Subsidiaries, for any period, the aggregate of the net
income (or loss) of the Borrower and the Consolidated Restricted Subsidiaries
after allowances for taxes for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net income
(to the extent otherwise included therein) the following: (a) the net income of
any Person in which the Borrower or any Consolidated Restricted Subsidiary has
an interest (which interest does not cause the net income of such other Person
to

-6-

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

be consolidated with the net income of the Borrower and the Consolidated
Restricted Subsidiaries in accordance with GAAP), except, in the case of the
foregoing clause (a), to the extent of the amount of dividends or distributions
actually paid in cash during such period by such Person to the Borrower or to a
Consolidated Restricted Subsidiary, as the case may be; (b) the net income (but
not loss) during such period of any Consolidated Restricted Subsidiary to the
extent that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Restricted Subsidiary is not at the time
permitted by operation of the terms of its charter or any agreement, instrument
or Governmental Requirement applicable to such Consolidated Restricted
Subsidiary or is otherwise restricted or prohibited, in each case determined in
accordance with GAAP; (c) the net income (or deficit) of any Person accrued
prior to the date it becomes a Consolidated Restricted Subsidiary or is merged
into or consolidated with the Borrower or any of its Consolidated Restricted
Subsidiaries; (d) any extraordinary gains or losses during such period; (e) any
non-cash gains or losses or positive or negative adjustments under FASB ASC 815
(and any statements replacing, modifying or superseding such statement) as the
result of changes in the fair market value of derivatives; and (f) any gains or
losses attributable to writeups or writedowns of assets, including ceiling test
writedowns. For the purposes of calculating Consolidated Net Income for any
period of four (4) consecutive fiscal quarters (each, a “Reference Period”), (i)
if during such Reference Period the Borrower or any Consolidated Restricted
Subsidiary shall have made any Material Disposition, the Consolidated Net Income
for such Reference Period shall be reduced by an amount equal to the
Consolidated Net Income (if positive) attributable to the Property that is the
subject of such Material Disposition for such Reference Period or increased by
an amount equal to the Consolidated Net Income (if negative) attributable
thereto for such Reference Period, (ii) if during such Reference Period the
Borrower or any Consolidated Restricted Subsidiary shall have made a Material
Acquisition, the Consolidated Net Income for such Reference Period shall be
calculated after giving pro forma effect thereto as if such Material Acquisition
occurred on the first day of such Reference Period and (iii) if during such
Reference Period a Consolidated Subsidiary shall be redesignated as either a
Consolidated Unrestricted Subsidiary or a Consolidated Restricted Subsidiary,
the Consolidated Net Income shall be calculated after giving pro forma effect to
such redesignation, as if such redesignation had occurred on the first day of
such Reference Period.
“Consolidated Restricted Subsidiaries” means any Restricted Subsidiaries that
are Consolidated Subsidiaries.
“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now
existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.
“Consolidated Total Debt” means, at any date, all Debt of the Borrower and the
Consolidated Restricted Subsidiaries on a consolidated basis, excluding non-cash
obligations under FASB ASC 815. Notwithstanding anything herein to the contrary,
if there are no Loans or unreimbursed LC Disbursements outstanding on any
applicable date on which Consolidated Total Debt is calculated, Consolidated
Total Debt shall be calculated net of the amount of unrestricted cash and Cash
Equivalents of the Borrower and the Consolidated Restricted Subsidiaries on such
date.
“Consolidated Unrestricted Subsidiaries” means any Unrestricted Subsidiaries
that are Consolidated Subsidiaries.
“Control” 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 voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

-7-

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

“Control Agreement” means a control agreement, in form and substance reasonably
satisfactory to the Administrative Agent, providing for the Administrative
Agent’s exclusive control of a Deposit Account, Securities Account or Commodity
Account, as applicable, after notice as provided therein, executed and delivered
by the Borrower or a Restricted Subsidiary, as applicable, and the applicable
securities intermediary (with respect to a Securities Account), bank (with
respect to a Deposit Account) or commodity intermediary (with respect to a
Commodity Account), in each case at which such relevant account is maintained.
“Credit Party” means the Administrative Agent, the Issuing Bank or any Lender.
“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services (other
than accounts payable and accrued expenses, liabilities or other obligations to
pay the deferred purchase price of Property or services from time to time
incurred in the ordinary course of business which are not greater than ninety
(90) days past the date of invoice or delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP); (d) all obligations under Capital Leases;
(e) all obligations under Synthetic Leases; (f) all Debt (as defined in the
other clauses of this definition) of others secured by (or for which the holder
of such Debt has an existing right, contingent or otherwise, to be secured by) a
Lien on any Property of such Person, whether or not such Debt is assumed by such
Person; (g) all Debt (as defined in the other clauses of this definition) of
others guaranteed by such Person or in which such Person otherwise assures a
creditor against loss of the Debt (howsoever such assurance shall be made) to
the extent of the lesser of the amount of such Debt and the maximum stated
amount of such guarantee or assurance against loss; (h) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others;
(i) obligations to deliver commodities, goods or services, including, without
limitation, Hydrocarbons, in consideration of one or more advance payments,
other than gas balancing arrangements in the ordinary course of business; (j)
obligations to pay for goods or services actually ordered or rendered even if
such goods or services are not actually received by such Person; (k) any Debt of
a partnership for which such Person is liable either by agreement, by operation
of law or by a Governmental Requirement but only to the extent of such
liability; (l) Disqualified Capital Stock; and (m) the undischarged balance of
any production payment created by such Person or for the creation of which such
Person directly or indirectly received payment. The Debt of any Person shall
include all obligations of such Person of the character described above to the
extent such Person remains legally liable in respect thereof notwithstanding
that any such obligation is not included as a liability of such Person under
GAAP. The amount of Debt of any Person for purposes of clause (f) shall (unless
such Debt has been assumed by such Person) be deemed to be equal to the lesser
of (i) the aggregate unpaid amount of such Debt and (ii) the fair market value
of the property encumbered thereby as determined by such Person in good faith.
“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.
“Defaulting Lender” means any Lender that (a) has failed, within two Business
Days of the date required to be funded or paid, to (i) fund any portion of its
Loans, (ii) fund any portion of its participations in Letters of Credit or (iii)
pay over to any Credit Party any other amount required to be paid by it
hereunder, unless, in the case of clause (i) above, such Lender notifies the
Administrative Agent in writing that such failure is the result of such Lender’s
good faith determination that a condition precedent to funding (specifically
identified and including the particular default, if any) has not been satisfied,
(b) has notified the Borrower or any Credit Party in writing, or has made a
public statement to the effect, that it does not

-8-

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

intend or expect to comply with any of its funding obligations under this
Agreement (unless such writing or public statement indicates that such position
is based on such Lender’s good faith determination that a condition precedent
(specifically identified and including the particular default, if any) to
funding a loan under this Agreement cannot be satisfied) or generally under
other agreements in which it commits to extend credit, (c) has failed, within
three Business Days after request by a Credit Party, acting in good faith, to
provide a certification in writing from an authorized officer of such Lender
that it will comply with its obligations (and is financially able to meet such
obligations) to fund prospective Loans and participations in then outstanding
Letters of Credit under this Agreement; provided that such Lender shall cease to
be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s
receipt of such certification in form and substance satisfactory to it and the
Administrative Agent, or (d) has, or whose Lender Parent has, become the subject
of a Bankruptcy Event or a Bail-In Action.
“Deposit Account” has the meaning assigned to such term in the UCC.
“Disposition” means with respect to any Property, any sale, lease, sale and
leaseback transaction, assignment, farmout, exchange, conveyance, transfer or
other disposition (including by way of a merger or consolidation) of such
Property or any interest therein; and the terms “Dispose” and “Disposed of”
shall have correlative meanings.
“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part (but if in part only with respect to such amount that meets
the criteria set forth in this definition), on or prior to the date that is one
year after the earlier of (a) the Maturity Date and (b) the date on which there
are no Loans, LC Exposure or other obligations hereunder outstanding and all of
the Commitments are terminated.
“dollars” or “$” refers to lawful money of the United States of America.
“Domestic Subsidiary” means any Restricted Subsidiary that is organized under
the laws of the United States of America or any state thereof or the District of
Columbia.
“EBITDAX” means, for any period, Consolidated Net Income for such period plus
the following expenses or charges to the extent deducted from Consolidated Net
Income in such period: the sum of (a) interest expense, income taxes, franchise
or similar taxes, depreciation, depletion, amortization, exploration and
abandonment expenses, (b) transaction costs, expenses and charges with respect
to the acquisition of Property by the Borrower or any Restricted Subsidiary
deducted from Consolidated Net Income pursuant to SFAS 141(R), (c) distributions
in connection with Equity Interests owned by management employees of the
Borrower and its Restricted Subsidiaries permitted under this Agreement; (d) any
actual expenses or charges directly incurred in connection with any issuance of
Equity Interests, Investment, acquisition, disposition, recapitalization or the
incurrence or repayment of Debt permitted to be incurred hereunder including a
refinancing thereof (whether or not successful) and any amendment or
modification to the terms of any such transactions, including any transaction
costs or expenses directly related to the Transactions, in an aggregate amount
not to exceed five percent (5%) of EBITDAX (prior to giving effect thereto) for
any period of four consecutive fiscal quarters of the Borrower, and provided
that the Borrower has delivered to the Administrative Agent a certificate from a
Financial Officer of the Borrower certifying, in good faith, as to such expenses
or charges, in such detail, and together with such supporting documentation
therefor, as may be reasonably requested by the Administrative Agent; (e) solely
to the extent (i) covered by

-9-

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

indemnification provisions in any agreement and (ii) actually reimbursed,
expenses incurred in connection with any Disposition or other Investment
permitted hereunder; (f) any extraordinary, unusual or nonrecurring expenses or
losses to the extent such amounts are non-cash; and (g) all other noncash
charges, minus all noncash income added to Consolidated Net Income. For the
purposes of calculating EBITDAX for any Reference Period, (i) if during such
Reference Period the Borrower or any Consolidated Restricted Subsidiary shall
have made any Material Disposition, EBITDAX for such Reference Period shall be
reduced by an amount equal to the EBITDAX (if positive) attributable to the
Property that is the subject of such Material Disposition for such Reference
Period or increased by an amount equal to the EBITDAX (if negative) attributable
thereto for such Reference Period, (ii) if during such Reference Period the
Borrower or any Consolidated Restricted Subsidiary shall have made a Material
Acquisition, EBITDAX for such Reference Period shall be calculated after giving
pro forma effect thereto as if such Material Acquisition occurred on the first
day of such Reference Period and (iii) if during such Reference Period a
Consolidated Subsidiary shall be redesignated as either a Consolidated
Unrestricted Subsidiary or a Consolidated Restricted Subsidiary, EBITDAX shall
be calculated after giving pro forma effect to such redesignation, as if such
redesignation had occurred on the first day of such Reference Period.
Notwithstanding anything herein to the contrary: EBITDAX for the Reference
Period ending on September 30, 2016 shall be calculated by multiplying EBITDAX
for the fiscal quarter ending on such date by four (4); EBITDAX for the
Reference Period ending on December 31, 2016 shall be calculated by multiplying
EBITDAX for the two consecutive fiscal quarters ending on such date by two (2);
and EBITDAX for the Reference Period ending on March 31, 2017 shall be
calculated by multiplying EBITDAX for the three consecutive fiscal quarters
ending on such date by four-thirds (4/3).
“EEA Financial Institution” means (a) any credit institution or investment firm
established in any EEA Member Country which is subject to the supervision of an
EEA Resolution Authority, (b) any entity established in an EEA Member Country
which is a parent of an institution described in clause (a) of this definition,
or (c) any financial institution established in an EEA Member Country which is a
subsidiary of an institution described in clauses (a) or (b) of this definition
and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union,
Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any
person entrusted with public administrative authority of any EEA Member Country
(including any delegee) having responsibility for the resolution of any EEA
Financial Institution.
“Effective Date” means the date on which the conditions specified in Section
6.01 are satisfied (or waived in accordance with Section 12.02).
“Engineering Reports” has the meaning assigned to such term in Section
2.07(c)(i).
“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety, the environment, the preservation or reclamation of
natural resources, or the management, Release or threatened Release of any
Hazardous Materials, in effect in any and all jurisdictions in which the
Borrower or any Subsidiary is conducting, or at any time has conducted,
business, or where any Property of the Borrower or any Subsidiary is located,
including, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act,
as amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act,

-10-

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

as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Law, as amended, and other
environmental conservation or protection Governmental Requirements.
“Environmental Permit” means any permit, registration, license, notice,
approval, consent, exemption, variance, or other authorization required under or
issued pursuant to applicable Environmental Laws.
“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.
“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or a Restricted Subsidiary would be deemed to
be a “single employer” within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
“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.
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.
“Event of Default” has the meaning assigned to such term in Section 10.01.
“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory or common law landlord’s
liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’,
suppliers’, workers’, materialmen’s, construction or other like Liens arising by
operation of law in the ordinary course of business or incident to the
exploration, development, operation and maintenance of Oil and Gas Properties
each of which is in respect of obligations that are not overdue for a period of
more than thirty (30) days or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; provided that at no time shall such sums being contested
exceed in the aggregate $20,000,000; (d) contractual Liens which arise in the
ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance

-11-

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

with GAAP; provided that any such Lien referred to in this clause does not
materially impair the use of any material Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any Restricted
Subsidiary or materially impair the value of any material Property subject
thereto; (e) Liens arising solely by virtue of any statutory or common law
provision relating to banker’s liens, rights of set-off or similar rights and
remedies and burdening only deposit accounts or other funds maintained with a
creditor depository institution; provided that no such deposit account is a
dedicated cash collateral account or is subject to restrictions against access
by the depositor in excess of those set forth by regulations promulgated by the
Board and no such deposit account is intended by Borrower or any of its
Restricted Subsidiaries to provide collateral to the depository institution; (f)
easements, rights-of-way, restrictions, servitudes, permits, conditions,
covenants, exceptions, encroachments, protrusions, reservations and other
similar encumbrances in any Property of the Borrower or any Restricted
Subsidiary that do not secure any monetary obligations and which in the
aggregate do not materially impair the use of such Property for the purposes of
which such Property is held by the Borrower or any Restricted Subsidiary or
materially impair the value of such Property subject thereto; (g) Liens on cash,
Cash Equivalents, or securities pledged to secure performance of tenders,
surety, stay, customs and appeal bonds, government contracts, performance and
return of money bonds, bids, trade contracts, leases, statutory obligations,
regulatory obligations and other obligations of a like nature incurred in the
ordinary course of business; (h) judgment and attachment Liens not giving rise
to an Event of Default; provided that any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceeding may be initiated
shall not have expired and no action to enforce such Lien has been commenced;
(i) Liens arising from Uniform Commercial Code financing statement filings
regarding operating leases entered into by the Borrower and the Restricted
Subsidiaries in the ordinary course of business covering only the Property under
lease; (j) licenses, subleases or sublicenses granted to other Persons in the
ordinary course of business which do not interfere in any material respect with
the business of the Borrower and its Restricted Subsidiaries; (k) consisting of
an agreement to Dispose of any property in a Disposition permitted under this
Agreement; (l) any interest or title of a lessor, sublessor, licensor or
sublicensor under licenses entered into by the Borrower or any of its Restricted
Subsidiaries in the ordinary course of business; (m) Liens arising out of
conditional sale, title retention, consignment or similar arrangements for sale
of goods entered into by the Borrower or any of its Restricted Subsidiaries in
the ordinary course of business; (n) Liens (i) of a collecting bank arising in
the ordinary course of business under Section 4-208 of the Uniform Commercial
Code on the items in the course of collection and (ii) attaching to commodity
trading accounts or other commodities brokerage accounts incurred in the
ordinary course of business; (o) Liens that are contractual rights of setoff
relating to the establishment of depository relations with banks or other
deposit-taking financial institutions in the ordinary course of business and not
given in connection with the issuance of Debt; and (p) restrictions resulting
from any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property, in each case, which do not and will not interfere with or affect in
any material respect the use, value or operations of any real Property or the
ordinary conduct of the business of the Borrower or any of its Restricted
Subsidiaries; provided, further that Liens described in clauses (a) through (e)
shall remain “Excepted Liens” only for so long as no action to enforce such Lien
has been commenced (and not stayed) and no intention to subordinate the first
priority Lien granted in favor of the Administrative Agent and the Lenders is to
be hereby implied or expressed by the permitted existence of such Excepted
Liens.
“Excluded Swap Obligations” has the meaning assigned to such term in the
Guaranty Agreement.
“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower or any Guarantor hereunder or under
any other Loan Document, (a) income or franchise Taxes (i) imposed on (or
measured by) its net income (however denominated and including for the avoidance
of doubt, any backup

-12-

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

withholding in respect thereof under Section 3406 of the Code and any similar
provision of state, local or foreign law) by the United States of America or
such other jurisdiction under the laws of which such recipient is organized or
in which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located, or (ii) that are Other Connection
Taxes, (b) any branch profits Taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Borrower or any
Guarantor is located, (c) in the case of a Lender or Administrative Agent, any
U.S. federal withholding Tax that is imposed on amounts payable (i) to or for
the account of such Lender with respect to an applicable interest in the Loan or
Commitment or (ii) to the Administrative Agent for its own account, in each
case, pursuant to a law in effect on the date on which (A) such Lender acquires
such interest in the Loan or Commitment (other than pursuant to an assignment
request under Section 5.04 or Section 5.05), (B) such Lender changes its lending
office or (C) the Administrative Agent becomes a party to this Agreement, except
to the extent that such Lender or Administrative Agent (or, in each case, its
assignor, if any) was entitled, at the time of assignment or designation of a
new lending office to receive additional amounts with respect to such
withholding Tax pursuant to Section 5.03, (d) U.S. federal withholding Taxes
attributable to such recipient’s failure to comply with Section 5.03(e), and (e)
any U.S. federal withholding Tax that is imposed under FATCA.
“Existing Credit Agreement” means that certain Amended and Restated Credit
Agreement dated as of October 21, 2013, among Parsley Energy, L.P., Parsley
Energy Management, LLC, Parsley Energy, LLC, Wells Fargo Bank, National
Association, as administrative agent, and the lenders and other agents party
thereto, as heretofore amended, modified and supplemented.

“Existing Letters of Credit” shall mean each of the letters of credit existing
on the Effective Date and identified on Schedule 1.1(a).

“Facility Termination Date” means the date upon which the Obligations have been
paid in full in cash, the Commitments have been terminated and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, other than with respect to contingent indemnification obligations
for which no claim has been made and Letters of Credit that have been cash
collateralized or otherwise backstopped to the reasonable satisfaction of the
Issuing Bank, in each case, up to an amount equal to 103% of the face amount of
such Letters of Credit, or deemed issued under another credit facility.
    
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b) (1) of the Code, any intergovernmental agreement
entered into in connection with the implementation of such Sections of the Code
and any fiscal or regulatory legislation, rules or practices adopted pursuant to
such intergovernmental agreement.

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

-13-

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

“Fee Letter” means the Fee and Engagement Letter dated as of September 19, 2016,
among the Borrower, the Administrative Agent and the Arranger.
“Finance Co.” means Parsley Finance Corp., a Delaware corporation.
“Financial Officer” means, for any Person, the chief financial officer,
principal accounting officer, treasurer, controller or other natural person
principally responsible for the financial matters of such Person (or in the case
of any Person that is a partnership, of such Person’s general partner). Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.
“Financial Statements” means the financial statement or statements of PEI and
its consolidated subsidiaries referred to in Section 7.04(a).
“Foreign Lender” means any Lender that is not a U.S. Person.
“Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic
Subsidiary.
“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.
“Good and Defensible Title” means title that is free from reasonable doubt to
the end that a prudent person engaged in the business of purchasing and owning,
developing, and operating producing oil and gas properties in the geographical
areas in which they are located, with knowledge of all of the facts and their
legal bearing, would be willing to accept the same acting reasonably.
“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.
“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, rules of common law, authorization or other
directive or requirement, whether now or hereinafter in effect, of any
Governmental Authority.
“Guarantors” means each Restricted Subsidiary or other Person that is a party to
the Guaranty Agreement as a “Guarantor” and “Grantor” (as such terms are defined
in the Guaranty Agreement) and guarantees the Obligations (including pursuant to
Section 6.01 or Section 8.13(b)).
“Guaranty Agreement” means the Guarantee and Collateral Agreement executed by
the Borrower and the Guarantors in substantially the form attached hereto as
Exhibit F.
“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law including: (a) any chemical,
compound, material, product, byproduct, substance or waste defined as or
included in the definition or meaning of “hazardous substance,” “hazardous
material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous
substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar
meaning or import found in any applicable Environmental Law; (b) Hydrocarbons,
petroleum products, petroleum substances, natural gas, oil, oil and gas waste,
crude oil, and any components, fractions, or derivatives thereof; and (c)
radioactive materials, explosives, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon, infectious or medical wastes.

-14-

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

“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Obligations under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.
“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
Unless otherwise indicated herein, each reference to the term “Hydrocarbon
Interests” shall mean Hydrocarbon Interests of the Loan Parties and their
Restricted Subsidiaries.
“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.
“Increase Effective Date” has the meaning ascribed such term in Section
2.07(h)(ii).
“Increase Notice” has the meaning ascribed such term in Section 2.07(h)(ii).
“Indemnified Taxes” means Taxes, other than Excluded Taxes, imposed on or with
respect to any payment made by or on account of any obligation of the Borrower
or any Guarantor.
“Initial Reserve Report” means the report of the Borrower dated as of September
13, 2016, with respect to certain of the Oil and Gas Properties of the Borrower
and its Restricted Subsidiaries as of April 1, 2017.
“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04.
“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each March, June, September and December and (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period.
“Interest Period” means, as to each Eurodollar Borrowing, the period commencing
on the date such Borrowing is disbursed or converted to or continued as a
Eurodollar Borrowing and ending on the date (a) one, two, three or six months
thereafter, or (b) upon consent of all Lenders, twelve months thereafter, in any
case as selected by the Borrower in its Borrowing Request or Interest Election
Request, as applicable; provided that: (i) any Interest Period that would
otherwise end on a day that is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day; (ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and (iii)
no Interest Period shall extend beyond the Maturity Date.
“Interim Redetermination” has the meaning assigned to such term in Section
2.07(b).

-15-

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

“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 2.07(d).
“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person (including, without limitation, any “short sale” or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, loan or
capital contribution to, assumption of Debt of, purchase or other acquisition of
any other Debt or equity participation or interest in, or other extension of
credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person, but excluding any such advance, loan or
extension of credit having a term not exceeding ninety (90) days representing
the purchase price of inventory or supplies sold by such Person in the ordinary
course of business); (c) the purchase or acquisition (in one or a series of
transactions) of Property of another Person that constitutes a business unit; or
(d) the entering into of any guarantee of, or other contingent obligation
(including the deposit of any Equity Interests to be sold) with respect to, Debt
of any other Person and (without duplication) any amount committed to be
advanced, lent or extended to such Person.
“Issuing Bank” means Wells Fargo, in its capacity as the issuer of Letters of
Credit hereunder, and its successors in such capacity as provided in Section
2.08(i). The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case
the term “Issuing Bank” shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.
“LC Commitment” at any time means Two Million Five Hundred Thousand dollars
($2,500,000).
“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time. The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.
“Lender Certificate” has the meaning ascribed such term in Section 2.07(h)(ii).
“Lender Parent” means, with respect to any Lender, any Person as to which such
Lender is, directly or indirectly, a subsidiary.
“Lenders” means the Persons listed on Annex I and any Person that shall have
become a party hereto pursuant to Section 2.07(h)(ii) or pursuant to an
Assignment and Assumption, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Assumption.
“Letter of Credit” means any letter of credit issued pursuant to this Agreement
(including the Existing Letters of Credit).
“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with the Issuing
Bank relating to any Letter of Credit.
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor
or substitute page of such service, or any successor to or substitute for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Administrative Agent from time
to time for purposes of

-16-

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

providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the “LIBO Rate”
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate (rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar
deposits of an amount comparable to such Eurodollar Borrowing and for a maturity
comparable to such Interest Period are offered by the principal London office of
the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period; provided, that, if the LIBO Rate shall be
less than zero, such rate shall be deemed to be zero for purposes of this
Agreement.
“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties. The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Restricted Subsidiaries shall
be deemed to be the owner of any Property which it has acquired or holds subject
to a conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
“Liquidate” means, with respect to any Swap Agreement, (a) the sale, assignment,
novation, unwind or termination of all or any part of such Swap Agreement or (b)
the creation of an offsetting position against all or any part of such Swap
Agreement. The terms “Liquidated” and “Liquidation” have correlative meanings
thereto.
“Liquidity” means, as of any date of determination, the sum of (a) the amount of
unrestricted cash and Cash Equivalents of the Borrower on such date and (b) the
amount of the unused Commitments as of such date.
“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Agreements, the Letters of Credit, the Security Instruments and the Fee Letter.
“Loan Parties” means, collectively, the Borrower and each Restricted Subsidiary.
“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.
“Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Non-Defaulting Lenders having more than fifty percent (50%) of the
Aggregate Maximum Credit Amounts of all Non-Defaulting Lenders; and at any time
while any Loans or LC Exposure is outstanding, Non-Defaulting Lenders holding
more than fifty percent (50%) of the outstanding aggregate principal amount of
the Loans and participation interests in Letters of Credit of all Non-Defaulting
Lenders (without regard to any sale by a Non-Defaulting Lender of a
participation in any Loan under Section 12.04(c)).
“Material Acquisition” means any acquisition of Property or series of related
acquisitions of Property that involves the payment of consideration by the
Borrower and its Restricted Subsidiaries in excess of ten percent (10%) of the
then effective Borrowing Base.

-17-

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

“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, assets, operations, Property, or condition
(financial or otherwise) of the Loan Parties taken as a whole, (b) the ability
of the Borrower, any Restricted Subsidiary or any Guarantor to perform any of
its payment obligations or other material obligations under any Loan Document,
(c) the validity or enforceability of any Loan Document or (d) the rights and
remedies of or benefits available to the Administrative Agent, any other Agent,
the Issuing Bank or any Lender under any Loan Document.
“Material Disposition” means any Disposition of Property or series of related
Dispositions of property that yields gross proceeds to the Borrower or any of
its Restricted Subsidiaries in excess of ten percent (10%) of the then effective
Borrowing Base.
“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
the Loan Parties in an aggregate principal amount exceeding $10,000,000. For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of any Loan Party in respect of any Swap Agreement at any time shall
be the Swap Termination Value of such Swap Agreement.
“Maturity Date” means October 28, 2021.
“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the
same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06(b), (b) increased or reduced from time to time pursuant to Section
2.07(h)(ii)(C) or (c) modified from time to time pursuant to any assignment
permitted by Section 12.04(b).
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.
“Mortgaged Property” means any Property owned by any Loan Party or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.
“Net Cash Proceeds” means (a) in connection with any Disposition, the proceeds
thereof in the form of cash and cash equivalents (including any such proceeds
received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) of such Disposition, net of (i) amounts required to
be applied to the repayment of Debt secured by a Lien expressly permitted
hereunder on any asset that is the subject of such Disposition and that is
senior to the Liens securing the Obligations and required to be repaid in
connection with such Disposition (other than any Lien pursuant to a Security
Document), (ii) attorneys’ fees, accountants’ fees, investment bank fees and
other reasonable and customary fees and expenses actually incurred in connection
therewith and (iii) taxes paid or reasonably estimated to be payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements); and (b) in connection with any incurrence of Debt
for borrowed money, the cash proceeds received from such incurrence, net of
attorneys’ fees, accountants’ fees, investment bank fees, underwriting discounts
and commissions and other reasonable and customary fees and expenses actually
incurred in connection therewith; provided, however, that, in each case,
evidence of such costs and payments is provided to the Administrative Agent in
form and substance reasonably satisfactory to it.
“New Borrowing Base Notice” has the meaning assigned to such term in Section
2.07(d).

-18-

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

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting
Lender at such time.
“Notes” means the promissory notes of the Borrower described in Section 2.02(d)
and being substantially in the form of Exhibit A, together with all amendments,
modifications, replacements, extensions and rearrangements thereof.
“Obligations” means (a) any and all amounts owing or to be owing by the Borrower
or any Guarantor (whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising) to the Administrative Agent, the Arranger, the Issuing Bank,
any Lender or any Related Party of any of the foregoing under any Loan Document;
(b) all Secured Swap Obligations; (c) all Secured Cash Management Obligations;
and (d) all renewals, extensions and/or rearrangements of any of the above.
Without limitation of the foregoing, the term “Obligations” shall include the
unpaid principal of and interest on the Loans and LC Exposure (including,
without limitation, interest accruing at the then applicable rate provided in
this Agreement after the maturity of the Loans and LC Exposure and interest
accruing at the then applicable rate provided in this Agreement after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
reimbursement obligations (including, without limitation, to reimburse LC
Disbursements), obligations to post cash collateral in respect of Letters of
Credit, payments in respect of an early termination of Secured Swap Obligations
and unpaid amounts, fees, expenses, indemnities, costs, and all other
obligations and liabilities of every nature of the Borrower or any Guarantor,
whether absolute or contingent, due or to become due, now existing or hereafter
arising under this Agreement, the other Loan Documents, any Secured Swap
Agreement or any Secured Cash Management Agreement.
“OFAC” means the Office of Foreign Assets Control of the U.S. Department of the
Treasury.
“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests; and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any

-19-

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

and all of the foregoing. Unless otherwise indicated herein, each reference to
the term “Oil and Gas Properties” shall mean Oil and Gas Properties of the Loan
Parties and their Restricted Subsidiaries.
“Operations” means Parsley Energy Operations, LLC, a Texas limited liability
company.
“Other Connection Taxes” means, with respect to any recipient, Taxes imposed as
a result of a present or former connection between such recipient and the
jurisdiction imposing such Tax (other than connections arising solely from such
recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means any and all present or future stamp, court or documentary,
intangible, recording, filing taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery, performance or
enforcement or registration of, from the receipt or perfection of a security
interest under or otherwise with respect to, this Agreement and any other Loan
Document, except any such taxes, charges or similar levies that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
pursuant to Section 5.04 or Section 5.05).
“Pacesetter” means Pacesetter Drilling, LLC, a Texas limited liability company.
“Participant” has the meaning set forth in Section 12.04(c)(i).
“Participant Register” has the meaning set forth in Section 12.04(c)(ii).
“PEI” means Parsley Energy, Inc., a Delaware corporation.
“Permitted Holders” means Sheffield and his controlled entity Sheffield Energy
Management, LLC, a Texas limited liability company.
“Permitted PEI Payments” means the distribution by the Borrower to PEI from time
to time of amounts not to exceed $10,000,000 during any calendar year necessary
to fund the payment by or reimbursement of PEI of (i) its general corporate
operating and overhead costs and expenses in the ordinary course of business and
(ii) expenses related to the registration and offering of securities (in either
case, including any such fees, costs or expenses of independent auditors,
reserve engineers and legal counsel to PEI or such other entity, fees and
expenses (including franchise or similar taxes) required to maintain its
corporate existence and customary salary, bonus and other benefits payable to
its directors, officers and employees), to the extent such costs and expenses
are reasonably attributable or related to the ownership of the Borrower and its
Subsidiaries.
“Permitted Refinancing Debt” means unsecured senior or unsecured senior
subordinated Debt or Debt securities (whether registered or privately placed and
whether convertible into Equity Interests or not), issued or incurred by the
Borrower and/or Finance Co. pursuant to Permitted Refinancing Documents (for
purposes of this definition, “new Debt”) incurred in exchange for, or proceeds
of which are used to refinance, all or any portion of the Senior Notes (the
“Refinanced Debt”) or all or any portion of the Refinanced Debt; provided that
(a) such new Debt is in an aggregate principal amount not in excess of the sum
of (i) the aggregate principal amount then outstanding of the Senior Notes or
the aggregate principal amount then outstanding of the Refinanced Debt being
refinanced, as the case may be (or to the extent the amount of outstanding
principal thereof increases, so long as the Borrower is in compliance with
Section 9.02(f) or (g), as applicable, and the Borrowing Base has been adjusted
pursuant to Section 2.07(f)), and (ii) an amount necessary to pay any fees and
expenses, including premiums and original issue discount, related to such

-20-

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

exchange or refinancing; (b) such new Debt does not have any scheduled principal
amortization prior to the date which is ninety-one (91) days after the Maturity
Date as in effect on the date such new Debt is incurred; (c) such new Debt does
not mature sooner than the date which is ninety-one (91) days after the Maturity
Date as in effect on the date such new Debt is incurred; (d) such new Debt does
not add scheduled recurring fees, add call or prepayment premiums materially
less favorable to the Borrower and its Subsidiaries as market terms for issuers
of similar size and credit quality given the then prevailing market conditions
as reasonably determined by the Borrower, or shorten any period for the payment
of interest; (e) no Subsidiary or other Person is required to guarantee such new
Debt unless such Subsidiary or other Person has guaranteed the Obligations
pursuant to the Guaranty Agreement; (f) if such new Debt is senior subordinated
Debt, such Debt is expressly subordinate to the payment in full of all of the
Obligations on terms and conditions reasonably satisfactory to the
Administrative Agent; (g) such new Debt and any guarantees thereof are on terms,
taken as a whole, not materially less favorable to the Borrower and its
Subsidiaries as market terms for issuers of similar size and credit quality
given the then prevailing market conditions as reasonably determined by the
Borrower; (h) the financing documentation entered into by the Borrower and/or
Finance Co., each of their applicable Subsidiaries and the other Loan Parties in
connection therewith shall constitute Permitted Refinancing Documents; (i) such
new Debt does not have any mandatory prepayment, redemption, defeasance, tender,
sinking fund or repurchase provisions (other than customary change of control or
asset tender offer provisions, in each case, to the extent permitted to be
applied first to the Obligations); and (j) such new Debt is not redeemable at
the option of the holder thereof (other than with respect to the conversion of
such new Debt into Equity Interests that do not constitute Disqualified Capital
Stock) prior to the date which is ninety-one (91) days after the Maturity Date
as in effect on the date such new Debt is incurred.
“Permitted Refinancing Documents” means any financing documentation which
replaces the Senior Notes, the Refinanced Debt Agreement, the Senior Notes
Documents or the Refinanced Debt Documents, pursuant to which the outstanding
Senior Notes or the Refinanced Debt is refinanced in its entirety by the
incurrence of Permitted Refinancing Debt, as the same may be amended, modified
or supplemented in accordance with Section 9.04(b).
“Permitted Tax Distributions” means for any calendar year or portion thereof
during which the Borrower is a pass-through entity for U.S. federal income tax
purposes, payments and distributions to the members or partners of the Borrower,
on or prior to each estimated tax payment date as well as each other applicable
due date, in an amount not to exceed the product of (i) the total aggregate
taxable income of the Borrower and its Subsidiaries (or estimates thereof) which
is allocable to its members or partners as a result of the operations or
activities of the Borrower and its Subsidiaries during the relevant period
calculated without regard to, for clarity, any tax deductions or basis
adjustments arising under Code Section 743 attributable to the assets of the
Borrower, multiplied by (ii) the highest combined marginal federal, state and
local income tax rates applicable to any member or partner of the Borrower (or,
if any of them are themselves a pass-through entity for U.S. federal income tax
purposes, their members or partners) determined by taking into account the
character of the income and loss allocable to the members or partners as it
affects the applicable tax rate, after taking proper account of loss
carryforwards resulting from losses allocated to the members or partners by the
Borrower, to the extent not taken into account in prior periods; provided that,
for the avoidance of doubt, taxable income of the Borrower and its Subsidiaries
for any period shall include any increases thereto as a result of any tax
examination, audit or adjustment.
“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored, maintained or contributed
to by the Borrower, a Restricted Subsidiary or an ERISA Affiliate or (b) was at
any time during the six calendar years preceding the date hereof, sponsored,
maintained or contributed to by the Borrower, a Restricted Subsidiary or an
ERISA Affiliate.

-21-

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

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by Wells Fargo as its prime rate in effect at its principal office in
New York City; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective. Such
rate is set by the Administrative Agent as a general reference rate of interest,
taking into account such factors as the Administrative Agent may deem
appropriate; it being understood that many of the Administrative Agent’s
commercial or other loans are priced in relation to such rate, that it is not
necessarily the lowest or best rate actually charged to any customer and that
the Administrative Agent may make various commercial or other loans at rates of
interest having no relationship to such rate.
“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.
“Proposed Borrowing Base” has the meaning assigned to such term in Section
2.07(c)(i)).
“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.07(c)(ii).
“Qualified ECP Counterparty” means, in respect of any Swap Agreement, the
Borrower and each Guarantor that (a) has total assets exceeding $10,000,000 at
the time any guarantee of obligations under such Swap Agreement or grant of the
relevant security interest to secure such Swap Agreement becomes effective or
(b) otherwise constitutes an “eligible contract participant” under the Commodity
Exchange Act and can cause another Person to qualify as an “eligible contract
participant” at such time by entering into a keepwell under Section
1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Qualified Investment” means expenditures incurred to drill, develop or acquire
Oil and Gas Properties or to acquire equipment in each case, useful in the
business of the Borrower or any Wholly-Owned Subsidiary Guarantor.
“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt. “Redeem” has the correlative meaning thereto.
“Redetermination Date” means, with respect to any Scheduled Redetermination or
any Interim Redetermination, the date that the redetermined Borrowing Base
related thereto becomes effective pursuant to Section 2.07(d).
“Reference Period” has the meaning assigned to such term in the definition of
Consolidated Net Income.
“Refinanced Debt” has the meaning assigned to such term in the definition of the
term “Permitted Refinancing Debt”.
“Refinanced Debt Agreement” means the credit agreement, indenture or other loan
agreement governing the Refinanced Debt pursuant to which such Refinanced Debt
is incurred or issued, as the same may from time to time be amended, modified,
supplemented or restated to the extent permitted by Section 9.04(b).
“Refinanced Debt Documents” means the Refinanced Debt Agreement, the Refinanced
Notes and any and all other documents, including all loan documents, security
documents, guaranty agreements, mortgages, deeds of trust and other instruments
or agreements, entered into in connection with any of the foregoing, as the same
may from time to time be amended, modified, supplemented or restated to the
extent permitted by Section 9.04(b).

-22-

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

“Refinanced Notes” means the notes issued pursuant to the Refinanced Debt
Agreement, as the same may from time to time be amended, modified, supplemented
or restated to the extent permitted by Section 9.04(b).
“Register” has the meaning assigned to such term in Section 12.04(b)(iv).
“Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective partners, directors, officers, employees, agents
and advisors (including attorneys, accountants and experts) of such Person and
such Person’s Affiliates.
“Release” means any depositing, spilling, leaking, pumping, pouring, placing,
emitting, discarding, abandoning, emptying, discharging, migrating, injecting,
escaping, leaching, dumping, or disposing.
“Remedial Work” has the meaning assigned to such term in Section 8.09(a).
“Required Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Non-Defaulting Lenders having at least sixty-six and two-thirds
percent (66-2/3%) of the Aggregate Maximum Credit Amounts of all Non-Defaulting
Lenders; and at any time while any Loans or LC Exposure is outstanding,
Non-Defaulting Lenders holding at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding aggregate principal amount of the Loans and
participation interests in Letters of Credit of all Non-Defaulting Lenders
(without regard to any sale by a Non-Defaulting Lender of a participation in any
Loan under Section 12.04(c)).
“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each January 1st or July 1st
(or such other date in the event of an Interim Redetermination) the oil and gas
reserves attributable to the Oil and Gas Properties of the Borrower and the
Restricted Subsidiaries, together with a projection of the rate of production
and future net income, taxes, operating expenses and capital expenditures with
respect thereto as of such date, based upon the pricing assumptions consistent
with the Administrative Agent’s lending requirements at the time.
“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person (or in the
case of any Person that is a partnership of such Person’s general partner).
Unless otherwise specified, all references to a Responsible Officer herein means
a Responsible Officer of the Borrower.
“Restricted Payment” means (a) any dividend or other distribution (whether in
cash, securities or other Property) with respect to any Equity Interests in any
Loan Party, or any payment (whether in cash, securities or other Property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in any Loan Party or any option, warrant or other right to
acquire any such Equity Interests in any Loan Party or (b) any payment of
management fees or similar fees by any Loan Party to any of the holders of the
Equity Interests of any Loan Party or any Affiliates of any Loan Party.
“Restricted Subsidiary” means any Subsidiary of the Borrower that is not an
Unrestricted Subsidiary.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Loans and its LC
Exposure at such time.

-23-

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

“S&P” means S&P Global Ratings, a division of S&P Global Inc., and any successor
thereto that is a nationally recognized rating agency.
“Sanctioned Country” means, at any time, a country, region or territory which is
itself the subject or target of any Sanctions (as of the Effective Date, Crimea,
Cuba, Iran, North Korea, Sudan and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by OFAC, the U.S.
Department of State, or by the United Nations Security Council, the European
Union or any European Union member state or Her Majesty’s Treasury of the United
Kingdom, (b) any Person operating, organized or resident in a Sanctioned Country
or (c) any Person owned or controlled by any such Person or Persons described in
the foregoing clauses (a) or (b).
“Sanctions” means economic or financial sanctions or trade embargoes imposed,
administered or enforced from time to time by (a) the U.S. government, including
those administered by OFAC or the U.S. Department of State, or (b) the United
Nations Security Council, the European Union, any European Union member state or
Her Majesty’s Treasury of the United Kingdom.
“Scheduled Redetermination” has the meaning assigned to such term in Section
2.07(b).
“Scheduled Redetermination Date” means the date on which a Borrowing Base that
has been redetermined pursuant to a Scheduled Redetermination becomes effective
as provided in Section 2.07(d).
“SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.
“Secured Cash Management Agreement” means a Cash Management Agreement between
(a) the Borrower or any other Loan Party and (b) a Secured Cash Management
Provider.
“Secured Cash Management Obligations” means any and all amounts and other
obligations owing by the Borrower or any other Loan Party to any Secured Cash
Management Provider under any Secured Cash Management Agreement.
“Secured Cash Management Provider” means a Lender, an Affiliate of a Lender, the
Administrative Agent or an Affiliate of the Administrative Agent.
“Secured Swap Agreement” means any Swap Agreement between the Borrower or any
Restricted Subsidiary and any Person that is entered into prior to the time, or
during the time, that such Person was, a Lender or an Affiliate of a Lender
(including any such Swap Agreement in existence prior to the date hereof), even
if such Person subsequently ceases to be a Lender (or an Affiliate of a Lender)
for any reason (any such Person, a “Secured Swap Party”); provided that, for the
avoidance of doubt, the term “Secured Swap Agreement” shall not include any Swap
Agreement or transactions under any Swap Agreement entered into after the time
that such Secured Swap Party ceases to be a Lender or an Affiliate of a Lender.
“Secured Swap Obligations” means all amounts and other obligations owing to any
Secured Swap Party under any Secured Swap Agreement (other than Excluded Swap
Obligations).
“Secured Swap Party” has the meaning assigned to such term in the definition of
Secured Swap Agreement.
“Securities Account” has the meaning assigned to such term in the UCC.

-24-

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

“Security Instruments” means the mortgages, deeds of trust and other agreements,
instruments or certificates described or referred to in Exhibit E, and any and
all other agreements, instruments, consents or certificates (including the
Guaranty Agreement and each Control Agreement) now or hereafter executed and
delivered by the Borrower or any other Person (other than Secured Cash
Management Agreements, Secured Swap Agreements or participation or similar
agreements between any Lender and any other lender or creditor with respect to
any Obligations pursuant to this Agreement) in connection with, or as security
for the payment or performance of the Obligations, the Notes, this Agreement, or
reimbursement obligations under the Letters of Credit, as such agreements may be
amended, modified, supplemented or restated from time to time.
“Senior Indenture” means, collectively or individually, as the context requires,
any indenture or other agreement among the Borrower and/or Finance Co., as
issuer or co-issuers, the subsidiary guarantors party thereto, and the trustee
named therein, pursuant to which the Senior Notes are issued, as the same may
from time to time be amended, modified, supplemented or restated to the extent
permitted by Section 9.04(b).
“Senior Notes” means any unsecured senior or unsecured senior subordinated Debt
securities (whether registered or privately placed and whether convertible into
Equity Interests or not) issued or incurred by the Borrower and/or Finance Co.,
as issuer or co-issuers, pursuant to the Senior Indenture, as the same may from
time to time be amended, modified, supplemented or restated to the extent
permitted by Section 9.04(b).
“Senior Notes Documents” means the Senior Notes and the Senior Indenture, in
each case, as the same may from time to time be amended, modified, supplemented
or restated to the extent permitted by Section 9.04(b).
“Sheffield” means (a) Mr. Bryan Sheffield, (b) upon Mr. Bryan Sheffield’s death,
Mr. Bryan Sheffield’s heirs, beneficiaries, and decedents, (c) the estate or
legal representative of the estate of Mr. Bryan Sheffield (acting in the
capacity of such legal representative), and (d) trusts, partnerships, limited
liability companies, corporations or other entities that are Controlled by one
or more Persons in clauses (b) and/or (c) of this definition.
“SPS” means Spraberry Production Services, LLC, a Texas limited liability
company.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
“subsidiary” means, with respect to any Person (the “parent”) at any date, any
other Person (a) of which Equity Interests representing more than 50% of the
equity or more than 50% of the ordinary voting power (irrespective of whether or
not at the time Equity Interests of any other class or classes of such Person
shall have or might have voting power by reason of the happening of any
contingency) or, in the case of a partnership, any general partnership interests
are, as of such date, owned, controlled or held, or (b) that is,

-25-

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

as of such date, otherwise Controlled, by the parent or one or more subsidiaries
of the parent or by the parent and one or more subsidiaries of the parent.
“Subsidiary” means any subsidiary of the Borrower.
“Subsidiary Guarantor” means any Restricted Subsidiary of the Borrower that is a
Guarantor.
“Super Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Non-Defaulting Lenders having more than eighty percent (80%) of the
Aggregate Maximum Credit Amounts of all Non-Defaulting Lenders; and at any time
while any Loans or LC Exposure is outstanding, Non-Defaulting Lenders holding
more than eighty percent (80%) of the outstanding aggregate principal amount of
the Loans and participation interests in Letters of Credit of all Non-Defaulting
Lenders (without regard to any sale by a Non-Defaulting Lender of a
participation in any Loan under Section 12.04(c)).
“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement, whether exchange
traded, “over-the-counter” or otherwise, involving, or settled by reference to,
one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions; provided that no phantom stock, profits interests or
similar plan providing for payments only on account of services provided by
current or former directors, officers, employees or consultants of the Borrower
or the Restricted Subsidiaries shall be a Swap Agreement.
“Swap Termination Value” means, in respect of any one or more Swap Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements, (a) for any date on or after the
date such Swap Agreements have been closed out and termination value(s)
determined in accordance therewith, such termination value(s) and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Agreements, as determined by the
counterparties to such Swap Agreements.
“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.
“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or 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 earlier of the Maturity Date and the date of
termination of the Commitments.
“Transactions” means, with respect to (a) PEI, the execution, delivery and
performance by PEI of this Agreement, (b) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement, and each other Loan Document
to which it is a party, the borrowing of Loans, the use of the proceeds thereof
and the issuance of Letters of Credit hereunder, and, as applicable, the grant
of Liens by the Borrower on Mortgaged Properties pursuant to the Security
Instruments and (c) each Guarantor, the execution, delivery

-26-

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

and performance by such Guarantor of each Loan Document to which it is a party,
the guaranteeing of the Obligations and the other obligations under the Guaranty
Agreement by such Guarantor and such Guarantor’s grant of the security interests
and provision of Collateral under the Security Instruments, and, as applicable,
the grant of Liens by such Guarantor on Mortgaged Properties pursuant to the
Security Instruments.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.
“UCC” means the Uniform Commercial Code as in effect in the State of New York.
“Unrestricted Subsidiary” means (a) initially, so long as it otherwise
constitutes a Subsidiary, meets the requirements of Section 1.06 and has not
been designated a Restricted Subsidiary, any Subsidiary of the Borrower
designated as an Unrestricted Subsidiary on Schedule 7.14 on the date hereof and
(b) any Subsidiary of the Borrower designated by the Borrower as an Unrestricted
Subsidiary after the date hereof in accordance with, and subject to the
satisfaction of the conditions set forth in, Section 1.06.
“U.S. Person” means any Person that is a “United States Person” as defined in
section 7701(a)(30) of the Code.
“USA Patriot Act” means the USA PATRIOT ACT (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)).
“Wholly-Owned Subsidiary” means any Restricted Subsidiary of which all of the
outstanding Equity Interests (other than any directors’ qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Borrower
or one or more of the Wholly-Owned Subsidiaries of the Borrower or are owned by
the Borrower and one or more of the Wholly-Owned Subsidiaries of the Borrower.
“Wholly-Owned Subsidiary Guarantor” means any Subsidiary Guarantor that is a
Wholly-Owned Subsidiary of the Borrower.
“Withholding Agent” means Borrower, any Guarantor and the Administrative Agent.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution
Authority, the write-down and conversion powers of such EEA Resolution Authority
from time to time under the Bail-In Legislation for the applicable EEA Member
Country, which write-down and conversion powers are described in the EU Bail-In
Legislation Schedule.

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

Section 1.04    Terms Generally; Rules of Construction. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” as used in this Agreement shall be deemed to be
followed by the phrase “without limitation”. The word “will” shall be construed
to have the same meaning and effect as the word “shall”. Unless the context
requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth in the Loan Documents), (b)
any reference herein to any law shall be construed

-27-

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

as referring to such law as amended, modified, codified or reenacted, in whole
or in part, and in effect from time to time, (c) any reference herein to any
Person shall be construed to include such Person’s successors and assigns
(subject to the restrictions contained in the Loan Documents), (d) the words
“herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (e) with respect to the determination of any time period, the
word “from” means “from and including” and the word “to” means “to and
including” and (f) any reference herein to Articles, Sections, Annexes, Exhibits
and Schedules shall be construed to refer to Articles and Sections of, and
Annexes, Exhibits and Schedules to, this Agreement. No provision of this
Agreement or any other Loan Document shall be interpreted or construed against
any Person solely because such Person or its legal representative drafted such
provision.

Section 1.05    Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which the PEI’s independent
certified public accountants concur and which are disclosed to the
Administrative Agent on the next date on which financial statements are required
to be delivered to the Lenders pursuant to Section 8.01(a); provided that,
unless the Borrower and the Majority Lenders shall otherwise agree in writing,
no such change shall modify or affect the manner in which compliance with the
covenants set forth in Section 9.01 is computed such that all such computations
shall be conducted utilizing financial information presented consistently with
prior periods.

Section 1.06    Designation and Conversion of Restricted and Unrestricted
Subsidiaries.
(a)    Unless designated in writing to the Administrative Agent by the Borrower
in accordance with clause (b) below, any Person that becomes a Subsidiary of the
Borrower or any of its Restricted Subsidiaries after the date hereof (whether by
formation, acquisition or merger) shall be classified as a Restricted
Subsidiary. On the date hereof, except as set forth on Schedule 7.14, all
Subsidiaries of the Borrower are Restricted Subsidiaries.
(b)    The Borrower may designate by prior written notice thereof to the
Administrative Agent, any Restricted Subsidiary (including a newly formed or
newly acquired Subsidiary) as an Unrestricted Subsidiary (other than any
Restricted Subsidiary that owns or has an interest in any Property assigned
value in the Borrowing Base then in effect, as determined by the Administrative
Agent), provided that (i) both before, and immediately after giving effect, to
such designation, (A) no Default, Event of Default or Borrowing Base Deficiency
exists or would result from such designation, (B) the Borrower shall be in
compliance, on a pro forma basis, with the covenants set forth in Section 9.01,
(C) the representations and warranties of Borrower and its Restricted
Subsidiaries contained in this Agreement and each of the other Loan Documents
shall be true and correct in all material respects (except that any
representation and warranty that is qualified by materiality shall be true and
correct in all respects) on and as of such date as if made on and as of the date
of such designation (or, if stated to have been made expressly as of an earlier
date, were true and correct in all material respects (except that any
representation and warranty that is qualified by materiality shall be true and
correct in all respects) as of such date); (ii) such Subsidiary is not a
“restricted subsidiary” for purposes of any indenture or other agreement
governing Debt of the Borrower or a Restricted Subsidiary; (iii) such
designation shall be deemed to be an Investment in an amount equal to the fair
market value of Borrower's direct and indirect ownership interest in such
Subsidiary and such designation shall be permitted only to the extent such
Investment is permitted under Section 9.05(k) on the date of such designation
(it being understood, for the avoidance of doubt, that (A) in the event SPS
becomes a Restricted Subsidiary

-28-

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

and is promptly designated an Unrestricted Subsidiary, the fair market value of
Borrower’s direct and indirect ownership interest in SPS shall be deemed to
equal the amount of any Investments previously made in SPS pursuant to Section
9.05(k) and (B) any calculation regarding whether an Investment is permitted
under Section 9.05(k) shall be made without duplication of any Investments
previously made in such Person pursuant to Section 9.05(k)); (iv) such
designation shall be deemed to be a Disposition pursuant to which the provisions
of Section 2.07(e) and Section 2.07(g) shall apply; (v) after giving effect to
such designation, such Subsidiary is in compliance with the requirements of
Section 8.18; and (vi) the Administrative Agent shall have received a
certificate of a Responsible Officer, in form and substance reasonably
satisfactory to the Administrative Agent, certifying as to the satisfaction of
the conditions and matters set forth in clauses (i)-(v) above (and in the case
of clause (i)(B) above, setting forth reasonably detailed calculations
demonstrating compliance on a pro forma basis with the covenants set forth in
Section 9.01). Except as provided in this Section 1.06, no Subsidiary may be
designated (and no Restricted Subsidiary may be redesignated) as an Unrestricted
Subsidiary.
(c)    If, at any time, any Unrestricted Subsidiary would fail to meet the
requirements for an Unrestricted Subsidiary set forth in Section 8.18, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement
(and, for the avoidance of doubt, any Investment, Debt and Liens of such
Subsidiary existing at such time shall be deemed to be incurred by such
Subsidiary as of such time and, if such Investments, Debt and Liens are not
permitted to be incurred as of such time under Article IX, an Event of Default
shall occur).
(d)    The Borrower may designate by prior written notice thereof to the
Administrative Agent any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that (i) both before, and immediately after giving effect, to such
designation, (A) no Default, Event of Default or Borrowing Base Deficiency
exists or would result from such designation, (B) the Borrower shall be in
compliance, on a pro forma basis, with the covenants set forth in Section 9.01,
(C) the representations and warranties of Borrower and its Restricted
Subsidiaries contained in this Agreement and each of the other Loan Documents
shall be true and correct in all material respects (except that any
representation and warranty that is qualified by materiality shall be true and
correct in all respects) on and as of such date as if made on and as of the date
of such designation (or, if stated to have been made expressly as of an earlier
date, were true and correct in all material respects (except that any
representation and warranty that is qualified by materiality shall be true and
correct in all respects) as of such date), (iii) the designation of any
Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the
incurrence at the time of designation of any Investment, Debt, or Liens of such
Subsidiary existing at such time, and the Borrower shall be in compliance with
Article IX after giving effect to such designation, (iv) immediately after
giving effect to such designation, the Borrower and such Subsidiary shall be in
compliance with the requirements of Section 8.13 and (v) the Administrative
Agent shall have received a certificate of a Responsible Officer, in form and
substance reasonably satisfactory to the Administrative Agent, certifying as to
the satisfaction of the conditions and matters set forth in clauses (i)-(iv)
above (and in the case of clause (i)(B) above, setting forth reasonably detailed
calculations demonstrating compliance on a pro forma basis with the covenants
set forth in Section 9.01).

Section 1.07    Rounding. Any financial ratios required to be satisfied in order
for a specific action to be permitted under this Agreement or required to be
maintained pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

-29-

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

ARTICLE II
THE CREDITS

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

Section 2.02    Loans and Borrowings.
(a)    Borrowings; Several Obligations. Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.
(b)    Types of Loans. Subject to Section 3.03, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith. Each Lender at its option may make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement.
(c)    Minimum Amounts; Limitation on Number of Borrowings. At the commencement
of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in
an aggregate amount that is an integral multiple of $100,000 and not less than
$500,000. At the time that each ABR Borrowing is made, such Borrowing shall be
in an aggregate amount that is an integral multiple of $100,000 and not less
than $500,000; provided that, notwithstanding the foregoing, an ABR Borrowing
may be in an aggregate amount that is equal to the entire unused balance of the
total Commitments or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.08(e). Borrowings of more than one
Type may be outstanding at the same time; provided that there shall not at any
time be more than a total of ten Eurodollar Borrowings outstanding.
Notwithstanding any other provision of this Agreement, the Borrower shall not be
entitled to request, or to elect to convert or continue, any Borrowing if the
Interest Period requested with respect thereto would end after the Maturity
Date.
(d)    Notes. Upon request of such Lender, the Loans made by a Lender shall be
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit A, and, in the case of (i) any Lender party hereto as of the date of
this Agreement, such Note shall be dated as of the date of this Agreement, (ii)
any Lender that becomes a party hereto in connection with an increase in the
Aggregate Elected Borrowing Base Commitments pursuant to Section 2.07(h), such
Note shall be dated as of the effective date of such increase, or (iii) in the
case of any Lender that becomes a party hereto pursuant to an Assignment and
Assumption, such Note shall be dated as of the effective date of the Assignment
and Assumption, payable to such Lender or its registered assigns in a principal
amount equal to its Maximum Credit Amount as in effect on such date, and
otherwise duly completed. In the event that any Lender’s Maximum Credit Amount
increases or decreases for any reason (whether pursuant to Section 2.06, Section
12.04(b) or otherwise), the Borrower shall, upon request of such Lender, deliver
or cause to be delivered on the effective date of such increase or decrease, a
new Note payable to such Lender or its registered assigns in a principal amount
equal to its Maximum Credit Amount after giving effect to such increase or
decrease,

-30-

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

and otherwise duly completed, against return to the Borrower of the Note so
replaced. The date, amount, Type, interest rate and, if applicable, Interest
Period of each Loan made by each Lender, and all payments made on account of the
principal thereof, shall be recorded by such Lender on its books for its Note,
and, prior to any transfer, may be recorded by such Lender on a schedule
attached to such Note or any continuation thereof or on any separate record
maintained by such Lender. Failure to make any such notation or to attach a
schedule shall not affect any Lender’s or the Borrower’s rights or obligations
in respect of such Loans or affect the validity of such transfer by any Lender
of its Note.

Section 2.03    Requests for Borrowings. To request a Borrowing, the Borrower
shall notify the Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 12:00 noon, Houston, Texas time,
three Business Days before the date of the proposed Borrowing or (b) in the case
of an ABR Borrowing, not later than 12:00 noon, Houston, Texas time, one
Business Day before the date of the proposed Borrowing; provided that no such
notice shall be required for any deemed request of an ABR Borrowing to finance
the reimbursement of an LC Disbursement as provided in Section 2.08(e). Each
such telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery, telecopy or electronic communication to the
Administrative Agent of a written Borrowing Request in substantially the form of
Exhibit B and signed by the Borrower. Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.02:
(i)    the aggregate amount of the requested Borrowing;
(ii)    the date of such Borrowing, which shall be a Business Day;
(iii)    whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(iv)    in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”;
(v)    the amount of the then effective Borrowing Base and the then effective
Aggregate Elected Borrowing Base Commitments, the current total Revolving Credit
Exposures (without regard to the requested Borrowing) and the pro forma total
Revolving Credit Exposures (giving effect to the requested Borrowing);
(vi)    the Consolidated Cash Balance (without regard to the requested
Borrowing) and the pro forma Consolidated Cash Balance (giving effect to the
requested Borrowing); and
(vii)    the location and number of the Borrower’s account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.05.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration. Each Borrowing
Request shall constitute a representation that (a) the amount of the requested
Borrowing shall not cause the total Revolving Credit Exposures to exceed the
total Commitments (i.e., the lesser of (x) the Aggregate Maximum Credit Amounts
and (y) the lesser of (i) the then effective Borrowing Base and (ii) the then
effective Aggregate Elected Borrowing Base Commitments) and (b) after giving pro
forma effect to the requested Borrowing, the Consolidated Cash Balance shall not
exceed the Consolidated Cash Balance Threshold.

-31-

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

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

Section 2.04    Interest Elections.
(a)    Conversion and Continuance. Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Borrowing, shall have an initial Interest Period as specified in such Borrowing
Request. Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this Section
2.04. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans comprising each such portion shall be considered a separate
Borrowing.
(b)    Interest Election Requests. To make an election pursuant to this Section
2.04, the Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if the Borrower were requesting a Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed promptly
by hand delivery, telecopy or electronic communication to the Administrative
Agent of a written Interest Election Request in substantially the form of
Exhibit C and signed by the Borrower.
(c)    Information in Interest Election Requests. Each telephonic and written
Interest Election Request shall specify the following information in compliance
with Section 2.02:
(i)    the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall
be specified for each resulting Borrowing);
(ii)    the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii)    whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(iv)    if the resulting Borrowing is a Eurodollar Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.
(d)    Notice to Lenders by the Administrative Agent. Promptly following receipt
of an Interest Election Request, the Administrative Agent shall advise each
Lender of the details thereof and of such Lender’s portion of each resulting
Borrowing.
(e)    Effect of Failure to Deliver Timely Interest Election Request and Events
of Default on Interest Election. If the Borrower fails to deliver a timely
Interest Election Request with respect to a

-32-

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

Eurodollar Borrowing prior to the end of the Interest Period applicable thereto,
then, unless such Borrowing is repaid as provided herein, at the end of such
Interest Period such Borrowing shall be converted to an ABR Borrowing.
Notwithstanding any contrary provision hereof, if an Event of Default has
occurred and is continuing: (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing (and any Interest Election Request that
requests the conversion of any Borrowing to, or continuation of any Borrowing
as, a Eurodollar Borrowing shall be ineffective) and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.

Section 2.05    Funding of Borrowings.
(a)    Funding by Lenders. Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m., Houston, Texas time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower maintained with a Lender and designated by the Borrower in the
applicable Borrowing Request; provided that ABR Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be
remitted by the Administrative Agent to the Issuing Bank. Nothing herein shall
be deemed to obligate any Lender to obtain the funds for its Loan in any
particular place or manner or to constitute a representation by any Lender that
it has obtained or will obtain the funds for its Loan in any particular place or
manner.
(b)    Presumption of Funding by the Lenders. Unless the Administrative Agent
shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with
Section 2.05(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.

Section 2.06    Termination and Reduction of Aggregate Maximum Credit Amounts.
(a)    Scheduled Termination of Commitments. Unless previously terminated, the
Commitments shall terminate on the Maturity Date. If at any time the Aggregate
Maximum Credit Amounts or the Borrowing Base is terminated or reduced to zero,
then the Commitments shall terminate on the effective date of such termination
or reduction.
(b)    Optional Termination and Reduction of Aggregate Maximum Credit Amounts.
(i)    The Borrower may at any time terminate, or from time to time reduce, the
Aggregate Maximum Credit Amounts; provided that (A) each reduction of the
Aggregate Maximum Credit Amounts shall be in an amount that is an integral
multiple of $1,000,000 and not less than $2,000,000 and (B) the Borrower shall
not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving

-33-

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

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

Section 2.07    Borrowing Base.
(a)    Initial Borrowing Base. For the period from and including the Effective
Date to but excluding the first Redetermination Date, the amount of the
Borrowing Base shall be $900,000,000. Notwithstanding the foregoing, the
Borrowing Base may be subject to further adjustments from time to time pursuant
to Section 2.07(e), Section 2.07(f), Section 2.07(g) or Section 8.12(c).
(b)    Scheduled and Interim Redeterminations. The Borrowing Base shall be
redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled
Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing
Base shall become effective and applicable to the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders on April 1st and October 1st of each
year, commencing April 1, 2017. In addition, the Borrower may, by notifying the
Administrative Agent thereof, and the Administrative Agent may, at the direction
of the Required Lenders, by notifying the Borrower thereof, one time between
Scheduled Redeterminations, each elect to cause the Borrowing Base to be
redetermined between Scheduled Redeterminations, and the Borrower may elect, by
notifying the Administrative Agent of any acquisition of Oil and Gas Properties
by the Borrower or its Restricted Subsidiaries with a purchase price in the
aggregate of at least five percent (5%) of the then effective Borrowing Base, to
cause the Borrowing Base to be redetermined between Scheduled Redeterminations
(an “Interim Redetermination”) in accordance with this Section 2.07.
(c)    Scheduled and Interim Redetermination Procedure.
(i)    Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: Upon receipt by the Administrative Agent of (A) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, in the case of a Scheduled Redetermination, pursuant
to Section 8.11(a) and (c), and, in the case of an Interim Redetermination,
pursuant to Section 8.11(b) and (c), and (B) such other reports, data and
supplemental information, including, without limitation, the information
provided pursuant to Section 8.11(c), as may, from time to time, be reasonably
requested by the Required Lenders (the Reserve Report, such certificate and such
other reports, data and supplemental information being the “Engineering
Reports”), the Administrative Agent shall evaluate the information contained in
the Engineering Reports and shall, in good faith, propose a new Borrowing Base
(the “Proposed Borrowing Base”) based upon such information and such other
information (including, without limitation, the status of title information with
respect to the Oil and Gas Properties as described in

-34-

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

the Engineering Reports and the existence of any other Debt) as the
Administrative Agent deems appropriate in its sole discretion and consistent
with its normal oil and gas lending criteria as it exists at the particular
time. In no event shall the Proposed Borrowing Base exceed the Aggregate Maximum
Credit Amounts.
(ii)    The Administrative Agent shall notify the Borrower and the Lenders of
the Proposed Borrowing Base (the “Proposed Borrowing Base Notice”):
(A)    in the case of a Scheduled Redetermination (1) if the Administrative
Agent shall have received the Engineering Reports required to be delivered by
the Borrower pursuant to Section 8.11(a) and (c) in a timely and complete
manner, then on or before March 15th and September 15th of such year following
the date of delivery or (2) if the Administrative Agent shall not have received
the Engineering Reports required to be delivered by the Borrower pursuant to
Section 8.11(a) and (c) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports from the Borrower
and has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.07(c)(i); and
(B)    in the case of an Interim Redetermination, promptly, and in any event,
within fifteen (15) days after the Administrative Agent has received the
required Engineering Reports.
(iii)    Any Proposed Borrowing Base that would increase the Borrowing Base then
in effect must be approved or deemed to have been approved by all of the Lenders
(in each Lender’s sole discretion consistent with its normal oil and gas lending
criteria as it exists at the particular time) as provided in this Section
2.07(c)(iii); and any Proposed Borrowing Base that would decrease or maintain
the Borrowing Base then in effect must be approved or be deemed to have been
approved by the Required Lenders (in each Lender’s sole discretion consistent
with its normal oil and gas lending criteria as it exists at the particular
time) as provided in this Section 2.07(c)(iii). Upon receipt of the Proposed
Borrowing Base Notice, each Lender shall have fifteen (15) days to agree with
the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by
proposing an alternate Borrowing Base. If at the end of such fifteen (15) days,
any Lender has not communicated its approval or disapproval in writing to the
Administrative Agent, such silence shall be deemed to be an approval of the
Proposed Borrowing Base. If, at the end of such 15-day period, all of the
Lenders, in the case of a Proposed Borrowing Base that would increase the
Borrowing Base then in effect, or the Required Lenders, in the case of a
Proposed Borrowing Base that would decrease or maintain the Borrowing Base then
in effect, have approved or deemed to have approved, as aforesaid, then the
Proposed Borrowing Base shall become the new Borrowing Base, effective on the
date specified in Section 2.07(d). If, however, at the end of such 15-day
period, all of the Lenders or the Required Lenders, as applicable, have not
approved or deemed to have approved, as aforesaid, then the Administrative Agent
shall poll the Lenders to ascertain the highest Borrowing Base then acceptable
to a number of Lenders sufficient to constitute the Required Lenders and, so
long as such amount does not increase the Borrowing Base then in effect, such
amount shall become the new Borrowing Base, effective on the date specified in
Section 2.07(d).
(d)    Effectiveness of a Redetermined Borrowing Base. After a redetermined
Borrowing Base is approved or is deemed to have been approved by all of the
Lenders or the Required Lenders, as applicable, pursuant to Section 2.07(c)(iii)
or adjusted or redetermined pursuant to Section 2.07(e), Section 2.07(f),
Section 2.07(g) or Section 8.12(c), the Administrative Agent shall notify the
Borrower and the Lenders of the amount of the redetermined Borrowing Base (the
“New Borrowing Base Notice”), and such amount shall become the new Borrowing
Base, effective and applicable to the Borrower, the Administrative Agent, the
Issuing Bank and the Lenders:

-35-

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

(i)    in the case of a Scheduled Redetermination, (A) if the Administrative
Agent shall have received the Engineering Reports required to be delivered by
the Borrower pursuant to Section 8.11(a) and (c) in a timely and complete
manner, then on April 1st or October 1st, as applicable, following such notice,
or (B) if the Administrative Agent shall not have received the Engineering
Reports required to be delivered by the Borrower pursuant to Section 8.11(a) and
(c) in a timely and complete manner, then on the Business Day next succeeding
delivery of such notice; and
(ii)    in the case of an Interim Redetermination, on the Business Day next
succeeding delivery of such notice.
Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 2.07(e), Section 2.07(f), Section
2.07(g) or Section 8.12(c), whichever occurs first. Notwithstanding the
foregoing, no Scheduled Redetermination, Interim Redetermination or adjusted
Borrowing Base shall become effective until the New Borrowing Base Notice
related thereto is received by the Borrower.
(e)    Reduction of Borrowing Base Related to Disposition of Borrowing Base
Properties and/or Liquidation of Swap Agreements. If (i) any Swap Agreement to
which the Borrower or any Restricted Subsidiary is a party is Liquidated or (ii)
the Borrower or any Restricted Subsidiary Disposes of any Borrowing Base
Property or Equity Interests in any Restricted Subsidiaries owning Borrowing
Base Properties, and the Borrowing Base value assigned to the Liquidated portion
of such Swap Agreement or the fair market value of such Borrowing Base Property
or Equity Interests in such Restricted Subsidiaries owning Borrowing Base
Properties, as applicable, when combined with the sum of (A) the fair market
value of all other Dispositions of Borrowing Base Properties or Equity Interests
in Restricted Subsidiaries owning Borrowing Base Properties, in each case since
the most recent Scheduled Redetermination Date (after giving effect to the
Borrowing Base value, if any, of any Oil and Gas Properties or Equity Interests
in Restricted Subsidiaries owning Oil and Gas Properties acquired since the most
recent Scheduled Redetermination Date, including, for the avoidance of doubt,
any such Oil and Gas Properties or Equity Interests acquired concurrently with
such Disposition, in each case as determined by the Administrative Agent) and
(B) the Borrowing Base value of the Liquidated portion of other Swap Agreements
Liquidated since the most recent Scheduled Redetermination Date (after giving
effect to the Borrowing Base value of any Swap Agreements executed since the
most recent Scheduled Redetermination Date, including, for the avoidance of
doubt, any Swap Agreements executed concurrently with such Liquidation), exceeds
five percent (5%) of the Borrowing Base as then in effect (as determined by the
Administrative Agent), individually or in the aggregate, the Borrowing Base then
in effect shall be reduced by an amount equal to the value, if any, assigned to
the Liquidated portion of such Swap Agreement in the then effective Borrowing
Base (after giving effect to the Borrowing Base value of any Swap Agreements
executed since the most recent Scheduled Redetermination Date, including, for
the avoidance of doubt, any Swap Agreements executed concurrently with such
Liquidation) and/or the value assigned to such Disposed Borrowing Base Property
in the most recently delivered Reserve Report (after giving effect to the
Borrowing Base value, if any, of any Oil and Gas Properties or Equity Interests
in Restricted Subsidiaries owning Oil and Gas Properties acquired since the most
recent Scheduled Redetermination Date, including, for the avoidance of doubt,
any such Oil and Gas Properties or Equity Interests acquired concurrently with
such Disposition, in each case as determined by the Administrative Agent), as
the case may be, in each case as determined by the Administrative Agent. The
Borrowing Base as so reduced shall become the new Borrowing Base immediately
upon the date of such Disposition, effective and applicable to the Borrower, the
Administrative Agent, the Issuing Bank and the Lenders on such date until the
next redetermination or modification thereof hereunder.

-36-

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

(f)    Reduction of Borrowing Base Upon Issuance of Certain Senior Notes and
Permitted Refinancing Debt. Notwithstanding anything to the contrary contained
herein, if the Borrower and/or Finance Co. incurs (i) any Senior Notes in
reliance on Section 9.02(f) or (ii) any Permitted Refinancing Debt in reliance
on Section 9.02(g) in a principal amount in excess of the aggregate principal
amount of Senior Notes or Refinanced Debt refinanced with such Permitted
Refinancing Debt, then the Borrowing Base then in effect shall be reduced
immediately upon the date of such incurrence by an amount equal to the product
of 0.25 multiplied by an amount equal to the stated principal amount of such
excess Senior Notes or excess Permitted Refinancing Debt incurred. The Borrowing
Base as so reduced shall become the new Borrowing Base immediately upon the date
of such incurrence, effective and applicable to the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders on such date until the next
redetermination or modification thereof hereunder. For purposes of this Section
2.07(f), if any such Debt is issued at a discount or otherwise sold for less
than “par”, the reduction shall be calculated based upon the stated principal
amount without reference to such discount.
(g)    Right to Redetermine Borrowing Base Upon Certain Dispositions of Oil and
Gas Properties. If the Borrower or any Restricted Subsidiary Disposes of any
Borrowing Base Property or Equity Interests in any Restricted Subsidiaries
owning Borrowing Base Properties, and the fair market value of such Borrowing
Base Property or Equity Interests in such Restricted Subsidiaries owning
Borrowing Base Properties, as applicable, when combined with the sum of the fair
market value of all other Dispositions of Borrowing Base Properties or Equity
Interests in Restricted Subsidiaries owning Borrowing Base Properties, in each
case since the most recent Scheduled Redetermination Date, exceeds ten percent
(10%) of the Borrowing Base as then in effect (as determined by the
Administrative Agent, and for the avoidance of doubt, without giving effect to
the Borrowing Base value, if any, of any Oil and Gas Properties or Equity
Interests in Restricted Subsidiaries owning Oil and Gas Properties acquired
since the most recent Scheduled Redetermination Date), individually or in the
aggregate, then, without limiting the provisions of Section 2.07(b) or Section
2.07(e), the Administrative Agent and the Required Lenders shall have the right
to redetermine the Borrowing Base. The Borrowing Base as so redetermined shall
become the new Borrowing Base immediately upon the date of such Disposition,
effective and applicable to the Borrower, the Administrative Agent, the Issuing
Bank and the Lenders on such date until the next redetermination or modification
thereof hereunder.
(h)    Reduction/Termination of Aggregate Elected Borrowing Base Commitments;
Additional Lenders; Increase in Aggregate Elected Borrowing Base Commitments.
(i)    The Borrower may from time to time by written notice to the
Administrative Agent reduce or terminate the Aggregate Elected Borrowing Base
Commitments; provided that (A) each reduction of the Aggregate Elected Borrowing
Base Commitments shall be in an amount that is an integral multiple of
$5,000,000 and not less than $10,000,000 (other than in connection with a
Scheduled Redetermination or Interim Redetermination) and (B) such reduction or
termination shall not become effective if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 3.04(c)(i), the total
Revolving Credit Exposures would exceed the total Commitments. The Borrower
shall notify the Administrative Agent of any election to reduce or terminate the
Aggregate Elected Borrowing Base Commitments under this Section 2.07(h)(i) at
least three Business Days prior to the effective date of such reduction or
termination, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof; provided that a notice of termination of the
Aggregate Elected Borrowing Base 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. Each notice delivered by the Borrower pursuant to
this

-37-

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

Section 2.07(h)(i) shall be irrevocable. Each reduction of the Aggregate Elected
Borrowing Base Commitments shall occur on the effective date of such reduction
specified in such written notice and shall be made ratably among the Lenders in
accordance with each Lender’s Applicable Percentage.
(ii)    (A) Subject to the conditions set forth in Section 2.07(h)(ii)(B), the
Borrower may, at any time and from time to time increase the Aggregate Elected
Borrowing Base Commitments up to an amount not to exceed the then effective
Borrowing Base by providing written notice of such requested increase to the
Administrative Agent (an “Increase Notice”). Each such Increase Notice shall
specify (x) the proposed effective date of the increase (the “Increase Effective
Date”), which date shall be no earlier than ten (10) Business Days after receipt
by the Administrative Agent of such Increase Notice and (y) the amount of such
requested increase to the Aggregate Elected Borrowing Base Commitments.
(B)    Any increase in the Aggregate Elected Borrowing Base Commitments shall be
subject to the following additional conditions:
(1)    such increase shall be in an aggregate amount that is an integral
multiple of $5,000,000 and not less than $10,000,000 (or such lesser amount up
to the Borrowing Base), unless in each case the Administrative Agent otherwise
consents to a lesser amount;
(2)    both immediately before and immediately after giving effect to such
increase and any Borrowing made on the date of such increase, no Default, Event
of Default or Borrowing Base Deficiency exists or would exist;
(3)    the Borrower shall have paid to the Administrative Agent, the Arranger
and the Lenders all fees and other amounts due and payable on or prior to the
effective date of such increase (including in connection with such increase);
(4)    immediately after giving effect to such increase, the Aggregate Elected
Borrowing Base Commitments do not exceed the Borrowing Base then in effect;
(5)    no Lender shall be obligated to provide any portion of such increase in
the Aggregate Elected Borrowing Base Commitments (it being understood that any
Lender’s decision to agree to participate in such increase shall be made in its
sole and absolute discretion and only with such Lender’s prior written consent);
(6)    the Borrower may seek commitments in respect of such increase, in its
sole discretion, from either existing Lenders (each of which shall be entitled
to agree or decline to participate in its sole discretion) or from one or more
additional banks or financial institutions with the prior written consent of
each of the Administrative Agent and the Issuing Bank (such consent not to be
unreasonably withheld or delayed) (“Additional Lenders”);
(7)    Each existing Lender or Additional Lender that agrees to provide any
portion of such increase shall evidence its agreement by executing and
delivering to the Borrower and the Administrative Agent a certificate
substantially in the form of Exhibit H hereto (a “Lender Certificate”); and
(8)    the Administrative Agent shall have received Lender Certificates with
commitments in an aggregate amount equal to the requested increase to the
Aggregate Elected Borrowing Base Commitments as specified in the Increase Notice
(or such lesser amount as the Borrower may elect in its sole discretion).

-38-

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

(C)    Subject to the satisfaction of the conditions specified in Section
2.07(h)(ii)(B), the requested increase to the Aggregate Elected Borrowing Base
Commitments shall become effective on the Increase Effective Date, and upon such
effectiveness: (1) the Aggregate Elected Borrowing Base Commitments
automatically without further action by the Borrower, the Administrative Agent,
the Issuing Bank or any Lender shall be increased by an amount equal to the
aggregate amount indicated in the executed Lender Certificates; and (2) the
Aggregate Maximum Credit Amounts of the Lenders will be reallocated so that
after giving effect to the increase to the Aggregate Elected Borrowing Base
Commitments, each Lender will hold a Maximum Credit Amount equal to such
Lender’s portion of the Aggregate Elected Borrowing Base Commitments. The
Administrative Agent, the Lenders and the Borrower hereby consent and agree to
such reallocation. On the Increase Effective Date, the Administrative Agent
shall distribute to the Borrower and the Lenders (including each Additional
Lender) a revised Annex I to this Agreement, which shall set forth the Maximum
Credit Amount and the Commitment of each Lender after giving effect to such
reallocation, and such revised Annex I shall amend and restate and supersede and
replace Annex I to this Agreement as in effect immediately prior to the Increase
Effective Date. With respect to such reallocation, each Lender shall be deemed
to have acquired the Maximum Credit Amount and Commitment allocated to it from
each of the other Lenders pursuant to the terms of the Assignment and
Assumption, as if the Lenders had executed an Assignment Agreement with respect
to such allocation. On the Increase Effective Date, the Administrative Agent
shall take the actions specified in Section 12.04(b)(v), including recording the
assignments described herein in the Register, and such assignments shall be
effective for purposes of this Agreement. Notwithstanding Section
12.04(b)(ii)(C), no Person shall be required to pay a processing and recordation
fee of $3,500 to the Administrative Agent in connection with such assignments.
If, on the Increase Effective Date, any Eurodollar Loans have been funded, then
the Borrower shall be obligated to pay any breakage fees or costs that are
payable pursuant to Section 5.02 in connection with the reallocation of such
outstanding Eurodollar Loans to effectuate the provisions of this paragraph.
(iii)    Notwithstanding anything herein to the contrary, contemporaneously with
any increase in the Borrowing Base pursuant to this Agreement, if (A) the
Borrower elects to increase the Aggregate Elected Borrowing Base Commitments
ratably among the Lenders and (B) each Lender has consented to such increase in
the Aggregate Elected Borrowing Base Commitments, then the Aggregate Elected
Borrowing Base Commitments shall be increased (ratably among the Lenders in
accordance with each Lender’s Applicable Percentage) by the amount requested by
the Borrower (subject to the conditions set forth in Section 2.07(h)(ii)(B))
without the requirement that any Lender deliver a Lender Certificate.

Section 2.08    Letters of Credit.
(a)    General. Subject to the terms and conditions set forth herein, the
Borrower may request the issuance of dollar denominated Letters of Credit for
its own account or for the account of any of its Restricted Subsidiaries, in a
form reasonably acceptable to the Administrative Agent and the Issuing Bank, at
any time and from time to time during the Availability Period; provided that the
Borrower may not request the issuance, amendment, renewal or extension of
Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time
or would exist as a result thereof. In the event of any inconsistency between
the terms and conditions of this Agreement and the terms and conditions of any
form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
(b)    Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative

-39-

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

Agent (not less than five (5) Business Days in advance of the requested date of
issuance, amendment, renewal or extension) a notice:
(i)    requesting the issuance of a Letter of Credit or identifying the Letter
of Credit to be amended, renewed or extended;
(ii)    specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day);
(iii)    specifying the date on which such Letter of Credit is to expire (which
shall comply with Section 2.08(c));
(iv)    specifying the amount of such Letter of Credit;
(v)    specifying the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit; and
(vi)    specifying the amount of the then effective Borrowing Base and the then
effective Aggregate Elected Borrowing Base Commitments and whether a Borrowing
Base Deficiency exists at such time, the current total Revolving Credit
Exposures (without regard to the requested Letter of Credit or the requested
amendment, renewal or extension of an outstanding Letter of Credit) and the pro
forma total Revolving Credit Exposures (giving effect to the requested Letter of
Credit or the requested amendment, renewal or extension of an outstanding Letter
of Credit).
A Letter of Credit shall be issued, amended, renewed or extended only if (and
each notice shall constitute a representation and warranty by the Borrower
that), after giving effect to the requested issuance, amendment, renewal or
extension, as applicable, (i) the LC Exposure shall not exceed the LC Commitment
and (ii) the total Revolving Credit Exposures shall not exceed the total
Commitments (i.e., the lesser of (x) the Aggregate Maximum Credit Amounts and
(y) the lesser of (i) the then effective Borrowing Base and (ii) the then
effective Aggregate Elected Borrowing Base Commitments).
If requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank’s standard form in connection with any
request for a Letter of Credit; provided that, in the event of any conflict
between such application and the terms of this Agreement, the terms of this
Agreement shall control.
(c)    Expiration Date. Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date selected by the Borrower that
is no more than eighteen months after the date of the issuance of such Letter of
Credit (or, in the case of any renewal or extension thereof, the date either
selected by the Borrower or set forth in such Letter of Credit that is, in
either case, no more than eighteen months after such renewal or extension) and
(ii) the date that is five Business Days prior to the Maturity Date.
(d)    Participations. By the issuance of a Letter of Credit (or an amendment to
a Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants
to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC
Disbursement made

-40-

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

by the Issuing Bank and not reimbursed by the Borrower on the date due as
provided in Section 2.08(e), or of any reimbursement payment required to be
refunded to the Borrower for any reason. Each Lender acknowledges and agrees
that its obligation to acquire participations pursuant to this Section 2.08(d)
in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a
Default, the existence of a Borrowing Base Deficiency or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e)    Reimbursement. If the Issuing Bank shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement
by paying to the Administrative Agent an amount equal to such LC Disbursement
not later than 12:00 noon, Houston, Texas time, on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m., Houston, Texas time, on such date, or, if such
notice has not been received by the Borrower prior to such time on such date,
then not later than 12:00 noon, Houston, Texas time, on (i) the Business Day
that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., Houston, Texas time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that,
unless the Borrower has notified the Administrative Agent that it intends to
reimburse all or part of such LC Disbursement without using Loan proceeds or has
submitted a Borrowing Request with respect thereto, if such LC Disbursement is
not less than $1,000,000, the Borrower shall, subject to the conditions to
Borrowing set forth herein, be deemed to have requested, and the Borrower does
hereby request under such circumstances, that such payment be financed with an
ABR Borrowing in an equivalent amount and, to the extent so financed, the
Borrower’s obligation to make such payment shall be discharged and replaced by
the resulting ABR Borrowing. If the Borrower fails to make such payment when
due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender’s Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.05 with respect to Loans made by such Lender (and Section
2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
and the Administrative Agent shall promptly pay to the Issuing Bank the amounts
so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this Section
2.08(e), the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Lenders have made payments pursuant to this Section
2.08(e) to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank
as their interests may appear. Any payment made by a Lender pursuant to this
Section 2.08(e) to reimburse the Issuing Bank for any LC Disbursement (other
than the funding of ABR Loans as contemplated above) shall not constitute a Loan
and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f)    Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit or any Letter of Credit
Agreement, or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section 2.08(f), constitute a legal or equitable discharge of, or

-41-

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

provide a right of setoff against, the Borrower’s obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their
Related Parties shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised all requisite care in each such
determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.
(g)    Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy or
electronic communication) of such demand for payment and whether the Issuing
Bank has made or will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower of
its obligation to reimburse the Issuing Bank and the Lenders with respect to any
such LC Disbursement.
(h)    Interim Interest. If the Issuing Bank shall make any LC Disbursement,
then, until the Borrower shall have reimbursed the Issuing Bank for such LC
Disbursement (either with its own funds or a Borrowing under Section 2.08(e)),
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Loans. Interest accrued pursuant to this Section 2.08(h) shall be for the
account of the Issuing Bank, except that interest accrued on and after the date
of payment by any Lender pursuant to Section 2.08(e) to reimburse the Issuing
Bank shall be for the account of such Lender to the extent of such payment.
(i)    Replacement of the Issuing Bank. The Issuing Bank may be replaced at any
time by written agreement among the Borrower, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank. At the
time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 3.05(b). From and after the effective date of any such replacement, (i)
the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall
remain a party hereto and shall

-42-

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

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

-43-

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

(k)    Outstanding Letters of Credit. On the Effective Date, each of the
Existing Letters of Credit shall be deemed to have been issued as Letters of
Credit under this Agreement by the Issuing Bank, without payment of any fees
otherwise due upon the issuance of a Letter of Credit, and the Issuing Bank
shall be deemed, without further action by any party hereto, to have sold to
each Lender, and each Lender shall be deemed, without further action by any
party hereto, to have purchased from the Issuing Bank, a participation, to the
extent of such Lender’s Applicable Percentage, in such Existing Letters of
Credit.

ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

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

Section 3.02    Interest.
(a)    ABR Loans. The Loans comprising each ABR Borrowing shall bear interest at
the Alternate Base Rate plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate.
(b)    Eurodollar Loans. The Loans comprising each Eurodollar Borrowing shall
bear interest at the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing plus the Applicable Margin, but in no event to exceed the Highest
Lawful Rate.
(c)    Post-Default Rate. Notwithstanding the foregoing, if an Event of Default
has occurred and is continuing, or if any principal of or interest on any Loan
or any fee or other amount payable by the Borrower or any Guarantor hereunder or
under any other Loan Document is not paid when due, whether at stated maturity,
upon acceleration or otherwise, and including any payments in respect of a
Borrowing Base Deficiency under Section 3.04(c), then (but only upon notice
thereof to the Borrower from the Administrative Agent, at the request of the
Majority Lenders, in the case of an Event of Default other than one described in
Section 10.01(a), Section 10.01(b), Section 10.01(h), Section 10.01(i) or
Section 10.01(j)) all Loans outstanding, in the case of an Event of Default, and
such overdue amount, in the case of a failure to pay amounts when due, shall
bear interest, after as well as before judgment, at a rate per annum equal to
two percent (2%) plus the rate applicable to ABR Loans as provided in Section
3.02(a), but in no event to exceed the Highest Lawful Rate.
(d)    Interest Payment Dates. Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and on the Termination Date;
provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than an optional prepayment of an ABR Loan prior to the Termination Date),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment, and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.
(e)    Interest Rate Computations. All interest hereunder shall be computed on
the basis of a year of 360 days, unless such computation would exceed the
Highest Lawful Rate, in which case interest shall be computed on the basis of a
year of 365 days (or 366 days in a leap year), except that interest computed by
reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or
366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The

-44-

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

applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error or bad faith, and be binding upon the parties
hereto.

Section 3.03    Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:
(a)    the Administrative Agent determines (which determination shall be
conclusive absent manifest error or bad faith) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate for
such Interest Period; or
(b)    the Administrative Agent is advised by the Majority Lenders that the
Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period will
not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (a) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (b) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing
shall be made as an ABR Borrowing.

Section 3.04    Prepayments.
(a)    Optional Prepayments. The Borrower shall have the right at any time and
from time to time to prepay any Borrowing in whole or in part, subject to prior
notice in accordance with Section 3.04(b).
(b)    Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by telecopy or electronic
communication) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 12:00 noon, Houston, Texas time, three
Business Days before the date of prepayment, or (ii) in the case of prepayment
of an ABR Borrowing, not later than 12:00 noon, Houston, Texas time, one
Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid; provided that, if a notice of
prepayment is given in connection with a conditional notice of termination of
the Aggregate Maximum Credit Amounts as contemplated by Section 2.06(b), then
such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.06(b). Promptly following receipt of any
such notice relating to a Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Borrowing shall
be in an amount that would be permitted in the case of an advance of a Borrowing
of the same Type as provided in Section 2.02. Each prepayment of a Borrowing
shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 3.02 and any payments to the extent required by Section 5.02.
(c)    Mandatory Prepayments.
(i)    If, after giving effect to any termination or reduction of (A) the
Aggregate Maximum Credit Amounts pursuant to Section 2.06(b) or (B) the
Aggregate Elected Borrowing Base Commitment pursuant to Section 2.07(h), the
total Revolving Credit Exposures exceeds the total Commitments, then the
Borrower shall (1) prepay the Borrowings on the date of such termination or
reduction

-45-

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

in an aggregate principal amount equal to such excess, and (2) if any excess
remains after prepaying all of the Borrowings as a result of an LC Exposure,
cash collateralize such excess as provided in Section 2.08(j).
(ii)    Upon any Scheduled Redetermination or Interim Redetermination or
adjustment to the amount of the Borrowing Base in accordance with Section
8.12(c), if the total Revolving Credit Exposures exceeds the redetermined or
adjusted Borrowing Base, then the Borrower shall (A) prepay the Borrowings in an
aggregate principal amount equal to such excess, and (B) if any excess remains
after prepaying all of the Borrowings as a result of an LC Exposure, cash
collateralize such excess as provided in Section 2.08(j). The Borrower shall be
obligated to make such prepayment and/or cash collateralize such excess within
one-hundred eighty (180) days following the date it receives the New Borrowing
Base Notice in accordance with Section 2.07(d) or the date the adjustment occurs
pursuant to Section 8.12(c), in six (6) consecutive equal monthly installments,
the first installment being due and payable on the date that is thirty (30) days
after the date the Borrower receives the New Borrowing Base Notice and each
subsequent installment being due and payable on the same day in each of the
subsequent calendar months; provided that all payments required to be made
pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination
Date.
(iii)    Upon any adjustment to the Borrowing Base pursuant to Section 2.07(e),
Section 2.07(f) or Section 2.07(g), if the total Revolving Credit Exposures
exceeds the Borrowing Base as adjusted, then the Borrower shall (A) prepay the
Borrowings in an aggregate principal amount equal to such excess, and (B) if any
excess remains after prepaying all of the Borrowings as a result of an LC
Exposure, cash collateralize such excess as provided in Section 2.08(j). The
Borrower shall be obligated to make such prepayment and/or cash collateralize
such excess on the second (2nd) Business Day after it receives the applicable
New Borrowing Base Notice in accordance with Section 2.07(d); provided that all
payments required to be made pursuant to this Section 3.04(c)(iii) must be made
on or prior to the Termination Date.
(iv)    Upon the Disposition (including Casualty Events) of any Oil and Gas
Property or any interest therein or any Restricted Subsidiary owning Oil and Gas
Properties pursuant to Section 9.12(b), (d) or (e), which Disposition does not
result in the total Revolving Credit Exposures exceeding the Borrowing Base, as
the same may be adjusted pursuant to Section 2.07(e) or Section 2.07(g) upon any
such Disposition, then the Borrower shall prepay the Borrowings (and if any
excess remains after prepaying Borrowings as a result of an LC Exposure, cash
collateralize such excess as provided in Section 2.08(j)), together with accrued
and unpaid interest thereon, in an amount equal to 100% of the Net Cash Proceeds
(which Net Cash Proceeds, for the avoidance of doubt, shall not be calculated
giving effect to the payment of any Debt) received from such Disposition. Such
payment shall be due one (1) Business Day prior to any date on which the
Borrower or any Restricted Subsidiary would be required to make a mandatory
prepayment of Senior Notes permitted by Section 9.02(f) or Permitted Refinancing
Debt permitted by Section 9.02(g), as the case may be, with the Net Cash
Proceeds from such Disposition; provided that such payment shall be reduced by
the amount of such Net Cash Proceeds expended by the Borrower and the Subsidiary
Guarantors, during the period from the date of such Disposition to the due date
of such prepayment, to make a Qualified Investment (other than inventory and
working capital) in the businesses permitted pursuant to Section 9.06.
Notwithstanding the foregoing, all payments required to be made pursuant to this
Section 3.04(c)(iv) must be made on or prior to the Termination Date.
(v)    Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied, first, ratably to any ABR Borrowings then outstanding, and, second, to
any Eurodollar Borrowings then outstanding, and if more than one Eurodollar
Borrowing is then outstanding, to each such Eurodollar Borrowing in order of
priority beginning with the Eurodollar Borrowing with the least number of days

-46-

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

remaining in the Interest Period applicable thereto and ending with the
Eurodollar Borrowing with the most number of days remaining in the Interest
Period applicable thereto.
(vi)    Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied ratably to the Loans included in the prepaid Borrowings. Prepayments
pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the
extent required by Section 3.02.
(d)    No Premium or Penalty. Prepayments permitted or required under this
Section 3.04 shall be without premium or penalty, except as required under
Section 5.02.

Section 3.05    Fees.
(a)    Commitment Fees. Except as otherwise provided in Section 4.03(c), the
Borrower agrees to pay to the Administrative Agent for the account of each
Lender a commitment fee, which shall accrue at the applicable Commitment Fee
Rate on the average daily amount of the unused amount of the Commitment of such
Lender during the period from and including the date of this Agreement to but
excluding the Termination Date. Accrued commitment fees shall be payable in
arrears on the last day of March, June, September and December of each year and
on the Termination Date, commencing on the first such date to occur after the
date hereof. All commitment fees shall be computed on the basis of a year of 360
days, unless such computation would exceed the Highest Lawful Rate, in which
case such commitment fees shall be computed on the basis of a year of 365 days
(or 366 days in a leap year), and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(b)    Letter of Credit Fees. The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Lender a participation fee with
respect to its participations in Letters of Credit, which shall accrue at the
same Applicable Margin used to determine the interest rate applicable to
Eurodollar Loans on the average daily amount of such Lender’s LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the date of this Agreement to but excluding
the later of the date on which such Lender’s Commitment terminates and the date
on which such Lender ceases to have any LC Exposure, (ii) to the Issuing Bank a
fronting fee, which shall accrue at the rate of 0.25% per annum on the average
daily amount of the LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the date of
this Agreement to but excluding the later of the date of termination of the
Commitments and the date on which there ceases to be any LC Exposure; provided
that in no event shall such fee be less than $500 during any quarter, and (iii)
to the Issuing Bank, for its own account, its standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the date of this Agreement; provided that all
such fees shall be payable on the Termination Date and any such fees accruing
after the Termination Date shall be payable on demand. Any other fees payable to
the Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10
days after demand. All participation fees and fronting fees shall be computed on
the basis of a year of 360 days, unless such computation would exceed the
Highest Lawful Rate, in which case interest shall be computed on the basis of a
year of 365 days (or 366 days in a leap year), and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).
(c)    Administrative Agent Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times set forth in the Fee Letter.

-47-

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

(d)    Arranger Fees. The Borrower agrees to pay to the Arranger, for its own
account, fees payable in the amounts and at the times set forth in the Fee
Letter.
(e)    Borrowing Base Increase Fees. The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender then party to this
Agreement, ratably in accordance with its Applicable Percentage, a Borrowing
Base increase fee in an amount to be agreed by the Lenders and the Borrower on
the amount of any increase of the Borrowing Base over the highest Borrowing Base
previously in effect, payable on the effective date of any such increase to the
Borrowing Base.

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

Section 4.01    Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a)    Payments by the Borrower. The Borrower shall make each payment required
to be made by it hereunder (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 5.01,
Section 5.02, Section 5.03 or otherwise) prior to 12:00 noon, Houston, Texas
time, on the date when due, in immediately available funds, without defense,
deduction, recoupment, set-off or counterclaim. Fees, once paid, shall be fully
earned and shall not be refundable under any circumstances, absent manifest
error. Any amounts received after such time on any date may, in the discretion
of the Administrative Agent, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon. All such
payments shall be made to the Administrative Agent at its offices specified in
Section 12.01, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Section 5.01,
Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments hereunder shall be made in dollars.
(b)    Application of Insufficient Payments. If at any time insufficient funds
are received by and available to the Administrative Agent to pay fully all
amounts of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such parties.
(c)    Sharing of Payments by Lenders. If any Lender shall, by exercising any
right of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and
participations in LC Disbursements; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and

-48-

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

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

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

Section 4.03    Deductions by the Administrative Agent; Defaulting Lenders.
(a)    Certain Deductions by the Administrative Agent. If any Lender shall fail
to make any payment required to be made by it pursuant to Section 2.05(b),
Section 2.08(d), Section 2.08(e), Section 4.02, Section 5.03(h), Section 11.10
or Section 12.03(c), then the Administrative Agent may, in its sole discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender for the
benefit of the Administrative Agent or the Issuing Bank to satisfy such Lender’s
obligations to it under such Sections until all such unsatisfied obligations are
fully paid.
(b)    Payments to Defaulting Lenders. If a Defaulting Lender (or a Lender who
would be a Defaulting Lender but for the expiration of the relevant grace
period) as a result of the exercise of a set-off shall have received a payment
in respect of its Revolving Credit Exposure which results in its Revolving
Credit Exposure being less than its Applicable Percentage of the aggregate
Revolving Credit Exposures, then no payments will be made to such Defaulting
Lender until such time as such Defaulting Lender shall have complied with
Section 4.03(c) and all amounts due and owing to the Lenders have been equalized
in accordance with each Lender’s respective pro rata share of the Obligations.
Further, if at any time prior to the acceleration or maturity of the Loans, the
Administrative Agent shall receive any payment in respect of principal of a Loan
or a reimbursement of an LC Disbursement while one or more Defaulting Lenders
shall be party to this Agreement, the Administrative Agent shall apply such
payment first to the Borrowing(s) for which such Defaulting Lender(s) shall have
failed to fund its pro rata share until such time as such Borrowing(s) are paid
in full or each Lender (including each Defaulting Lender) is owed its Applicable
Percentage of all Loans then outstanding. After acceleration or maturity of the
Loans, subject to the first sentence of this Section 4.03(b), all principal will
be paid ratably as provided in Section 10.02(c).

-49-

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

(c)    Defaulting Lenders. Notwithstanding any provision of this Agreement to
the contrary, if any Lender becomes a Defaulting Lender, then the following
provisions shall apply for so long as such Lender is a Defaulting Lender:
(i)    Fees shall cease to accrue on the unfunded portion of the Commitment of
such Defaulting Lender pursuant to Section 3.05(a).
(ii)    The Commitment, the Maximum Credit Amount and the Revolving Credit
Exposure of such Defaulting Lender shall not be included in determining whether
the Majority Lenders, the Required Lenders or the Super Majority Lenders have
taken or may take any action hereunder (including any consent to any amendment
or waiver pursuant to Section 12.02); provided that any waiver, amendment or
modification requiring the consent of all Lenders or each affected Lender shall
require the consent of such Defaulting Lender; and provided, further, that any
redetermination or affirmation of the Borrowing Base shall occur without the
participation of a Defaulting Lender, but the Commitment (i.e., the Applicable
Percentage of the Borrowing Base of a Defaulting Lender) may not be increased
without the consent of such Defaulting Lender.
(iii)    If any LC Exposure exists at the time a Lender becomes a Defaulting
Lender then:
(A)    all or any part of the LC Exposure of such Defaulting Lender shall be
reallocated among the Non-Defaulting Lenders in accordance with their respective
Applicable Percentages (for the purposes of such reallocation the Defaulting
Lender’s Commitment shall be disregarded in determining the Non-Defaulting
Lender’s Applicable Percentage) but only to the extent (d) the sum of all
Non-Defaulting Lenders’ Revolving Credit Exposures plus such Defaulting Lender’s
LC Exposure does not exceed the total of all Non-Defaulting Lenders’
Commitments, and (2) the sum of each Non-Defaulting Lender’s Revolving Credit
Exposure plus its reallocated share of such Defaulting Lender’s LC Exposure does
not exceed such Non-Defaulting Lender’s Commitment; provided, that no such
reallocation will constitute a waiver or release of any claim the Borrower, the
Administrative Agent, the Issuing Bank or any Lender may have against such
Defaulting Lender or cause such Defaulting Lender to be a Non-Defaulting Lender;
(A)    if the reallocation described in clause (A) above cannot, or can only
partially, be effected, then the Borrower, without prejudice to any right or
remedy available to it hereunder or under law, shall within one Business Day
following notice by the Administrative Agent cash collateralize for the benefit
of the Issuing Bank only the Borrower’s obligations corresponding to such
Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation
pursuant to clause (A) above) in accordance with the procedures set forth in
Section 2.08(j) for so long as such LC Exposure is outstanding;
(B)    if the Borrower cash collateralizes any portion of such Defaulting
Lender’s LC Exposure pursuant to clause (B) above, then the Borrower shall not
be required to pay any fees to such Defaulting Lender pursuant to Section
3.05(b) with respect to such Defaulting Lender’s LC Exposure during the period
such Defaulting Lender’s LC Exposure is cash collateralized;
(C)    if the LC Exposure of the Non-Defaulting Lenders is reallocated pursuant
to clause (A) above, then the fees payable to the Lenders pursuant to Section
3.05(b) shall be adjusted in accordance with such Non-Defaulting Lenders’
Applicable Percentages; and
(D)    if all or any portion of such Defaulting Lender’s LC Exposure is neither
reallocated nor cash collateralized pursuant to clause (A) or (B) above, then,
without prejudice to

-50-

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

any rights or remedies of the Issuing Bank or any Lender hereunder, all
commitment fees that otherwise would have been payable to such Defaulting Lender
(solely with respect to the portion of such Defaulting Lender’s Commitment that
was utilized by such LC Exposure) and letter of credit fees payable under
Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be
payable to the Issuing Bank until such LC Exposure is reallocated and/or cash
collateralized.
If (i) a Bankruptcy Event or a Bail-In Action with respect to a Lender Parent of
any Lender shall occur following the date hereof and for so long as such event
shall continue or (ii) the Issuing Bank has a good faith belief that any Lender
has defaulted in fulfilling its obligations under one or more other agreements
in which such Lender commits to extend credit, the Issuing Bank shall not be
required to issue, amend or increase any Letter of Credit, unless the Issuing
Bank shall have entered into arrangements with the Borrower, such Lender or the
Non-Defaulting Lenders, satisfactory to the Issuing Bank, as the case may be.
In the event that the Administrative Agent, the Borrower and the Issuing Bank
each agrees that a Defaulting Lender has adequately remedied all matters that
caused such Lender to be a Defaulting Lender and such Lender is no longer a
Defaulting Lender, then the LC Exposure of the Lenders shall be readjusted to
reflect the inclusion of such Lender’s Commitment and on such date, if
necessary, such Lender shall purchase at par such of the Loans and/or
participations in Letters of Credit of the other Lenders as the Administrative
Agent shall determine may be necessary in order for such Lender to hold such
Loans and/or participations in Letters of Credit in accordance with its
Applicable Percentage; provided, that no adjustments will be made retroactively
with respect to fees accrued while such 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 Non-Defaulting
Lender will constitute a waiver or release of any claim of any party hereunder
arising from such Lender having been a Defaulting Lender.

Section 4.04    Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower’s or
each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property. The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Obligations and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in such
Security Instruments, until the occurrence and continuance of an Event of
Default, (a) the Administrative Agent and the Lenders agree that they will
neither notify the purchaser or purchasers of such production nor take any other
action to cause such proceeds to be remitted to the Administrative Agent or the
Lenders, but the Lenders will instead permit such proceeds to be paid to the
Borrower and its Restricted Subsidiaries and (b) the Lenders hereby authorize
the Administrative Agent to take such actions as may be necessary to cause such
proceeds to be paid to the Borrower and/or such Restricted Subsidiaries.

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

Section 5.01    Increased Costs.
(a)    Eurodollar Changes in Law. If any Change in Law shall:
(i)    impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate);

-51-

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

(ii)    impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender; or
(iii)    subject any Lender to any Taxes (other than (A) Indemnified Taxes and
(B) Excluded Taxes) on its loans, loan principal, letters of credit,
commitments, or other obligations, or its deposits, reserves, other liabilities
or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making, maintaining, converting or continuing any Eurodollar Loan (or
of maintaining its obligation to make any such Loan) or to reduce the amount of
any sum received or receivable by such Lender (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered.
(b)    Capital Requirements. If any Lender or the Issuing Bank determines that
any Change in Law regarding capital or liquidity requirements has or would have
the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s
capital or on the capital of such Lender’s or the Issuing Bank’s holding
company, if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Bank, to a level below that which such Lender or
the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the
Issuing Bank’s holding company with respect to capital or liquidity adequacy),
then from time to time the Borrower will pay to such Lender or the Issuing Bank,
as the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding
company for any such reduction suffered.
(c)    Certificates. A certificate of a Lender or the Issuing Bank setting forth
the amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in Section 5.01(a) or (b)
shall be delivered to the Borrower and shall be conclusive absent manifest error
or bad faith. The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d)    Effect of Failure or Delay in Requesting Compensation. Failure or delay
on the part of any Lender or the Issuing Bank to demand compensation pursuant to
this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing
Bank’s right to demand such compensation; provided that the Borrower shall not
be required to compensate a Lender or the Issuing Bank pursuant to this Section
5.01 for any increased costs or reductions incurred more than 365 days prior to
the date that such Lender or the Issuing Bank, as the case may be, notifies the
Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lender’s or the Issuing Bank’s intention to claim compensation
therefor; provided, further, that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 365-day period referred
to above shall be extended to include the period of retroactive effect thereof.

Section 5.02    Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan into an ABR Loan other than on the last
day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any
notice delivered pursuant hereto, or (d) the assignment of any Eurodollar Loan
other than on the last day of the Interest Period applicable thereto as a result
of a request by the Borrower pursuant to Section 5.05, then, in any such event,
the Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a Eurodollar Loan, such loss, cost or
expense to any Lender shall be deemed to include an amount determined by such
Lender to be the

-52-

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

excess, if any, of (x) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (y) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the eurodollar market.
A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error or bad faith. Except in
cases of manifest error or bad faith, the Borrower shall pay such Lender the
amount shown as due on any such certificate within 10 days after receipt
thereof.

Section 5.03    Taxes.
(a)    Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction or withholding for any Taxes,
except as required by applicable law; provided that if the Withholding Agent
shall be required to deduct or withhold any Taxes from such payments, then (i)
in the case of Indemnified Taxes or Other Taxes, the sum payable shall be
increased as necessary so that after making all required deductions or
withholdings (including deductions or withholdings of Indemnified Taxes or Other
Taxes applicable to additional sums payable under this Section 5.03(a)), the
Administrative Agent, Lender or Issuing Bank (as the case may be) receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made, (ii) the Withholding Agent shall make such deductions or
withholdings and (iii) the Withholding Agent shall pay the full amount deducted
or withheld to the relevant Governmental Authority in accordance with applicable
law.
(b)    Payment of Other Taxes by the Borrower. The Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.
(c)    Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Bank, within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the
case may be (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section 5.03) and any reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate of the Administrative
Agent, a Lender or the Issuing Bank as to the amount of such payment or
liability under this Section 5.03 shall be delivered to the Borrower and shall
be conclusive absent manifest error or bad faith.
(d)    Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.
(e)    Status of Lenders. Any Lender that is entitled to an exemption from or
reduction of withholding Tax shall deliver to the Borrower and the
Administrative Agent, at the time or times prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation prescribed by applicable law or reasonably
requested by the Borrower

-53-

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

or the Administrative Agent as will permit such payments to be made without
withholding or at a reduced rate. In addition, any Lender, if reasonably
requested by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements. Notwithstanding
anything to the contrary in the preceding two sentences, the completion,
execution and submission of such documentation (other than such documentation
set forth in Section 5.03(e)(i)(A), (i)(B) and (i)(D) below) shall not be
required if in the Lender’s reasonable judgment such completion, execution or
submission would subject such Lender to any material unreimbursed cost or
expense or would materially prejudice the legal or commercial position of such
Lender.
(i)    Without limiting the generality of the foregoing:
(A)    any Lender that is a U.S. Person shall deliver to the Borrower and the
Administrative Agent on or prior to the date on which such Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), executed copies
of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup
withholding tax;
(B)    any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), whichever of the following is applicable:
(1)    in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed copies of IRS Form W-8BEN-E or W-8BEN
(as applicable) establishing an exemption from, or reduction of, U.S. federal
withholding Tax pursuant to the “interest” article of such tax treaty and (y)
with respect to any other applicable payments under any Loan Document, IRS Form
W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding
Tax pursuant to the “business profits” or “other income” article of such tax
treaty;
(2)    executed copies of IRS 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 to
the effect that such Foreign Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN-E or W-8BEN
(as applicable); or
(4)    to the extent a Foreign Lender is not the beneficial owner (for example,
where the Foreign Lender is a partnership), executed copies of IRS Form W-8IMY,
accompanied by IRS Form W-8ECI, W-8BEN-E, W-8BEN, U.S. Tax Compliance
Certificate, Form W-9, and/or other certification documents from each beneficial
owner, as applicable; provided that if the Foreign Lender is a partnership (and
not a participating Lender) and one or more beneficial owners of such Foreign
Lender are claiming the portfolio interest exemption, such Foreign Lender may
provide a U.S. Tax Compliance Certificate on behalf of each such beneficial
owner;

-54-

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

(C)    any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), executed copies of any other form prescribed by applicable law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrower or the Administrative Agent
to determine the withholding or deduction required to be made; and
(D)    if a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower and the Administrative Agent at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to comply with their obligations under FATCA and to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine
the amount to deduct and withhold from such payment. Solely for purposes of this
clause (D), “FATCA” shall include any amendments made to FATCA after the date of
this Agreement.
Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrower and the Administrative
Agent in writing of its legal inability to do so.
(f)    Status of Administrative Agent. On or prior to the date of this
Agreement, Wells Fargo Bank, National Association, shall (and any successor or
replacement Administrative Agent shall, on or before the date on which it
becomes the Administrative Agent hereunder), deliver to the Borrower two duly
executed copies of either (i) IRS Form W-9, or (ii) IRS Form W-8ECI or IRS Form
W-8BEN-E (with respect to any payments to be received on its own behalf) and IRS
Form W-8IMY (for all other payments), establishing that the Borrower can make
payments to the Administrative Agent without deduction or withholding of any
Taxes imposed by the United States, including Taxes imposed under FATCA.
(g)    Tax 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 or Other 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 5.03, 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 5.03 with respect to the Taxes or Other 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 Administrative Agent or
Lender be required to pay any amount to the Borrower pursuant to this paragraph
(g) the payment of which would place the Administrative Agent or Lender in a
less favorable net after-Tax position than the Administrative Agent or Lender
would have been in if the Tax subject to indemnification and giving rise to

-55-

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

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

Section 5.04    Mitigation Obligations; Designation of Different Lending Office.
If any Lender requests compensation under Section 5.01, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 5.03, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (a) would eliminate or reduce
amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in
the future and (b) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

Section 5.05    Replacement of Lenders. If (i) any Lender requests compensation
under Section 5.01, (ii) the Borrower is required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 5.03, (iii) any Lender becomes a Defaulting Lender, (iv) the
Super Majority Lenders provided their consent to increase or maintain the
Borrowing Base pursuant to Section 2.07(c)(iii), or (v) other than with respect
to the matter set forth in clause (iv) above, the Required Lenders provided
their approval with respect to an amendment, waiver or consent requiring the
approval of all Lenders or all affected Lenders, then the Borrower may, at its
sole expense and effort, upon notice to such Lender and the Administrative Agent
(and in the case of clause (iv) above, within thirty (30) days of the
effectiveness of the redetermination of the Borrowing Base pursuant to Section
2.07(d)), require, in the case of clauses (i) through (iii) above, such Lender,
in the case of clause (iv) above, any Lender that did not consent to either
increase or maintain the Borrowing Base then in effect, or, in the case of
clause (v) above, any Lender that did not approve the applicable amendment,
waiver or consent, to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in Section 12.04(a)), all its
interests, rights and obligations under this Agreement to an assignee that shall
assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (A) the Borrower shall have received the
prior written consent of the Administrative Agent and the Issuing Bank, which
consent shall not unreasonably be withheld, (B) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and
participations in LC Disbursements, accrued interest thereon, accrued

-56-

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

fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts), (C) in the case of any such
assignment resulting from a claim for compensation under Section 5.01 or
payments required to be made pursuant to Section 5.03, such assignment will
result in a reduction in such compensation or payments and (D) such assignment
does not conflict with applicable law. A Lender shall not be required to make
any such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply. Notwithstanding the foregoing, a
Lender shall not be required to make any such assignment and delegation if such
Lender is a Secured Swap Party with any outstanding Secured Swap Agreement,
unless on or prior thereto, all such Swap Agreements have been terminated or
novated to another Person and such Lender (or its Affiliate) shall have received
payment of all amounts, if any, payable to it in connection with such
termination or novation.

Section 5.06    Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to honor its obligation to make or maintain Eurodollar
Loans either generally or having a particular Interest Period hereunder, then
(a) such Lender shall promptly notify the Borrower and the Administrative Agent
thereof and such Lender’s obligation to make such Eurodollar Loans shall be
suspended (the “Affected Loans”) until such time as such Lender may again make
and maintain such Eurodollar Loans and (b) all Affected Loans which would
otherwise be made by such Lender shall be made instead as ABR Loans (and, if
such Lender so requests by notice to the Borrower and the Administrative Agent,
all Affected Loans of such Lender then outstanding shall be automatically
converted into ABR Loans on the date specified by such Lender in such notice)
and, to the extent that Affected Loans are so made as (or converted into) ABR
Loans, all payments of principal which would otherwise be applied to such
Lender’s Affected Loans shall be applied instead to its ABR Loans.

ARTICLE VI
CONDITIONS PRECEDENT

Section 6.01    Effective Date. The obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 12.02):
(a)    The Administrative Agent, the Arranger and the Lenders shall have
received all commitment and agency fees and all other fees and amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrower hereunder (including, to the extent invoiced on or prior
to the Effective Date, the fees and expenses of Paul Hastings LLP, counsel to
the Administrative Agent).
(b)    The Borrower shall have deposited $17,877.00 with Paul Hastings LLP,
counsel for the Administrative Agent, to be held by such counsel and applied
toward payment of costs and expenses for recordation of the Mortgaged Property,
as provided pursuant to Section 12.03(a). If such deposit exceeds the amount of
such costs and expenses, the excess shall be returned to the Borrower. If such
deposit is less than such costs and expenses, the deficit shall be paid by
Borrower pursuant to Section 12.03(a).
(c)    The Administrative Agent shall have received a certificate of the
Secretary, Assistant Secretary or a Responsible Officer of the Borrower and each
Guarantor each setting forth (i) resolutions of the members, board of directors
or other appropriate governing body with respect to the authorization of the
Borrower or such Guarantor to execute and deliver the Loan Documents to which it
is a party and to enter into the transactions contemplated in those documents,
(ii) the officers of the Borrower or such Guarantor

-57-

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

(A) who are authorized to sign the Loan Documents to which the Borrower or such
Guarantor is a party and (B) who will, until replaced by another officer or
officers duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated hereby, (iii)
specimen signatures of such authorized officers, and (iv) the partnership
agreement, the limited liability company agreement, the articles or certificate
of incorporation and bylaws or other applicable organizational documents of the
Borrower and such Guarantor certified as being true and complete. The
Administrative Agent and the Lenders may conclusively rely on such certificate
until the Administrative Agent receives notice in writing from the Borrower to
the contrary.
(d)    The Administrative Agent shall have received certificates of the
appropriate State agencies with respect to the existence, qualification and good
standing of the Borrower and each Guarantor.
(e)    The Administrative Agent shall have received a compliance certificate
which shall be substantially in the form of Exhibit D, duly and properly
executed by a Responsible Officer and dated as of the Effective Date.
(f)    The Administrative Agent shall have received from each party hereto
counterparts (in such number as may be requested by the Administrative Agent) of
this Agreement signed on behalf of such party.
(g)    The Administrative Agent shall have received duly executed Notes payable
to each Lender requesting a Note in a principal amount equal to its Maximum
Credit Amount dated as of the Effective Date.
(h)    The Administrative Agent shall have received from each party thereto duly
executed counterparts (in such number as may be requested by the Administrative
Agent) of the Security Instruments, including the Guaranty Agreement, described
on Exhibit E. In connection with the execution and delivery of the Security
Instruments, the Administrative Agent shall:
(i)    be reasonably satisfied that the Security Instruments create first
priority, perfected Liens (subject only to Excepted Liens, including the
provisos at the end of such definition) on at least 90% of the total value of
the proved Oil and Gas Properties evaluated in the Initial Reserve Report; and
(ii)    have received certificates, together with undated, blank stock powers
for such certificates, representing all of the issued and outstanding
certificated Equity Interests in each Restricted Subsidiary, to the extent
required under the Guaranty Agreement.
(i)    The Administrative Agent shall have received satisfactory evidence that
on the Effective Date, and after the making of the initial Loans hereunder, the
application of the proceeds thereof and after giving effect to the Transactions
contemplated to occur on the Effective Date, the Borrower will have Liquidity of
not less than $10,000,000.
(j)    The Administrative Agent shall have received an opinion of Vinson &
Elkins LLP, special counsel to the Borrower and the other Loan Parties, in form
and substance satisfactory to the Administrative Agent.
(k)    The Administrative Agent shall have received a certificate of insurance
coverage of the Borrower evidencing that the Borrower is carrying insurance in
accordance with Section 7.12.

-58-

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

(l)    The Administrative Agent shall have received title information as the
Administrative Agent may reasonably require satisfactory to the Administrative
Agent setting forth the status of title to at least 90% of the total value of
the proved Oil and Gas Properties evaluated in the Initial Reserve Report.
(m)    The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries.
(n)    The Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower certifying that the Loan Parties have
received all consents and approvals required by Section 7.03.
(o)    The Administrative Agent shall have received the financial statements
referred to in Section 7.04(a), which shall reflect no Debt other than the Loans
made by the Lenders on the Effective Date and other Debt permitted by Section
9.02 and demonstrating a positive working capital position (after all
transaction fees are paid and specifically including, without limitation, cash
and unused Commitments under this Agreement) reasonably satisfactory to the
Administrative Agent, and the Initial Reserve Report accompanied by a
certificate covering the matters described in Section 8.11(c).
(p)    The Administrative Agent shall have received appropriate UCC search
certificates reflecting no prior Liens encumbering the Properties of the
Borrower and the other Loan Parties for the States of Delaware and Texas and any
other jurisdiction requested by the Administrative Agent; other than those being
assigned or released on or prior to the Effective Date or Liens permitted by
Section 9.03.
(q)    The Administrative Agent shall have reviewed and be satisfied with the
Borrower’s capital structure, financing plan and hedging strategy and shall have
performed and be satisfied with such other due diligence regarding the Borrower
and the Restricted Subsidiaries and their respective Properties as the
Administrative Agent may reasonably require.
(r)    The Administrative Agent shall have received evidence satisfactory to it
that (i) all loans and other amounts owing under the Existing Credit Agreement
have been (or contemporaneously herewith are being) repaid in full and all
commitments thereunder have been terminated or cancelled and (ii) all Liens on
the Properties of the Borrower and of the Subsidiaries associated with the
Existing Credit Agreement have been released or terminated, subject only to the
filing of applicable terminations, releases or assignments.
(s)    The Administrative Agent and the Lenders shall have received, and be
reasonably satisfied in form and substance with, all documentation and other
information required by bank regulatory authorities under applicable
“know-your-customer” and anti-money laundering rules and regulations, including
but not restricted to the USA PATRIOT Act.
(t)    The Administrative Agent shall have received such other documents as the
Administrative Agent or special counsel to the Administrative Agent may
reasonably request.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 12.02)
at or prior to 2:00 p.m., Houston, Texas time, on October 28, 2016 (and, in the
event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time). For purposes of determining compliance with the
conditions specified in this Section 6.01, each Lender that has signed this
Agreement shall be deemed to have consented

-59-

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

to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed Effective Date specifying
its objection thereto.

Section 6.02    Each Credit Event. The obligation of each Lender to make a Loan
on the occasion of any Borrowing (including the initial funding), and of the
Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject
to the satisfaction of the following conditions:
(a)    At the time of and immediately after giving effect to such Borrowing or
the issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.
(b)    The representations and warranties of the Borrower and the Guarantors set
forth in this Agreement and in the other Loan Documents shall be true and
correct in all material respects (except that any representation and warranty
that is qualified by materiality shall be true and correct in all respects) on
and as of the date of such Borrowing or the date of issuance, amendment, renewal
or extension of such Letter of Credit, as applicable, except to the extent any
such representations and warranties are expressly limited to an earlier date, in
which case, on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, such
representations and warranties shall be true and correct in all material
respects (except that any representation and warranty that is qualified by
materiality shall be true and correct in all respects) as of such specified
earlier date.
(c)    The making of such Loan or the issuance, amendment, renewal or extension
of such Letter of Credit, as applicable, would not conflict with, or cause any
Lender or the Issuing Bank to violate or exceed, any applicable Governmental
Requirement, and no Change in Law shall have occurred, and no litigation shall
be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
any Loan, the issuance, amendment, renewal, extension or repayment of any Letter
of Credit or any participations therein or the consummation of the transactions
contemplated by this Agreement or any other Loan Document.
(d)    At the time of and immediately after giving effect to such Borrowing, the
Consolidated Cash Balance shall not exceed the Consolidated Cash Balance
Threshold.
(e)    The receipt by the Administrative Agent of a Borrowing Request in
accordance with Section 2.03 or a request for a Letter of Credit in accordance
with Section 2.08(b), as applicable.
Each request for a Borrowing and each request for the issuance, amendment,
renewal or extension of any Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters specified in Section 6.02(a) through (d).

Section 6.03    Additional Conditions to Credit Events. In addition to the
conditions precedent set forth in Section 6.02, so long as any Lender is a
Defaulting Lender, the Issuing Bank shall not be required to issue, amend or
increase any Letter of Credit, unless it is satisfied that the LC Exposure will
be 100% covered by the Commitments of the Non-Defaulting Lenders and/or the
Borrower will Cash Collateralize the LC Exposure in accordance with Section
4.03(c)(iii), and participating interests in any such newly issued or increased
Letter of Credit shall be allocated among Non-Defaulting Lenders in accordance
with Section 4.03(c)(iii)(A) (and Defaulting Lenders shall not participate
therein).

-60-

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

ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower (and PEI, in the case of Section 7.01, Section 7.02, Section 7.03,
Section 7.04(a), Section 7.09 and Section 7.11) represents and warrants to the
Lenders that:

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

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

Section 7.03    Approvals; No Conflicts. Except as set forth on Schedule 7.03,
the Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority or any other
third Person (including holders of its Equity Interests or any class of
directors, managers or supervisors, as applicable, whether interested or
disinterested, of PEI, the Borrower or any other Person), nor is any such
consent, approval, registration, filing or other action necessary for the
validity or enforceability of any Loan Document or the consummation of the
Transactions, except such as have been obtained or made and are in full force
and effect other than (i) the recording and filing of the Security Instruments
as required by this Agreement and (ii) those third party approvals or consents
which, if not made or obtained, would not cause a Default hereunder, could not
reasonably be expected to have a Material Adverse Effect or do not have an
adverse effect on the enforceability of the Loan Documents, (b) will not violate
any applicable law or regulation or the partnership agreements, limited
liability agreements, charter, by-laws or other organizational documents of any
Loan Party or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, material agreement or other material
instrument binding upon any Loan Party or its Properties, or give rise to a
right thereunder to require any payment to be made by any Loan Party and (d)
will not result in the creation or imposition of any Lien on any Property of any
Loan Party (other than the Liens created by the Loan Documents).

Section 7.04    Financial Condition; No Material Adverse Change.
(a)    PEI has heretofore furnished to the Lenders the consolidated balance
sheet and statements of income, stockholders equity and cash flows for PEI and
its consolidated subsidiaries (i) as of and for the fiscal year ended December
31, 2015, reported on by KPMG LLP, independent public accounts, and (ii) as of
and for the fiscal quarter and the portion of the fiscal year ended June 30,
2016, certified by its chief financial officer. Such financial statements
present fairly, in all material respects, the financial position and results of
operations and cash flows of PEI and its consolidated subsidiaries as of such
dates and for

-61-

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

such periods in accordance with GAAP, except that the reports for June 30, 2016
are on a cash basis, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii) above.
(b)    Since December 31, 2015, there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect.
(c)    Except as set forth on Schedule 7.04(c), no Loan Party has on the date
hereof any material Debt (including Disqualified Capital Stock) or any
contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the Financial Statements, including the footnotes
thereto.

Section 7.05    Litigation.
(a)    Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower or any Restricted
Subsidiary, threatened against or affecting any Loan Party (i) not fully covered
by insurance (except for normal deductibles) as to which there is a reasonable
possibility of an adverse determination that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect or (ii) that involve any Loan Document or the
Transactions.
(b)    Since the date of this Agreement, there has been no change in the status
of the matters disclosed on Schedule 7.05 that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.

Section 7.06    Environmental Matters. Except for such matters as set forth on
Schedule 7.06 or that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect:
(a)    the Borrower and the Restricted Subsidiaries and each of their respective
Properties and operations thereon are, and within all applicable statute of
limitation periods have been, in compliance with all applicable Environmental
Laws;
(b)    the Borrower and the Restricted Subsidiaries have obtained all
Environmental Permits required for their respective operations and each of their
Properties, with all such Environmental Permits being currently in full force
and effect, and none of the Borrower or the Restricted Subsidiaries has received
any written notice or otherwise has knowledge that any such existing
Environmental Permit will be revoked or that any application for any new
Environmental Permit or renewal of any existing Environmental Permit will be
protested or denied;
(c)    there are no claims, demands, suits, orders, inquiries, or proceedings
concerning any violation of, or any liability (including as a potentially
responsible party) under, any applicable Environmental Laws that is pending or,
to the Borrower’s knowledge, threatened against the Borrower or any of its
Restricted Subsidiaries or any of their respective Properties or as a result of
any operations at such Properties;
(d)    none of the Properties of the Borrower or any Restricted Subsidiary
contain or have contained any: (i) underground storage tanks; (ii)
asbestos-containing materials; (iii) landfills or dumps; (iv) hazardous waste
management units as defined pursuant to RCRA or any comparable state law; or (v)

-62-

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

sites on or nominated for the National Priority List promulgated pursuant to
CERCLA or any state remedial priority list promulgated or published pursuant to
any comparable state law;
(e)    there has been no Release or, to the Borrower’s knowledge, threatened
Release, of Hazardous Materials at, on, under or from any of the Borrower’s or
any Restricted Subsidiary’s Properties, there are no investigations,
remediations, abatements, removals, or monitorings of Hazardous Materials
required under applicable Environmental Laws at such Properties and, to the
knowledge of the Borrower, none of such Properties are adversely affected by any
Release or threatened Release of a Hazardous Material originating or emanating
from any other real property;
(f)    none of the Borrower or any Restricted Subsidiary has received any
written notice asserting an alleged liability or obligation under any applicable
Environmental Laws with respect to the investigation, remediation, abatement,
removal, or monitoring of any Hazardous Materials at, under, or Released or
threatened to be Released from any real properties offsite, any of the
Borrower’s or any Restricted Subsidiary’s Properties and, to Borrower’s
knowledge, there are no conditions or circumstances that could reasonably be
expected to result in the receipt of such written notice;
(g)    there has been no exposure of any Person or Property to any Hazardous
Materials as a result of or in connection with the operations and businesses of
any of the Borrower’s or any Restricted Subsidiary’s Properties that could
reasonably be expected to form the basis for a claim for damages or
compensation; and
(h)    the Borrower and its Restricted Subsidiaries have made available to the
Lenders complete and correct copies of all environmental site assessment
reports, investigations, studies, analyses, and correspondence on environmental
matters (including matters relating to any alleged non-compliance with or
liability under Environmental Laws) that are in the Borrower’s or any Restricted
Subsidiary’s possession or control and relating to any of the Borrower’s or any
Restricted Subsidiary’s Properties or operations thereon.

Section 7.07    Compliance with the Laws and Agreements; No Defaults.
(a)    Except as set forth on Schedule 7.07, each Loan Party is in compliance
with all Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses
all licenses, permits, franchises, exemptions, approvals and other governmental
authorizations necessary for the ownership of its Property and the conduct of
its business, except, in each case, where the failure to do so, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
(b)    No Loan Party is in default nor has any event or circumstance occurred
which, but for the expiration of any applicable grace period or the giving of
notice, or both, would constitute a default or would require such Loan Party to
Redeem or make any offer to Redeem under any indenture, note, credit agreement
or instrument pursuant to which any Material Indebtedness is outstanding or by
which any Loan Party or any of its Properties is bound.
(c)    No Default has occurred and is continuing.

Section 7.08    Investment Company Act. No Loan Party is an “investment company”
or a company “controlled” by an “investment company,” within the meaning of, or
subject to regulation under, the Investment Company Act of 1940, as amended.

-63-

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

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

Section 7.10    ERISA.
(a)    The Borrower, its Restricted Subsidiaries and each ERISA Affiliate has
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan.
(b)    Each Plan is, and has been, established and maintained in substantial
compliance with its terms, ERISA and, where applicable, the Code.
(c)    No act, omission or transaction has occurred which could result in
imposition on the Borrower, any Restricted Subsidiary or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed pursuant
to subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary
duty liability damages under section 409 of ERISA.
(d)    Full payment when due has been made of all amounts which the Borrower,
its Restricted Subsidiaries or any ERISA Affiliate is required under the terms
of each Plan or applicable law to have paid as contributions to such Plan as of
the date hereof.
(e)    Neither the Borrower, its Restricted Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by the
Borrower, a Restricted Subsidiary or any ERISA Affiliate in its sole discretion
at any time without any material liability.
(f)    Neither the Borrower, its Restricted Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any employee
pension benefit plan, as defined in section 3(2) of ERISA, that is subject to
Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

Section 7.11    Disclosure; No Material Misstatements. No written information,
report, financial statement, certificate, Borrowing Request, request for a
Letter of Credit, exhibit or schedule furnished by or on behalf of PEI or any
Loan Party to the Administrative Agent or any Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto, taken as a whole, or statements or conclusions in any Reserve Report
contained or contains any material misstatement of fact or omitted or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were or are made, not misleading as of the
date such information is dated or certified; provided that (a) to the extent any
such information, report, financial statement, exhibit or schedule was based
upon or constitutes a forecast or projection, PEI and the Borrower represents
only that it acted in good faith and utilized reasonable assumptions and due
care in the preparation of such information,

-64-

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

report, financial statement, exhibit or schedule (it being recognized by the
Lenders, however, that projections as to future events are not to be viewed as
facts and that results during the period(s) covered by such projections may
differ from the projected results and that such differences may be material and
that PEI and the Borrower makes no representation that such projections will be
realized) and (b) as to statements, information and reports supplied by third
parties after the Effective Date, PEI and the Borrower each represents only that
it is not aware of any material misstatement or omission therein. There are no
statements or conclusions in any Reserve Report which are based upon or include
misleading information or fail to take into account material information
regarding the matters reported therein, it being understood that projections
concerning volumes attributable to the Oil and Gas Properties of the Loan
Parties and production and cost estimates contained in each Reserve Report are
necessarily based upon professional opinions, estimates and projections and that
the Borrower does not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate.

Section 7.12    Insurance. The Borrower has, and has caused its Restricted
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrower and its Restricted
Subsidiaries. Such insurance policies contain an endorsement naming the
Administrative Agent and the Lenders as additional insureds in respect of such
liability insurance policies and naming the Administrative Agent as loss payee
with respect to Property loss insurance.

Section 7.13    Restriction on Liens. No Loan Party is a party to any agreement
or arrangement (other than this Agreement, the Security Instruments, Capital
Leases and purchase money Debt creating Liens permitted by Section 9.03(c)), or
subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to the Administrative Agent and
the Lenders on or in respect of their Properties to secure the Obligations and
the Loan, or restricts any Loan Party from paying dividends or making any other
distributions in respect of its Equity Interests to any Loan Party, or restricts
any Loan Party from making loans or advances or transferring any Property to any
other Loan Party, or which requires the consent of or notice to other Persons in
connection therewith, except, in each case, for such encumbrances or
restrictions permitted under Section 9.16.

Section 7.14    Subsidiaries. Except as set forth on Schedule 7.14 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.14, the Borrower
has no Subsidiaries. The Borrower has no Foreign Subsidiaries. Each Subsidiary
listed on Schedule 7.14 is a Restricted Subsidiary unless specifically
designated as an Unrestricted Subsidiary therein.

Section 7.15    Location of Business and Offices. (a) The Borrower’s
jurisdiction of organization is Delaware; (b) the name of the Borrower as listed
in the public records of its jurisdiction of organization is Parsley Energy,
LLC; (c) the organizational identification number of the Borrower in its
jurisdiction of organization is 5346895 (or, in each case, as set forth in a
notice delivered to the Administrative Agent pursuant to Section 8.01(n) in
accordance with Section 12.01); (d) the Borrower’s principal place of business
and chief executive offices are located at the address specified in Section
12.01 (or as set forth in a notice delivered pursuant to Section 8.01(n) in
accordance with Section 12.01). Each Restricted Subsidiary’s jurisdiction of
organization, name as listed in the public records of its jurisdiction of
organization, organizational identification number in its jurisdiction of
organization, and the location of its principal place of business and chief
executive office is stated on Schedule 7.14 (or as set forth in a notice
delivered pursuant to Section 8.01(n)).

-65-

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

Section 7.16    Properties; Titles, Etc.
(a)    Except as set forth on Schedule 7.16, each Loan Party has Good and
Defensible Title to its Oil and Gas Properties evaluated in the most recently
delivered Reserve Report and good title to all its material personal Properties,
in each case, free and clear of all Liens except Liens permitted by Section
9.03. After giving full effect to the Excepted Liens, each Loan Party specified
as the owner owns the net interests in production attributable to the
Hydrocarbon Interests as reflected in the most recently delivered Reserve
Report, and the ownership of such Properties shall not in any material respect
obligate such Loan Party to bear the costs and expenses relating to the
maintenance, development and operations of each such Property in an amount in
excess of the working interest of each Property set forth in the most recently
delivered Reserve Report that is not offset by a corresponding proportionate
increase in such Loan Party’s net revenue interest in such Oil and Gas Property.
(b)    To the best of the Borrower’s knowledge and belief, all material leases
and agreements necessary for the conduct of the business of the Loan Parties are
valid and subsisting, in full force and effect, and there exists no default or
event or circumstance which with the giving of notice or the passage of time or
both would give rise to a default under any such lease or leases, which could
reasonably be expected to have a Material Adverse Effect.
(c)    To the best of the Borrower’s knowledge and belief, the rights and
Properties presently owned, leased or licensed by the Loan Parties including,
without limitation, all easements and rights of way, include all rights and
Properties necessary to permit the Loan Parties to conduct their business in all
material respects in the same manner as its business has been conducted prior to
the date hereof.
(d)    All of the Properties of the Loan Parties which are reasonably necessary
for the operation of their businesses, taken as a whole, are in good working
condition, ordinary wear and tear excepted, and are maintained in accordance
with prudent business standards, except in each case as could not reasonably be
expected to have a Material Adverse Effect.
(e)    Each Loan Party owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual Property material to its business,
and the use thereof by such Loan Party does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. The Loan Parties either own or have valid licenses or other rights to
use all databases, geological data, geophysical data, engineering data, seismic
data, maps, interpretations and other technical information used in their
businesses as presently conducted, subject to the limitations contained in the
agreements governing the use of the same, which limitations are customary for
companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to have a
Material Adverse Effect.

Section 7.17    Maintenance of Properties. To the best of the Borrower’s
knowledge and belief, except for such acts or failures to act as would not be
reasonably expected to have a Material Adverse Effect, the Oil and Gas
Properties (and Properties unitized therewith) of the Loan Parties have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all Governmental Requirements and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties of the Loan Parties.

Section 7.18    Gas Imbalances, Prepayments. Except as set forth on Schedule
7.18 or on the most recent certificate delivered pursuant to Section 8.11(c), on
a net basis there are no gas imbalances, take or

-66-

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

pay or other prepayments which would require any Loan Party to deliver
Hydrocarbons produced from their Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor other than gas
imbalances, take-or-pay or other prepayments incurred in the ordinary course of
business and which gas imbalances, take-or-pay, or other prepayments and
balancing rights, in the aggregate, do not result in any Loan Party having net
aggregate liability at any time in excess of an amount equal to 2% of the Oil
and Gas Properties that are designated proved, developed, producing reserves in
the most recently delivered Reserve Report.

Section 7.19    Marketing of Production. Except for contracts listed and in
effect on the date hereof on Schedule 7.19, and thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrower represents
that it or its Restricted Subsidiaries are receiving a price for all production
sold thereunder which is computed substantially in accordance with the terms of
the relevant contract and are not having deliveries curtailed substantially
below the subject Property’s delivery capacity except as disclosed on Schedule
7.19 or the most recently delivered Reserve Report), no material agreements
exist which are not cancelable on 90 days’ notice or less without penalty or
detriment for the sale of production from any Loan Party’s Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that (a)
pertain to the sale of production at a fixed price and (b) have a maturity or
expiry date of longer than six (6) months from the date hereof. For the
avoidance of doubt, sale of production shall not be deemed at a fixed price if
the price is determined based upon market price, the purchaser's resale price or
other criteria relating to market pricing conditions and beyond the Borrower's
control.

Section 7.20    Swap Agreements and Qualified ECP Counterparty. Schedule 7.20,
as of the date hereof, and after the date hereof, each report required to be
delivered by the Borrower pursuant to Section 8.01(e), as of the date of such
report, sets forth, a true and complete list of all Swap Agreements of each Loan
Party, the material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net mark to market value
thereof, all credit support agreements relating thereto (including any margin
required or supplied) and the counterparty to each such agreement. For purposes
of this Section 7.20, the net mark-to-market value (x) shall not be required to
be included on Schedule 7.20, and (y) shall, with respect to reports required to
be delivered by the Borrower pursuant to Section 8.01(e), be calculated as of
the date of the financial statements concurrently delivered pursuant to Section
8.01(a) or Section 8.01(b), as applicable. The Borrower is a Qualified ECP
Counterparty.

Section 7.21    Use of Loans and Letters of Credit. The proceeds of the Loans
and the Letters of Credit shall be used (a) to provide working capital for lease
acquisitions, for exploration and production operations and for development
(including the drilling and completion of producing wells), (b) for acquisitions
and Investments permitted hereunder (including acquisitions of Oil and Gas
Properties and joint ventures) and (c) for funding general corporate purposes.
The Borrower and the Restricted Subsidiaries are not engaged principally, or as
one of its or their important activities, in the business of extending credit
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying margin stock (within the meaning of Regulation T, U or X of the Board).
No part of the proceeds of any Loan or Letter of Credit will be used for any
purpose which violates the provisions of Regulations T, U or X of the Board.

Section 7.22    Solvency. After giving effect to the Transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be expected to be received by reason of indemnity, offset, insurance
or any similar arrangement), at a fair valuation, of the Borrower and the
Guarantors, taken as a whole, exceed the aggregate Debt of the Borrower and the
Guarantors on a consolidated basis, (b) each of the Borrower and the Guarantors
has not incurred and does not intend to incur, and do not believe that it has
incurred, Debt beyond its ability to pay such Debt (after taking into account
the timing

-67-

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

and amounts of cash it reasonably expects could be received and the amounts that
it reasonably expects could be payable on or in respect of its liabilities, and
giving effect to amounts that that could reasonably be expected to be received
by reason of indemnity, offset, insurance or any similar arrangement) as such
Debt becomes absolute and matures and (c) the Borrower and the Guarantors, taken
as a whole, do not have (and do not have reason to believe that it will have
thereafter) unreasonably small capital for the conduct of their business.

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

Section 7.24    Anti-Corruption Laws and Sanction. The Borrower has implemented
and maintains in effect such policies and procedures, if any, as it reasonably
deems appropriate, in light of its business and international activities (if
any), to ensure compliance by the Borrower and its Subsidiaries and their
respective directors, officers, employees and agents with Anti-Corruption Laws
and applicable Sanctions, and the Borrower and its Subsidiaries and their
respective officers and employees and, to the knowledge of the Borrower, their
respective directors and agents, are in compliance with Anti-Corruption Laws and
applicable Sanctions in all material respects. None of (a) the Borrower, its
Subsidiaries, any of their respective directors, officers or employees, or to
the knowledge of the Borrower, any of their respective Affiliates or (b) to the
knowledge of the Borrower, any agent of the Borrower or any Subsidiary that will
act in any capacity in connection with or benefit from the credit facility
established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit,
use of proceeds or other transaction contemplated by this Agreement will violate
any Anti-Corruption Law or applicable Sanctions.

Section 7.25    Accounts. Schedule 7.25, on the Effective Date (and at any time
after the Effective Date, as such Schedule 7.25 is amended or supplemented from
time to time), lists all Deposit Accounts, Securities Accounts and Commodity
Accounts maintained by or for the benefit of any Loan Party.

ARTICLE VIII
AFFIRMATIVE COVENANTS
Until the Facility Termination Date, the Borrower (and in the case of Section
8.01(a), (b), (c), (h) and (i) and Section 8.04, PEI), for itself and for each
of its Restricted Subsidiaries, covenants and agrees with the Lenders that:

Section 8.01    Financial Statements; Ratings Change; Other Information. The
Borrower will furnish to the Administrative Agent and each Lender:
(a)    Annual Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 120 days after the end of
each fiscal year of PEI, commencing with the fiscal year of PEI ending December
31, 2016, PEI’s audited consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by KPMG LLP or other independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of PEI and its consolidated subsidiaries on a consolidated basis in
accordance with GAAP consistently applied.

-68-

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

(b)    Quarterly Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of PEI, commencing
with the fiscal quarter of PEI ending September 30, 2016, PEI’s consolidated
balance sheet and related statements of operations, shareholders’ equity and
cash flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the previous fiscal year, all certified by one
of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of PEI and its consolidated
subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes.
(c)    Certificate of Financial Officer — Compliance. Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer of PEI and the Borrower in substantially the
form of Exhibit D hereto (a “Compliance Certificate”) (i) certifying as to
whether a Default has occurred and, if a Default has occurred, specifying the
details thereof and any action taken or proposed to be taken with respect
thereto, (ii) setting forth reasonably detailed calculations demonstrating
compliance with Section 8.12(b) and Section 9.01, (iii) stating whether any
change in GAAP or in the application thereof has occurred since the date of the
Financial Statements and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate, and
(iv) setting forth information in reasonable detail regarding the calculation of
Consolidated Net Income and EBITDAX and any revisions to such calculations
attributable to Consolidated Unrestricted Subsidiaries.
(d)    Annual Budget. Within 120 days after the end of each fiscal year of the
Borrower, a report, in a form reasonably satisfactory to the Administrative
Agent, prepared by or on behalf of the Borrower detailing on a monthly basis (1)
the projected production of Hydrocarbons by the Borrower and its Restricted
Subsidiaries and the assumptions used in calculating such projections, (ii) an
annual operating budget for the Borrower and its Restricted Subsidiaries for
such fiscal year, (iii) the projected capital expenditures to be incurred by the
Borrower and its Restricted Subsidiaries, with a breakdown of those capital
expenditures to be used for the development of proved undeveloped reserves in
the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries, and
the assumptions used in calculating such projections, and (iv) such other
information as may be reasonably requested by the Administrative Agent.
(e)    Certificate of Financial Officer — Swap Agreements. Concurrently with any
delivery of financial statements under Section 8.01(a) and Section 8.01(b), a
certificate of a Financial Officer, in form and substance reasonably
satisfactory to the Administrative Agent, setting forth as of a recent date, a
true and complete list of all Swap Agreements of the Loan Parties, the material
terms thereof (including the type, term, effective date, termination date and
notional amounts or volumes), the net mark-to-market value therefor, any new
credit support agreements relating thereto not listed on Schedule 7.20, any
margin required or supplied under any credit support document, and the
counterparty to each such agreement.
(f)    [Reserved].
(g)    Certificate of Insurer — Insurance Coverage. Concurrently with any
delivery of financial statements under Section 8.01(a), if requested by the
Administrative Agent, a certificate of insurance coverage from each insurer with
respect to the insurance required by Section 8.06, in form and substance
reasonably satisfactory to the Administrative Agent, and, if requested by the
Administrative Agent or any Lender, all copies of the applicable policies.

-69-

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

(h)    Other Accounting Reports. Promptly upon receipt thereof, a copy of each
other report or letter submitted to PEI or any Loan Party by independent
accountants in connection with any annual, interim or special audit made by them
of the books of PEI or such Loan Party, and a copy of any response by PEI or
such Loan Party, or the board of directors or equivalent body of PEI or such
Loan Party, to such letter or report.
(i)    SEC and Other Filings; Reports to Shareholders. Promptly after the same
become publicly available, copies of all periodic and other reports, proxy
statements and other materials filed by PEI or any Loan Party with the SEC, or
with any national securities exchange, or distributed by PEI or such Loan Party
to its shareholders generally, as the case may be.
(j)    Notices Under Material Instruments. Promptly after the furnishing
thereof, copies of any financial statement, material report or material notice
furnished to or by any Person pursuant to the terms of any preferred stock
designation, indenture, loan or credit or other similar agreement (including,
without limitation, the Senior Notes Documents and the Permitted Refinancing
Documents), other than this Agreement and not otherwise required to be furnished
to the Lenders pursuant to any other provision of this Section 8.01.
(k)    Lists of Purchasers. Concurrently with the delivery of any Reserve Report
to the Administrative Agent pursuant to Section 8.11, a list of all Persons
purchasing Hydrocarbons from any Loan Party.
(l)    Notice of Sales of Oil and Gas Properties. In the event the any Loan
Party intends to Dispose of any Oil or Gas Properties (or any Equity Interests
in any Subsidiary owning Oil and Gas Properties) in a single transaction or
series of transactions with a fair market value in excess of $10,000,000, at
least three (3) Business Days prior written notice of such Disposition, the
price thereof and the anticipated date of closing and any other details thereof
reasonably requested by the Administrative Agent. In the event that any Loan
Party receives any notice of early termination of any Swap Agreement to which it
is a party from any of its counterparties, or any Swap Agreement to which any
Loan Party is a party is Liquidated, prompt written notice of the receipt of
such early termination notice or such Liquidation, as the case may be, together
with a reasonably detailed description or explanation thereof and any other
details thereof reasonably requested by the Administrative Agent.
(m)    Notice of Casualty Events. Prompt written notice of the occurrence of any
Casualty Event or the commencement of any action or proceeding that could
reasonably be expected to result in a Casualty Event.
(n)    Information Regarding Borrower and Guarantors. Prompt written notice (and
in any event within thirty (30) days prior thereto or such shorter period as
agreed to by the Administrative Agent) of any change (i) in any Loan Party’s
corporate name or in any trade name used to identify such Person in the conduct
of its business or in the ownership of its Properties, (ii) in the location of
any Loan Party’s chief executive office or principal place of business, (iii) in
any Loan’s Party’s identity or corporate structure or in the jurisdiction in
which such Person is incorporated or formed, (iv) in any Loan Party’s
jurisdiction of organization or such Person’s organizational identification
number in such jurisdiction of organization, and (v) in any Loan Party’s federal
taxpayer identification number.
(o)    Production Report and Lease Operating Statements. Concurrently with the
delivery of each Reserve Report hereunder, a report setting forth, for each of
the past six calendar months, 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

-70-

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

forth the related ad valorem, severance and production taxes and lease operating
expenses attributable thereto and incurred for each such calendar month.
(p)    Notices of Certain Changes. Promptly, copies of any amendment,
modification or supplement to any of the Senior Notes Documents or the Permitted
Refinancing Documents, or the certificate of formation, partnership agreement,
limited liability company agreement, articles of incorporation, by-laws, any
preferred stock designation or any other organic document of any Loan Party.
(q)    Notice of Senior Notes Issuance. (i) Written notice on or prior to the
offering of any Senior Notes incurred in reliance on Section 9.02(f) or
Permitted Refinancing Debt incurred in reliance on Section 9.02(g), the amount
thereof and the anticipated date of closing, and (ii) with respect to Senior
Notes, no later than four (4) Business Days after the offering thereof, a copy
of the preliminary offering memorandum (if any) and the final offering
memorandum (if any) and any other material documents relating to such offering
of Senior Notes, and with respect to Permitted Refinancing Debt in respect
thereof, no later than four (4) Business Days after the offering thereof, a copy
of each Permitted Refinancing Document.
(r)    Other Requested Information. Promptly following any reasonable request
therefor, such other information regarding the operations, business affairs and
financial condition of any Loan Party (including any Plan and any reports or
other information required to be filed with respect thereto under the Code or
under ERISA), or compliance with the terms of this Agreement or any other Loan
Document, as the Administrative Agent or any Lender may reasonably request.
Documents required to be delivered pursuant to Section 8.01(a), Section 8.01(b),
Section 8.01(h), Section 8.01(i), and Section 8.01(q) (to the extent any such
documents are included in materials otherwise filed with the SEC) may be
delivered electronically and if so delivered, shall be deemed to have been
delivered on the date on which PEI posts such documents on an Internet or
intranet website, if any, to which each Lender and the Administrative Agent have
access (whether a commercial, third-party website or whether sponsored by the
Administrative Agent).

Section 8.02    Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:
(a)    the occurrence of any Default;
(b)    the filing or commencement of, or the threat in writing of, any action,
suit, proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting any the Borrower or any of its
Restricted Subsidiaries not previously disclosed in writing to the Lenders or
any material adverse development in any action, suit, proceeding, investigation
or arbitration (whether or not previously disclosed to the Lenders) that, in
either case, if adversely determined, could reasonably be expected to result in
a Material Adverse Effect; and
(c)    any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.
Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

Section 8.03    Existence; Conduct of Business. The Borrower will, and will
cause each of its Restricted Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full

-71-

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

force and effect (a) its legal existence and (b) the rights, licenses, permits,
privileges and franchises material to the conduct of its business and maintain,
if necessary, its qualification to do business in each other jurisdiction in
which its Oil and Gas Properties is located or the ownership of its Properties
requires such qualification, except, in each case, where the failure to maintain
such rights, licenses, permits, privileges and franchises, or to so qualify
could not reasonably be expected to have a Material Adverse Effect; provided
that the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 9.11.

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

Section 8.05    Operation and Maintenance of Properties. The Borrower, at its
own expense, will, and will cause each of its Restricted Subsidiaries to:
(a)    operate its Oil and Gas Properties and other material Properties or cause
such Oil and Gas Properties and other material Properties to be operated in
accordance with the practices of the industry and in compliance with all
applicable contracts and agreements and in compliance with all Governmental
Requirements, including, without limitation, applicable pro ration requirements
and Environmental Laws, and all applicable laws, rules and regulations of every
other Governmental Authority from time to time constituted to regulate the
development and operation of its Oil and Gas Properties and the production and
sale of Hydrocarbons and other minerals therefrom, except, in each case, where
the failure to comply could not reasonably be expected to have a Material
Adverse Effect.
(b)    keep and maintain all Property material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted, and preserve,
maintain and keep in good repair, working order and efficiency (ordinary wear
and tear and depletion excepted) all of its material Oil and Gas Properties.
(c)    promptly pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Properties and will do all other things necessary
to keep unimpaired their rights with respect thereto and prevent any forfeiture
thereof or default thereunder, except, in each case, where the failure to do so
could not reasonably be expect to result in a Material Adverse Effect.
(d)    promptly perform or make reasonable and customary efforts to cause to be
performed, in accordance with customary industry standards, the material
obligations required by each and all of the assignments, deeds, leases,
sub-leases, contracts and agreements affecting its interests in its Oil and Gas
Properties and other material Properties.
(e)    to the extent a Loan Party is not the operator of any Property, the
Borrower shall use commercially reasonable efforts to cause the operator to
comply with this Section 8.05.

Section 8.06    Insurance. The Borrower will, and will cause each of its
Restricted Subsidiaries to, maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against

-72-

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

such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations. The loss payable
clauses or provisions in said insurance policy or policies insuring any of the
Collateral shall be endorsed in favor of and made payable to the Administrative
Agent as its interests may appear and such policies shall contain an endorsement
naming the Administrative Agent and the Lenders as “additional insureds” and
provide that the insurer will endeavor to give at least 30 days prior notice of
any cancellation to the Administrative Agent.

Section 8.07    Books and Records; Inspection Rights. The Borrower will, and
will cause each of its Restricted Subsidiaries to, keep proper books of record
and account in which full, true and correct entries in all material respects are
made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Restricted
Subsidiaries to, permit any representatives designated by the Administrative
Agent or any Lender, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants (subject to such accountants’ customary policies and procedures),
all at such reasonable times and as reasonably requested; provided that,
excluding any such visits and inspections during the continuation of an Event of
Default, only the Administrative Agent on behalf of the Lenders may exercise
rights of the Administrative Agent and the Lenders under this Section 8.07 and
the Administrative Agent shall not exercise such rights more often than
two (2) times during any calendar year absent the existence of an Event of
Default and only one (1) such time shall be at the Borrower’s expense; provided
further that when an Event of Default exists, the Administrative Agent or any
Lender (or any of their respective representatives or independent contractors)
may do any of the foregoing at the expense of the Borrower at any time during
normal business hours and upon reasonable advance notice. The Administrative
Agent and the Lenders shall give the Borrower the opportunity to participate in
any discussions with the Borrower’s independent public accountants.
Notwithstanding anything to the contrary in this Section 8.07, none of the Loan
Parties will be required to disclose, permit the inspection, examination or
making copies or abstracts of, or discussion of, any document, information or
other matter that (a) in respect of which disclosure to the Administrative Agent
or any Lender (or their respective representatives or contractors) is prohibited
by applicable law or any bona fide arm’s length third party contract or (b) is
subject to attorney-client or similar privilege or constitutes attorney work
product.

Section 8.08    Compliance with Laws. The Borrower will, and will cause each of
its Restricted Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its Property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. The Borrower will
maintain in effect and enforce such policies and procedures to ensure compliance
by the Borrower, its Restricted Subsidiaries and each of their respective
directors, officers, employees and agents with Anti-Corruption Laws and
applicable Sanctions.

Section 8.09    Environmental Matters.
(a)    The Borrower shall at its sole expense: (i) comply, and shall cause its
Properties and operations and each of its Restricted Subsidiaries and each of
its Restricted Subsidiaries’ Properties and operations to comply, with all
applicable Environmental Laws, the breach of which could be reasonably expected
to have a Material Adverse Effect; (ii) not Release or threaten to Release, and
shall cause each of its Restricted Subsidiaries not to Release or threaten to
Release, any Hazardous Material on, under, about or from any of the Borrower’s
or its Restricted Subsidiaries’ Properties or any other property offsite the
Property to the extent caused by any the Borrower’s or its Restricted
Subsidiaries’ operations except in compliance with applicable Environmental
Laws, the Release or threatened Release of which could reasonably be expected to
have a Material Adverse Effect; (iii) timely obtain or file, and shall cause
each of its Restricted Subsidiaries to timely obtain or file, all Environmental
Permits, if any, required under applicable

-73-

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

Environmental Laws to be obtained or filed in connection with the operation or
use of the Borrower’s or its Restricted Subsidiaries’ Properties, which failure
to obtain or file could reasonably be expected to have a Material Adverse
Effect; (iv) promptly commence and diligently prosecute to completion, and shall
cause each of its Restricted Subsidiaries to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the “Remedial Work”) in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future Release or threatened Release of any Hazardous Material on, under, about
or from any of the Borrower’s or its Restricted Subsidiaries’ Properties, which
failure to commence and diligently prosecute to completion could reasonably be
expected to have a Material Adverse Effect; (v) conduct, and cause its
Restricted Subsidiaries to conduct, their respective operations and businesses
in a manner that will not expose any Property or Person to Hazardous Materials
that could reasonably be expected to form the basis for a material claim for
damages or compensation; and (vi) establish and implement, and shall cause each
Restricted Subsidiary to establish and implement, such procedures as may be
necessary to continuously determine and assure that the Borrower’s and its
Restricted Subsidiaries’ obligations under this Section 8.09(a) are timely and
fully satisfied, which failure to establish and implement would reasonably be
expected to have a Material Adverse Effect.
(b)    The Borrower will promptly, but in no event later than five days of the
occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any Person against
the Borrower or any Restricted Subsidiary or its Properties of which the
Borrower has knowledge in connection with any Environmental Laws if the Borrower
could reasonably anticipate that such action will result in liability (whether
individually or in the aggregate) in excess of $5,000,000, not fully covered by
insurance, subject to normal deductibles.

Section 8.10    Further Assurances.
(a)    The Borrower at its sole expense will, and will cause each of its
Restricted Subsidiaries to, promptly execute and deliver to the Administrative
Agent all such other documents, agreements and instruments reasonably requested
by the Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of each Loan Party in the Loan
Documents, including the Notes, or to further evidence and more fully describe
the collateral intended as security for the Obligations, or to correct any
omissions in this Agreement or the Security Instruments, or to state more fully
the obligations secured therein, or to perfect, protect or preserve any Liens
created pursuant to this Agreement or any of the Security Instruments or the
priority thereof, or to make any recordings, file any notices or obtain any
consents, all as may be reasonably necessary or appropriate, in the reasonable
discretion of the Administrative Agent, in connection therewith.
(b)    The Borrower hereby authorizes the Administrative Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Mortgaged Property without the signature of any Loan
Party where permitted by law. A carbon, photographic or other reproduction of
the Security Instruments or any financing statement covering the Mortgaged
Property or any part thereof shall be sufficient as a financing statement where
permitted by law.

Section 8.11    Reserve Reports.
(a)    On or before March 1st and September 1st of each year, commencing March
1, 2017, the Borrower shall furnish to the Administrative Agent and the Lenders
a Reserve Report evaluating

-74-

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

the Oil and Gas Properties of the Loan Parties as of the immediately preceding
January 1st and July 1st. The Reserve Report as of January 1 of each year shall
be prepared by one or more Approved Petroleum Engineers, and the July 1 Reserve
Report of each year shall be prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be true and
accurate and to have been prepared in accordance with the procedures used in the
immediately preceding January 1 Reserve Report.
(b)    In the event of an Interim Redetermination, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared by or under
the supervision of the chief engineer of the Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the immediately preceding January 1 Reserve Report.
For any Interim Redetermination requested by the Administrative Agent or the
Borrower pursuant to Section 2.07(b), the Borrower shall provide such Reserve
Report with an “as of” date as required by the Administrative Agent as soon as
possible, but in any event no later than thirty (30) days following the receipt
of such request.
(c)    With the delivery of each Reserve Report, the Borrower shall provide to
the Administrative Agent and the Lenders a certificate from a Responsible
Officer certifying that in all material respects: (i) that there are no
statements or conclusions in the Reserve Report which are based upon or include
misleading information or fail to take into account material information
regarding the matters reported therein, it being understood that projections
concerning volumes attributable to the Oil and Gas Properties of the Loan
Parties and production and cost estimates contained in the Reserve Report are
necessarily based upon professional opinions, estimates and projections and that
the Loan Parties do not warrant that such opinions, estimates and projections
will ultimately prove to have been accurate, (ii) each Loan Party owns Good and
Defensible Title to the Oil and Gas Properties evaluated in such Reserve Report
and such Properties are free of all Liens except for Liens permitted by Section
9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis
there are no gas imbalances, take or pay or other prepayments in excess of the
volume specified in Section 7.18 with respect to its Oil and Gas Properties
evaluated in such Reserve Report which would require any Loan Party to deliver
Hydrocarbons either generally or produced from such Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor,
(iv) none of their Oil and Gas Properties have been sold since the date of the
last Borrowing Base determination except as set forth on an exhibit to the
certificate, which certificate shall list all of its Oil and Gas Properties sold
and in such detail as reasonably required by the Administrative Agent, (v)
attached to the certificate is a list of all marketing agreements entered into
subsequent to the later of the date hereof or the most recently delivered
Reserve Report which the Borrower could reasonably be expected to have been
obligated to list on Schedule 7.19 had such agreement been in effect on the date
hereof, and (vi) attached thereto is a schedule of the Oil and Gas Properties
evaluated by such Reserve Report that are Mortgaged Properties and demonstrating
the percentage of the total value of the proved Oil and Gas Properties that the
value of such Mortgaged Properties represents in compliance with Section
8.13(a).

Section 8.12    Title Information.
(a)    On or before the delivery to the Administrative Agent and the Lenders of
each Reserve Report required by Section 8.11(a), 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 by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, satisfactory title
information on at least 90% of the total value of the proved Oil and Gas
Properties (and on at least 90% of the total value of the proved, developed and
producing reserves) evaluated by such Reserve Report.

-75-

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

(b)    If the Borrower has provided title information for additional Properties
under Section 8.12(a), the Borrower shall, within 60 days of notice from the
Administrative Agent (or within 90 days of such notice, with the consent of the
Administrative Agent, which consent shall not be unreasonably withheld) that
title defects or exceptions exist with respect to such additional Properties,
either (i) cure any such title defects or exceptions (including defects or
exceptions as to priority) which are not permitted by Section 9.03 raised by
such information, (ii) substitute acceptable Mortgaged Properties with no title
defects or exceptions except for Excepted Liens (other than Excepted Liens
described in clauses (e), (g) and (h) of such definition) having an equivalent
value or (iii) deliver title information in form and substance acceptable to the
Administrative Agent so that the Administrative Agent shall have received,
together with title information previously delivered to the Administrative
Agent, satisfactory title information on at least 90% of the value of the Oil
and Gas Properties (and on at least 90% of the total value of the proved,
developed and producing reserves) evaluated by such Reserve Report.
(c)    If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 60-day period (or
90-day period, if applicable) or the Borrower does not comply with the
requirements to provide acceptable title information covering 90% of the value
of the Oil and Gas Properties (and on at least 90% of the total value of the
proved, developed and producing reserves) evaluated in the most recent Reserve
Report, such default shall not be a Default, but instead the Administrative
Agent and/or the Required Lenders shall have the right to exercise the following
remedy in their sole discretion from time to time, and any failure to so
exercise this remedy at any time shall not be a waiver as to future exercise of
the remedy by the Administrative Agent or the Lenders. To the extent that the
Administrative Agent or the Required Lenders are not satisfied with title to any
Mortgaged Property after the 60-day period (or 90-day period, if applicable) has
elapsed, such unacceptable Mortgaged Property shall not count towards the 90%
requirement, and the Administrative Agent may send a notice to the Borrower and
the Lenders that the then outstanding Borrowing Base shall be reduced by an
amount as determined by the Required Lenders to cause the Borrower to be in
compliance with the requirement to provide acceptable title information on 90%
of the value of the Oil and Gas Properties (and on at least 90% of the total
value of the proved, developed and producing reserves). This new Borrowing Base
shall become effective immediately after receipt of such notice.

Section 8.13    Additional Collateral; Additional Guarantors.
(a)    In connection with each redetermination of the Borrowing Base, the
Borrower shall review the Reserve Report and the list of current Mortgaged
Properties (as described in Section 8.11(c)(vi)) to ascertain whether the
Mortgaged Properties represent at least 90% of the total value of the proved Oil
and Gas Properties (and on at least 90% of the total value of the proved,
developed and producing reserves) evaluated in the most recently completed
Reserve Report after giving effect to exploration and production activities,
acquisitions, dispositions and production. In the event that the Mortgaged
Properties do not represent at least 90% of such total value (and at least 90%
of the total value of the proved, developed and producing reserves), then the
Borrower shall, and shall cause its Restricted Subsidiaries to, grant, within
thirty (30) days of delivery of the certificate required under Section 8.11(c),
to the Administrative Agent as security for the Obligations a first-priority
Lien interest (provided that, Excepted Liens of the type described in clauses
(a) through (d), (f) and (p) of the definition thereof may exist, but subject to
the provisos at the end of such definition) on additional Oil and Gas Properties
not already subject to a Lien of the Security Instruments such that after giving
effect thereto, the Mortgaged Properties will represent at least 90% of such
total value (and at least 90% of the total value of the proved, developed and
producing reserves). All such Liens will be created and perfected by and in
accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent and in sufficient executed
(and acknowledged where necessary or

-76-

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

appropriate) counterparts for recording purposes. In order to comply with the
foregoing, if any Subsidiary places a Lien on its Oil and Gas Properties and
such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply
with Section 8.13(b).
(b)    The Borrower shall promptly cause each of its Restricted Subsidiaries to
guarantee the Obligations pursuant to the Guaranty Agreement. In connection with
any such guaranty, the Borrower shall, or shall cause its Restricted
Subsidiaries to, concurrently with the formation or acquisition (or other
similar event, including upon the designation of an Unrestricted Subsidiary as a
Restricted Subsidiary) of any Restricted Subsidiary to, (i) execute and deliver
a supplement to the Guaranty Agreement executed by such Restricted Subsidiary,
(ii) pledge all of the Equity Interests issued by such Restricted Subsidiary
(including, without limitation, delivery of original stock certificates
evidencing the Equity Interests issued by such Restricted Subsidiary, together
with an appropriate undated stock powers for each certificate duly executed in
blank by the registered owner thereof) and (iii) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.
(c)    the Borrower shall maintain, and shall cause each of its Restricted
Subsidiaries to maintain, each of its bank accounts with a bank or financial
institution reasonably acceptable to the Administrative Agent, at all times
after the Effective Date, subject to a Control Agreement.

Section 8.14    ERISA Compliance. The Borrower will promptly furnish and will
cause each of its Restricted Subsidiaries and any ERISA Affiliate to promptly
furnish to the Administrative Agent (a) promptly after the filing thereof with
the United States Secretary of Labor or the Internal Revenue Service, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, and (b) immediately upon becoming aware of the occurrence of any
“prohibited transaction,” as described in section 406 of ERISA or in section
4975 of the Code, in connection with any Plan or any trust created thereunder, a
written notice signed by the President or the principal Financial Officer, the
Restricted Subsidiary or the ERISA Affiliate, as the case may be, specifying the
nature thereof, what action the Borrower, the Restricted Subsidiary or the ERISA
Affiliate is taking or proposes to take with respect thereto, and, when known,
any action taken or proposed by the Internal Revenue Service or the Department
of Labor with respect thereto.

Section 8.15    Marketing Activities. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than (a)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be
produced from their proved Oil and Gas Properties during the period of such
contract, (a) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Loan Parties that a Loan Party has the right to market pursuant to joint
operating agreements, unitization agreements or other similar contracts that are
usual and customary in the oil and gas business and (a) other contracts for the
purchase and/or sale of Hydrocarbons of third parties (A) which have generally
offsetting provisions (i.e. corresponding pricing mechanics, delivery dates and
points and volumes) such that no “position” is taken and (A) for which
appropriate credit support has been taken to alleviate the material credit risks
of the counterparty thereto.

Section 8.16    Accounts. No later than thirty (30) days after the Effective
Date (or such later date as is reasonably acceptable to the Administrative
Agent), the Borrower shall, and shall cause each Restricted Subsidiary to:
(i) deposit or cause to be deposited directly, all Cash Receipts into one or
more Deposit Accounts in which the Administrative Agent has been granted a first
priority Lien and that, in each case, is listed on Schedule 7.25 and is subject
to a Control Agreement, (ii) deposit or credit or cause to be deposited or
credited directly, all securities and financial assets held or owned by (whether
directly or indirectly),

-77-

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

credited to the account of, or otherwise reflected as an asset on the balance
sheet of, the Borrower and its Restricted Subsidiaries (including, without
limitation, all marketable securities, treasury bonds and bills, certificates of
deposit, investments in money market funds and commercial paper) into one or
more Securities Accounts in which the Administrative Agent has been granted a
first priority Lien and that is listed on Schedule 7.25 and that is subject to a
Control Agreement and (iii) cause all Commodity Contracts held or owned by
(whether directly or indirectly), credited to the account of, or otherwise
reflected as an asset on the balance sheet of, the Borrower and its Restricted
Subsidiaries, to be carried or held in one or more Commodity Accounts in which
the Administrative Agent has been granted a first priority Lien and that is
listed on Schedule 7.25 and that is subject to a Control Agreement.

Section 8.17    Consolidated Cash Balance Information. Upon the reasonable
request of the Administrative Agent, the Borrower shall provide to the
Administrative Agent, no later than two (2) Business Days following such
request, (a) a certificate of a Financial Officer in substantially the form of
Exhibit I, certifying as to the amount of the Consolidated Cash Balance as of
such date, and (b) attaching thereto, summary and balance statements, in a form
reasonably acceptable to the Administrative Agent, for each Deposit Account,
Securities Account, or other account in which any Consolidated Cash Balance is
held, credited or carried.

Section 8.18    Unrestricted Subsidiaries. The Borrower:
(a)    will cause the management, business and affairs of each of the Borrower
and its Restricted Subsidiaries, on the one hand, and the Unrestricted
Subsidiaries, on the other hand, to be conducted in such a manner (including by
keeping separate books of account, furnishing separate financial statements of
the Unrestricted Subsidiaries to creditors and potential creditors thereof and
by not permitting Properties of the Borrower and its Restricted Subsidiaries, on
the one hand, and the Unrestricted Subsidiaries, on the other hand, to be
commingled) so that each Unrestricted Subsidiary will be treated as a corporate
entity separate and distinct from the Borrower and any Restricted Subsidiary;
(b)    except as permitted by Section 9.05(k), will not, and will not permit any
of its Restricted Subsidiaries to, incur, assume or suffer to exist any
guarantee by the Borrower or such Restricted Subsidiary of, or be or become
liable for any Debt of any Unrestricted Subsidiary; and
(c)    will not permit any Unrestricted Subsidiary to hold any Equity Interest
in, or any Debt of, the Borrower or any Restricted Subsidiary.

ARTICLE IX
NEGATIVE COVENANTS
Until the Facility Termination Date, the Borrower (and in the case of Sections
9.20 and 9.21, PEI) covenants and agrees with the Lenders that:

Section 9.01    Financial Covenants.
(a)    Consolidated Leverage Ratio. The Borrower will not permit, as of the last
day of any fiscal quarter of the Borrower, the Consolidated Leverage Ratio for
the period of four consecutive fiscal quarters ending on such day, to exceed
4.00 to 1.00.
(b)    Current Ratio. The Borrower will not, as of the last day of any fiscal
quarter, permit the ratio of (i) consolidated current assets (including
unrestricted cash and the unused amount of the total Commitments, but excluding
non-cash assets under FASB ASC 815 under GAAP) as of such date to (ii)

-78-

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

consolidated current liabilities (excluding non-cash obligations under FASB ASC
815 under GAAP and current maturities under this Agreement) as of such date to
be less than 1.00 to 1.00.

Section 9.02    Debt. The Borrower will not, and will not permit any of its
Restricted Subsidiaries to, incur, create, assume or suffer to exist any Debt,
except:
(a)    the Loans or other Obligations arising under the Loan Documents or any
guaranty of or suretyship arrangement for the Loans or other Obligations arising
under the Loan Documents;
(b)    Debt under Capital Leases and purchase money Debt of the Borrower and its
Restricted Subsidiaries in an aggregate amount not to exceed $10,000,000;
provided, any such Debt shall be secured only by the asset acquired in
connection with the incurrence of such Debt;
(c)    Debt associated with bonds, surety obligations or similar instruments
required by Governmental Requirements in connection with the operation of the
Oil and Gas Properties;
(d)    endorsements of negotiable instruments for collection, deposit or
negotiation and warranties of products or services, in each case, incurred in
the ordinary course of business;
(e)    intercompany Debt between the Borrower and any Wholly-Owned Subsidiary
Guarantor or between Wholly-Owned Subsidiary Guarantors to the extent permitted
by Section 9.05(g); provided that such Debt is not held, assigned, transferred,
negotiated or pledged to any Person other than the Borrower or a Wholly-Owned
Subsidiary Guarantor; and, provided, further, that any such Debt owed by either
the Borrower or a Wholly-Owned Subsidiary Guarantor shall be subordinated to the
Obligations on terms set forth in the Guaranty Agreement;
(f)    unsecured Senior Notes and any guarantees thereof, the principal amount
of which does not exceed in the aggregate, at the time any such Debt is
incurred, an amount equal to the product of two (2) multiplied by the Borrowing
Base then in effect (prior to giving effect to any reduction of the Borrowing
Base pursuant to clause (ix) below); provided that: (i) the Borrower shall have
complied with Section 8.01(q); (ii) such Senior Notes do not have any scheduled
principal amortization; (iii) such Senior Notes do not mature sooner than the
date which is ninety-one (91) days after the Maturity Date; (iv) both before and
immediately after giving effect to the incurrence of any such Debt, no Default,
Event of Default or Borrowing Base Deficiency exists or would exist after giving
effect to any concurrent repayment of Debt with the proceeds of such incurrence,
if any; (v) such Senior Notes do not have any mandatory prepayment or redemption
provisions (other than customary change of control or asset sale tender offer
provisions) which would require a mandatory prepayment or redemption in priority
to the Obligations; (vi) such Senior Notes and any guarantees thereof are on
terms, taken as a whole, not materially less favorable to the Borrower and its
Subsidiaries as market terms for issuers of similar size and credit quality
given the then prevailing market conditions as reasonably determined by the
Borrower; (vii) if such Senior Notes are senior subordinated Debt, such Senior
Notes are expressly subordinate to the payment in full of all of the Obligations
on terms and conditions reasonably satisfactory to the Administrative Agent;
(viii) no Subsidiary is required to guarantee the Senior Notes unless such
Subsidiary has guaranteed the Obligations pursuant to the Guaranty Agreement;
and (ix) the Borrowing Base then in effect shall be adjusted to the extent
required by Section 2.07(f) and the Borrower shall make any prepayment required
by Section 3.04(c)(iii); for purposes of clarification, any Senior Notes
incurred under this Section 9.02(f) which is repaid may not be reborrowed under
this Section 9.02(f);
(g)    Permitted Refinancing Debt and any guarantees thereof, the proceeds of
which shall be used concurrently with the incurrence thereof to refinance the
outstanding Senior Notes permitted under

-79-

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

Section 9.02(f) or to refinance the outstanding Refinanced Debt, as the case may
be; provided that (i) the Borrower shall have complied with Section 8.01(q);
(ii) the Borrower shall have furnished to the Administrative Agent and the
Lenders copies of the final executed versions of the definitive documents
therefor, (iii) both before and immediately after giving effect to the
incurrence of such Permitted Refinancing Debt (and any concurrent repayment of
Senior Notes or Refinanced Debt, as the case may be, with the proceeds of such
incurrence), no Default or Event of Default shall occur and be continuing or
would result therefrom, and (iv) the Borrowing Base then in effect shall be
adjusted to the extent required by Section 2.07(f), and the Borrower shall make
any prepayment required by Section 3.04(c)(iii); for purposes of clarification,
any Permitted Refinancing Debt incurred under this Section 9.02(g) which is
repaid may not be reborrowed under this Section 9.02(g); and
(h)    Guarantees by the Borrower and its Restricted Subsidiaries of Debt of the
Borrower or any Wholly-Owned Subsidiary Guarantor otherwise permitted hereunder.

Section 9.03    Liens. The Borrower will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or permit to exist any Lien on
any of its Properties (now owned or hereafter acquired), except:
(a)    Liens securing the payment of any Obligations;
(b)    Excepted Liens;
(c)    Liens securing Capital Leases and purchase money Debt permitted by
Section 9.02(b); provided that any such Lien shall encumber only the asset
acquired and proceeds thereof with the proceeds of such Debt; provided, further,
that individual financings otherwise permitted to be incurred pursuant to
Section 9.02(b) and subject to a Lien permitted pursuant to this Section 9.03(c)
provided by one Person (or its affiliates) may be cross collateralized to other
such financings permitted to be incurred pursuant to Section 9.02(b) and subject
to a Lien permitted pursuant to this Section 9.03(c) provided by such Person (or
its affiliates); and
(d)    Title defects that exist with respect to Mortgaged Property that is
described in and subject to the procedures set forth in Section 8.12(c).

Section 9.04    Restricted Payments; Redemption of Senior Notes.
(a)    Restricted Payments. The Borrower will not, and will not permit any of
its Restricted Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, return any capital to its
holders of Equity Interests or make any distribution of its Property to its
Equity Interest holders without the prior approval of the Majority Lenders,
except (i) each Loan Party may declare and pay dividends or distributions with
respect to its Equity Interests payable solely in additional shares of its
Equity Interests (other than Disqualified Capital Stock), (ii) Restricted
Subsidiaries of the Borrower may declare and pay dividends or distributions
ratably with respect to their Equity Interests to the Borrower or any
Wholly-Owned Subsidiary Guarantor, (iii) the Permitted PEI Payments shall be
permitted and (iv) the Permitted Tax Distributions shall be permitted, so long
as both before and after giving effect to each such Permitted Tax Distribution,
no Default or Event of Default has occurred and is continuing or would result
therefrom.
(b)    Redemption of Senior Notes and Amendment to Terms of Senior Notes and
Permitted Refinancing Documents. The Borrower will not, and will not permit any
of its Restricted Subsidiaries (including Finance Co.) to: (a) prior to the date
that is ninety-one (91) days after the Maturity

-80-

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

Date, call, make or offer to make any optional or voluntary Redemption of or
otherwise optionally or voluntarily Redeem (whether in whole or in part) any
Senior Notes or any Permitted Refinancing Debt; provided that, so long as no
Default, Event of Default or Borrowing Base Deficiency shall have occurred and
be continuing or would result therefrom, the Borrower and/or Finance Co. may
optionally prepay the Senior Notes or the Refinanced Debt with the proceeds of
Permitted Refinancing Debt; or (b) amend, modify, waive or otherwise change,
consent or agree to any amendment, modification, waiver or other change to, any
of the terms of the Senior Notes, any other Senior Notes Document, any Permitted
Refinancing Debt or any Permitted Refinancing Documents related thereto if the
effect thereof would be to shorten its maturity to a date prior to the date
which is ninety-one (91) days after the Maturity Date (as in effect on the date
of such amendment, modification, waiver, change, consent or agreement), or
increase the amount of any payment of principal thereof (other than (x) as a
result of the payment of interest in kind, or (y) to the extent the amount of
outstanding principal thereof increases, so long as the Borrower is in
compliance with Section 9.02(f) or (g), as applicable, and the Borrowing Base
has been adjusted pursuant to Section 2.07(f)), or increase the rate of interest
thereon in a manner materially less favorable to the Borrower and its
Subsidiaries as compared to market terms for issuers of similar size and credit
quality given the then prevailing market conditions as reasonably determined by
the Borrower, or shorten any period for payment of interest thereon; provided
that the foregoing shall not prohibit the execution of supplemental indentures
associated with the issuance of additional Senior Notes to the extent permitted
by Section 9.02(f) or the execution of supplemental indentures to add guarantors
if required by the terms of the Senior Indenture or Permitted Refinancing
Documents, provided such Person complies with Section 8.13(b) or (C) with
respect to any Senior Notes or Permitted Refinancing Debt that is subordinated
to the Obligations or any other Debt, designate any such Debt (other than
obligations of the Borrower and the Restricted Subsidiaries pursuant to the Loan
Documents) as “Specified Senior Indebtedness” or “Specified Guarantor Senior
Indebtedness” or give any such other Debt any other similar designation for the
purposes of any Senior Notes Document or any Permitted Refinancing Document
related to such Permitted Refinancing Debt that is subordinated to the
Obligations or any other Debt.

Section 9.05    Investments, Loans and Advances. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, make or permit to remain
outstanding any Investments in or to any Person, except that the foregoing
restriction shall not apply to:
(a)    Investments reflected in the Financial Statements or which are disclosed
to the Lenders on Schedule 9.05;
(b)    accounts receivable or notes receivable arising from the grant of trade
credit arising in the ordinary course of business;
(c)    direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof;
(d)    commercial paper maturing within one year from the date of creation
thereof rated in the highest grade by S&P or Moody’s;
(e)    deposits maturing within one year from the date of creation thereof with,
including certificates of deposit issued by, any Lender or any office located in
the United States of any other bank or trust company which is organized under
the laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $100,000,000 (as of the date of such bank
or trust company’s most

-81-

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

recent financial reports) and has a short term deposit rating of no lower than
A2 or P2, as such rating is set forth from time to time, by S&P or Moody’s,
respectively;
(f)    deposits in money market funds investing exclusively in Investments
described in Section 9.05(c), Section 9.05(d) or Section 9.05(e);
(g)    Investments (i) made by the Borrower in or to any Person that, prior to
such Investment, is a Wholly-Owned Subsidiary Guarantor and (ii) made by any
Restricted Subsidiary in or to the Borrower or any Person that, prior to such
Investment, is a Wholly-Owned Subsidiary Guarantor;
(h)    Investments in stock, obligations or securities received in settlement of
debts arising from Investments permitted under this Section 9.05 owing to the
Borrower or any Restricted Subsidiary as a result of a bankruptcy or other
insolvency proceeding of the obligor in respect of such debts or upon the
enforcement of any Lien in favor of the Borrower or any Restricted Subsidiary;
provided that the Borrower shall give the Administrative Agent prompt written
notice in the event that the aggregate amount of all Investments held at any one
time under this Section 9.05(h) exceeds $1,500,000;
(i)    Guarantees permitted by Section 9.02;
(j)    Swap Agreements to the extent expressly permitted by Section 9.18; and
(k)    Investments in Unrestricted Subsidiaries (including but not limited to
Pacesetter) and joint venture entities (including but not limited to SPS) in an
aggregate amount at any one time outstanding not to exceed $25,000,000 (net of
the fair market value of any dividends, distributions, or any return of capital
received by the applicable Loan Party in respect of Investments previously made
pursuant to this clause (k)).

Section 9.06    Nature of Business; International Operations. The Borrower will
not, and will not permit any Restricted Subsidiary to, allow any material change
to be made in the character of its business as an independent oil and gas
exploration and production company. From and after the date hereof, the Borrower
will not, and will not permit any of its Restricted Subsidiaries to, (a) acquire
or make any other expenditure (whether such expenditure is capital, operating or
otherwise) in or related to, any Oil and Gas Properties not located within the
geographical boundaries of the United States of America; (b) enter into any
business, either directly or through any Restricted Subsidiary, except for the
development, production and sale of Hydrocarbons and other businesses conducted
by the Borrower and the Restricted Subsidiaries on the Effective Date, and, in
each case, activities reasonably incidental or relating thereto; or (c) form or
acquire any Foreign Subsidiaries.

Section 9.07    Limitation on Leases. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist
any obligation for the payment of rent or hire of Property of any kind
whatsoever (real or personal but excluding Capital Leases, leases of Hydrocarbon
Interests and leases of drilling rigs), under leases or lease agreements which
would cause the aggregate amount of all payments made by the Borrower and the
Restricted Subsidiaries pursuant to all such leases or lease agreements,
including, without limitation, any residual payments at the end of any lease, to
exceed at any time one and one-half percent (1.5%) of the Borrowing Base then in
effect at such time, in any period of twelve consecutive calendar months during
the life of such leases.

Section 9.08    Proceeds of Notes. The Borrower will not permit the proceeds of
the Loans to be used for any purpose other than those permitted by Section 7.21.
Neither the Borrower nor any Person acting on behalf of the Borrower has taken
or will take any action which might cause any of the Loan Documents

-82-

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

to violate Regulations T, U or X or any other regulation of the Board or to
violate section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect. If requested by the Administrative Agent, the Borrower
will furnish to the Administrative Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 or such
other form referred to in Regulation U, Regulation T or Regulation X of the
Board, as the case may be. The Borrower will not request any Borrowing or Letter
of Credit, and the Borrower shall not use, and shall procure that the
Subsidiaries and its or their respective directors, officers, employees and
agents shall not use, the proceeds of any Borrowing or Letter of Credit (a) in
furtherance of an offer, payment, promise to pay, or authorization of the
payment or giving of money, or anything else of value, to any Person in
violation of any Anti-Corruption Laws in any material respect, (b) for the
purpose of funding, financing or facilitating any activities, business or
transaction of or with any Sanctioned Person, or in any Sanctioned Country, or
(c) in any manner that would result in the violation of any Sanctions applicable
to any party hereto.

Section 9.09    ERISA Compliance. The Borrower will not, and will not permit any
of its Restricted Subsidiaries to, at any time:
(a)    engage in, or permit any ERISA Affiliate to engage in, any transaction in
connection with which the Borrower, a Restricted Subsidiary or any ERISA
Affiliate could be subjected to either a civil penalty assessed pursuant to
subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed by
Chapter 43 of Subtitle D of the Code.
(b)    fail to make, or permit any ERISA Affiliate to fail to make, full payment
when due of all amounts which, under the provisions of any Plan, agreement
relating thereto or applicable law, the Borrower, a Restricted Subsidiary or any
ERISA Affiliate is required to pay as contributions thereto.
(c)    contribute to or assume an obligation to contribute to, or permit any
ERISA Affiliate to contribute to or assume an obligation to contribute to (i)
any employee welfare benefit plan, as defined in section 3(1) of ERISA,
including, without limitation, any such plan maintained to provide benefits to
former employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability, or (ii) any
employee pension benefit plan, as defined in section 3(2) of ERISA, that is
subject to Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

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

Section 9.11    Mergers, Etc. The Borrower will not, and will not permit any of
its Restricted Subsidiaries to, merge into or with or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its Property to any other
Person (whether now owned or hereafter acquired) (any such transaction, a
“consolidation”), or liquidate or dissolve; provided that, so long as no Default
has occurred and is then continuing, (a) any Wholly-Owned Subsidiary Guarantor
may participate in a consolidation with the Borrower (provided that the Borrower
shall be the survivor) or any

-83-

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

other Wholly-Owned Subsidiary Guarantor and (b) the Loan Parties may make any
Disposition permitted by Section 9.12.

Section 9.12    Sale of Properties. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, Dispose of any Property except for:
(a)    the sale of Hydrocarbons in the ordinary course of business;
(b)    farmouts of undeveloped acreage and assignments in connection with such
farmouts;
(c)    the sale or transfer of equipment that is obsolete, worn out or no longer
necessary or useful for the business of the Borrower or such Restricted
Subsidiary or is replaced by equipment of at least comparable value and use;
(d)    the Disposition (including Casualty Events) of any Oil and Gas Property
or any interest therein or any Restricted Subsidiary owning Oil and Gas
Properties; provided that:
(i)    either (A) 100% of the consideration received in respect of such
Disposition shall be cash; or (B) if less than 100% of the consideration
received in respect of such Disposition shall be cash, then (1) such Disposition
shall be made to an unaffiliated third party, (2) the Administrative Agent shall
have provided its prior written consent to such Disposition (such consent not to
be unreasonably withheld, conditioned or delayed) and (3) both before and
immediately after giving effect to any such Disposition, (x) no Default, Event
of Default or Borrowing Base Deficiency exists or would exist, (y) Liquidity is
at least 10% of the total Commitments and (z) the Consolidated Leverage Ratio
does not exceed 3.00 to 1.00 (on a pro forma basis after giving effect to such
Disposition), as the Consolidated Leverage Ratio is recomputed on such date
using (I) Consolidated Total Debt outstanding on such date and (II) EBITDAX for
the four fiscal quarters ending on the last day of the fiscal quarter
immediately preceding such date for which financial statements are available);
(ii)    the consideration received in respect of such Disposition shall be equal
to or greater than the fair market value of the Oil and Gas Property, interest
therein or Restricted Subsidiary subject of such Disposition (as reasonably
determined by the board of directors (or equivalent body) of the Borrower, and,
if requested by the Administrative Agent, the Borrower shall deliver a
certificate of a Responsible Officer of the Borrower certifying to that effect);
(iii)    the Borrowing Base shall be reduced to the extent required by Section
2.07(e), as applicable; and
(iv)    if any such Disposition is of a Restricted Subsidiary owning Oil and Gas
Properties, such Disposition shall include all the Equity Interests of such
Restricted Subsidiary;
(e)    Dispositions of unproved reserves to unaffiliated third parties for
non-cash consideration; provided that (i) both before and immediately after
giving effect to any such Disposition, (A) no Default, Event of Default or
Borrowing Base Deficiency exists or would exist, (B) Liquidity is at least 10%
of the total Commitments and (C) the Consolidated Leverage Ratio does not exceed
3.00 to 1.00 (on a pro forma basis after giving effect to such Disposition), as
the Consolidated Leverage Ratio is recomputed on such date using (x)
Consolidated Total Debt outstanding on such date and (y) EBITDAX for the four
fiscal quarters ending on the last day of the fiscal quarter immediately
preceding such date for which financial statements are available), and (ii) the
consideration received in respect of such Disposition shall be equal to

-84-

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

or greater than the fair market value of such reserves (as reasonably determined
by the board of directors (or equivalent body) of the Borrower, and, if
requested by the Administrative Agent, the Borrower shall deliver a certificate
of a Responsible Officer of the Borrower certifying to that effect);
(f)    dispositions of Cash and Investments described in Sections 9.05(c), (d),
(e) and (f);
(g)    (i) Dispositions permitted under Section 9.10, (ii) Liens permitted under
Section 9.03, (iii) Restricted Payments permitted under Section 9.04 and (iv)
Investments permitted under Section 9.05; provided that, notwithstanding the
foregoing, any Disposition of any Oil and Gas Property or interest therein or
any Restricted Subsidiary owning Oil and Gas Properties in connection with the
foregoing clauses (g)(iii)-(iv) shall also be subject to, and constitute a
Disposition regulated by, Section 2.07(e) and Section 2.07(g);
(h)    Dispositions among the Borrower and its Wholly Owned Subsidiary
Guarantors; provided that both before and after giving effect to such
Disposition, (i) no Default or Event of Default exists or would exist and (ii)
the Borrower and the Restricted Subsidiaries are in compliance with Section 8.13
as of the date of such Disposition without giving effect to any grace period
specified in such Section;
(i)    Dispositions in the ordinary course of business consisting of the
abandonment or cancellation of any intellectual property which, in the
reasonable good faith determination of the Borrower is not material to the
conduct of the business of the Borrower and its Restricted Subsidiaries, taken
as a whole; and
(j)    Dispositions of Properties not constituting Oil and Gas Properties and
not otherwise regulated by Section 9.12(a) to (i), the fair market value of
which for all such Dispositions since the Effective Date does not exceed
$50,000,000 in the aggregate.

Section 9.13    Environmental Matters. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, cause or permit any of its
Property to be in violation of, or do anything or permit anything to be done
which will subject any such Property to a Release or threatened Release of
Hazardous Materials, exposure to any Hazardous Materials, or to any Remedial
Work under any Environmental Laws, assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and circumstances, if
any, pertaining to such Property where such violations, Release or threatened
Release, exposure, or Remedial work would reasonably be expected to have a
Material Adverse Effect.

Section 9.14    Transactions with Affiliates. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of Property
or the rendering of any service, with any Affiliate (other than the Wholly-Owned
Subsidiary Guarantors), unless such transactions are not otherwise prohibited
under this Agreement and are upon fair and reasonable terms no less favorable to
it than it would obtain in a comparable arm’s length transaction with a Person
not an Affiliate; provided, however, that this Section 9.14 shall not be
applicable to (i) any Permitted PEI Payments and (ii) any Permitted Tax
Distributions to the extent permitted by Section 9.04(a).

Section 9.15    Subsidiaries. The Borrower will not, and will not permit any of
its Restricted Subsidiaries to, create or acquire any additional subsidiary
unless the Borrower gives written notice to the Administrative Agent of such
creation or acquisition and complies with Section 8.13(b), as applicable. The
Borrower shall not, and shall not permit any of its Restricted Subsidiaries to,
sell, assign or otherwise dispose of any Equity Interests in any Subsidiary
except in compliance with Section 9.12. Neither the Borrower nor any of its
Restricted Subsidiaries shall own any Foreign Subsidiaries.

-85-

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

Section 9.16    Negative Pledge Agreements; Dividend Restrictions. The Borrower
will not, and will not permit any of its Restricted Subsidiaries to, create,
incur, assume or suffer to exist any contract, agreement or understanding (other
than this Agreement, the Security Instruments, Capital Leases creating Liens
permitted by Section 9.03(c)) which in any way prohibits or restricts (a) the
granting, conveying, creation or imposition of any Lien on any of its Property
in favor of the Administrative Agent and the Lenders; (b) any Restricted
Subsidiary from paying dividends or making any other distributions in respect of
its Equity Interests to the Borrower or any other Restricted Subsidiary; or (c)
any Restricted Subsidiary from making loans or advances, or transferring any
Property, to the Borrower or any other Restricted Subsidiary, or which requires
the consent of or notice to other Persons in connection therewith, except for
(i) restrictions that (A) are included in a contractual obligation entered into
in connection with a Disposition permitted pursuant to this Agreement; and (B)
relate only to assets subject to such Disposition.

Section 9.17    Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower
will not, and will not permit any of its Restricted Subsidiaries to, allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties of any Loan Party that would require such Loan Party to deliver
Hydrocarbons at some future time without then or thereafter receiving full
payment therefor other than gas imbalances, take-or-pay or other prepayments
incurred in the ordinary course of business and which gas imbalances,
take-or-pay, or other prepayments and balancing rights, in the aggregate, do not
result in the Loan Parties having net aggregate liability at any time in excess
of an amount equal to 2% of the Oil and Gas Properties that are designated
proved, developed, producing reserves in the most recently delivered Reserve
Report.

Section 9.18    Swap Agreements. The Borrower will not, and will not permit any
of its Restricted Subsidiaries to, enter into any Swap Agreements with any
Person other than (a) (i) Swap Agreements entered into by the Borrower in
respect of commodities (ii) with an Approved Counterparty, (iii) the notional
volumes for which (when aggregated with other commodity Swap Agreements then in
effect other than put or floor options as to which an upfront premium has been
paid or basis differential swaps on volumes already hedged pursuant to other
Swap Agreements) do not exceed, as of the date such Swap Agreement is executed,
(A) for the first 24 months following the date such Swap Agreement is entered
into, 85%, and (B) for the next 36 months thereafter, 65%, of the reasonably
anticipated projected production from proved Oil and Gas Properties determined
by reference to the Reserve Report most recently delivered pursuant to Section
8.11 (or by reference to a Reserve Report with a recent “as of date” delivered
to the Administrative Agent for the purpose of this Section 9.18 (together with
the certificate referred to in Section 8.11(c)), which shall be prepared by or
under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and to have been prepared in
accordance with the procedures used in the immediately preceding January 1
Reserve Report), for each month during the period during which such Swap
Agreement is in effect for each of crude oil (including Properties, rights,
titles, interests or estates relating to natural gas liquids) and natural gas,
calculated separately, and (iv) the tenor of which is not more than 60 months
from the date such Swap Agreement is entered into, and (a) Swap Agreements
entered into by the Borrower in respect of interest rates with an Approved
Counterparty effectively converting interest rates from floating to fixed, the
notional amounts of which (when aggregated with all other Swap Agreements of the
Borrower and its Restricted Subsidiaries then in effect effectively converting
interest rates from floating to fixed) do not exceed, as of the date such Swap
Agreement is entered into, 90% of the then outstanding principal amount of the
Borrower’s Debt for borrowed money which bears interest at a floating rate. In
no event shall any Swap Agreement contain any requirement, agreement or covenant
for any Loan Party to post collateral or margin to secure their obligations
under such Swap Agreement or to cover market exposures; provided, however, that
the foregoing shall not prohibit or be deemed to prohibit the Secured Swap
Obligations from being secured by the Security Instruments.

-86-

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

Section 9.19    New Bank Accounts. No later than thirty (30) days after the
opening or establishment of such account (or such later date as is reasonably
acceptable to the Administrative Agent), the Borrower will not, and will not
permit any of its Restricted Subsidiaries to, have any Deposit Account or
Securities Account in the name or otherwise for the benefit of any Loan Party
unless the Administrative Agent shall have received a Control Agreement,
executed and delivered by such Loan Party and the bank or other financial
institution at which such account is maintained. No later than thirty (30) days
after the Effective Date (or such later date as is reasonably acceptable to the
Administrative Agent), the Borrower will not, and will not permit any of its
Restricted Subsidiaries to, deposit, credit or otherwise transfer any Cash
Receipts, securities, financial assets or any other Property into or deposit,
credit or otherwise transfer any Cash Receipts, securities, financial assets or
any other Property into, any Deposit Account, Securities Account or Commodity
Account in the name or otherwise for the benefit of any Loan Party unless the
Administrative Agent shall have received a Control Agreement, executed and
delivered by such Loan Party and the bank or other financial institution at
which such account is maintained.

Section 9.20    Changes in Fiscal Period. PEI and the Borrower will not, and
will not permit any of the Restricted Subsidiaries to, change its fiscal year to
end on a day other than December 31 or change the method of determining its
fiscal year.

Section 9.21    Passive Holding Company Status of PEI. PEI shall not engage in
any material operating or business activities; provided that the following and
activities incidental thereto shall be permitted in any event: (a) its ownership
of the Equity Interests of the Borrower, (b) the maintenance of its legal
existence (including the ability to incur fees, costs and expenses relating to
such maintenance), (c) the performance of its obligations with respect to the
Loan Documents, (d) any public offering of its common stock or any other
issuance or sale of its Equity Interests and, in each case, the redemption
thereof, (e) payment of taxes and dividends and making contributions to the
capital of the Loan Parties, (f) participating in tax, accounting and other
administrative matters as a member of the consolidated group of PEI and its
subsidiaries or the making and filing of any reports required by Governmental
Authority, (g) holding any cash incidental to any activities permitted under
this Section 9.21, (h) providing indemnification to officers, managers and
directors, (i) carrying out its obligations as the sole managing member of the
Borrower, (j) managing, through its board, directors, officers and managers, the
business of the Borrower and its Subsidiaries, and (k) any other activities
incidental to the foregoing or customary for passive holding companies. For the
avoidance of doubt, PEI shall not (i) incur, create, assume or suffer to exist
any Debt or other material liabilities or material financial obligations, except
(A) nonconsensual obligations imposed by operation of law, (B) pursuant to any
Loan Documents, Senior Notes Documents or Permitted Refinancing Documents to
which it is a party, (C) obligations with respect to its Equity Interests and
(D) any liabilities or financial obligations permitted to be incurred, created,
assumed or in existence pursuant to the other clauses of this Section 9.21 or
(ii) incur or suffer to exist any Liens on its Properties (now owned or
hereafter acquired), except for Excepted Liens.

Section 9.22    Amendment to Certain Documents and Agreements. The Borrower will
not, and will not permit any of its Restricted Subsidiaries, to (a) amend,
modify or otherwise change in a manner materially adverse to the Lenders, or
consent or agree to any amendment, modification or other change that is
materially adverse to the Lenders, in each case, with respect to any of the
terms of any joint operating agreements, pooling or unitization agreements or
similar contractual arrangements relating to the development and operation of
their Oil and Gas Properties or (b) amend, modify or otherwise change, or permit
any amendment, modification or other change to (pursuant to a waiver or
otherwise), any partnership agreement, limited liability company agreement,
articles or certificate of incorporation and bylaws or other applicable
organizational documents of the Borrower and the Restricted Subsidiaries
(including by the filing or modification of any certificate of designation, or
any agreement or arrangement (including any

-87-

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

shareholders’ agreement) entered into, with respect to any of its Equity
Interests), or enter into any new agreement with respect to any of its Equity
Interests, except any such amendments, modifications or changes or any such
agreements or arrangements that do not materially and adversely affect any
right, privilege or interest of Administrative Agent or the Lenders under the
Loan Documents or in the Collateral.

ARTICLE X
EVENTS OF DEFAULT; REMEDIES

Section 10.01    Events of Default. One or more of the following events shall
constitute an “Event of Default”:
(a)    the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof, by acceleration or otherwise.
(b)    the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in Section 10.01(a)) payable
under any Loan Document, when and as the same shall become due and payable and
such failure shall continue for a period of three (3) Business Days.
(c)    any representation or warranty made or deemed made by or on behalf of PEI
or any Loan Party in or in connection with any Loan Document or any amendment or
modification of any Loan Document or waiver under such Loan Document, or in any
report, certificate, financial statement or other document furnished pursuant to
or in connection with any Loan Document or any amendment or modification thereof
or waiver thereunder, shall prove to have been incorrect in any material respect
when made or deemed made; provided that to the extent any such representation or
warranty is otherwise qualified as to materiality, the materiality qualification
of this paragraph (c) shall not apply.
(d)    PEI or any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in Section 8.01(j), Section 8.01(n), Section
8.02, Section 8.03(a), Section 8.13, Section 8.14, Section 8.16, Section 8.17,
Section 8.18 or in Article IX.
(e)    PEI or any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in Section 10.01(a), Section 10.01(b) or Section 10.01(d)) or any other Loan
Document, and such failure shall continue unremedied for a period of 30 days.
(f)    any Loan Party shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness, when
and as the same shall become due and payable and after taking into account any
applicable grace periods with respect thereto.
(g)    any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the Redemption
thereof or any offer to Redeem to be made in respect thereof, prior to its
scheduled maturity or require any Loan Party to make an offer in respect
thereof; provided that this clause (g) shall not apply to secured Debt that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Debt, if such sale or transfer is permitted hereunder and
under the documents providing for such Debt.

-88-

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

(h)    an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of PEI or any Loan Party or its debts, or of a substantial part of its
assets, under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for PEI or any
Loan Party or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for 60 days or an order or
decree approving or ordering any of the foregoing shall be entered.
(i)    PEI or any Loan Party shall (i) voluntarily commence any proceeding or
file any petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in Section 10.01(h), (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
PEI or such Loan Party or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing; or the
holders of Equity Interests of PEI or the Borrower shall make any request or
take any action for the purpose of calling a meeting of the members or partners
of PEI or such Loan Party to consider a resolution to dissolve and wind-up PEI
or the Borrower’s affairs.
(j)    PEI or any Loan Party shall become unable, admit in writing its inability
or fail generally to pay its debts as they become due.
(k)    one or more judgments for the payment of money in an aggregate amount in
excess of $10,000,000 (to the extent not covered by independent third party as
to which the insurer does not dispute coverage and is not subject to an
insolvency proceeding) shall be rendered against any Loan Party or any
combination thereof and the same shall remain undischarged, unsatisfied,
unvacated or unbonded for a period of 60 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of such Loan Party to
enforce any such judgment.
(l)    the Loan Documents after delivery thereof shall for any reason, except to
the extent permitted by the terms thereof, cease to be in full force and effect
and valid, binding and enforceable in accordance with their terms against PEI or
any Loan Party party thereto or shall be repudiated by any of them or PEI or any
Loan Party or any Affiliate of PEI or any Loan Party shall so state in writing;
the Loan Documents after delivery thereof shall for any reason cease to create a
valid and perfected Lien of the priority required thereby on any Collateral
purported to be covered thereby with a fair market value greater than
$5,000,000, except to the extent permitted by the terms of this Agreement or
such other applicable Loan Document and except to the extent that any such loss
of perfection or priority results from the failure of the Administrative Agent
to maintain possession of certificates actually delivered to it representing
securities pledged under the Loan Documents or to file UCC continuation
statements.
(m)    the guarantee contained in Article 2 of the Guaranty Agreement shall
cease, for any reason (other than by reason of the express release thereof
pursuant to the terms thereof), to be in full force and effect or any Loan Party
or any Affiliate of any Loan Party shall so assert.
(n)    a Change in Control shall occur.

-89-

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

Section 10.02    Remedies.
(a)    In the case of an Event of Default other than one described in Section
10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter during
the continuance of such Event of Default, the Administrative Agent may, and at
the request of the Majority Lenders, shall, by notice to the Borrower, take
either or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Notes and the Loans then outstanding to be due
and payable in whole (or in part, in which case any principal not so declared to
be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and all fees and other obligations of the Borrower
and the Guarantors accrued hereunder and under the Notes and the other Loan
Documents (including, without limitation, the payment of cash collateral to
secure the LC Exposure as provided in Section 2.08(j)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the
Commitments shall automatically terminate and the Notes and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
the other obligations of the Borrower and the Guarantors accrued hereunder and
under the Notes and the other Loan Documents (including, without limitation, the
payment of cash collateral to secure the LC Exposure as provided in Section
2.08(j)), shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and each Guarantor.
(b)    In the case of the occurrence and continuance of an Event of Default, the
Administrative Agent and the Lenders will have all other rights and remedies
available at law and equity.
(c)    All proceeds realized from the liquidation or other disposition of
Collateral or otherwise received after maturity of the Loans, whether by
acceleration or otherwise, shall be applied:
(i)    first, to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Administrative Agent
in its capacity as such;
(ii)    second, pro rata to payment or reimbursement of that portion of the
Obligations constituting fees, expenses and indemnities payable to the Lenders;
(iii)    third, pro rata to payment of accrued interest on the Loans;
(iv)    fourth, pro rata to payment of (A) principal outstanding on the Loans,
(B) reimbursement obligations in respect of Letters of Credit pursuant to
Section 2.08(e) (and cash collateralization of LC Exposure hereunder), (C)
Secured Swap Obligations owing to Secured Swap Parties and (D) Secured Cash
Management Obligations owing to Secured Cash Management Providers;
(v)    fifth, pro rata to any other Obligations; and
(vi)    sixth, any excess, after all of the Obligations shall have been paid in
full in cash, shall be paid to the Borrower or as otherwise required by any
Governmental Requirement;
provided that, for the avoidance of doubt, Excluded Swap Obligations with
respect to any Guarantor shall not be paid with amounts received from such
Guarantor or its assets, but appropriate adjustments shall be made with respect
to payments from the Borrower and any other Guarantors to preserve the
allocation to Obligations otherwise set forth above in this Section 10.02(c).

-90-

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

ARTICLE XI
THE AGENTS

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

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

Section 11.03    Action by Administrative Agent. The Administrative Agent shall
have no duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that the Administrative Agent is required to
exercise in writing as directed by the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02) and in all cases the Administrative

-91-

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

Agent shall be fully justified in failing or refusing to act hereunder or under
any other Loan Documents unless it shall (a) receive written instructions from
the Majority Lenders, the Required Lenders or the Lenders, as applicable, (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02) specifying the action to be taken
and (a) be indemnified to its satisfaction by the Lenders against any and all
liability and expenses which may be incurred by it by reason of taking or
continuing to take any such action. The instructions as aforesaid and any action
taken or failure to act pursuant thereto by the Administrative Agent shall be
binding on all of the Lenders. If a Default has occurred and is continuing, then
the Administrative Agent shall take such action with respect to such Default as
shall be directed by the requisite Lenders in the written instructions (with
indemnities) described in this Section 11.03; provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law. The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Majority Lenders, the Required Lenders or the Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02), and otherwise the Administrative
Agent shall not be liable for any action taken or not taken by it hereunder or
under any other Loan Document or under any other document or instrument referred
to or provided for herein or therein or in connection herewith or therewith
INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or
willful misconduct.

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

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

Section 11.06    Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided in
this Section 11.06, the Administrative Agent may resign at any time by notifying
the Lenders, the Issuing Bank and the Borrower, and the Administrative Agent may
be removed at any time with or without cause by the Majority Lenders. Upon any
such resignation or removal, the Majority Lenders shall have the right, with the
Borrower’s consent, which consent shall not

-92-

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

be unreasonably withheld, to appoint a successor (provided that the Borrower’s
consent shall not be required if (a) an Event of Default has occurred and is
continuing or (b) no successor has been appointed within 30 days of such
resignation or removal). If no successor shall have been so appointed by the
Majority Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation or removal of
the retiring Administrative Agent, then the retiring Administrative Agent may,
on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent’s resignation hereunder, the
provisions of this Article XI and Section 12.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.

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

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

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

-93-

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

(a)    to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans and all other Obligations that
are owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and
(b)    to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.
Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or to authorize the Administrative Agent
to vote in respect of the claim of any Lender in any such proceeding.

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

Section 11.11    Authority of Administrative Agent to Release Collateral and
Liens. Each Lender and the Issuing Bank hereby authorizes the Administrative
Agent to release any Collateral that is permitted to be sold or released
pursuant to the terms of the Loan Documents. Each Lender and the Issuing Bank
hereby authorizes the Administrative Agent to execute and deliver to the
Borrower, at the Borrower’s sole cost and expense, any and all releases of
Liens, termination statements, assignments or other documents reasonably
requested by the Borrower in connection with any sale or other disposition of
Property to the

-94-

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

extent such sale or other disposition is permitted by the terms of Section 9.12
or is otherwise authorized by the terms of the Loan Documents.

Section 11.12    The Arranger. None of the Arranger, the Syndication Agent or
the Documentation Agent shall have any duties, responsibilities or liabilities
under this Agreement and the other Loan Documents other than its duties,
responsibilities and liabilities, as applicable, in its capacity as a Lender
hereunder.

ARTICLE XII
MISCELLANEOUS

Section 12.01    Notices.
(a)    Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 12.01(b)), all
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(i)    if to PEI or the Borrower, to it at:
303 Colorado Street, Suite 3000
Austin, Texas 78701
Attention: Colin Roberts, General Counsel
Fax: (432) 686-7011
Email: croberts@parsleyenergy.com

(ii)    if to the Administrative Agent or Wells Fargo as Issuing Bank, to it at:
Wells Fargo Bank, National Association
1000 Louisiana Street, 9th Floor
Houston, Texas 77002
Attention: Edward Pak, Director
Fax: (713) 651-8101
Email: Edward.pak@wellsfargo.com

with a copy to:
Wells Fargo Bank, National Association
MAC D1109-019
1525 West W. T. Harris Blvd.
Charlotte, NC 28262
Attention: Syndication Agency Services
Fax: (704) 590-3481; and

(iii)    if to any other Lender, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.
(b)    Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II, Article III, Article IV and Article V
unless otherwise agreed by the Administrative Agent and the applicable Lender.
The Administrative Agent

-95-

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

or the Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.
(c)    Any party hereto may change its address or telecopy number for notices
and other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

Section 12.02    Waivers; Amendments.
(a)    No failure on the part of the Administrative Agent, the Issuing Bank or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege, or any abandonment or discontinuance
of steps to enforce such right, power or privilege, under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under any of the Loan Documents
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of the Administrative Agent,
any other Agent, the Issuing Bank and the Lenders hereunder and under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
any other Loan Document or consent to any departure by PEI or any Loan Party
therefrom shall in any event be effective unless the same shall be permitted by
Section 12.02(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, any other Agent, any Lender or the Issuing Bank may
have had notice or knowledge of such Default at the time.
(b)    Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Majority Lenders or by the Borrower and the Administrative Agent with
the consent of the Majority Lenders; provided that no such agreement shall (i)
increase the Commitment or the Maximum Credit Amount of any Lender without the
written consent of such Lender (it being understood that (x) a waiver of any
condition precedent set forth in Section 6.02 and (y) the waiver of any Default,
Event of Default, mandatory prepayment (or waiver of the terms of any mandatory
prepayment) or mandatory reduction of the Commitments shall not constitute an
extension or increase of any Commitment of any Lender), (ii) increase the
Borrowing Base without the written consent of each Lender (other than any
Defaulting Lender), decrease or maintain the Borrowing Base without the consent
of the Required Lenders, or modify Section 2.07 in any manner that results in an
increase in the Borrowing Base without the consent of each Lender (other than
any Defaulting Lender) or that results in a decrease in or maintenance of the
Borrowing Base without the consent of the Required Lenders; provided that a
Scheduled Redetermination may be postponed by the Required Lenders, (iii) reduce
the principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon (other than a waiver of default interest), or reduce any fees
payable hereunder, or reduce any other Obligations hereunder or under any other
Loan Document, without the written consent of each Lender affected thereby, (iv)
postpone the scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or any
other Obligations hereunder or under any other Loan Document, or reduce the
amount of, waive or excuse any such payment (other than a waiver of default
interest) (it being understood that the waiver of (or amendment to the terms of)
any mandatory prepayment of the Loans shall not constitute a postponement of any
date scheduled for the payment of principal or interest), or postpone or extend
the Termination Date, without the written consent of each Lender affected
thereby, (v) change Section 4.01(b), Section 4.01(c) or

-96-

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

any other term or condition hereof in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each
Lender, (vi) waive or amend Section 3.04(c), Section 6.01, Section 8.13 or
Section 12.14 or change the definition of the terms “Domestic Subsidiary”,
“Foreign Subsidiary” or “Subsidiary”, without the written consent of each
Lender; provided that any waiver or amendment of Section 12.14, this proviso in
this Section 12.02(b)(vi), or Section 12.02(b)(vii), shall also require the
written consent of each Secured Swap Party, (vii) modify the terms of Section
10.02(c) without the written consent of each Lender and Secured Swap Party
adversely affected thereby, or amend or otherwise modify any Security Instrument
in a manner that results in the Secured Swap Obligations secured by such
Security Instrument no longer being secured thereby on an equal and ratable
basis with the principal of the Loans, or amend or otherwise change the
definition of “Secured Swap Agreement,” “Secured Swap Obligations” or “Secured
Swap Party,” without the written consent of each Secured Swap Party adversely
affected thereby), (viii) release any Guarantor (except as set forth in the
Guaranty Agreement or as permitted by this Agreement) or release all or
substantially all of the Collateral (other than as provided in Section 11.11),
without the written consent of each Lender and each Secured Swap Party, (ix)
modify any Security Instrument in a manner that results in the Secured Swap
Obligations secured by such Security Instrument no longer being secured thereby
on an equal and ratable basis with the principal of the Loans without the
written consent of each Secured Swap Party adversely affected thereby; or (x)
change any of the provisions of this Section 12.02(b) or the definitions of
“Required Lenders”, “Majority Lenders” or “Super Majority Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or under any other Loan Documents or
make any determination or grant any consent hereunder or any other Loan
Documents, without the written consent of each Lender; provided, further, that
no such agreement shall amend, modify or otherwise affect the rights or duties
of the Administrative Agent, any other Agent, or the Issuing Bank hereunder or
under any other Loan Document without the prior written consent of the
Administrative Agent, such other Agent or the Issuing Bank, as the case may be.
Notwithstanding the foregoing, (A) any supplement permitted to be made to any
Schedule hereto shall be effective simply by delivering to the Administrative
Agent a supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the Lenders, and
(A) any Security Instrument may be supplemented to add additional collateral
with the consent of the Administrative Agent.
(c)    Notwithstanding anything to the contrary contained in this Section 12.02,
the Administrative Agent and the Borrower may amend or modify this Agreement and
any other Loan Document to (i) cure any ambiguity, omission, defect or
inconsistency therein and (ii) grant a new Lien for the benefit of the Lenders,
extend an existing Lien over additional property for the benefit of the Lenders
or join additional Persons as Guarantors.

Section 12.03    Expenses, Indemnity; Damage Waiver.
(a)    The Borrower shall pay (i) all reasonable and documented out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, including,
without limitation, the reasonable and documented out-of-pocket fees, charges
and disbursements of outside counsel and other outside consultants for the
Administrative Agent, the reasonable and documented travel, photocopy, mailing,
courier, telephone and other similar out-of-pocket expenses, and the cost of
environmental invasive and non-invasive assessments and audits and surveys and
appraisals, in connection with the syndication of the credit facilities provided
for herein, the preparation, negotiation, execution, delivery and administration
(both before and after the execution hereof and including advice of counsel to
the Administrative Agent as to the rights and duties of the Administrative Agent
and the Lenders with respect thereto) of this Agreement and the other Loan
Documents and any amendments, modifications or waivers of or consents related to
the provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated),

-97-

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

(ii) all costs, expenses, Other Taxes, assessments and other charges incurred by
any Agent or any Lender in connection with any filing, registration, recording
or perfection of any security interest contemplated by this Agreement or any
Security Instrument or any other document referred to therein, (iii) all
reasonable and documented out-of-pocket expenses incurred by the Issuing Bank in
connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder, (iv) all out-of-pocket expenses
incurred by any Agent, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for any Agent, the Issuing Bank or any
Lender, in connection with the enforcement or protection of its rights in
connection with this Agreement or any other Loan Document, including its rights
under this Section 12.03, or in connection with the Loans made or Letters of
Credit issued hereunder, including, without limitation, all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans or Letters of Credit.
(b)    THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, THE ISSUING BANK
AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH
SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND DEFEND AND HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES,
LIABILITIES AND RELATED EXPENSES, INCLUDING THE REASONABLE FEES, CHARGES AND
DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST
ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (1) THE
EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF PEI ANY
LOAN PARTY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS
AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF PEI OR ANY LOAN
PARTY SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR
CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF
CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (1)
ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF
CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY
COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING
UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR
OTHER IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH,
(v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS
OF PEI, THE BORROWER AND ITS SUBSIDIARIES BY PEI, THE BORROWER AND ITS
SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE
THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR
PROPERTIES OR OPERATIONS, INCLUDING, THE PRESENCE, GENERATION, STORAGE, RELEASE,
THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR
TREATMENT OF HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES, (ix) THE
BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST
OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST
ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY

-98-

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

PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE,
USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE,
TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF HAZARDOUS
MATERIALS ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR
ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS
MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY
SUBSIDIARY, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER
OR ANY SUBSIDIARY, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION
IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM (A) THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR A BREACH IN BAD
FAITH OF SUCH INDEMNITEE’S OBLIGATIONS HEREUNDER OR (B) A DISPUTE SOLELY BETWEEN
OR AMONG INDEMNITEES AND NOT INVOLVING ANY ACT OR OMISSION OF PEI, THE BORROWER,
ANY OF ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE AFFILIATES (OTHER THAN ANY
CLAIMS AGAINST AN INDEMNITEE IN ITS CAPACITY OR FULFILLING ITS ROLE AS AN AGENT
OR ARRANGER WITH RESPECT TO THIS AGREEMENT). THIS SECTION 12.03(b) SHALL NOT
APPLY WITH RESPECT TO TAXES OTHER THAN ANY TAXES THAT REPRESENT LOSSES, CLAIMS,
DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES FROM ANY NON-TAX CLAIM.
(c)    To the extent that the Borrower fails to pay any amount required to be
paid by it to any Agent, the Arranger or the Issuing Bank under Section 12.03(a)
or (b), each Lender severally agrees to pay to such Agent, the Arranger or the
Issuing Bank, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against such Agent, the Arranger or the
Issuing Bank in its capacity as such.
(d)    To the extent permitted by applicable law, the Borrower shall not assert,
and the Borrower hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or Letter
of Credit or the use of the proceeds thereof.
(e)    All amounts due under this Section 12.03 shall be payable not later than
three (3) days after written demand therefor.

-99-

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

Section 12.04    Successors and Assigns.
(a)    The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) neither PEI nor the Borrower may assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of each Lender (and any attempted assignment or transfer by PEI
or the Borrower without such consent shall be null and void), (ii) no Lender may
assign or otherwise transfer its rights or obligations hereunder except in
accordance with this Section 12.04, and (iii) no Lender may assign to the
Borrower, an Affiliate of the Borrower, a Defaulting Lender or an Affiliate of a
Defaulting Lender all or any portion of such Lender’s rights and obligations
under this Agreement or all or any portion of its Commitments or the Loans owing
to it hereunder. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b)    (1) Subject to the conditions set forth in Section 12.04(b)(ii), any
Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld or delayed) of:
(A)    the Borrower; provided that no consent of the Borrower shall be required
if such assignment is to a Lender, an Affiliate of a Lender, an Approved Fund
or, if an Event of Default has occurred and is continuing, to any other
assignee; provided that the Borrower shall be deemed to have consented to any
such assignment unless it shall object thereto by written notice to the
Administrative Agent within five (5) Business Days after having received notice
thereof; and
(B)    the Administrative Agent; provided that no consent of the Administrative
Agent shall be required for an assignment to an assignee that is a Lender
immediately prior to giving effect to such assignment.
(ii)    Assignments shall be subject to the following additional conditions:
(A)    except in the case of an assignment to a Lender or an Affiliate of a
Lender or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent; provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;
(B)    each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;
(A)    the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

-100-

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

(B)    the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.
(iii)    Subject to Section 12.04(b)(iv) and the acceptance and recording
thereof, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 5.01,
Section 5.02, Section 5.03 and Section 12.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 12.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 12.04(c).
(iv)    The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Maximum Credit Amount of, and principal amount
(and stated interest) of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice. In
connection with any changes to the Register, if necessary, the Administrative
Agent will reflect the revisions on Annex I and forward a copy of such revised
Annex I to the Borrower, the Issuing Bank and each Lender.
(v)    Upon its receipt of a duly completed Assignment and Assumption executed
by an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in Section 12.04(b) and any written
consent to such assignment required by Section 12.04(b), the Administrative
Agent shall accept such Assignment and Assumption and record the information
contained therein in the Register. No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this Section 12.04(b).
(c)    (1) Any Lender may, without the consent of the Borrower, any other Loan
Party, the Administrative Agent or the Issuing Bank, sell participations to one
or more banks or other entities (a “Participant”) in all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the proviso to Section
12.02 that affects such Participant. In addition such agreement must provide
that the Participant be bound by the

-101-

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

provisions of Section 12.03. Subject to Section 12.04(c)(ii), the Borrower
agrees that each Participant shall be entitled to the benefits of Section 5.01,
Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender; provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.
(i)    A Participant shall not be entitled to receive any greater payment under
Section 5.01 or Section 5.03 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower’s
prior written consent. A Participant shall not be entitled to the benefits of
Section 5.03 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 5.03(e) as though it were a Lender; provided, however, that
any documents required to be provided under Section 5.03(e) shall be provided to
the participating Lender. Each Lender that sells a participation shall, acting
solely for this purpose as a non-fiduciary agent of the Borrower, maintain a
register on which it enters the name and address of each Participant and the
principal amounts (and stated interest) of each Participant’s interest in the
Loans or other obligations under the Loan Documents (the “Participant
Register”). Any such Participant Register shall be available for inspection by
the Administrative Agent at any reasonable time and from time to time upon
reasonable prior notice; provided that the applicable Lender shall have no
obligation to show such Participant Register to the Borrower except to the
extent such disclosure is necessary to establish that such Loan, commitment,
letter of credit or other obligation is in registered form under Section
5f.l03-l(c) of the Treasury regulations. The entries in the Participant Register
shall be conclusive absent manifest error or bad faith, and such Lender shall
treat each Person whose name is recorded in the Participant Register as the
owner of such participation for all purposes of this Agreement notwithstanding
any notice to the contrary.
(d)    Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank or any central bank having jurisdiction
over such Lender, and this Section 12.04(d) shall not apply to any such pledge
or assignment of a security interest; provided that no such pledge or assignment
of a security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.
(e)    Notwithstanding any other provisions of this Section 12.04, no transfer
or assignment of the interests or obligations of any Lender or any grant of
participations therein shall be permitted if such transfer, assignment or grant
would require the Borrower or any Guarantor to file a registration statement
with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.

Section 12.05    Survival; Revival; Reinstatement.
(a)    All covenants, agreements, representations and warranties made by PEI and
the Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any other Agent, the Issuing Bank or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not expired or

-102-

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

terminated. The provisions of Section 5.01, Section 5.02, Section 5.03, and
Section 12.03 and Article XI shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Letters of Credit
and the Commitments or the termination of this Agreement, any other Loan
Document or any provision hereof or thereof.
(b)    To the extent that any payments on the Obligations or proceeds of any
Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect. In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.

Section 12.06    Counterparts; Integration; Effectiveness.
(a)    This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.
(b)    This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof. THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(c)    Except as provided in Section 6.01, this Agreement shall become effective
when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy, facsimile, as an attachment
to an email or other similar electronic means shall be effective as delivery of
a manually executed counterpart of this Agreement.

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

Section 12.08    Right of Setoff. If an Event of Default shall have occurred and
be continuing, each Lender and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including, without limitation obligations under Swap Agreements) at any
time owing by such Lender or Affiliate to or for the credit or the account

-103-

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

of any Loan Party against any of and all the obligations of any Loan Party owed
to such Lender now or hereafter existing under this Agreement or any other Loan
Document, irrespective of whether or not such Lender shall have made any demand
under this Agreement or any other Loan Document and although such obligations
may be unmatured. The rights of each Lender under this Section 12.08 are in
addition to other rights and remedies (including other rights of setoff) which
such Lender or its Affiliates may have.

Section 12.09    GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a)    THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED
STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE
OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER
IS LOCATED.
(b)    ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL
BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT
PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT
OTHERWISE HAVING JURISDICTION.
(c)    EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS
SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO
SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME
EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANOTHER PARTY IN ANY OTHER JURISDICTION.
(d)    EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (ii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED
THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS, AND (iii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED
IN THIS SECTION 12.09.

-104-

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

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

Section 12.11    Confidentiality. Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority (including any self-regulatory
authority, such as the National Association of Insurance Commissioners), (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement or any other
Loan Document, (e) in connection with the exercise of any remedies hereunder or
under any other Loan Document or any suit, action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section 12.11, to (i) any assignee of or Participant in,
or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective counterparty
(or its advisors) to any Swap Agreement relating to the Borrower and its
obligations, (g) on a confidential basis to (i) any rating agency in connection
with rating the Borrower or its Subsidiaries or this Agreement or (ii) the CUSIP
Service Bureau or any similar agency in connection with the issuance and
monitoring of CUSIP numbers with respect to this Agreement; (h) with the consent
of the Borrower or (i) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 12.11 or (ii)
becomes available to the Administrative Agent, the Issuing Bank, any Lender or
any Affiliate of the foregoing Persons on a nonconfidential basis from a source
other than the Borrower; provided, unless specifically prohibited by applicable
law or court order, Administrative Agent, the Issuing Bank and each Lender shall
make reasonable efforts to notify the Borrower of any request by any
governmental agency or representative thereof (other than any such request in
connection with any examination of the financial condition or other routine
examination of such Lender by such governmental agency) for disclosure of any
such non-public information prior to disclosure of such information. In
addition, the Administrative Agent and the Lenders may disclose the existence of
this Agreement and information about this Agreement to market data collectors,
similar service providers to the lending industry and service providers to the
Agents and the Lenders in connection with the administration of this Agreement
and the other Loan Documents. For the purposes of this Section 12.11,
“Information” means all information received from any Loan Party relating to any
Loan Party and their businesses, other than any such information that is
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by a Loan Party; provided that, in the
case of information received from any Loan Party after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section 12.11 shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

Section 12.12    Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (a) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender

-105-

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

under any of the Loan Documents or agreements or otherwise in connection with
the Notes shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Obligations (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (b) in the event that the maturity of the Notes is accelerated by
reason of an election of the holder thereof resulting from any Event of Default
under this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to any Lender may never include more than the maximum amount allowed
by such applicable law, and excess interest, if any, provided for in this
Agreement or otherwise shall be canceled automatically by such Lender as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Obligations (or, to the
extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder shall, to the extent permitted by law applicable to such Lender,
be amortized, prorated, allocated and spread throughout the stated term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law. If at any time and from time to time (i) the
amount of interest payable to any Lender on any date shall be computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of interest
payable to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total amount of interest had been computed
without giving effect to this Section 12.12. To the extent that Chapter 303 of
the Texas Finance Code is relevant for the purpose of determining the Highest
Lawful Rate applicable to a Lender, such Lender elects to determine the
applicable rate ceiling under such Chapter by the weekly ceiling from time to
time in effect. Chapter 346 of the Texas Finance Code does not apply to the
Borrower’s obligations hereunder.

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

-106-

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

Section 12.14    Collateral Matters; Swap Agreements; Cash Management
Agreements. The benefit of the Security Instruments and of the provisions of
this Agreement relating to any Collateral securing the Obligations shall also
extend to and be available to Secured Swap Parties and Secured Cash Management
Providers on a pro rata basis (but subject to the terms of the Loan Documents,
including, without limitation, provisions thereof relating to the application
and priority of payments to the Persons entitled thereto) in respect of Secured
Swap Obligations and Secured Cash Management Obligations. Except as provided in
Section 12.02(b), no Secured Swap Party or Secured Cash Management Provider
shall have any voting rights under any Loan Document as a result of the
existence of any Secured Swap Obligation or Secured Cash Management Obligation
owed to it.

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

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

Section 12.17    Non-Fiduciary Status.. The arranging and other services
regarding this Agreement provided by the Administrative Agent, the Arranger, and
the Lenders are arm’s-length commercial transactions between the Loan Parties,
and their Affiliates, on the one hand, and the Administrative Agent, the
Arranger, and the Lenders, on the other hand. Each of PEI and the Borrower has
consulted its own legal, accounting, regulatory and tax advisors to the extent
it has deemed appropriate. PEI and the Borrower are capable of evaluating, and
understand and accept, the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents. The Administrative Agent,
the Arranger and each Lender is and has been acting solely as a principal and,
except as expressly agreed in writing by the relevant parties, has not been, is
not, and will not be acting as an advisor, agent or fiduciary for any Loan Party
or any of its Affiliates, or any other Person and neither the Administrative
Agent, the Arranger nor any Lender has any obligation to any Loan Party, or any
of its Affiliates with respect to the transactions contemplated hereby except
those obligations expressly set forth herein and in the other Loan Documents.
The Administrative Agent, the Arranger and the Lenders and their respective
Affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of a Loan Party, and its Affiliates, and
neither the Administrative Agent, the Arranger, nor any Lender has any
obligation to disclose any of such interests to such Loan Party or its
Affiliates. To the fullest extent permitted by law, each of PEI and the Borrower
hereby waives and releases any claims that it may have against the
Administrative Agent, the Arranger or any Lender with respect to any breach or
alleged breach of agency or fiduciary duty in connection with any aspect of any
transaction contemplated hereby.

Section 12.18    Flood Insurance Provisions. Notwithstanding any provision in
this Agreement or any other Loan Document to the contrary, in no event is any
Building (as defined in the applicable Flood Insurance Regulation) or
Manufactured (Mobile) Home (as defined in the applicable Flood Insurance
Regulation) included in the definition of “Mortgaged Property” and no Building
or Manufactured (Mobile)

-107-

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

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

Section 12.19    Acknowledgement and Consent to Bail-In of EEA Financial
Institutions. Notwithstanding anything to the contrary in any Loan Document or
in any other agreement, arrangement or understanding among any such parties,
each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Loan Document, to the extent such liability is
unsecured, may be subject to the write-down and conversion powers of an EEA
Resolution Authority and agrees and consents to, and acknowledges and agrees to
be bound by:
(a)    the effects of any Bail-In Action on any such liability, including, if
applicable:
(i)    a reduction in full or in part or cancellation of any such liability;
(ii)    a conversion of all, or a portion of, such liability into shares or
other instruments of ownership in such EEA Financial Institution, its parent
undertaking, or a bridge institution that may be issued to it or otherwise
conferred on it, and that such shares or other instruments of ownership will be
accepted by it in lieu of any rights with respect to any such liability under
this Agreement or any other Loan Document; or
(iii)    the variation of the terms of such liability in connection with the
exercise of the Write-Down and Conversion Powers of any EEA Resolution
Authority.
[SIGNATURES BEGIN NEXT PAGE]

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

BORROWER:
PARSLEY ENERGY, LLC

 

By:  /s/ Bryan Sheffield            
Name: Bryan Sheffield
Title: President and Chief Executive Officer

   

-108-

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

PEI:
PARSLEY ENERGY, INC.

 

By:  /s/ Bryan Sheffield            
Name: Bryan Sheffield
Title: President and Chief Executive Officer

   

Signature Page – Credit Agreement
Parsley Energy, LLC

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

ADMINISTRATIVE AGENT, ISSUING BANK AND LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION

 
By:  /s/ Edward Pak               
Name: Edward Pak
Title: Director  
        

Signature Page – Credit Agreement
Parsley Energy, LLC

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

DOCUMENTATION AGENT AND LENDER:
BMO HARRIS BANK, N.A.

 
By:  /s/ Matthew L. Davis            
Name: Matthew L. Davis
Title: Vice President

Signature Page – Credit Agreement
Parsley Energy, LLC

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

SYNDICATION AGENT AND LENDER:
JPMORGAN CHASE BANK, N.A.

 
By:  /s/ Robert L. Mendoza            
Name: Robert L. Mendoza
Title: Managing Director  
        

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH

By:  /s/ Nupur Kumar               
Name: Nupur Kumar
Title: Authorized Signatory  

By:  /s/ Warren Van Heyst            
Name: Warren Van Heyst
Title: Authorized Signatory

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
COMPASS BANK

By:  /s/ Les Werme               
Name: Les Werme
Title: Director

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
ROYAL BANK OF CANADA

By:  /s/ Kristan Spivey              
Name: Kristan Spivey
Title: Authorized Signatory

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
BOKF NA DBA BANK OF TEXAS

By:   /s/ Thomas E. Stelmar, Jr.              
Name: Thomas E. Stelmar, Jr.
Title: Senior Vice President

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
FROST BANK, A TEXAS STATE BANK

By:  /s/ Jack Herndon                                     
Name: Jack Herndon
Title: Senior Vice President    

                                

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
U.S. BANK NATIONAL ASSOCIATION

By:   /s/ Nicholas T. Hanford                                                 
Name: Nicholas T. Hanford
Title: Vice President    

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
THE BANK OF NOVA SCOTIA

By:  /s/ Alan Dawson               
Name: Alan Dawson
Title: Director

 
 

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
MORGAN STANLEY BANK, N.A.

By:  /s/ Michael King               
Name: Michael King
Title: Authorized Signatory

Signature Page – Credit Agreement
Parsley Energy, LLC

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

LENDER:
MORGAN STANLEY SENIOR FUNDING, INC.

By:  /s/ Michael King               
Name: Michael King
Title: Vice President

    

Signature Page – Credit Agreement
Parsley Energy, LLC

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

ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS

Name of Lender
Applicable Percentage
Maximum Credit Amount
Wells Fargo Bank, National Association
16.000000000%
$400,000,000.00
BMO Harris Bank, N.A.
12.083333330%
$302,083,333.33
JPMorgan Chase Bank, N.A.
12.083333330%
$302,083,333.33
Credit Suisse AG, Cayman Islands Branch
10.416666670%
$260,416,666.67
BBVA Bank d/b/a Compass Bank
8.666666667%
$216,666,666.67
Royal Bank of Canada
8.666666667%
$216,666,666.67
BOKF NA dba Bank of Texas
6.416666667%
$160,416,666.67
Frost Bank, a Texas State Bank
6.416666667%
$160,416,666.67
U.S. Bank National Association
6.416666667%
$160,416,666.67
The Bank of Nova Scotia
6.416666667%
$160,416,666.67
Morgan Stanley Bank, N.A.
4.681159420%
$117,028,985.50
Morgan Stanley Senior Funding, Inc.
1.735507247%
$43,387,681.17
TOTAL
100.00%
$2,500,000,000.00

Annex I

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

EXHIBIT A
FORM OF NOTE
$[           ]                     [              ], 201[     ]

FOR VALUE RECEIVED, Parsley Energy, LLC, a limited liability company duly formed
and existing under the laws of the state of Delaware (the “Borrower”) hereby
promises to pay [ ] or its registered assigns (the “Lender”), at the principal
office of Wells Fargo Bank, National Association (the “Administrative Agent”),
the principal sum of [ ] Dollars ($[ ]) (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Lender to the
Borrower under the Credit Agreement, as hereinafter defined), in lawful money of
the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of each Loan
made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be recorded by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender’s or the Borrower’s rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.
This Note is one of the Notes referred to in the Credit Agreement dated as of
October 28, 2016 among the Borrower, Parsley Energy, Inc., a Delaware
corporation, the Administrative Agent, and the other agents and lenders
signatory thereto (including the Lender), and evidences Loans made by the Lender
thereunder (such Credit Agreement as the same may be amended, supplemented or
restated from time to time, the “Credit Agreement”). Capitalized terms used in
this Note have the respective meanings assigned to them in the Credit Agreement.
This Note is issued pursuant to, and is subject to the terms and conditions set
forth in, the Credit Agreement and is entitled to the benefits provided for in
the Credit Agreement and the other Loan Documents. The Credit Agreement provides
for the acceleration of the maturity of this Note upon the occurrence of certain
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Note.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS.
PARSLEY ENERGY, LLC
 
 
By:
 
Name:
 
Title:
 

Exhibit A

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

EXHIBIT B
FORM OF BORROWING REQUEST
[ ], 201[ ]
Parsley Energy, LLC, a limited liability company duly formed and existing under
the laws of the state of Delaware (the “Borrower”), pursuant to Section 2.03 of
the Credit Agreement dated as of October 28, 2016, (together with all
amendments, restatements, supplements or other modifications thereto, the
“Credit Agreement”) among the Borrower, Parsley Energy, Inc., a Delaware
corporation, Wells Fargo Bank, National Association, as Administrative Agent and
the other agents and lenders (the “Lenders”) which are or become parties thereto
(unless otherwise defined herein, each capitalized term used herein is defined
in the Credit Agreement), hereby requests a Borrowing as follows:
(i)    Aggregate amount of the requested Borrowing is $[ ];
(ii)    Date of such Borrowing is [ ], 201[ ];
(iii)    Requested Borrowing is to be [an ABR Borrowing] [a Eurodollar
Borrowing];
(iv)    In the case of a Eurodollar Borrowing, the initial Interest Period
applicable thereto is [ ];
(v)    Amount of Aggregate Elected Borrowing Base Commitments in effect on the
date hereof is $[ ];
(vi)    Total Revolving Credit Exposures on the date hereof (i.e., outstanding
principal amount of Loans and total LC Exposure) is $[ ];
(vii)    Pro forma total Revolving Credit Exposures (giving effect to the
requested Borrowing) is $[ ]; and
(viii)    the Consolidated Cash Balance (without regard to the requested
Borrowing) is $[ ], and the pro forma Consolidated Cash Balance (giving effect
to the requested Borrowing) is $[ ];
(ix)    Location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05 of the
Credit Agreement, is as follows:
[________________________]
[________________________]
[________________________]
[________________________]
[________________________]

Exhibit B

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

The undersigned certifies that he/she is the [ ] of Parsley Energy, LLC, and
that as such he/she is authorized to execute this certificate on behalf of the
Borrower. The undersigned further certifies, represents and warrants on behalf
of the Borrower that (a) the Borrower is entitled to receive the requested
Borrowing under the terms and conditions of the Credit Agreement and (b) after
giving effect to the requested Borrowing, the Consolidated Cash Balance does not
exceed the Consolidated Cash Balance Threshold.
    
PARSLEY ENERGY, LLC
 
 
By:
 
Name:
Title:

Exhibit B

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

EXHIBIT C
FORM OF INTEREST ELECTION REQUEST
[ ], 201[ ]
Parsley Energy, LLC, a limited liability company duly formed and existing under
the laws of the state of Delaware (the “Borrower”), pursuant to Section 2.04 of
the Credit Agreement dated as of October 28, 2016 (together with all amendments,
restatements, supplements or other modifications thereto, the “Credit
Agreement”) among the Borrower, Parsley Energy, Inc., a Delaware corporation,
Wells Fargo Bank, National Association, as Administrative Agent and the other
agents and lenders (the “Lenders”) which are or become parties thereto (unless
otherwise defined herein, each capitalized term used herein is defined in the
Credit Agreement), hereby makes an Interest Election Request as follows:
(i)    The Borrowing to which this Interest Election Request applies, and if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information specified pursuant to (iii) and (iv) below shall be specified
for each resulting Borrowing) is [ ];
(ii)    The effective date of the election made pursuant to this Interest
Election Request is [ ], 201[ ];[and]
(iii)    The resulting Borrowing is to be [an ABR Borrowing] [a Eurodollar
Borrowing][; and][
(iv)    [If the resulting Borrowing is a Eurodollar Borrowing] The Interest
Period applicable to the resulting Borrowing after giving effect to such
election is [ ]].
The undersigned certifies that he/she is the [ ] of Parsley Energy, LLC, and
that as such he/she is authorized to execute this certificate on behalf of the
Borrower. The undersigned further certifies, represents and warrants on behalf
of the Borrower that the Borrower is entitled to receive the requested
continuation or conversion under the terms and conditions of the Credit
Agreement.
PARSLEY ENERGY, LLC

By: ______________________________________
Name:
Title:

Exhibit C

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

EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he/she is the [ ] of Parsley Energy, Inc.,
a Delaware corporation (“PEI”) and the [ ] of Parsley Energy, LLC, a Delaware
limited liability company (the “Borrower”), and that as such he/she is
authorized to execute this certificate on behalf of the Borrower. With reference
to the Credit Agreement dated as of October 28, 2016 (together with all
amendments, restatements, supplements or other modifications thereto being the
“Agreement”) among the Borrower, Parsley Energy, Inc., a Delaware corporation,
Wells Fargo Bank, National Association, as Administrative Agent, and the other
agents and lenders (the “Lenders”) which are or become a party thereto, the
undersigned represents and warrants as follows (each capitalized term used
herein having the same meaning given to it in the Agreement unless otherwise
specified):
(a)    The representations and warranties of PEI and the Loan Parties contained
in Article VII of the Agreement and in the Loan Documents and otherwise made in
writing by or on behalf of PEI or any Loan Party pursuant to the Agreement and
the Loan Documents were true and correct in all material respects (except that
any representation and warranty that is qualified by materiality shall be true
and correct in all respects) when made, and are repeated at and as of the time
of delivery hereof and are true and correct in all material respects at and as
of the time of delivery hereof, except to the extent such representations and
warranties are expressly limited to an earlier date or the Majority Lenders have
expressly consented in writing to the contrary.
(b)    Each of PEI, the Borrower and the other Loan Parties has performed and
complied with all agreements and conditions contained in the Agreement and in
the Loan Documents required to be performed or complied with by it prior to or
at the time of delivery hereof [or specify default and describe].
(c)    Since December 31, 2015, no change has occurred, either in any case or in
the aggregate, in the condition, financial or otherwise, of the Borrower or any
Restricted Subsidiary which could reasonably be expected to have a Material
Adverse Effect [or specify event].
(d)    There exists no Default or Event of Default [or specify Default and
describe].
(e)    Attached hereto are the detailed computations necessary to determine
whether the Borrower is in compliance with Section 9.01 as of the end of the
[fiscal quarter][fiscal year] ending [ ].
(f)    Attached hereto is information in reasonable detail regarding the
calculation of Consolidated Net Income and EBITDAX and any revisions to such
calculations attributable to Consolidated Unrestricted Subsidiaries.
[signature page follows]

Exhibit D

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

EXECUTED AND DELIVERED this [ ] day of [ ].
                    
PARSLEY ENERGY, INC.
 
 
By:
 
Name:
 
Title:
 

PARSLEY ENERGY, LLC
 
 
By:
 
Name:
 
Title:
 

Exhibit D

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

EXHIBIT E
SECURITY INSTRUMENTS
1)
Guarantee and Collateral Agreement dated as of the date hereof made by the
Borrower and each of the other Grantors (as defined therein) in favor of the
Administrative Agent

2)
Financing Statements in respect of item 1

3)
Deed of Trust, Mortgage, Fixture Filing, Assignment of As-Extracted Collateral,
Security Agreement and Financing Statement dated as of October 28, 2016 by the
Borrower, as mortgagor, to Edward Pak, as Trustee, for the benefit of the
Administrative Agent, as mortgagee, for the benefit of the Secured Persons

Exhibit E

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

EXHIBIT F
FORM OF GUARANTY AGREEMENT

See attached.

Exhibit F-1

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

EXHIBIT G
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit and guarantees included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

Exhibit G-1

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

1.    Assignor:
______________________________
2.    Assignee:
______________________________
 
[and is an Affiliate/Approved Fund of [identify Lender]1]
3.    Borrower:
Parsley Energy, LLC
4.    Administrative Agent:
Wells Fargo Bank, National Association, as the administrative agent under the
Credit Agreement
5.    Credit Agreement:
The Credit Agreement dated as of October 28, 2016, among Parsley Energy, LLC, as
Borrower, Parsley Energy, Inc., the Lenders parties thereto, Wells Fargo Bank,
National Association, as Administrative Agent, and the other agents parties
thereto
6.    Assigned Interest:
 
Commitment
Assigned
Aggregate Amount of Commitment/Loans for all Lenders
Amount of Commitment/Loans Assigned
Percentage
Assigned of Commitment/Loans2
 
$
$
%
 
$
$
%
 
$
$
%

Effective Date: _____________ ___, 201___ [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
 
 
 
[NAME OF ASSIGNOR] 
 
 
By:______________________________ 
Title: 
 

ASSIGNEE
 
 
 
[NAME OF ASSIGNEE]
 
 
By:______________________________
Title:
 

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

Exhibit G-2

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

[Consented to and]3 Accepted:
 
 
 
 
WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Administrative Agent
 
 
 
 
By______________________________
 
Name: 
 
 
Title:
 
 

[Consented to and]4 Accepted:
 
 
 
 
[NAME OF RELEVANT PARTY] 
 
 
 
By______________________________
 
Name:
 
 
Title:
 
 

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

Exhibit G-3

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

ANNEX 1
[__________________]5 

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1.    Representations and Warranties.
1.1    Assignor. The Assignor (a) represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim 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 (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.
1.2    Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 8.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.
2.    Payments. From and after the Effective Date, the Administrative Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees and other amounts) to the Assignor for amounts
which have accrued to but excluding the Effective Date and to the Assignee for
amounts which have accrued from and after the Effective Date.
 
 
 
 
 
5 Describe Credit Agreement at option of Administrative Agent

Exhibit G-4

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

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 laws of the State of Texas.

Exhibit G-5

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

EXHIBIT H
FORM OF LENDER CERTIFICATE
________, 201___

To: Wells Fargo Bank, National Association, as Administrative Agent

Reference is hereby made to that certain Credit Agreement dated as of October
28, 2016 (as amended, amended and restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”) among Parsley Energy, LLC, a Delaware
limited liability company (the “Borrower”), Parsley Energy, Inc., a Delaware
corporation, the lenders from time to time party thereto, and Wells Fargo Bank,
National Association, as Administrative Agent. Unless otherwise defined herein,
capitalized terms used herein have the meaning specified in the Credit
Agreement.

[Language for Existing Lender]

[Please be advised that pursuant to Section 2.07(h)(ii)(B) of the Credit
Agreement, the undersigned has agreed (a) to increase its Commitment under the
Credit Agreement effective on the Increase Effective Date from $________________
to $____________ and (b) that, from and after the Increase Effective Date, it
shall continue to be a Lender in all respects under the Credit Agreement and the
other Loan Documents.

The undersigned hereby: (a) represents and warrants that (i) it has full power
and authority, and has taken all action necessary, to execute and deliver this
Lender Certificate and to consummate the transactions contemplated hereby, (ii)
it has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered thereunder, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Lender Certificate and to increase its Commitment,
on the basis of which it has made such analysis and decision independently and
without reliance on the Administrative Agent or any other Lender; and (b) agrees
that (i) it will, independently and without reliance on 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 action under the Credit Agreement, and (ii) it will perform
in accordance with the terms of the Credit Agreement, all of the obligations
which by the terms of the Credit Agreement are required to be performed by it as
a Lender.]

[Language for New Lender]

[Please be advised that that pursuant to Section 2.07(h)(ii)(B) of the Credit
Agreement, the undersigned has agreed (a) to become a Lender under the Credit
Agreement effective on the Increase Effective Date with a Commitment of
$____________ and (b) that, from and after the Increase Effective Date, it shall
be deemed to be a Lender in all respects under the Credit Agreement and the
other Loan Documents and shall be bound thereby.

The undersigned hereby: (a) represents and warrants that (i) it has full power
and authority, and has taken all action necessary, to execute and deliver this
Lender Certificate and to consummate the transactions contemplated hereby and to
become a Lender under the Credit Agreement, (ii) it satisfies the requirements,
if any, specified in the Credit Agreement that are required to be satisfied by
it in order to become a Lender under the Credit Agreement, (iii) from and after
the Increase Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and shall have the obligations of a Lender
thereunder, (iv) it has received a copy of the Credit Agreement, together with
copies of the most recent financial statements

Exhibit H-1

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

delivered thereunder, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Lender Certificate and to acquire its Commitment on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if the undersigned is a
Foreign Lender, any documentation required to be delivered by the undersigned
pursuant to Section 5.03(e) of the Credit Agreement has been duly completed and
executed and delivered to the Borrower and the Administrative Agent; and (b)
agrees that (i) it will, independently and without reliance on 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 action under the Credit Agreement, and
(ii) it will perform in accordance with the terms of the Credit Agreement, all
of the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender.]

Very truly yours,
 
[EXISTING/NEW LENDER]   

                            
By:
                                   
Name:
Title:   

                            

Accepted and Agreed:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent

By:
 
Name:
Title:

Accepted and Agreed:

PARSLEY ENERGY, LLC

By: ______________________________________ 
Name: Bryan Sheffield
Title: President

Exhibit H-2

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

EXHIBIT I
FORM OF CONSOLIDATED CASH BALANCE CERTIFICATE

Reference is made to the Credit Agreement dated as of October 28, 2016 (together
with all amendments, restatements, supplements or other modifications thereto
being the “Agreement”) among Parsley Energy, LLC, a Delaware limited liability
company (the “Borrower”), Parsley Energy, Inc., a Delaware corporation, Wells
Fargo Bank, National Association, as Administrative Agent, and the Lenders party
thereto (the “Credit Agreement”). Each capitalized term used herein has the same
meaning given to it in the Credit Agreement unless otherwise specified. The
undersigned hereby certifies on behalf of the Borrower (and not individually) as
follows:

(a)    The Consolidated Cash Balance as of the date hereof is $_______________.

(b)    Attached hereto are summary and balance statements, in a form reasonably
acceptable to the Administrative Agent, for each Deposit Account, Securities
Account, Commodity Account or other account in which any Consolidated Cash
Balance is held, credited or carried as of the date hereof.

(c)    To the extent the calculation of Consolidated Cash Balance set forth in
clause (a) above excludes any amounts permitted to be excluded therefrom
pursuant to the definition of “Consolidated Cash Balance” set forth in the
Credit Agreement, attached hereto are summary and balance statements and/or
other supporting documentation, in a form reasonably acceptable to the
Administrative Agent, with respect to such exclusions.

The undersigned is the [                ] of the Borrower, and as such he/she is
authorized to execute this certificate on behalf of the Borrower.

EXECUTED AND DELIVERED this [          ] day of [          ].

PARSLEY ENERGY, LLC
 
 
By:
 
Name:
 
Title:
 

Exhibit I