Blueprint






Exhibit 10.1


Execution
Version






	

 


CREDIT
AGREEMENT


 


 


dated
as of


 


 


October
26, 2016


 


 


among


 


 


YUMA
ENERGY, INC.,


YUMA
EXPLORATION AND PRODUCTION COMPANY, INC.,


PYRAMID
OIL LLC,


and


DAVIS
PETROLEUM CORP.,


as
Borrowers


 


 


the
Lenders that are from time to time parties hereto


 


 


and


 


 


SOCIÉTÉ
GÉNÉRALE,


 


as
Administrative Agent


 


___________________________


 


SG
AMERICAS SECURITIES, LLC,


as Lead
Arranger and Bookrunner


 







 














 






 


	


ARTICLE I

	


Definitions

	


2


	

SECTION
1.1

	

Defined
Terms

	


2


	

SECTION
1.2

	

Classification
of Loans and Borrowings

	


37


	

SECTION
1.3

	

Terms
Generally; Rules of Construction

	


37


	

SECTION
1.4

	

Accounting
Terms and Determinations; GAAP

	


37


	

SECTION
1.5

	

Oil
and Gas Definitions

	


38


	

SECTION
1.6

	

Time
of Day

	


38


	

SECTION
1.7

	

Amendment
and Restatement; Allocation of Loans at the Effective
Date

	


38


	


ARTICLE II

	


The Credits

	


39


	

SECTION
2.1

	

Commitments

	


39


	

SECTION
2.2

	

Loans
and Borrowings

	


39


	

SECTION
2.3

	

Requests
for Borrowings

	


40


	

SECTION
2.4

	

Borrowing
Base

	


41


	

SECTION
2.5

	

Letters
of Credit

	


44


	

SECTION
2.6

	

Funding
of Borrowings

	


49


	

SECTION
2.7

	

Interest
Elections

	


50


	

SECTION
2.8

	

Termination
and Reduction of Aggregate Maximum Credit Amount

	


51


	

SECTION
2.9

	

Repayment of
Loans; Evidence of Debt

	


52


	

SECTION
2.10

	

Prepayment
of Loans

	


53


	

SECTION
2.11

	

Fees

	


55


	

SECTION
2.12

	

Interest

	


56


	

SECTION
2.13

	

Alternate
Rate of Interest

	


57


	

SECTION
2.14

	

Increased
Costs

	


57


	

SECTION
2.15

	

Change
in Legality

	


59


	

SECTION
2.16

	

Break
Funding Payments

	


59


	

SECTION
2.17

	

Taxes

	


60


	

SECTION
2.18

	

Payments
Generally

	


64


	

SECTION
2.19

	

Pro-Rata
Treatment; Sharing of Set-offs

	


64


	

SECTION
2.20

	

Mitigation
Obligations; Replacement of Lenders

	


65


	

SECTION
2.21

	

Cash
Collateral

	


67


	

SECTION
2.22

	

Defaulting
Lenders

	


68


	

SECTION
2.23

	

Disposition
of Proceeds of Production

	


71


	


ARTICLE III

	


Representations and Warranties

	


71


	

SECTION
3.1

	

Organization;
Powers

	


71


	

SECTION
3.2

	

Authorization;
Enforceability

	


71


	

SECTION
3.3

	

Approvals;
No Conflicts

	


71


	

SECTION
3.4

	

Financial
Condition; No Material Adverse Effect

	


72








 

i







 





 


	

SECTION
3.5

	

Properties;
Titles, Etc

	


72


	

SECTION
3.6

	

Litigation
and Environmental Matters

	


73


	

SECTION
3.7

	

Compliance
with Laws and Agreements

	


74


	

SECTION
3.8

	

Investment
Company Status; Other Laws

	


74


	

SECTION
3.9

	

Taxes

	


74


	

SECTION
3.10

	

ERISA
Compliance

	


74


	

SECTION
3.11

	

Insurance

	


75


	

SECTION
3.12

	

Margin
Regulations

	


75


	

SECTION
3.13

	

Subsidiaries;
Equity Interests

	


75


	

SECTION
3.14

	

Anti-Money
Laundering and Anti-Terrorism Finance Laws

	


75


	

SECTION
3.15

	

Disclosure

	


76


	

SECTION
3.16

	

Security
Documents

	


76


	

SECTION
3.17

	

Solvency,
etc

	


77


	

SECTION
3.18

	

Burdensome
Obligations

	


77


	

SECTION
3.19

	

Labor
Matters

	


77


	

SECTION
3.20

	

Related
Agreements, etc

	


77


	

SECTION
3.21

	

[Reserved]

	


78


	

SECTION
3.22

	

Maintenance
of Properties

	


78


	

SECTION
3.23

	

Gas
Imbalances, Prepayments

	


79


	

SECTION
3.24

	

Marketing
of Production

	


79


	

SECTION
3.25

	

Hedge
Agreements and Hedge Transactions

	


79


	

SECTION
3.26

	

Location
of Business and Offices

	


79


	

SECTION
3.27

	

[Reserved]

	


79


	

SECTION
3.28

	

Anti-Corruption
Laws

	


79


	

SECTION
3.29

	

Sanctions
Laws

	


80


	


ARTICLE IV

	


Conditions

	


80


	

SECTION
4.1

	

Effective
Date

	


80


	

SECTION
4.2

	

Each
Credit Event

	


84


	


ARTICLE V

	


Affirmative Covenants

	


85


	

SECTION
5.1

	

Financial
Statements and Other Information

	


85


	

SECTION
5.2

	

Notices
of Material Events

	


89


	

SECTION
5.3

	

Existence;
Conduct of Business; Governmental Approvals

	


89


	

SECTION
5.4

	

Payment
of Obligations

	


90


	

SECTION
5.5

	

Insurance

	


90


	

SECTION
5.6

	

Books
and Records; Inspection Rights

	


90


	

SECTION
5.7

	

Compliance
with Laws

	


90


	

SECTION
5.8

	

Use
of Proceeds and Letters of Credit

	


91








 

ii







 





 


	

SECTION
5.9

	

Further
Assurances; Additional Collateral or Guarantors

	


91


	

SECTION
5.10

	

Minimum
Hedging Requirements

	


92


	

SECTION
5.11

	

Deposit
Accounts

	


93


	

SECTION
5.12

	

Environmental
Matters

	


93


	

SECTION
5.13

	

Operation
and Maintenance of Properties

	


94


	

SECTION
5.14

	

Reserve
Reports

	


95


	

SECTION
5.15

	

Title
Information

	


97


	

SECTION
5.16

	

Consolidated
Cash Balance Information

	


98


	

SECTION
5.17

	

Keepwell

	


98


	

SECTION
5.18

	

Post-Closing
Covenant

	


98


	


ARTICLE VI

	


Negative Covenants

	


98


	

SECTION
6.1

	

Financial
Covenants

	


98


	

SECTION
6.2

	

Indebtedness

	


99


	

SECTION
6.3

	

Liens

	


100


	

SECTION
6.4

	

Fundamental
Changes

	


101


	

SECTION
6.5

	

Disposition
of Properties

	


102


	

SECTION
6.6

	

Investments,
Loans, Advances and Guarantees

	


104


	

SECTION
6.7

	

Marketing
Activities

	


105


	

SECTION
6.8

	

Restricted
Payments

	


105


	

SECTION
6.9

	

Transactions
with Affiliates

	


106


	

SECTION
6.10

	

Changes
in Nature of Business; Nature of Business; International
Operations

	


106


	

SECTION
6.11

	

Restrictive
Agreements

	


106


	

SECTION
6.12

	

Restriction
of Amendments to Certain Documents

	


106


	

SECTION
6.13

	

Changes
in Fiscal Periods

	


107


	

SECTION
6.14

	

[Reserved]

	


107


	

SECTION
6.15

	

Sanctions

	


107


	

SECTION
6.16

	

Limitation
on Leases

	


107


	

SECTION
6.17

	

Gas
Imbalances, Take-or-Pay or Other Prepayments

	


107


	

SECTION
6.18

	

Hedge
Transactions

	


108


	

SECTION
6.19

	

Hedge
Transaction Termination

	


109


	

SECTION
6.20

	

Sale
and Leaseback Transactions and other Off-Balance Sheet
Liabilities

	


109


	

SECTION
6.21

	

Sale
or Discount of Receivables

	


109


	

SECTION
6.22

	

[Reserved.]

	


109


	

SECTION
6.23

	

Additional
Deposit Accounts

	


109


	


ARTICLE VII

	


Events of Default

	


110


	

SECTION
7.1

	

Events
of Default

	


110


	

SECTION
7.2

	

Application
of Proceeds

	


112








 

iii







 





 


	


ARTICLE VIII

	


The Administrative Agent

	


114


	

SECTION
8.1

	

Appointment
and Authority

	


114


	

SECTION
8.2

	

Rights
as a Lender

	


114


	

SECTION
8.3

	

Exculpatory
Provisions

	


114


	

SECTION
8.4

	

Reliance
by Administrative Agent

	


115


	

SECTION
8.5

	

Delegation
of Duties

	


116


	

SECTION
8.6

	

Resignation
of Administrative Agent

	


116


	

SECTION
8.7

	

Non-Reliance
on Administrative Agent and Other Lenders

	


117


	

SECTION
8.8

	

No
Other Duties, etc

	


117


	

SECTION
8.9

	

Enforcement

	


117


	

SECTION
8.10

	

Administrative
Agent May File Proofs of Claim

	


118


	

SECTION
8.11

	

Collateral
and Guaranty Matters

	


118


	

SECTION
8.12

	

Secured
Party Hedge Transactions and Lender Provided Financial Service
Products

	


119


	

SECTION
8.13

	

Credit
Bidding

	


120


	

SECTION
8.14

	

Secured
Hedge Intercreditor Agreement

	


121


	


ARTICLE IX

	


Miscellaneous

	


121


	

SECTION
9.1

	

Notices;
Effectiveness; Electronic Communication

	


121


	

SECTION
9.2

	

Waivers;
Amendments

	


123


	

SECTION
9.3

	

Expenses;
Indemnity; Damage Waiver

	


125


	

SECTION
9.4

	

Successors
and Assigns

	


127


	

SECTION
9.5

	

Survival

	


132


	

SECTION
9.6

	

Counterparts;
Integration; Effectiveness; Electronic Execution

	


132


	

SECTION
9.7

	

Severability

	


132


	

SECTION
9.8

	

Right
of Setoff

	


133


	

SECTION
9.9

	

Governing
Law; Jurisdiction; Etc

	


133


	

SECTION
9.10

	

Waiver
of Jury Trial

	


134


	

SECTION
9.11

	

Headings

	


135


	

SECTION
9.12

	

Treatment
of Certain Information; Confidentiality

	


135


	

SECTION
9.13

	

Interest
Rate Limitation

	


136


	

SECTION
9.14

	

PATRIOT
Act

	


136


	

SECTION
9.15

	

Flood
Insurance Provisions

	


136


	

SECTION
9.16

	

Acknowledgement
and Consent to Bail-In of EEA Financial Institutions

	


136


	

SECTION
9.17

	

Final
Agreement of the Parties

	


137


	


ARTICLE X

	


Borrowing Agency

	


137


	

SECTION
10.1

	

Borrowing
Agency Provisions

	


137


	

SECTION
10.2

	

Waiver
of Subrogation

	


138







 




 

iv








 






SCHEDULES:


	

Schedule
1.1(a)

	

Maximum
Credit Amounts


	

Schedule
1.1(b)

	

Material
Subsidiaries


	

Schedule
3.6

	

Disclosed
Matters


	

Schedule
3.11

	

Insurance


	

Schedule
3.13

	

Subsidiaries;
Equity Interests


	

Schedule
3.19

	

Labor
Matters


	

Schedule
3.23

	

Gas
Imbalances


	

Schedule
3.24

	

Marketing
Production


	

Schedule
3.25

	

Hedge
Agreements and Hedge Transactions


	

Schedule
3.26

	

Location
of Business and Offices


	

Schedule
5.10

	

Minimum
Hedges Following Effective Date


	

Schedule
6.2

	

Existing
Indebtedness


	

Schedule
6.3

	

Existing
Liens


	

Schedule
6.6

	

Permitted
Investments


	

Schedule
6.11

	

Restrictive
Agreements






 





EXHIBITS:


	

Exhibit
A

	

Form of
Note


	

Exhibit
B

	

Form of
Borrowing Request


	

Exhibit
C

	

Form of
Compliance Certificate


	

Exhibit
D

	

Form of
Assignment and Assumption


	

Exhibit
E

	

Form of
Guarantee and Collateral Agreement


	

Exhibit
F

	

Form of
Mortgage


	

Exhibit
G-1

	

Form of
U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not
Partnerships For U.S. Federal Income Tax Purposes)


	

Exhibit
G-2

	

Form of
U.S. Tax Compliance Certificate (For Foreign Participants That Are
Not Partnerships For U.S. Federal Income Tax Purposes)


	

Exhibit
G-3

	

Form of
U.S. Tax Compliance Certificate (For Foreign Participants That Are
Partnerships For U.S. Federal Income Tax Purposes)


	

Exhibit
G-4

	

Form of
U.S. Tax Compliance Certificate (For Foreign Lenders That Are
Partnerships For U.S. Federal Income Tax Purposes)


	

Exhibit
H

	

Form of
Opinion of Borrower’s Counsel


	

Exhibit
I

	

Form of
Intercreditor Agreement for Secured Party Hedge
Transaction


	
 

	
 







 




 

v








 






CREDIT
AGREEMENT dated as of October 26, 2016, among YUMA
ENERGY, INC., a Delaware corporation (“Yuma Energy”), YUMA
EXPLORATION AND PRODUCTION COMPANY, INC., a Delaware
corporation (“Yuma
E&P”), PYRAMID OIL LLC, a California limited
liability company (“Pyramid”), and DAVIS
PETROLEUM CORP., a Delaware corporation (“Davis”, and together with
Yuma Energy, Yuma E&P, and Pyramid, the “Borrowers”, and each a
“Borrower”), the Lenders
that are from time to time parties hereto, and SOCIÉTÉ
GÉNÉRALE (“SocGen”), as
administrative agent (in such capacity together with any successors
thereto in such capacity, the “Administrative
Agent”).


PRELIMINARY
STATEMENT


WHEREAS, Yuma
E&P, as borrower, the lenders party thereto (the
“Existing Yuma
Lenders”), SocGen, as administrative agent for the
Existing Yuma Lenders, and certain other financial institutions are
party to that certain Credit Agreement dated as of
August 10, 2011, as amended, restated, modified or
supplemented from time to time prior to the date hereof (the
“Existing Yuma
Agreement”), which provided for a revolving credit
facility in a maximum principal amount at any one time outstanding
of up to $125,000,000 or such lesser amount as therein provided
(the “Existing Yuma
Facility”); and


WHEREAS, Davis, as
a borrower, the lenders party thereto (the “Existing Davis Lenders”),
Bank of America, N.A., as administrative agent for the
Existing Davis Lenders (the “Existing Davis Agent”),
and certain other financial institutions are party to that certain
Amended and Restated Credit Agreement dated as of
December 23, 2008, as amended, restated, modified or
supplemented from time to time prior to the date hereof (the
“Existing Davis
Agreement”, and together with the Existing Yuma
Agreement, the “Existing Agreements”),
which provided for revolving credit facility loans in a maximum
principal amount at any one time outstanding of up to $125,000,000
or such lesser amount as therein provided (the “Existing Davis Facility”,
and together with the Existing Yuma Facility, the
“Existing
Facilities”); and


WHEREAS, Yuma
Energy, certain subsidiaries of Yuma Energy and Davis Petroleum
Acquisition Corp., a Delaware corporation (“DPAC”), have executed a
certain Agreement and Plan of Merger and Reorganization dated as of
February 10, 2016 (as amended by that certain First
Amendment to Agreement and Plan of Merger and Reorganization dated
as of September 2, 2016, the “Davis Merger Agreement”),
pursuant to which Yuma Energy, its subsidiary and DPAC shall
effectuate certain merger transactions more particularly described
therein (the “Davis
Merger”); and


WHEREAS,
concurrently with the consummation of the Davis Merger, pursuant to
the terms of that certain Omnibus Assignment and Acceptance dated
as of October 26, 2016, by and among Davis and certain
affiliated co-borrowers, the Existing Davis Lenders, the Existing
Davis Agent, the Lenders, the Administrative Agent and the other
parties thereto (the “Assignment Agreement”),
the Existing Davis Lenders have sold and assigned, and the Lenders
have purchased and assumed, all of the outstanding loans and credit
extensions outstanding under the Existing Davis Agreement, together
with the benefit of all of the related security documents and
liens, as more particularly set forth therein, and have authorized
the Existing Davis Agent to assign and transfer all of the liens
securing obligations under the Existing Davis Agreement to the
Administrative Agent; and


WHEREAS, (a) the Borrowers
have requested that loans outstanding under the Existing Facilities
shall, on the Effective Date of this Agreement, be continued,
amended, renewed, restated, extended, rearranged and converted into
Loans under this Agreement (but shall not be deemed to be repaid,
novated or terminated), all letters of credit issued under the
Existing Yuma Agreement shall be Letters of Credit hereunder and
all Liens securing loans and other obligations of the borrowers and
the guarantors pursuant to the Existing Facilities shall be
continued and renewed and shall remain in full force and effect to
secure the Secured Obligations, (b) the Borrowers have
requested that the Lenders extend credit in the form of Loans made
available to the Borrowers and at any time and from time to time
after the Effective Date not to exceed their respective
Commitments, and (c) the Borrowers have requested that the Issuing
Bank issue Letters of Credit in accordance with this Agreement;
and


WHEREAS, the
Borrowers have requested that the Lenders and the Issuing Bank
provide the Borrowers with the credit facilities described and
provided herein, and the Lenders are willing to provide such
facilities on the terms and subject to the conditions hereinafter
set forth.



 







 






Accordingly, in
consideration of the foregoing and the mutual covenants set forth
herein, the parties hereto agree as follows:

ARTICLE
I



Definitions


SECTION
1.1 Defined Terms. As used in this
Agreement, the following terms have the meanings specified
below:


“Adjusted LIBO Rate”
means, with respect to each Eurodollar Borrowing, the rate per
annum calculated by the Administrative Agent (rounded upwards, if
necessary, to the next higher 1/100%) determined on a daily basis
pursuant to the following formula:


Adjusted LIBO
Rate                                           =     
     
        LIBO Rate        
      
                                                    




                        
(1.00
– Reserve Percentage)


“Administrative Agent” is
defined in the preamble.


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


“Advance Payment Contract”
means any contract whereby any Loan Party either (a) receives
or becomes entitled to receive (either directly or indirectly) any
payment (an “Advance
Payment”) to be applied toward payment of the purchase
price of Hydrocarbons produced or to be produced from Oil and Gas
Properties owned by any Loan Party and which Advance Payment is, or
is to be, paid in advance of actual delivery of such production to
or for the account of the purchaser regardless of whether such
Hydrocarbons are actually produced or actual delivery is required,
or (b) grants an option or right of refusal to the purchaser to
take delivery of such Hydrocarbons in lieu of payment, and, in
either of the foregoing instances, the Advance Payment is, or is to
be, applied as payment in full for such Hydrocarbons when sold and
delivered or is, or is to be, applied as payment for a portion only
of the purchase price thereof or of a percentage or share of such
Hydrocarbons; provided that inclusion of the
standard “take or pay” provisions in any gas sales or
purchase contract or any other similar contract shall not, in and
of itself, constitute such contract as an Advance Payment Contract
for the purposes hereof.


“Affiliate” means, with
respect to a specified Person at any time, 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.


“Agent Parties” is defined
in Section
9.1(d).


“Agents” means
collectively, the Administrative Agent and other agents
subsequently named; and “Agent” shall mean either
the Administrative Agent or such other agent, as the context
requires.


“Aggregate Maximum Credit
Amount” at any time shall equal the sum of the Maximum
Credit Amounts, as the same may be increased, reduced or terminated
pursuant to Section 2.8; provided, however, that in no event shall
the Aggregate Maximum Credit Amount exceed
$75,000,000.


“Agreement” means on any
date, this Credit Agreement as from time to time amended, restated,
supplemented or otherwise modified and in effect on such
date.


“Alternate Base Rate”
means, for any day, a rate per annum equal to the greatest of
(a) the Prime Rate, (b) 1/2 of one percent above the Federal
Funds Effective Rate, and (c) the LIBO Rate for a Eurodollar
Loan with a one-month Interest Period commencing on such day plus
1%; provided, that
if, in any case, such rate is less than zero, the Alternate Base
Rate shall be deemed to be zero. If for any reason the
Administrative Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate specified in
clause (b) of the
first sentence of this definition for any reason, including the
inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms hereof, the
Alternate Base Rate shall be determined without regard to
clause (b) of
the first sentence of this definition until the circumstances
giving rise to such inability no longer exist. Any change in the
Alternate Base Rate shall be effective on the effective date of any
change in such rate.



 

2







 






“Annualized EBITDAX”
means




(a)

EBITDAX for the
four-fiscal quarter period ending on December 31, 2016
shall be deemed to equal EBITDAX for such fiscal quarter multiplied
by four (4);








(b)

EBITDAX for the
four-fiscal quarter period ending March 31, 2017 shall be deemed to
equal EBITDAX for the two-fiscal quarter period comprising the
fiscal quarter ending December 31, 2016 and the fiscal quarter
ending March 31, 2017, multiplied by two (2);
and








(c)

EBITDAX for the
four-fiscal quarter period ending June 30, 2017 shall be
deemed to equal EBITDAX for the three-fiscal quarter period
comprising the fiscal quarter ending December 31, 2016,
the fiscal quarter ending March 31, 2017 and the fiscal
quarter ending June 30, 2017, multiplied by four-thirds
(4/3).






“Annualized Interest
Expense” means




(a)

Interest Expense
for the four-fiscal quarter period ending on
December 31, 2016 shall be deemed to equal Interest
Expense for such fiscal quarter multiplied by
four (4);








(b)

Interest Expense
for the four-fiscal quarter period ending March 31, 2017
shall be deemed to equal Interest Expense for the two-fiscal
quarter period comprising the fiscal quarter ending December 31,
2016 and the fiscal quarter ending March 31, 2017, multiplied by
two (2); and








(c)

Interest Expense
for the four-fiscal quarter period ending June 30, 2017
shall be deemed to equal Interest Expense for the three-fiscal
quarter period comprising the fiscal quarter ending
December 31, 2016, the fiscal quarter ending
March 31, 2017 and the fiscal quarter ending
June 30, 2017, multiplied by four-thirds
(4/3).






“Anti-Corruption Laws” is
defined in Section
3.28.


“Anti-Terrorism Laws” is
defined in Section
3.14.


“Applicable Law” means,
with respect to any Person, (x) all provisions of law, statute,
treaty, ordinance, rule, regulation, requirement, restriction,
permit, certificate, decision, directive or order of any
Governmental Authority applicable to such Person or any of its
property and (y) all judgments, injunctions, orders and
decrees of all courts and arbitrators in proceedings or actions in
which such Person is a party or by which any of its property is
bound.


“Applicable Margin” means,
for any day, with respect to any Base Rate Loan or Eurodollar Loan
or the Commitment Fee Rate, 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 Percentage

	


 ≤ 25%

	


>    25%
≤   50%

	


>    50%



≤    75%

	


>    75% ≤
   90%

	


>    90%


	

Base
Rate Loans

	


   2.00 %

	


   2.25 %

	


   2.50 %

	


   2.75 %

	


   3.00 %


	

Eurodollar
Loans

	


   3.00 %

	


   3.25 %

	


   3.50 %

	


   3.75 %

	


   4.00 %


	

Commitment
Fee Rate

	


   0.50 %

	


   0.50 %

	


   0.50 %

	


   0.50 %

	


   0.50 %







 



 

3







 






Each
change in the Applicable Margin or Commitment Fee Rate 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 Borrowing Agent fails to deliver a Reserve Report pursuant to
Section 5.14, then
the “Applicable
Margin” and the “Commitment Fee Rate”
means the rate per annum set forth on the applicable grid when the
applicable Borrowing Base Utilization Percentage is at its highest
level; provided
further that the
Applicable Margin and Commitment Fee Rate shall revert to the
previous Applicable Margin and Commitment Fee Rate upon the
Borrowing Agent’s delivery of such Reserve
Report.


“Applicable Percentage”
means, with respect to any Lender, the percentage of the Aggregate
Maximum Credit Amount represented by such Lender’s Maximum
Credit Amount as such percentage is set forth on Schedule 1.1(a) or as may be
adjusted from time to time in accordance with the terms
hereof.


“Approved Counterparty”
means any Person who, at the time of entry into the applicable
Hedge Transaction, is (a) a Lender or an Affiliate of a Lender,
(b) any Person engaged in the business of Hedge Transactions
for commodity, interest rate or currency risk that has (or the
credit support provider of such Person has), at the time any
Borrower enters into a Hedge Transaction with such Person, a long
term senior unsecured debt credit rating of “BBB+” or
better from S&P or “Baa1” or better from
Moody’s, (c) BP Energy Company, or (d) any other Person
from time to time approved by the Required Lenders.


“Approved Fund” means any
Fund 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., and (b) any other independent petroleum
engineers reasonably acceptable to the Administrative
Agent.


“Assignment Agreement” is
defined in the preamble.


“Assignment and
Assumption” means an assignment and assumption entered
into by a Lender and an Eligible Assignee (with the consent of any
party whose consent is required by Section 9.4), and accepted
by the Administrative Agent, in substantially the form of
Exhibit B or
any other form approved by the Administrative Agent.


“Availability Period”
means the period from and including the Effective Date to but
excluding the earlier of the Maturity Date and the date of
termination of the Commitments.


“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 that is described in the
EU Bail-In Legislation Schedule.


“Base Rate,” 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.


“Borrower” and
“Borrowers” are defined in
the preamble.


“Borrower Materials” is
defined in Section
9.1(d).


“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 Agent” means
Yuma Energy.



 

4







 






“Borrowing Base” means at
any time an amount equal to the amount determined in accordance
with Section 2.4, as the same
may be adjusted from time to time pursuant to Section 2.4.


“Borrowing Base
Deficiency” means, at any time, the amount by which
the aggregate Credit Exposures exceeds the Borrowing Base then in
effect, provided
that, for purposes of determining the existence and amount of any
Borrowing Base Deficiency, obligations under any Letter of Credit
will not be deemed to be outstanding to the extent such obligations
are Cash Collateralized.


“Borrowing Base Deficiency
Determination Date” means the date on which the
Administrative Agent shall have notified the Borrowing Agent that
(x) the aggregate Credit Exposures exceeds (y) the Borrowing Base
then in effect.


“Borrowing Base Deficiency Payment
Date” means, with respect to each Borrowing Base
Deficiency Determination Date, the corresponding day of the month
in each of the six (6) consecutive months occurring immediately
after such Borrowing Base Deficiency Determination Date or if any
of such months does not have a corresponding day, then, with
respect to such month(s), the last day of such month, provided that if any such
corresponding day is not a Business Day, then the Borrowing Base
Deficiency Payment Date for such month shall be the Business Day
immediately succeeding such corresponding day.


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


“Borrowing Base Value”
means, with respect to any Oil and Gas Property constituting proved
reserves of a Loan Party, the value the Administrative Agent
attributed to such Oil and Gas Property in connection with the most
recent determination or redetermination of the Borrowing Base
hereunder in accordance with Section 2.4.


“Borrowing Request” means
a request by the Borrowing Agent, on behalf of any Borrower, for a
Borrowing in accordance with Section 2.3.


“Business Day” means any
day that is not a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to remain
closed; provided
that, when used in connection with a Eurodollar Loan, the term
“Business Day” shall also exclude any day on which
banks are not open for dealings in Dollar deposits in the London
interbank market.


“Capital Lease
Obligations” of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required
to be classified and accounted for as capital leases on a balance
sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance
with GAAP.


“Capital Leases” means, in
respect of any Person, all leases that 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 Collateralize” means
to deposit in a Controlled Account or to pledge and deposit with or
deliver to the Administrative Agent, for the benefit of the
Administrative Agent and one or more of the Issuing Banks or
Lenders, as collateral for LC Exposure, or obligations of Lenders
to fund participations in respect of LC Exposure and to indemnify
the Administrative Agent under this Agreement, cash or deposit
account balances or, if the Administrative Agent and each
applicable Issuing Bank shall agree in their sole discretion, other
credit support, in each case pursuant to documentation in form and
substance satisfactory to the Administrative Agent and each
applicable Issuing Bank. “Cash Collateral” shall
have a meaning correlative to the foregoing and shall include the
proceeds of such cash collateral and other credit
support.


“Cash Equivalent
Investments” means:



 

5







 






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


(ii) investments
in commercial paper maturing within two hundred seventy (270) days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or
from Moody’s;


(iii) investments
in certificates of deposit, banker’s acceptances and time
deposits maturing within one hundred eighty (180) days from the
date of acquisition thereof issued or guaranteed by or placed with,
and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of
the United States of America or any State thereof that has a
combined capital and surplus and undivided profits of not less than
$500,000,000;


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


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


“Casualty Event” means any
loss, casualty or other damage to, or any nationalization, taking
under power of eminent domain or by condemnation or similar
proceeding of, any Property of any Borrower or any Subsidiary
having a fair market value in excess of $500,000.


“Change in Control” means
the occurrence of any of the following: (a) any Borrower other than
Yuma Energy ceases to be a Wholly-Owned Subsidiary, directly or
indirectly, of Yuma Energy, (b) the Yuma Energy Holders cease to
beneficially own and control, directly or indirectly, at least 30%
of the issued and outstanding shares of Yuma Energy Common Stock,
(c) any Person or two or more Persons acting as a group (as
defined in Section 13(d)(3) of the Securities Exchange Act of
1934) shall have acquired, directly or indirectly, beneficial
ownership (within the meaning of Rule 13d-3 of the SEC under the
Securities Exchange Act of 1934) of 30% or more of the outstanding
Yuma Energy Common Stock on a fully-diluted basis (and taking into
account all such securities that such Person or group has the right
to acquire pursuant to any option right) or (d) occupation of a
majority of the seats (other than vacant seats) on the board of
directors of Yuma Energy by Persons who were neither (i) directors
on the Effective Date nor (ii) nominated or appointed by the
board of directors of Yuma Energy.


“Change in Law” means the
occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any law, rule,
regulation or treaty, (b) any change in any law, rule, regulation
or treaty or in the administration, interpretation, implementation
or application thereof by any Governmental Authority or (c) the
making or issuance of any request, rule, guideline or directive
(whether or not having the force of law) by any Governmental
Authority; provided
that notwithstanding anything herein to the contrary, (x) the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or directives thereunder or issued in
connection therewith and (y) all requests, rules, guidelines or
directives promulgated by the Bank for International Settlements,
the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory
authorities, in each case pursuant to Basel III, shall in each case
be deemed to be a “Change in Law”, regardless of the
date enacted, adopted or issued.


“Collateral” means any
property of any Loan Party upon which a security interest in favor
of the Administrative Agent for the benefit of the holders of
Secured Obligations is purported to be granted pursuant to any
Security Document.


“Collateral Coverage
Minimum” means 95% of the PV-10 Value of the
“proved” Oil and Gas Properties evaluated in the most
recent Reserve Report delivered to the Lenders.



 

6







 






“Commitment” means, with
respect to each Lender, the commitment, if any, 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 Credit Exposure hereunder,
as such commitment may be terminated and/or reduced or increased
from time to time in accordance with the provisions hereof. The
amount representing each Lender’s Commitment shall at any
time be the lesser of such Lender’s Maximum Credit Amount and
such Lender’s Applicable Percentage of the then effective
Borrowing Base.


“Commitment Fee Rate” has
the meaning assigned to such term in the definition of Applicable
Margin.


“Commodity Exchange Act”
means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as
amended from time to time, and any successor statute.


“Communications” is
defined in Section
9.1(d).


“Compliance Certificate”
means a certificate substantially in the form of Exhibit C.


“Consolidated Cash
Balance” means, at any time, (a) the aggregate amount
of cash and Cash Equivalents, in each case, held or owned by
(either directly or indirectly), credited to the account of, or
that would otherwise be required to be reflected as an asset on the
balance sheet of, the Borrowers or any of their Subsidiaries less
(b) the sum of (i) any restricted cash or Cash Equivalents to pay
bona fide royalty obligations, working interest obligations,
production payments, vendor payments, suspense payments, severance
taxes, payroll, payroll taxes, other taxes, employee wage and
benefit payments and trust and fiduciary obligations, (ii) cash or
Cash Equivalents to pay obligations of the Borrowers or any of
their Subsidiaries to third parties and for which either any of the
Borrowers or any of their Subsidiaries (x) has issued checks
or has initiated wires or ACH transfers (but which amounts have
not, as of such time, been subtracted from the balance in the
relevant account of a Borrower or any such Subsidiary) or
(y) reasonably anticipates in good faith that it will issue
checks or initiate wires or ACH transfers within ten (10) Business
Days thereafter, (iii) other amounts permitted to be paid by the
Borrowers or any of their Subsidiaries in accordance with this
Agreement and the other Loan Documents for which a Borrower or any
such Subsidiary has issued checks or has initiated wires or ACH
transfers (but which amounts have not, as of such time, been
subtracted from the balance in the relevant account of such
Borrower or such Subsidiary), (iv) while and to the extent
refundable, any cash or Cash Equivalents held by any Borrower or
any Subsidiary constituting purchase price deposits pursuant to a
binding and enforceable purchase and sale agreement with a third
party containing customary provisions regarding the payment and
refunding of such deposits, (v) any cash or Cash Equivalents
held by the Borrowers or any of their Subsidiaries in good faith to
fund any customary deposit in the nature of earnest money with
respect to, or the purchase price of, any future acquisition
permitted under this Agreement so long as the Borrowing Agent shall
have provided notice of the intention of a Borrower or such
Subsidiary to make such acquisition to the Administrative Agent at
or prior to such time, (vi) cash held to Cash Collateralize
Letters of Credit and (vii) any cash or Cash Equivalents
received by Yuma Energy as proceeds of a capital contribution or
any issuance of Equity Interests by Yuma Energy that are on deposit
in a designated deposit account maintained with the Administrative
Agent or any other Lender that is subject to a Control Agreement so
long as the Borrowing Agent shall have provided notice of such
capital contribution or issuance of Equity Interests.


“Consolidated Net Income”
means with respect to Yuma Energy and its Subsidiaries, for any
period, the aggregate of the net income (or loss) of Yuma Energy
and its Subsidiaries; 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 (other
than Yuma Energy) if such Person is not a Subsidiary, except (i)
Yuma Energy’s equity in the net income of any such Person
shall be included in Consolidated Net Income to the extent of the
amount of dividends or distributions actually paid in cash during
such period by such other Person to Yuma Energy or to a Subsidiary,
as the case may be (and in the case of a dividend or other
distribution to a Subsidiary, such Subsidiary is not precluded from
further distributing such amount to Yuma Energy as described in
clause (b))
and (ii) Yuma Energy’s equity in a net loss of any such
Person for such period shall be included in determining such
Consolidated Net Income; (b) the net income (but not loss) during
such period of any Subsidiary to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans
by that Subsidiary is not at the time permitted by operation of the
terms of its Organization Documents or any agreement, instrument or
Applicable Law applicable to such Subsidiary or is otherwise
restricted or prohibited, in each case determined in accordance
with GAAP; (c) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date
of such transaction; (d) the net income (or deficit) of any Person
accrued prior to the date it becomes a Subsidiary or is merged into
or consolidated with Yuma Energy or any of its Subsidiaries or the
date that such Person’s assets are acquired by Yuma Energy or
any Subsidiary; (e) any extraordinary or non-recurring gains or
losses during such period; (f) the cumulative effect of a change in
accounting principles and any gains or losses attributable to
writeups or writedowns of assets (including as a result of ASC
Topic 410, formerly FAS 143), (g) non-cash gains or losses or
charges in respect of interest rate agreements, currency agreements
or commodity agreements (including those resulting from the
application of ASC Topic 815, formerly FAS 133, but shall expressly
include any cash charges or payments in respect of the termination
of any Hedge Transaction) and (h) any writedowns of
non-current assets, provided, however, that any ceiling
limitation writedowns under SEC guidelines shall be treated as
capitalized costs, as if such writedowns had not occurred. For the
purposes of calculating Consolidated Net Income for any period of
four (4) consecutive fiscal quarters (each, a “Reference Period”)
pursuant to any determination of the financial ratio contained in
Section 6.1(a)
or Section 6.1(c),
if at any time during such Reference Period Yuma Energy or any
Subsidiary shall have made any Material Disposition or any Material
Acquisition, the Consolidated Net Income for such Reference Period
shall be calculated after giving pro forma effect to such Material
Disposition or Material Acquisition, as if such Material
Disposition or Material Acquisition had occurred on the first day
of such Reference Period.



 

7







 






“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.


“Control Agreement” means
one or more deposit account control agreements or securities
account control agreements (or similar agreement), as applicable,
in form and substance reasonably satisfactory to the Administrative
Agent, executed by the applicable Loan Party, the Administrative
Agent and the relevant financial institution with whom such account
is maintained. Such agreement shall provide a first priority
perfected Lien in favor of the Administrative Agent, for the
benefit of the Secured Parties, in the applicable Loan
Party’s deposit account and/or securities account (in each
case, other than an Excluded Account).


“Controlled Account” means
each deposit account and securities account that is subject to a
Control Agreement.


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


“Davis” is defined in the
preamble.


“Davis Merger” is defined
in the preamble.


“Davis Merger Agreement”
is defined in the preamble.


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


“Default” means any event
or condition that constitutes an Event of Default or that with
notice, lapse of time or both would become an Event of
Default.


“Defaulting Lender” means,
subject to Section 2.22(b), any
Lender that (a) has failed to (i) fund all or any portion of
its Loans within two (2) Business Days of the date such Loans were
required to be funded hereunder unless such Lender notifies the
Administrative Agent and the Borrowing Agent in writing that such
failure is the result of such Lender’s determination that one
or more conditions precedent to funding (each of which conditions
precedent, together with any applicable default, shall be
specifically identified in such writing) has not been satisfied, or
(ii) pay to the Administrative Agent, any Issuing Bank or any
other Lender any other amount required to be paid by it hereunder
(including in respect of its participation in Letters of Credit)
within two (2) Business Days of the date when due, (b) has notified
the Borrowing Agent, the Administrative Agent or any Issuing Bank,
in writing that it does not intend to comply with its funding
obligations hereunder, or has made a public statement to that
effect (unless such writing or public statement relates to such
Lender’s obligation to fund a Loan hereunder and states that
such position is based on such Lender’s determination that a
condition precedent to funding (which condition precedent, together
with any applicable default, shall be specifically identified in
such writing or public statement) cannot be satisfied), (c) has
failed, within three (3) Business Days after written request by the
Administrative Agent or the Borrowing Agent, to confirm in writing
to the Administrative Agent and the Borrowing Agent that it will
comply with its prospective funding obligations hereunder
(provided that such
Lender shall cease to be a Defaulting Lender pursuant to this
clause (c) upon
receipt of such written confirmation by the Administrative Agent
and the Borrowing Agent), (d) has, or has a direct or indirect
parent company that has, (i) become the subject of a proceeding
under any Debtor Relief Law or (ii) had appointed for it a
receiver, custodian, conservator, trustee, administrator, assignee
for the benefit of creditors or similar Person charged with
reorganization or liquidation of its business or assets, including
the Federal Deposit Insurance Corporation or any other state or
federal regulatory authority acting in such a capacity, or (e) has,
or has a direct or indirect parent company that has, become the
subject of a Bail-In Action; provided that a Lender shall
not be a Defaulting Lender solely by virtue of the ownership or
acquisition of any Equity Interest in that Lender or any direct or
indirect parent company thereof by a Governmental Authority so long
as such ownership interest does not result in or provide such
Lender with immunity from the jurisdiction of courts within the
United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such
Governmental Authority) to reject, repudiate, disavow or disaffirm
any contracts or agreements made with such Lender. Any
determination by the Administrative Agent that a Lender is a
Defaulting Lender under any one or more of clauses (a) through
(e) above shall be
conclusive and binding absent manifest error, and such Lender shall
be deemed to be a Defaulting Lender (subject to Section 2.22(b)) upon
delivery of written notice of such determination to the Borrowing
Agent, each Issuing Bank, and each Lender.



 

8







 






“Disclosed Matters” means
the actions, suits and proceedings and the environmental matters
disclosed in Schedule 3.6.


“Disposition,” with
respect to any property, means any sale, lease, sale and leaseback,
assignment, conveyance, transfer or other disposition thereof. The
terms “Dispose” and
“Disposed
of” have meanings correlative thereto.


“Disqualified Equity
Interests” means any Equity Interest that, by its
terms (or by the terms of any security or other Equity Interest
into which it is convertible or for which it is exchangeable), or
upon the happening of any event or condition (i) matures or is
mandatorily redeemable (other than solely for Equity Interests that
are not otherwise Disqualified Equity Interests), pursuant to a
sinking fund obligation or otherwise, (ii) is redeemable at the
option of the holder thereof (other than solely for Equity
Interests that are not otherwise Disqualified Equity Interests), in
whole or in part, (iii) provides for scheduled payments or
dividends in cash or other Property or (iv) is or becomes
convertible into or exchangeable for Indebtedness or any other
Equity Interests that would constitute Disqualified Equity
Interests, in each case, prior to the date that is one (1) year
after the Maturity Date. The amount of Disqualified Equity
Interests deemed to be outstanding at any time for purposes of this
Agreement will be the maximum amount that the Borrowers and their
Subsidiaries may become obligated to pay upon the maturity of, or
pursuant to any mandatory redemption provisions of, such
Disqualified Equity Interests, exclusive of accrued
dividends.


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


“DPAC” is defined in the
recitals.


“EBITDAX” means, for any
period, the sum of Consolidated Net Income for such period plus,
without duplication, the following expenses or charges of Yuma
Energy and its Subsidiaries to the extent deducted in determining
such Consolidated Net Income in such period: (a) income taxes
paid or accrued; (b) Interest Expense; (c) amortization, depletion
and depreciation expense (excluding amortization expense
attributable to a prepaid operating expense that was paid in cash
in a prior period); (d) any non-cash losses or charges resulting
from the application of ASC Topic 815, formerly FAS 133 or ASC
Topic 410, formerly FAS 143; (e) oil and gas exploration and
abandonment expenses (including all drilling, completion,
geological and geophysical costs); (f) extraordinary or
non-recurring losses; (g) other non-cash charges (excluding any
such non-cash charge to the extent that it represents an accrual of
or reserve for cash expenditures in any future period) reducing
Consolidated Net Income for such period; minus, to the extent included
in the Consolidated Net Income for such period; (i) any non-cash
income included in Consolidated Net Income (excluding accruals for
cash income made in the ordinary course of business) and (ii) any
extraordinary or non-recurring items increasing Consolidated Net
Income for such period. For the purposes of calculating EBITDAX for
any Reference Period pursuant to any determination of the financial
ratio contained in Section
6.1(a) or Section
6.1(c), if at any time during such Reference Period Yuma
Energy or any Subsidiary shall have made any Material Disposition
or any Material Acquisition, the EBITDAX such Reference Period
shall be calculated after giving pro forma effect to such Material
Disposition or Material Acquisition, as if such Material
Disposition or Material Acquisition had occurred on the first day
of such Reference Period, provided that (x) the financial
statements of such acquired Subsidiary or acquisition target (in
the case of an asset purchase) have been audited or reviewed for
the period sought to be included or (y) the Administrative Agent
consents to such inclusion after being furnished with other
historical financial statements and information in form and
substance acceptable to the Administrative Agent.



 

9







 






Notwithstanding the
foregoing, the items specified in clause (a) or clauses (c) through
(g) for any
Subsidiary shall be added to Consolidated Net Income in calculating
EBITDAX only:


(a) to
the extent (and in the same proportion) that the net income or loss
of such Subsidiary was included in calculating Consolidated Net
Income, and


(b) to
the extent that a corresponding amount would be permitted at the
date of determination to be distributed to Yuma Energy by such
Subsidiary pursuant to its Organization Documents and each
Applicable Law, agreement or judgment applicable to such
distribution.


Additionally,
EBITDAX shall be adjusted to exclude certain expenses (including
employee termination costs, if any) incurred in connection with the
Related Transactions and to give pro forma effect to certain
general and administrative cost savings projected by Yuma Energy in
good faith to be realized as a result of specified actions either
taken or expected to be taken by the Borrowers or their
Subsidiaries in connection with, as a result of, or related to, the
Related Transactions (as if any such actions had been taken on the
first day of such Reference Period), in each case, in a manner
acceptable to Administrative Agent and the Required
Lenders.


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


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


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


“Effective Date” means the
date on which the conditions specified in Section 4.1 are satisfied
(or waived in accordance with Section 9.2).


“Eligible Assignee” means
any Person that meets the requirements to be an assignee under
Section 9.4(b)(iii),
(v) and
(vi) (subject to
such consents, if any, as may be required under Section 9.4(b)(iii)).


“Engineering Reports” has
the meaning assigned such term in Section 2.4(c)(i).



 

10







 






“Environmental Laws” means
all Applicable Law relating in any way to the environment,
preservation or reclamation of natural resources, the management,
release or threatened release of any Hazardous Material or to
health and safety matters, 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, as amended, the Superfund Amendments and Reauthorization Act
of 1986, as amended, the Hazardous Materials Transportation Act, as
amended, and other environmental conservation or protection
Governmental Requirements. The term “oil” shall have the
meaning specified in OPA, the terms “hazardous substance” and
“release” (or
“threatened
release”) have the meanings specified in CERCLA, the
terms “solid
waste” and “disposal” (or
“disposed”) have the
meanings specified in RCRA and the term “oil and gas waste” shall
have the meaning specified in Section 91.1011 of the Texas Natural
Resources Code (“Section 91.1011”);
provided,
however, that (a)
in the event either OPA, CERCLA, RCRA or Section 91.1011 is amended
so as to broaden the meaning of any term defined thereby, such
broader meaning shall apply subsequent to the effective date of
such amendment and (b) to the extent the laws of the state or other
jurisdiction in which any Property of any Loan Party is located
establish a meaning for “oil,” “hazardous
substance,” “release,” “solid waste,”
“disposal” or “oil and gas waste” that is
broader than that specified in either OPA, CERCLA, RCRA or Section
91.1011, such broader meaning shall apply.


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


“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.


“Equity Offering” means
any issuance and sale by any Borrower, whether public or private,
of any Equity Interests (other than Disqualified Equity Interests)
of any Borrower or any other capital contribution from shareholders
of such Borrower; provided that issuances of
securities pursuant to employee benefit plans shall not be
considered to be “Equity Offerings”.


“ERISA” means the Employee
Retirement Income Security Act of 1974.


“ERISA Affiliate” means
any trade or business (whether or not incorporated) that, together
with any Borrower, is treated as a single employer under
Section 414(b) or (c) of the IRC or, solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the
IRC.


“ERISA Event” means
(a) any “reportable event,” as defined in
Section 4043 of ERISA or the regulations issued thereunder
with respect to a Pension Plan (other than an event for which the
30-day notice period is waived); (b) the determination that
any Pension Plan is considered an at-risk plan or that any
Multiemployer Plan is endangered or is in critical status within
the meaning of Sections 430, 431 or 432 of the IRC or Sections 303,
304 or 305 of ERISA, as applicable; (c) the incurrence by any
Borrower or any ERISA Affiliate of any liability under
Title IV of ERISA, other than for PBGC premiums not yet due;
(d) the receipt by any Borrower or any ERISA Affiliate from
the PBGC or a plan administrator of any notice relating to an
intention to terminate any Pension Plan or to appoint a trustee to
administer any Pension Plan or the occurrence of any event or
condition that constitutes grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer,
any Pension Plan; (e) the appointment of a trustee to
administer any Pension Plan; (f) the withdrawal of any Borrower or
any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which such entity was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or the
cessation of operations by any Borrower or any ERISA Affiliate that
would be treated as a withdrawal from a Pension Plan under Section
4062(e) of ERISA; (g) the partial or complete withdrawal by any
Borrower or any ERISA Affiliate from any Multiemployer Plan or a
notification that a Multiemployer Plan is insolvent; or (h) the
taking of any action to terminate any Pension Plan under Section
4041 or 4041A of ERISA.



 

11







 






“EU Bail-In Legislation
Schedule” means the EU Bail-In Legislation Schedule
published by the Loan Market Association (or any successor
thereto), 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” is
defined in Section
7.1.


“Excluded Accounts” means
depository accounts that are used solely for one or more of the
following purposes: (i) making payroll and withholding tax payments
related thereto and other employee wage and benefit payments and
accrued and unpaid employee compensation (including salaries,
wages, benefits and expense reimbursements), (ii) paying
Taxes, including sales taxes, or (iii) as escrow accounts or as
fiduciary or trust accounts for the benefit of Persons other than
any Borrower or its Subsidiaries; provided that in no event shall
any of the principal operating, revenue or collection accounts of
any Borrower or any Subsidiary constitute an Excluded
Account.


“Excluded Hedge
Obligation” means, with respect to any Loan Party, any
Secured Party Hedge Transaction if and to the extent that all or a
portion of the guarantee of such Loan Party of, or the grant by
such Loan Party of a security interest to secure, such Secured
Party Hedge Transaction (or any guarantee thereof) is or becomes
(as a result of a Change in Law after the date of a transaction
governed by such Secured Party Hedge Transaction) illegal under the
Commodity Exchange Act or any rule, regulation or order of the
Commodity Futures Trading Commission (or the application or
official interpretation of any thereof) by virtue of such Loan
Party’s failure for any reason to constitute a Qualified ECP
Guarantor at the time such Loan Party’s guarantee or such
Loan Party’s grant of such security interest becomes
effective with respect to such Secured Party Hedge Transaction. If
a Hedge Obligation arises under a Hedge Agreement governing more
than one Secured Party Hedge Transaction, such exclusion shall
apply only to the portion of such Hedge Obligation that is
attributable to the Secured Party Hedge Transaction for which such
guarantee or security interest is or becomes illegal.


“Excluded Hedge
Transactions” means, collectively, Hedge Transactions
that are (a) put option contracts that are not related to
corresponding calls, collars or swaps and with respect to which
neither any Borrower nor any Subsidiary has any payment obligation
other than fixed premiums or other fixed charges or (b) basis
differential swaps on volumes already hedged pursuant to other
Hedge Transactions permitted under Section 6.18.


“Excluded Taxes” means any
of the following Taxes imposed on or with respect to a Recipient or
required to be withheld or deducted from a payment to a Recipient:
(a) Taxes imposed on or measured by net income (however
denominated), franchise Taxes, and branch profits Taxes, in each
case, (i) imposed as a result of such Recipient being organized
under the laws of, or having its principal office or, in the case
of any Lender, its applicable lending office located in, the
jurisdiction imposing such Tax (or any political subdivision
thereof) or (ii) that are Other Connection Taxes, (b) in the case
of a Lender, U.S. federal withholding Taxes imposed on amounts
payable to or for the account of such Lender with respect to an
applicable interest in a Loan or Commitment pursuant to a law in
effect on the date on which (i) such Lender acquires such interest
in such Loan or Commitment (other than pursuant to an assignment
request by the Borrowing Agent under Section 2.20) or (ii) such
Lender changes its lending office, except in each case to the
extent that, pursuant to Section 2.17, amounts with
respect to such Taxes were payable either to such Lender’s
assignor immediately before such Lender became a party hereto or to
such Lender immediately before it changed its lending office, (c)
Taxes attributable to such Recipient’s failure to comply with
Section 2.17(g) and (d)
any U.S. federal withholding Taxes imposed pursuant to
FATCA.


“Executive Order” is
defined in Section
3.29.


“Existing Agreements” is
defined in the preamble.



 

12







 






“Existing Davis Agent” is
defined in the preamble.


“Existing Davis Agreement”
is defined in the preamble.


“Existing Davis Facility”
is defined in the preamble.


“Existing Davis Lenders”
is defined in the preamble.


“Existing Facilities” is
defined in the preamble.


“Existing Yuma Agreement”
is defined in the preamble.


“Existing Yuma Entities”
means, collectively, Yuma Energy, Yuma E&P, Pyramid and The
Yuma Companies, Inc., each as in existence prior to the
consummation of the Davis Merger Agreement.


“Existing Yuma Facility”
is defined in the preamble.


“Existing Yuma Lenders” is
defined in the preamble.


“Existing Yuma Loans” is
defined in Section
1.7.


“Facility” means the
Commitments and the extensions of credit made
thereunder.


“FATCA” means Sections
1471 through 1474 of the IRC, 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 U.S. Treasury regulations or official IRS interpretation
thereof, any agreement entered into pursuant to Section 1471(b)(1)
of the IRC and any intergovernmental agreement entered into in
connection with the implementation of such Sections.


“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.


“Fee Letter” means each of
those certain fee letters dated on or about
October 26, 2016, among the Borrowers and (i) SocGen and
SG Americas Securities, LLC and (ii) SocGen, SG Americas
Securities, LLC and the Lenders, with respect to fees payable by
the Borrowers in connection with this Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to
time.


“Final Borrowing Base Deficiency
Payment Date” means, with respect to each Borrowing
Base Deficiency Date, the corresponding day of the month in the
sixth month after the Borrowing Base Deficiency Determination Date,
or if such month has no such corresponding day, then the last day
of such month, provided that if any such
corresponding day is not a Business Day, then the Borrowing Base
Deficiency Payment Date for such month shall be the Business Day
immediately succeeding such corresponding day.


“Financial Officer” means
the chief financial officer, principal accounting officer,
treasurer or controller of the Borrowing Agent.


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


“Foreign Official” is
defined in Section
3.28.


“FRB” means the Board of
Governors of the Federal Reserve System of the United States of
America.



 

13







 






“Fronting Exposure” means,
at any time there is a Defaulting Lender, with respect to any
Issuing Bank, such Defaulting Lender’s Applicable Percentage
of the outstanding LC Exposure with respect to Letters of Credit
issued by such Issuing Bank other than LC Exposure as to which such
Defaulting Lender’s participation obligation has been
reallocated to other Lenders or Cash Collateralized in accordance
with the terms hereof.


“Fund” means any Person
(other than a natural Person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial
loans, bonds and similar extensions of credit in the ordinary
course of its activities.


“Funding Rules” means the
requirements relating to the minimum required contributions
(including any installment payments) to Pension Plans and
Multiemployer Plans, as applicable, and set forth in Sections 412,
430, 431, 432 and 436 of the IRC and Sections 302, 303, 304 and 305
of ERISA.


“GAAP” means generally
accepted accounting principles in the United States of
America.


“Governmental Approval”
shall mean any action, order, authorization, consent, approval,
right, franchise, license, lease, ruling, permit, tariff, rate,
certification, exemption, filing or registration by or with any
Governmental Authority.


“Governmental Authority”
means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state,
regional 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
(including any supra-national bodies such as the European Union or
the European Central Bank).


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


“Guarantee” of or by any
Person (the “guarantor”) means any
obligation, contingent or otherwise, of the guarantor guaranteeing,
or having the economic effect of guaranteeing, any Indebtedness or
other obligation of any other Person (the “primary obligor”) in any
manner, whether directly or indirectly, and including any
obligation of the guarantor, direct or indirect, (a) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation or to purchase
(or to advance or supply funds for the purchase of) any security
for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness or
other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided that the term
“Guarantee” shall not include endorsements for
collection or deposit in the ordinary course of
business.


“Guarantee and Collateral
Agreement” means the Guarantee and Collateral
Agreement executed by the Guarantors in favor of the Administrative
Agent for the benefit of the holders of Secured Obligations,
substantially in the form of Exhibit E.


“Guarantor” means (a) each
Material Subsidiary of Yuma Energy other than any Borrower and (b)
each Subsidiary that guarantees the Indebtedness pursuant to
Section 5.9.


“Hazardous Materials”
means all toxic, corrosive, flammable, explosive, carcinogenic,
mutagenic, infectious or radioactive substances or wastes and all
other hazardous or toxic substances, wastes or other pollutants,
including petroleum hydrocarbons, petroleum products, petroleum
substances, natural gas, oil, oil and gas waste, crude oil, and any
components, fractions, or derivatives thereof, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of
any nature regulated pursuant to any Environmental
Law.



 

14







 






“Hedge Agreement” means
any agreement with respect to any swap, cap, collar, forward,
future or derivative transaction or option or similar agreement
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 (i) no phantom
stock or similar plan providing for payments only on account of
services provided by current or former directors, officers,
employees or consultants of any Borrower or any Subsidiary and
(ii) no agreements or obligations to sell physically any
commodity at any index-based price shall be a Hedge
Agreement.


“Hedge Liquidation” means
the sale, assignment, novation, liquidation, unwind, cancellation,
modification or termination of all or any part of any Hedge
Transaction included in the calculation of the Borrowing Base
(other than, in each case, at its scheduled maturity).


“Hedge Obligation” means,
with respect to any Loan Party, any obligation to pay or perform
under any agreement, contract or transaction that constitutes a
“swap” within the meaning of Section 1a(47) of the
Commodity Exchange Act.


“Hedge Termination Value”
means, during any period between two successive Scheduled
Redetermination Dates (or in the case of any Hedge Liquidation
occurring prior to January 1, 2017, the period from the
Effective Date to January 1, 2017), the net effect of any Hedge
Liquidation (after giving effect to any new hedge position or Hedge
Transaction previously entered into during such period) (as
reasonably determined by the Administrative Agent and the Majority
Lenders) on the Borrowing Base then in effect.


“Hedge Transaction” means
any trade or other transaction entered into by a Person under a
Hedge Agreement.


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


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


“Increased Cost Lender” is
defined in Section
2.20(b).


“Indebtedness” of any
Person means, without duplication, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances
of any kind, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such
Person in respect of the deferred purchase price of property or
services (excluding accounts payable incurred in the ordinary
course of business that are not more than seventy-five (75) days
past due), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed (but if such Indebtedness has not
been assumed, limited to the lesser of the amount of such
Indebtedness and the fair market value of the property securing
such Indebtedness), (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of
such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and
letters of guaranty, (j) Disqualified Equity Interests, (k) all
obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances, (l) all obligations, contingent or
otherwise, of such Person under Hedge Agreements after giving
effect to any legally enforceable netting obligations, (m) 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 Indebtedness of others; (n) obligations to deliver
commodities, goods or services, including Hydrocarbons, in
consideration of one or more Advance Payments, other than gas
balancing arrangements in the ordinary course of business (but only
to the extent of such Advance Payments); (o) obligations under
“take or pay” or similar agreements (other than
obligations under firm transportation or drilling contracts); and
(p) 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 Indebtedness 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 Indebtedness of any
Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result
of such Person’s ownership interest in or other relationship
with such other Person, except to the extent the terms of such
Indebtedness provide that such Person is not liable
therefor.



 

15







 






Notwithstanding
the preceding, “Indebtedness” of a Person shall not
include:


 


(1)           any
indebtedness that has been defeased in accordance with GAAP or
defeased pursuant to the deposit of cash or Cash Equivalent
Investments (in any amount sufficient to satisfy all such
indebtedness obligations at maturity or redemption, as applicable,
and all payments of interest and premium, if any) in a trust or
account created or pledged for the sole benefit of the holders of
such indebtedness, and subject to no other Liens; and


 


(2)           any
obligation of such Person in respect of a farm-in agreement or
similar arrangement whereby such Person agrees to pay all or a
share of the drilling, completion or other expenses of an
exploratory or development well (which agreement may be subject to
a maximum payment obligation, after which expenses are shared in
accordance with the working or participation interest therein or in
accordance with the agreement of the parties) or perform the
drilling, completion or other operation on such well in exchange
for an ownership interest in an oil or gas property.


 


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


“Indemnitee” is defined in
Section
9.3.


“Information” is defined
in Section
9.12.


“Initial Reserve Report”
means the internally prepared reserve reports of the Existing Yuma
Entities and of Davis, respectively, each dated as of July 1, 2016,
with respect to certain Oil and Gas Properties of each the Existing
Yuma Entities and of Davis.


“Interest Election
Request” means a request by the Borrowing Agent, on
behalf of any Borrower, to convert or continue a Borrowing in
accordance with Section 2.7.


“Interest Expense” means,
for any period, the sum (determined without duplication) of the
gross interest expense of Yuma Energy and its Subsidiaries for such
period calculated in accordance with GAAP, and including in any
event: (a) amortization of debt discount to the extent
included in interest expense under GAAP, (b) capitalized interest,
(c) the portion of any payments or accruals under Capital Leases
allocable to interest expense to the extent included in interest
expense under GAAP, and (d) dividends and interest, if any, paid by
Yuma Energy (whether or not in cash, but excluding Equity Interests
other than Disqualified Equity Interests) in connection with any
preferred stock or other preferred equity interest of Yuma Energy,
minus the portion of any payments or accruals under Synthetic
Leases allocable to interest expense.


“Interest Payment Date”
means (a) with respect to any Base Rate 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.



 

16







 






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


“Interim Redetermination”
shall mean any redetermination of the Borrowing Base pursuant to
Section
2.4(b)(ii).


“Investment” means, with
respect to any Person, all investments by such Person in other
Persons (including Affiliates) in the form of any direct or
indirect deposit with, advance, loan or other extension of credit
(including by way of Guarantee or similar arrangement (including
the deposit of any Equity Interests to be sold) with respect to,
Indebtedness or other liability of any other Person and (without
duplication) an amount committed to be advanced, lent or extended
to such Person) or capital contribution to (by means of any
transfer of cash or other Property or any payment for Property or
services for the account or use of others), or assumption of
Indebtedness of, purchase or other acquisition of any other
Indebtedness or equity participation or interest in, or any
purchase or acquisition of Equity Interests, evidences of
Indebtedness or other securities (excluding any interest in an oil
or natural gas leasehold to the extent constituting a security
under applicable law) of, such other Person and all other items
that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP, and any purchase or other
acquisition (in one transaction or a series of transactions) of any
assets of any other Person constituting a business unit;
provided that the
endorsement of negotiable instruments and documents in the ordinary
course of business will not be deemed to be an Investment. If any
Borrower or any Subsidiary sells or otherwise Disposes of any
Equity Interests of any direct or indirect Subsidiary such that,
after giving effect to any such sale or Disposition, such Person is
no longer a Subsidiary, such Borrower will be deemed to have made
an Investment on the date of any such sale or Disposition equal to
the fair market value of such Borrower’s Investments in such
Subsidiary that were not sold or Disposed of. The acquisition by
any Borrower or any Subsidiary of a Person that holds an Investment
in a third Person will be deemed to be an Investment by such
Borrower or such Subsidiary in such third Person in an amount equal
to the fair market value of the Investments held by the acquired
Person in such third Person. Except as otherwise provided in this
Agreement, the amount of an Investment will be determined at the
time the Investment is made and without giving effect to the
subsequent changes in value.


“IRC” means the Internal
Revenue Code of 1986.


“IRS” means the United
States Internal Revenue Service.


“ISP98” means, with
respect to any Letter of Credit, the “International Standby
Practices 1998” published by the International Chamber of
Commerce, Publication Number 590 (or such later version thereof as
may be in effect at the time of issuance).


“Issuing Bank” means
SocGen, in its capacity as issuer of Letters of Credit hereunder,
or such other Lender as the Borrowing Agent, on behalf of any
Borrower, may from time to time select as an Issuing Bank hereunder
pursuant to Section
2.5, with the consent of the Administrative Agent and such
other Lender.


“LC Application” means an
application and agreement for the issuance or amendment of a Letter
of Credit in the form from time to time in use by, or otherwise
acceptable to, the applicable Issuing Bank.



 

17







 






“LC Disbursement” means a
payment made by an 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 Borrowers 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. For all purposes of this Agreement, if on
any date of determination a Letter of Credit has expired by its
terms but any amount may still be drawn thereunder by reason of the
operation of Rule 3.14 of the ISP98 (or another rule or contractual
provision having a similar effect), such Letter of Credit shall be
deemed to be outstanding in the amount so remaining available to be
drawn.


“LC Sublimit” means an
amount equal to the lesser of (a) $5,000,000 and (b) the aggregate
Commitments. The LC Sublimit is part of, and not in addition to,
the Facility.


“Legal Requirement” means,
as to any Person, any law, statute, ordinance, decree, requirement,
order, judgment, rule, regulation (or official interpretation of
any of the foregoing) of, and the terms of any license or Permit
issued by, any Governmental Authority, including, but not limited
to, Regulations T, U, and X, that is applicable to such
Person.


“Lender” means each Person
listed on Schedule
1.1(a) and any other Person that shall have become a party
hereto as a Lender pursuant to an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to
an Assignment and Assumption.


“Lender Provided Financial Service
Product” means any agreement or other arrangements
under which any Existing Yuma Lender, Lender or any Affiliate of
any Existing Yuma Lender or Lender provides any of the following
products or services to any of the Loan Parties: (a) credit
cards, (b) credit card processing services, (c) debit cards, (d)
purchase cards, (e) gift cards, (f) ACH transactions, (g) cash
management, including electronic funds transfer, controlled
disbursement, accounts or services, (h) overdraft or (i) foreign
currency exchange.


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


“LIBO Rate” means, with
respect to any Eurodollar Borrowing for any Interest Period, the
rate per annum equal to the rate per annum appearing on Reuters
Screen LIBOR01 Page (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately
11:00 a.m., London time two (2) Business Days prior to the
first day of such Interest Period for a term comparable to such
Interest Period, provided, that if, in any case,
such rate is less than zero, the LIBO Rate shall be deemed to be
zero. 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 at which Dollar deposits 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
(2) Business Days prior to the commencement of such Interest
Period, provided
that, if any case, such rate is less than zero, the LIBO Rate shall
be deemed to be zero.


“Lien” means, with respect
to any asset, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such assets,
(c) production payments and the like payable out of Oil and Gas
Properties and (d) in the case of securities, any purchase
option, call or similar right of a third party with respect to such
securities; provided that in no event shall
an operating lease be deemed to be a Lien.


“Loan Document” means this
Agreement, the Security Documents, the Notes, the LC Applications,
the Assignment Agreement, each Fee Letter, any Secured Hedge
Intercreditor Agreement and any other documents entered into in
connection herewith.


“Loan Party” means each
Borrower and each Guarantor.


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



 

18







 






“Majority Lenders” means,
at any time while no Loans or LC Exposure is outstanding, Lenders
having greater than fifty percent (50%) of the Aggregate Maximum
Credit Amount; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding greater than fifty percent (50%) of
the outstanding aggregate principal amount of the Loans or
participation interests in Letters of Credit (without regard to any
sale by a Lender of a participation in any Loan under Section 9.4(d));
provided that (a)
at any time there are three or fewer Lenders, the percent shall be
one hundred percent (100%), and (b) the Maximum Credit Amounts and
the principal amount of the Loans and participation interests in
Letters of Credit of the Defaulting Lenders shall be excluded from
the determination of Majority Lenders.


“Material Acquisition”
mans any acquisition of Property or series of related acquisitions
of Property that involves the payment of consideration by any
Borrower and its Subsidiaries in excess of the lesser of (a)
$2,000,000 and (b) a dollar amount equal to five percent (5%) of
the then effective Borrowing Base.


“Material Adverse Effect”
means a material adverse effect on (a) the business, assets,
operations, prospects or condition, financial or otherwise, of any
Borrower or the Borrowers and the Subsidiaries taken as a whole,
(b) the ability of any Loan Party to perform any of its
obligations under the Loan Documents or any Secured Party Hedge
Transaction, (c) the validity or enforceability of any of the Loan
Documents or any Hedge Agreement evidencing a Secured Party Hedge
Transaction, or (d) the rights of or benefits or remedies
available to the Administrative Agent, the Issuing Banks and the
Lenders under the Loan Documents.


“Material Disposition”
means any Disposition of Property or series of related Dispositions
of property that yields gross proceeds to any Borrower or any of
its Subsidiaries in excess of the lesser of (a) $2,000,000 and (b)
a dollar amount to five percent (5%) of the then effective
Borrowing Base.


“Material Indebtedness”
means Indebtedness (other than the Loans and Letters of Credit), or
obligations in respect of one or more Hedge Transactions, of any
one or more of each Borrower and its Subsidiaries in an aggregate
principal amount exceeding $1,000,000. For purposes of determining
Material Indebtedness, the “principal amount” of the
obligations of any Borrower or any Subsidiary in respect of any
Hedge Transaction at any time shall be the maximum aggregate amount
that such Borrower or such Subsidiary would be required to pay if
such Hedge Transaction were terminated at such time.


“Material Subsidiary”
means, at any time, (i) each Subsidiary of Yuma Energy that
represents (or to which is attributable) (a) 5% or more of Yuma
Energy’s EBITDAX, (b) 5% or more of the Yuma Energy’s
consolidated total assets or (c) 5% or more of Yuma Energy’s
consolidated total revenues, in each case, as determined at the end
of the most recent fiscal quarter of Yuma Energy based on the
financial statements of Yuma Energy delivered pursuant to
Sections 5.1(a) and
(b) and (ii) any
Subsidiary of Yuma Energy designated by notice in writing given by
Yuma Energy to the Administrative Agent to be a “Material
Subsidiary”; provided that any such
Subsidiary so designated as a “Material Subsidiary”
shall at all times thereafter remain a Material Subsidiary for the
purposes of this Agreement unless otherwise agreed to by the
Borrowing Agent and the Required Lenders or unless such Material
Subsidiary ceases to be a Subsidiary in a transaction not
prohibited hereunder. Schedule 1.1(b) contains a
list of all Material Subsidiaries as of the Effective
Date.


“Maturity Date” means
October 26, 2019 or any earlier date on which the Commitments are
terminated pursuant to the terms hereof.


“Maximum Credit Amount”
means, as to each Lender, the amount set forth opposite such
Lender’s name on Schedule 1.1(a) 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 Amount
pursuant to Section
2.8, or (b) modified from time to time pursuant to any
assignment permitted by Section 9.4.


“Merger Proxy Statement”
means that certain Definitive Proxy Statement Relating to Merger or
Acquisition filed with the SEC on September 23, 2016 by
Yuma Energy, Inc., a California corporation and predecessor by
merger to Yuma Energy.



 

19







 






“Minimum Cash Collateral
Amount” means, at any time, (i) with respect to Cash
Collateral consisting of cash or deposit account balances, an
amount equal to 103% of the Fronting Exposures of all Issuing Banks
with respect to Letters of Credit issued and outstanding at such
time and (ii) otherwise, an amount determined by the Administrative
Agent and the Issuing Banks in their sole discretion.


“Moody’s” means
Moody’s Investors Service, Inc.


“Mortgage” means a
mortgage or deed of trust made by any Loan Party in favor of, or
for the benefit of, the Administrative Agent for the benefit of the
holders of Secured Obligations, substantially in the form of
Exhibit F
(with such changes thereto acceptable to the Administrative Agent
as shall be advisable under the law of the jurisdiction in which
such mortgage or deed of trust is to be recorded).


“Mortgaged Property” means
any Property owned by any Borrower or any Guarantor that is subject
to the Liens existing and to exist under the terms any
Mortgage.


“Multiemployer Plan” means
a multiemployer plan as defined in Section 4001(a)(3) of ERISA
to which any Borrower or any ERISA Affiliate contributes, is
obligated to contribute, or has any liability.


“Net Cash Proceeds” means,
(a) with respect to any Disposition of any Oil and Gas Properties
(including any Equity Interests of any Subsidiary owning Oil and
Gas Properties) by any Borrower or any Subsidiary, the excess, if
any, of (i) the sum of cash and cash equivalents received in
connection with such Disposition, but only as and when so received,
over (ii) the sum of (A) the principal amount of any Indebtedness
that is secured by such Oil and Gas Properties and that is senior
to the Liens securing the Secured Obligations and required to be
repaid in connection with such Disposition (other than the Loans),
(B) the out-of-pocket costs and expenses incurred by such Borrower
or such Subsidiary in connection with such Disposition,
(C) all legal, title and recording tax expense and all
federal, state, provincial, foreign and local Taxes required to be
accrued as a liability under GAAP as a consequence of such
Disposition, (D) all distributions and other payments required
to be made to minority interest holders in Subsidiaries as a result
of such Disposition, (E) the deduction of appropriate amounts
provided by the seller as a reserve, in accordance with GAAP,
against any liabilities associated with the Property Disposed of in
such Disposition and retained by any Borrower or any Subsidiary
after such Disposition, (F) cash payments made to satisfy
obligations resulting from Hedge Liquidations or the early
termination of any Hedge Transactions in connection with or as a
result of any such Disposition of Oil and Gas Properties, and (G)
any portion of the purchase price from such Disposition placed in
escrow, whether as a reserve for adjustment of the purchase price,
for satisfaction of indemnities in respect of such Disposition or
otherwise in connection with such Disposition; provided, however, that upon the
termination of that escrow, Net Cash Proceeds will be increased by
any portion of funds in the escrow that are released to any
Borrower or any Subsidiary, (b) with respect to any Hedge
Liquidation by any Loan Party or any Subsidiary, the excess, if
any, of (i) the sum of cash and cash equivalents received in
connection with such Hedge Liquidation (after giving effect to any
netting arrangements), over (ii) the out-of-pocket expenses
incurred by such Loan Party or such Subsidiary in connection with
such Hedge Liquidation and (c) with respect to any Equity Offering,
the cash proceeds thereof, net of customary fees, commissions,
costs and other expenses incurred in connection
therewith.


“New Borrowing Base
Notice” has the meaning assigned such term in
Section 2.4(d).


“Non-Consenting Lender”
means any Lender that does not approve any consent, waiver or
amendment to any provision of this Agreement or any other Loan
Document requested by the Administrative Agent or the Borrowing
Agent (excluding determinations of the Borrowing Base) that (i)
requires the approval of all Lenders or all affected Lenders or all
Required Lenders in accordance with the terms of Section 9.2(b) and (ii)
has been approved by the Majority Lenders.


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


“Note” is defined in
Section 2.9(e).



 

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“Obligations” means all
advances to, and debts, liabilities, obligations, covenants and
duties of, any Loan Party arising under any Loan Document, or
otherwise with respect to any Loan or Letter of Credit, in each
case whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including interest and fees that
accrue after the commencement by or against any Loan Party or any
Affiliate thereof of any proceeding under any Debtor Relief Law
naming such Person as the debtor in such proceeding, regardless of
whether such interest and fees are allowed claims in such
proceeding. Notwithstanding the foregoing, Excluded Hedge
Obligations shall not be an Obligation of any Guarantor that is not
a Qualified ECP Guarantor.


“OFAC” is defined in
Section
3.29.


“Off-Balance Sheet
Liability” of a Person means (a) any repurchase
obligation or liability of such Person with respect to accounts or
notes receivable sold by such Person, (b) any liability under
any sale and leaseback transaction that is not a Capital Lease
Obligation, (c) any indebtedness, liability or obligation under any
so-called “synthetic lease” transaction entered into by
such Person, (d) any Advance Payment Contract, or (e) any
indebtedness, liability or obligation arising with respect to any
other transaction that is the functional equivalent of or takes the
place of borrowing but that does not constitute a liability on the
balance sheets of such Person, but excluding from the foregoing
clauses (c) through
(e) operating
leases and usual and customary oil, gas and mineral
leases.


“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 all units created under orders, regulations and rules of
any Governmental Authority) that may affect all or any portion of
the Hydrocarbon Interests; (d) all operating agreements, contracts
and other agreements, including production sharing contracts and
agreements, that 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 that 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 that 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 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
Borrowers and/or the Subsidiaries as the context
requires.


“Organization Documents”
means, (a) with respect to any corporation, the certificate or
articles of incorporation and the bylaws; (b) with respect to any
limited liability company, the articles of formation and operating
agreement; and (c) with respect to any partnership, joint venture,
trust or other form of business entity, the partnership, joint
venture or other applicable agreement of formation and any
agreement, instrument, filing or notice with respect thereto filed
in connection with its formation with the secretary of state or
other department in the state of its formation, in each case as
amended from time to time.


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



 

21







 






“Other Taxes” means all
present or future stamp, court or documentary, intangible,
recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or
registration of, from the receipt or perfection of a security
interest under, or otherwise with respect to, any Loan
Document.


“Participant” is defined
in Section 9.4(d).


“Participant Register” is
defined in Section 9.4(d).


“PATRIOT Act” means the
“Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of
2001” (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)).


“PBGC” means the Pension
Benefit Guaranty Corporation referred to and defined in ERISA and
any successor entity performing similar functions.


“Pension Plan” means any
employee pension benefit plan as defined in Section 3(2) of
ERISA (other than a Multiemployer Plan) subject to the provisions
of Title IV of ERISA or Section 412 of the IRC or
Section 302 of ERISA, and in respect of which any Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an
“employer” as defined in Section 3(5) of
ERISA.


“Permitted Encumbrances”
means:




(a)

Liens for Taxes,
assessments or other governmental charges or levies that are not
delinquent or that 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
that are not delinquent or that are being contested in good faith
by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP;








(c)

statutory
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 delinquent or that are being contested in good faith by
appropriate action and for which adequate reserves have been
maintained in accordance with GAAP;








(d)

contractual Liens
that 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, marketing
agreements, processing agreements, development agreements,
injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or other geophysical permits or
agreements, and other agreements that are usual and customary in
the oil and gas business in each case, (i) that are customary in
the oil, gas and mineral production business, and (ii) that are
entered into by any Borrower or any Subsidiary in the ordinary
course of business; provided, that, in any event, (w) if such Liens
could have the effect of reducing net revenue interests or
increasing working interests of the Borrowers without a
corresponding increase in the net revenue interest in such Oil and
Gas Property or any of its Subsidiaries from such values set forth
in the Reserve Report delivered for the most recent Borrowing Base
redetermination (scheduled or otherwise), then the Borrowing Agent
shall have provided to the Administrative Agent written notice of
such Liens within 30 days of the incurrence of such Liens
accompanied by a Responsible Officer’s certification and
calculation of the adjusted net revenue interests and working
interests after taking into account such Liens, (x) such Liens
secure amounts that are not yet due or are being diligently
contested in good faith by appropriate proceedings, and such
reserve as may be required by GAAP shall have been made therefor,
(y) such Liens are limited to the assets that are the subject
of such agreements, and (z) such Liens shall not be in favor
of any Person that is an Affiliate of a Loan Party;







 

22







 








(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 FRB and no such deposit
account is intended by any Borrower or any of the Subsidiaries to
provide collateral to the depository institution;








(f)

easements,
restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any Property of any Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas,
oil, coal or other minerals or timber, and other like purposes, or
for the joint or common use of real estate, rights of way,
facilities and equipment, that in the aggregate do not materially
impair the use of such Property for the purposes of which such
Property is held by any Borrower or any Subsidiary or materially
impair the value of such Property subject thereto;








(g)

Liens on cash or
securities pledged to secure performance of tenders, surety and
appeal bonds, government contracts, performance and return of money
bonds, bids, trade contracts, leases, statutory obligations,
regulatory obligations and other obligations of a like nature, in
each case 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 that 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; and








(i)

Liens arising from
Uniform Commercial Code financing statement filings regarding
operating leases entered into by any Borrower or any Subsidiaries
in the ordinary course of its business and covering only the
Property under lease;






provided, further that (1) Liens
described in clauses
(a) through (e) shall remain
“Permitted Encumbrances” only for so long as no action
to enforce such Lien has been commenced, (2) 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 any Permitted Encumbrance,
and (3) the term “Permitted Encumbrances” shall not
include any Lien securing Indebtedness.


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


“Plan” means any employee
benefit plan as defined in Section 3(3) of ERISA, including a
Pension Plan, maintained by, contributed to by or required to be
contributed to by any Loan Party or with respect to which any Loan
Party may have any liability.


“Platform” is defined in
Section
9.1(d).


“Prime Rate” means, the
rate per annum which SocGen announces from time to time as its
“prime lending rate,” the Prime Rate to change when and
as such prime lending rate changes. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate
actually charged to any customer. SocGen may make commercial loans
or other loans at rates of interest at, above or below the Prime
Rate.



 

23







 






“Property” means any
interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible, including cash, securities,
accounts and contract rights.


“Proposed Borrowing Base”
has the meaning assigned to such term in Section 2.4(c)(i).


“Proposed Borrowing Base
Notice” has the meaning assigned to such term in
Section 2.4(c)(ii).


“Public Lender” is defined
in Section
9.1(d).


“PV-10 Value” shall mean,
as of any date of determination, with respect to the Borrowers and
their Subsidiaries, the present value of estimated future revenues
less severance and ad valorem taxes, operating, gathering,
transportation and marketing expenses and capital expenditures from
the production of “proved” Oil and Gas Properties of
the Borrowers and their Subsidiaries as set forth in the most
recent Reserve Report delivered pursuant hereto, calculated in
accordance with the SEC guidelines and using the Five-Year Strip
Price for crude oil (WTI Cushing) and natural gas (Henry Hub), with
such price held flat for each subsequent year, quoted on the New
York Mercantile Exchange (or its successor) on such date of
determination, adjusted for any basis differential, quality and
gravity, using prices and costs as of the date of estimation
without future escalation, without giving effect to non-property
related expenses such as general and administrative expenses, debt
service, future income tax expense and depreciation, depletion and
amortization, and discounted using an annual discount rate of 10%.
PV-10 Value shall be adjusted to give effect to the Hedge
Transactions with Approved Counterparties then in
effect.


“Pyramid” is defined in
the preamble.


“Qualified ECP Guarantor”
means, in respect of any Secured Party Hedge Transaction, each Loan
Party that has total assets exceeding $10,000,000 at the time such
Secured Party Hedge Transaction is incurred or such other Person as
constitutes an “eligible contract participant” under
the Commodity Exchange Act or any regulation promulgated
thereunder.


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


“Redemption” means with
respect to any Indebtedness, the repurchase, redemption,
prepayment, repayment or defeasance (or the segregation of funds
with respect to any of the foregoing) of such Indebtedness.
“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 2.4(d).


“Register” is defined in
Section 9.4(c).


“Regulation U” means
Regulation U of the FRB.


“Related Agreements” means
the Davis Merger Agreement.


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


“Related Transactions”
means the transactions contemplated by the Related
Agreements.


“Removal Effective Date”
is defined in Section
8.6.



 

24







 






“Required Deficiency
Payment” means, for each Borrowing Base Deficiency
Payment Date occurring after a Borrowing Base Deficiency
Determination Date in accordance with the terms hereof, an amount
equal to one-sixth of the Borrowing Base Deficiency (plus accrued interest thereon)
existing on the Borrowing Base Deficiency Determination Date;
provided, that if
the amount of the Borrowing Base Deficiency has increased after the
Borrowing Base Deficiency Determination Date then each remaining
Required Deficiency Payment shall be increased to substantially
equal amounts sufficient to reduce to zero the Borrowing Base
Deficiency on or before the Final Borrowing Base Deficiency Payment
Date (after giving effect to the Required Deficiency Payment made
on such date).


“Required Lenders” means,
at any time while no Loans or LC Exposure is outstanding, Lenders
having at least sixty-six and two-thirds percent (66-2⁄3%) of
the Aggregate Maximum Credit Amount; and at any time while any
Loans or LC Exposure is outstanding, Lenders holding at least
sixty-six and two-thirds percent (66-2⁄3%) of the outstanding
aggregate principal amount of the Loans or participation interests
in such Letters of Credit (without regard to any sale by a Lender
of a participation in any Loan under Section 9.4(d));
provided that at
any time there are two or fewer Lenders, (a) the percent shall be
one hundred percent (100%), and (b) the Maximum Credit Amounts and
the principal amount of the Loans and participation interests in
Letters of Credit of the Defaulting Lenders shall be excluded from
the determination of Required Lenders.


“Reserve Percentage”
means, on any day with respect to each Eurodollar Borrowing, the
maximum reserve requirement as determined by the Administrative
Agent (including any basic, supplemental, marginal, emergency or
similar reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements),
expressed as a fraction, that would then apply under Regulation D
of the FRB with respect to “Eurocurrency liabilities”
(as such term is defined in Regulation D of the FRB) equal in
amount to each Lender’s Eurodollar Loan in such Borrowing,
were such Lender to have any such “Eurocurrency
liabilities”. If such reserve requirement shall change after
the date hereof, the Reserve Percentage shall be automatically
increased or decreased, as the case may be, from time to time as of
the effective time of each such change in such reserve
requirement.


“Reserve Report” means the
Initial Reserve Report and a report, in form and substance
reasonably satisfactory to the Administrative Agent, setting forth,
as of each December 31st or June 30th (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 Borrowers and the
Subsidiaries, together with a projection of the rate of production
and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date, consistent with
SEC reporting requirements at the time, together with a supplement
indicating future net income based upon the Administrative
Agent’s usual and customary pricing assumptions for oil and
gas loans then in effect, in each case reflecting Hedge
Transactions in place with respect to such production.


“Resignation Effective
Date” is defined in Section 8.6.


“Responsible Officer”
means the chief executive officer, chief operating officer,
president or Financial Officer of the Borrowers.


“Restricted Payment” means
any dividend or other distribution (whether in cash, securities or
other Property other than dividends payable solely in Equity
Interests of such Person) with respect to any Equity Interests in
any Borrower or any Subsidiary, 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 Borrower or any of its Subsidiaries or any
option, warrant or other right to acquire any such Equity Interests
in any Borrower or any of its Subsidiaries.


“S&P” means Standard
& Poor’s Ratings Services, a unit of The McGraw-Hill
Companies, Inc.


“Sanctioned Country”
means, at any time, a country or territory that is the subject or
target of any comprehensive (and not list-based)
Sanctions.


“Sanctioned Person” means
any Person who is a designated target of Sanctions or is otherwise
a subject of Sanctions (including, without limitation, as a result
of being (a) owned or controlled directly or indirectly by any
Person that is a designated target of Sanctions or
(b) organized under the laws of, or a citizen or resident of,
any country that is subject to general or country-wide
Sanctions).



 

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“Sanctions” means economic
or financial sanctions, trade embargoes or similar measures
enacted, administered or enforced by any of the following (or by
any agency of any of the following): (a) the United Nations; (b)
the United States of America; (c) the United Kingdom; or (d) the
European Union or any present or future member state
thereof.


“Scheduled
Redetermination” has the meaning assigned such term in
Section
2.4(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 2.4(d).


“SEC” means the Securities
and Exchange Commission or any Governmental Authority succeeding to
any of its principal functions.


“Secured Hedge Intercreditor
Agreement” means an Intercreditor Agreement for
Secured Party Hedge Transaction substantially in the form attached
hereto as Exhibit I among the
Borrowers, the Administrative Agent and an Approved Counterparty
that is a party to a Secured Party Hedge Transaction.


“Secured Hedge Party”
means any Person who, at the time of entry into the applicable
Hedge Transaction, (i) was an Existing Yuma Lender or an
Affiliate of an Existing Yuma Lender, (ii) is then a Lender or
an Affiliate of a Lender, or (iii) is otherwise an Approved
Counterparty and is (or concurrently therewith becomes) a party to
a Secured Hedge Intercreditor Agreement.


“Secured Obligations”
means, collectively, (i) the Obligations and (ii) all obligations
of any Loan Party under any Secured Party Hedge Transaction or any
Lender Provided Financial Service Product, in each case whether
direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or
hereafter arising and including interest and fees that accrue after
the commencement by or against any Loan Party or any Affiliate
thereof of any proceeding under any Debtor Relief Law naming such
Person as the debtor in such proceeding, regardless of whether such
interest and fees are allowed claims in such proceeding.
Notwithstanding the foregoing, Excluded Hedge Obligations shall not
be a Secured Obligation of any Guarantor that is not a Qualified
ECP Guarantor.


“Secured Parties” means
the Administrative Agent, each Lender, each Lender or Affiliate
thereof party to a Lender Provided Financial Service Product and
each Lender or Affiliate thereof party to a Secured Party Hedge
Transaction.


“Secured Party Hedge
Transaction” means any Hedge Transaction between a
Loan Party and a counterparty that at the time such Hedge
Transaction is entered into is a Secured Hedge Party; provided that, for the
avoidance of doubt, the term “Secured Party Hedge
Transaction” shall not include any Hedge Transaction entered
into after the time that such counterparty ceases to be a Secured
Hedge Party.


“Security Documents” means
the Guarantee and Collateral Agreement, the Mortgages, each Control
Agreement and all other security documents hereafter delivered to
the Administrative Agent granting a Lien on any property of any
Person to secure the Secured Obligations.


“Shareholders’
Equity” means, as of any date of determination,
consolidated shareholders’ equity of Yuma Energy and its
Subsidiaries as of that date determined in accordance with
GAAP.


“SocGen” is defined in the
preamble.


“Subsidiary” means, with
respect to any Person at any time, any other Person the accounts of
which would be consolidated with those of such Person in such
Person’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as well as any
other Person (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50%
of the ordinary voting power or, in the case of a partnership, more
than 50% of the general partnership interests are, as of such date,
owned, controlled or held, by such Person or (b) that is, as
of such date, otherwise Controlled by such Person. Unless the
context otherwise specifically requires, the term
“Subsidiary” shall refer to a Subsidiary of Yuma
Energy.



 

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“Subsidiary Guarantor”
means any Subsidiary that guarantees the Secured Obligations
(including pursuant to Section 4.1 and Section 5.9).


“Synthetic Lease” means,
as to any Person, any lease (including a lease that may be
terminated by the lessee at any time) of any Property (whether
real, personal or mixed) (a) that is accounted for as an operating
lease under GAAP and (b) in respect of which the lessee retains or
obtains ownership of the Property so leased for U.S. Federal income
tax purposes, other than any such lease under which such Person is
the lessor.


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


“Termination Date” means
the first date on or before which all Obligations (other than
contingent indemnification obligations for which no claim has been
asserted and without regard to whether any obligations remain
outstanding under any Secured Party Hedge Transaction or Lender
Provided Financial Service Product) have been indefeasibly paid in
full in cash, all Letters of Credit have been terminated or expired
(or been Cash Collateralized), and all Commitments shall have
terminated.


“Total Debt” means, at any
date, all Indebtedness of Yuma Energy and its Subsidiaries,
determined on a consolidated basis, excluding Indebtedness of the
type described in clauses (e) and
(l) of the
definition of “Indebtedness”.


“Transactions” means the
execution, delivery and performance by the Loan Parties of the Loan
Documents, the borrowing of Loans, the use of the proceeds thereof
and the issuance of Letters of Credit hereunder, the grant by any
Loan Party of the Liens granted by it pursuant to the Loan
Documents to which it is a party, and the perfection or maintenance
of the Liens created under the Loan Documents to which it is a
party.


“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 LIBO Rate or the Alternate Base
Rate.


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


“U.S. Tax Compliance
Certificate” is defined in Section 2.17(g).


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


“Wholly-Owned Subsidiary”
means (a) any Subsidiary of which all of the outstanding
Equity Interests, on a fully-diluted basis, are owned by a Borrower
or one or more of the Wholly-Owned Subsidiaries or are owned by the
Borrower and one or more of the Wholly-Owned Subsidiaries or
(b) if permitted by this Agreement, any Subsidiary that is
organized in a foreign jurisdiction and is required by the
applicable laws and regulations of such foreign jurisdiction to be
partially owned by the government of such foreign jurisdiction or
individual or corporate citizens of such foreign jurisdiction,
provided that a Borrower,
directly or indirectly, owns the remaining Equity Interests in such
Subsidiary and, by contract or otherwise, controls the management
and business of such Subsidiary and derives economic benefits of
ownership of such Subsidiary to substantially the same extent as if
such Subsidiary were a Wholly-Owned Subsidiary.



 

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“Wholly-Owned Subsidiary
Guarantor” means any Subsidiary Guarantor that is a
Wholly-Owned Subsidiary of a Borrower.


“Withholding Agent” means
any Loan Party 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.


“Yuma E&P” is defined
in the preamble.


“Yuma Energy” is defined
in the preamble.


“Yuma Energy Common Stock”
means the common stock, no par value per share, of Yuma
Energy.


“Yuma Energy Holders”
means Sam L. Banks, Red Mountain Capital
Partners LLC, Davis Petroleum Investment, LLC, and
Sankaty Davis LLC, and each of their Affiliates.


SECTION
1.2 Classification of Loans and
Borrowings. For purposes of this Agreement, Loans may be
classified and referred to by Type (e.g., a “Eurodollar
Loan”). Borrowings also may be classified and referred to by
Type (e.g., a “Eurodollar Borrowing”).


SECTION
1.3 Terms Generally; Rules of
Construction. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and
“including” shall be deemed to be followed by the
phrase “without limitation.” The word
“will” shall be construed to have the same meaning and
effect as the word “shall.” Unless the context requires
otherwise, (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 herein), (b) any reference herein to any Person shall be
construed to include such Person’s successors and assigns,
(c) 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, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this
Agreement, (e) any reference to any law or regulation herein shall,
unless otherwise specified, refer to such law or regulation as
amended, modified or supplemented from time to time and (f) the
words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any
and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.


SECTION
1.4 Accounting Terms and Determinations;
GAAP. Except as otherwise expressly provided herein, all
terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the Borrowing
Agent notifies the Administrative Agent that the Borrowing Agent,
on behalf of any Borrower, requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the
date hereof in GAAP or in the application thereof on the operation
of such provision (or if the Administrative Agent notifies the
Borrowing Agent that the Majority Lenders request an amendment to
any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such
change shall have become effective until such notice shall have
been withdrawn or such provision amended in accordance
herewith.


SECTION
1.5 Oil and Gas Definitions. For
purposes of this Agreement and the other Loan Documents, the terms
“proved reserves,” “proved developed
reserves,” “proved undeveloped reserves,”
“proved developed nonproducing reserves” and
“proved developed producing reserves,” have the meaning
given such terms from time to time and at the time in question by
the Society of Petroleum Engineers of the American Institute of
Mining Engineers.



 

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SECTION
1.6 Time of Day. Unless otherwise
specified, all references herein to time of day shall be references
to Eastern time (daylight or standard, as applicable).


SECTION
1.7 Amendment and Restatement; Allocation
of Loans at the Effective Date.


(a) The parties hereto
agree that on the Effective Date, the following transactions shall
be deemed to occur automatically, without further action by any
party hereto:


(i) each of the
Existing Yuma Agreement and the Existing Davis Agreement shall be
deemed to be amended and restated in its entirety in the form of
this Agreement;


(ii) the
Loans shall serve to extend, renew, rearrange and continue, but not
to extinguish or novate, the loans under the Existing Yuma
Agreement (the “Existing Yuma Loans”) and
the loans under the Existing Davis Agreement and the corresponding
promissory notes (if any);


(iii) the
Borrower hereby agrees that, upon the effectiveness of this
Agreement, the Existing Yuma Loans outstanding under the Existing
Yuma Agreement, and all accrued and unpaid interest thereon (if
any), and the loans under the Existing Davis Agreement, and all
accrued and unpaid interest thereon (if any), shall be deemed to be
outstanding under and payable by this Agreement;


(iv) the
Liens in favor of Administrative Agent securing payment of the
Existing Yuma Loans and certain other obligations, including Liens
assigned to the Administrative Agent pursuant to the Assignment
Agreement securing among other things the loans under the Existing
Davis Agreement, shall remain in full force and effect with respect
to the Secured Obligations and are hereby reaffirmed in accordance
with the Security Documents; and


(v) the parties
acknowledge and agree that this Agreement and the other Loan
Documents do not constitute a novation, payment and reborrowing or
termination of the Existing Yuma Loans and other existing
obligations under the Existing Yuma Agreement or the loans under
the Existing Davis Agreement and that all such Existing Yuma Loans
and other existing obligations and loans under the Existing Davis
Agreement, are in all respects continued and outstanding as
Obligations under this Agreement with only the terms being modified
from and after the Effective Date as provided in this Agreement and
the other Loan Documents.


(b) To facilitate the
allocation described in Section 1.7(a), on the
Effective Date, (i) each Lender shall be deemed to have funded, in
accordance with the requirements of Section 2.6(a), its
respective Loans to the extent of its Existing Yuma Loans and Loans
under the Existing Davis Agreement and shall not be required to
wire transfer funds in such amounts as provided in such Section;
(ii) each Lender shall fund, in accordance with the requirements of
Section 2.6(a), the
applicable Loans (in accordance with its Applicable Percentages)
pursuant to the terms of this Agreement to the extent that the
Loans to be made on the Effective Date pursuant to such
Lender’s Commitments exceed its Existing Yuma
Loans.

ARTICLE
II



The Credits


SECTION
2.1 Commitments. Subject to the
terms and conditions set forth herein, each Lender agrees to make
Loans to the Borrowers from time to time during the Availability
Period in an aggregate principal amount that will not result in
such Lender’s Credit Exposure exceeding such Lender’s
Commitment then in effect by making immediately available funds
available to the Administrative Agent’s designated account,
not later than 1:00 p.m. Within the foregoing limits and subject to
the terms and conditions set forth herein, each Borrower may
borrow, prepay and reborrow Loans.



 

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SECTION
2.2 Loans and Borrowings.
   Each Loan shall be made as part of a Borrowing
consisting of Loans of the same Type 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.


(i) Subject to
Section 2.13,
each Borrowing shall be comprised entirely of Base Rate Loans or
Eurodollar Loans as the Borrowing Agent may request in accordance
with this Agreement. 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 any Borrower to
repay such Loan in accordance with the terms of this
Agreement.


(ii) 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 $1,000,000. At
the time that each Base Rate Borrowing is made, such Borrowing
shall be in an aggregate amount that is an integral multiple of
$50,000 and not less than $100,000; provided that a Base Rate
Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the total Commitments then in effect or that is
required to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.5(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 five (5) Eurodollar
Borrowings outstanding.


(iii) Notwithstanding
any other provision of this Agreement, the Borrowing Agent shall
not be entitled to request, or to elect to convert or continue any
Borrowing as, a Eurodollar Borrowing if the Interest Period
requested with respect thereto would end after the Maturity
Date.


SECTION
2.3 Requests for Borrowings. To
request a Borrowing, the Borrowing Agent shall notify the
Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m. three (3)
Business Days before the date of the proposed Borrowing or
(b) in the case of a Base Rate Borrowing, not later than 11:00
a.m. on the date of the proposed Borrowing; provided that no such notice
shall be required for any deemed request for a Base Rate Borrowing
to finance the reimbursement of an LC Disbursement as contemplated
by Section 2.5(e). Each such
telephonic Borrowing Request shall be irrevocable and shall be
confirmed promptly by hand delivery, telecopy or (if arrangements
for doing so have been approved by the Administrative Agent)
electronic communication to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent
and signed by the Borrowing Agent. Each such telephonic and written
Borrowing Request shall specify the following information in
compliance with Section 2.2:


(A) the aggregate
amount of the requested Borrowing;


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


(C) whether such
Borrowing is to be a Base Rate Borrowing or a Eurodollar
Borrowing;


(D) 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”;


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


(F) the location and
number of the appropriate Borrower’s account to which funds
are to be disbursed, which shall comply with the requirements of
Section
2.6.


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



 

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SECTION
2.4 Borrowing Base.


(a) Initial Borrowing Base. For the
period from and including the Effective Date to but excluding the
initial Redetermination Date, the amount of the Borrowing Base
shall be $44,000,000. Notwithstanding the foregoing, the Borrowing
Base may be subject to further adjustments from time to time
pursuant to this Section
2.4.


(b) Scheduled and Interim
Redeterminations.


(i) The Borrowing Base
shall be redetermined semi-annually in accordance with this
Section 2.4 (a
“Scheduled
Redetermination”), and, subject to Section 2.4(d), such
redetermined amount shall become effective and applicable to the
Borrowers, the Agents, each Issuing Bank and the Lenders on or
around April 1st and October 1st of each year; provided, however, the first
redetermination shall be on or around
January 1, 2017.


(ii) In
addition, the Borrowing Agent may, by notifying the Administrative
Agent thereof, and the Administrative Agent may, at the direction
of the Required Lenders, by notifying the Borrowing Agent thereof,
one time each during each six month period, elect to cause the
Borrowing Base to be redetermined between Scheduled
Redeterminations in accordance with this Section 2.4.


(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 Borrowing Agent to the Administrative Agent, in
the case of a Scheduled Redetermination, pursuant to Section 5.14(a) and (c),
and, in the case of an Interim Redetermination, pursuant to
Section 5.14(b) and
(c), and
(B) such other reports, data and supplemental information,
including, the information provided pursuant to Section 5.14(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 propose a new Borrowing Base
or a reaffirmation of the existing Borrowing Base (the
“Proposed Borrowing
Base”) based upon such information and such other
information (including, the status of title information with
respect to the Oil and Gas Properties as described in the
Engineering Reports and the existence of any other Indebtedness) 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.


(ii) The
Administrative Agent shall notify the Borrowing Agent 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 Borrowing Agent pursuant to Section 5.14(a) and
(c) in a timely and
complete manner, then on or before the March 15th and September
15th of such year following the date of delivery (or in the case of
the first Scheduled Redetermination, on or before
December 1, 2016) or (2) if the Administrative Agent
shall not have received the Engineering Reports required to be
delivered by the Borrowing Agent pursuant to Section 5.14(a) and
(c) in a timely and
complete manner, then promptly after the Administrative Agent has
received complete Engineering Reports from the Borrowing Agent and
has had a reasonable opportunity to determine the Proposed
Borrowing Base in accordance with Section 2.4(c)(i);
and



 

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(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) Subject
to Section 2.22(a)(i) and
Section 9.2
with respect to any Defaulting Lender, any Proposed Borrowing Base
that would increase the Borrowing Base then in effect must be
approved or deemed to have been approved by all the Lenders (other
than any Defaulting Lenders) as provided in this Section 2.4(c)(iii); and
any Proposed Borrowing Base that would decrease or maintain the
Borrowing Base then in effect must be approved or be deemed to have
been approved by the Required Lenders as provided in this
Section 2.4(c)(iii). Upon
receipt of the Proposed Borrowing Base Notice, each Lender shall
have fifteen (15) Business 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) Business Days, any Lender has not communicated its
approval or disapproval in writing to the Administrative Agent,
such silence shall be deemed to be (x) with respect to any
Proposed Borrowing Base that would increase the Borrowing Base then
in effect, a rejection of such Proposed Borrowing Base, and
(y) with respect to any Proposed Borrowing Base that would
decrease or maintain the Borrowing Base then in effect, an approval
of such Proposed Borrowing Base. If, at the end of such 15-Business
Day period, all 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 2.4(d). If,
however, at the end of such 15-Business Day period, all 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 amount then acceptable to
a number of Lenders sufficient to constitute all 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 an amount that would decrease or maintain the Borrowing Base,
then in effect, for purposes of this Section 2.4 and such
amount shall become the new Borrowing Base, effective on the date
specified in Section 2.4(d).


(iv) In
the event that the Borrowing Agent does not furnish to the
Administrative Agent and the Lenders the Reserve Reports, or other
information specified in clauses (i) and
(ii) above by the
date specified therein, the Administrative Agent and the Lenders
may nonetheless redetermine the Borrowing Base and re-designate the
Borrowing Base from time to time thereafter in their sole
discretion until the Administrative Agent and the Lenders receive
the relevant Reserve Reports, or other information, as applicable,
whereupon the Administrative Agent and the Lenders shall
redetermine the Borrowing Base as otherwise specified in this
Section
2.4.


(d) Effectiveness of a Redetermined
Borrowing Base. After a redetermined Borrowing Base is
approved or is deemed to have been approved by the Required Lenders
or all Lenders, as applicable, pursuant to Section 2.4(c)(iii) or
(iv), the
Administrative Agent shall notify the Borrowing Agent and the
Lenders (the “New
Borrowing Base Notice”), and such amount (or amounts,
as applicable) shall become the new Borrowing Base, effective and
applicable to the Borrowers, the Agents, each Issuing Bank and the
Lenders:


(i) in the case of a
Scheduled Redetermination, (A) if the Administrative Agent shall
have received the Engineering Reports required to be delivered by
the Borrowing Agent pursuant to Section 5.14(a) and
(c) in a timely and
complete manner, then on or around the April 1st or October 1st, as
applicable, following such notice (or in the case of the first
Scheduled Redetermination, on or around January 1, 2017),
or (B) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrowing Agent
pursuant to Section 5.14(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 extent applicable, under
Section 2.4(f),
(g) or (h), whichever occurs
first.



 

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(e) Lenders’ Sole Discretion.
The Lenders shall have no obligation to determine the Borrowing
Base at any particular amount, either in relation to the Aggregate
Maximum Credit Amount or otherwise. Furthermore, each Borrower
acknowledges that the Lenders have no obligation to increase the
Borrowing Base and that any increase in the Borrowing Base is in
each Lender’s sole discretion and subject to the individual
credit approval processes of each of the Lenders, which processes
shall be conducted in good faith and based upon such information
and such other information (including, the status of title
information with respect to the Oil and Gas Properties as described
in the Engineering Reports, the existence of any other
Indebtedness, the financial condition of the Loan Parties, the
economic effect of the Borrowers’ and their
Subsidiaries’ Hedge Transactions then in effect, commodity
price assumptions, projections of production, operating expenses,
general and administrative expenses, capital costs, working capital
requirements, liquidity evaluations, dividend payments,
environmental costs, legal costs, and such other credit factors) as
such Lender deems appropriate in its sole discretion and consistent
with its normal oil and gas lending criteria as it exists at the
particular time.


(f) Reduction of Borrowing Base upon
Disposition of Oil and Gas Properties or Hedge Liquidations.
In addition to any other redeterminations of or adjustments to the
Borrowing Base provided for herein, if at any time the aggregate
Borrowing Base Value of Oil and Gas Properties Disposed of
(including by means of a Disposition of Equity Interests of a
Subsidiary) pursuant to Section 6.5(d) and the
Hedge Termination Value of all Hedge Liquidations pursuant to
Section 6.19,
during any period between two successive Scheduled Redetermination
Dates (or, if prior to the first Scheduled Redetermination Date,
during the period from the Effective Date until the first Schedule
Redetermination Date) exceeds five percent (5%) of the Borrowing
Base then in effect (and after giving effect to any other Hedge
Transactions entered into by any Borrower contemporaneously with
such Hedge Liquidations), then the Borrowing Base shall be
automatically reduced by an amount equal to the Borrowing Base
Value of all such Oil and Gas Properties Disposed of and Hedge
Liquidations, and, in each case, the Borrowing Base as so reduced
shall become the new Borrowing Base immediately upon such
Disposition or Hedge Liquidation (as applicable) effective and
applicable to the Borrowers, the Agents, each Issuing Bank and the
Lenders until the next redetermination or other adjustment of the
Borrowing Base pursuant to this Agreement. Upon any such reduction,
the Administrative Agent shall promptly deliver a notice thereof to
the Borrowing Agent and the Lenders.


(g) Reduction of Borrowing Base Associated
with Title Defects or Exceptions. If at any time any
Borrower does not satisfy the title requirements of Section 5.15, then the
Administrative Agent may redetermine the Borrowing Base pursuant to
Section 5.15(c), and the
Borrowing Base as so reduced shall become the new Borrowing Base
immediately upon such redetermination, effective and applicable to
each Borrower, the Agents, each Issuing Bank and the Lenders until
the next redetermination or adjustment of the Borrowing Base
pursuant to this Agreement. Upon any such redetermination, the
Administrative Agent shall promptly deliver a New Borrowing Base
Notice to the Borrowing Agent and the Lenders.


(h) Borrowers’ Right to Elect
Reduced Borrowing Base. Within three Business Days of its
receipt of a New Borrowing Base Notice, the Borrowing Agent may
provide written notice to the Administrative Agent and the Lenders
that specifies that for the period from the effective date of the
new Borrowing Base notice until the next succeeding Scheduled
Redetermination Date, the Borrowing Base will be a lesser amount
than the amount set forth in such New Borrowing Base Notice,
whereupon such specified lesser amount will become the new
Borrowing Base; provided that the Borrowing
Agent shall not request that the Borrowing Base be reduced to a
level that would result in a Borrowing Base Deficiency. The
Borrowing Agent’s notice under this Section 2.4(h) shall be
irrevocable, but without prejudice to its rights to initiate
Interim Redeterminations.


SECTION
2.5 Letters of Credit. General. Subject to the terms
and conditions set forth herein, each Issuing Bank agrees, in
reliance upon the agreements of the Lenders set forth in this
Section, (i) from
time to time on any Business Day on and after the Effective Date
and prior to the date that is five (5) Business Days prior to the
Maturity Date, to issue Letters of Credit, in forms reasonably
acceptable to the Administrative Agent and such Issuing Bank, for
the account of any Borrower and for the benefit of such Borrower or
any of its Subsidiaries and to amend or extend Letters of Credit
previously issued by it, in accordance with Section 2.5(b) and (ii) to
honor drawings under the Letters of Credit; provided that no Issuing Bank
shall be obligated to issue any Letter of Credit or to amend or
extend any Letter of Credit if, after giving effect thereto, (x)
the total Credit Exposures would exceed the total Commitments then
in effect or (y) the LC Exposure would exceed the LC Sublimit.
Letters of Credit shall constitute utilization of the Commitments.
In the event of any inconsistency between the terms and conditions
of this Agreement and the terms and conditions of any LC
Application or other agreement submitted by any Borrower to, or
entered into by any Borrower with, any Issuing Bank relating to any
Letter of Credit, the terms and conditions of this Agreement shall
control. Each notice shall constitute a representation that after
giving effect to the requested issuance, amendment, renewal or
extension, as applicable, (i) the LC Exposure shall not exceed
the LC Sublimit and (ii) the total Credit Exposures shall not
exceed the total Commitments (i.e., the lesser of the Aggregate
Maximum Credit Amount and the then effective Borrowing
Base).


(a) Notice of Issuance, Amendment,
Extension; Certain Conditions. To request the issuance of a
Letter of Credit (or the amendment or extension of an outstanding
Letter of Credit), the Borrowing Agent, on behalf of any Borrower,
shall hand deliver or telecopy (or if arrangements for doing so
have been approved the Administrative Agent and by the applicable
Issuing Bank, notify by electronic communication) to such Issuing
Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the
Letter of Credit to be amended or extended, and specifying (i) the
date of issuance, amendment or extension (which shall be a Business
Day), (ii) the date on which such Letter of Credit is to expire
(which shall comply with clause (c) of this
Section), (iii) the
amount of such Letter of Credit, (iv) the name and address of the
beneficiary thereof, (v) specifying the amount of the then
effective Borrowing Base, the current total 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 Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or
extension of an outstanding Letter of Credit) and (vi) such
other information as shall be necessary to prepare, amend or extend
such Letter of Credit. The form of any requested Letter of Credit
or any requested amendment or extension of a Letter of Credit shall
be reasonably acceptable to the applicable Issuing Bank. No Issuing
Bank shall be obligated to issue any Letter of Credit (i) in
violation of any Applicable Law or policy of such Issuing Bank or
any Lender, (ii) if any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms purport to
enjoin or restrain such Issuing Bank from issuing such Letter of
Credit, (iii) if such Letter of Credit is to be denominated in a
currency other than Dollars or (iv) if such Letter of Credit
contains any provision for automatic reinstatement of the stated
amount after any drawing thereunder. If requested by the applicable
Issuing Bank, the Borrowing Agent, on behalf of the applicable
Borrower, also shall submit an LC Application in connection with
any request for a Letter of Credit. A Letter of Credit shall be
issued, amended or extended only if (and upon issuance, amendment
or extension of each Letter of Credit, the applicable Borrower
shall be deemed to represent and warrant that), after giving effect
to such issuance, amendment or extension (i) the LC Exposure
shall not exceed the LC Sublimit, (ii) the total Credit Exposures shall not exceed
the total Commitments then in effect and (iii) the other conditions
thereto set forth in this Agreement are met. No Issuing Bank shall
be under any obligation to amend or extend any Letter of Credit if
(i) such Issuing Bank would have no obligation at such time to
issue the Letter of Credit in its amended form under the terms
hereof or (ii) the beneficiary of such Letter of Credit does not
accept the proposed amendment thereto.



 

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(b) Expiration Date. Each Letter of
Credit shall expire at or prior to the close of business on the
earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any extension
thereof, one year after such extension) and (ii) the date that
is five (5) Business Days prior to the Maturity Date; provided that any Letter of
Credit may, with the consent of the applicable Issuing Bank, be
automatically extendable for successive one-year periods (which
shall in no event extend beyond the date referred to in the
foregoing clause (ii)).


(c) 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 any Issuing Bank or the Lenders, each applicable
Issuing Bank hereby grants to each Lender, and each Lender hereby
acquires from such 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.
Each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the applicable Issuing
Bank, such Lender’s Applicable Percentage of each LC
Disbursement made by such Issuing Bank and not reimbursed by the
applicable Borrower on the date due as provided in clause (e) of this Section, or of any
reimbursement payment required to be refunded to the applicable
Borrower for any reason. Each Lender agrees that its obligation to
acquire participations pursuant to this Section 2.5(d) in respect
of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment or
extension of any Letter of Credit or the occurrence and continuance
of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.


(d) Reimbursement. If any Issuing
Bank shall make any LC Disbursement in respect of a Letter of
Credit, the applicable 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 on the date that
such LC Disbursement is made, if the Borrowing Agent shall have
received notice of such LC Disbursement prior to 10:00 a.m. on such
date, or, if such notice has not been received by the Borrowing
Agent prior to such time on such date, then not later than 12:00
noon on (i) the Business Day that the Borrowing Agent receives such
notice, if such notice is received prior to 10:00 a.m. on the
day of receipt, or (ii) the Business Day immediately following the
day that the Borrowing Agent receives such notice, if such notice
is not received prior to such time on the day of receipt;
provided that, if
such LC Disbursement is not less than $50,000, the Borrowing Agent,
on behalf of any Borrower, shall, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.3 that such payment
be financed with a Base Rate Borrowing in an equivalent amount and,
to the extent so financed, the applicable Borrower’s
obligation to make such payment shall be discharged and replaced by
the resulting Base Rate Borrowing. If any 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 Borrowers 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 Borrowers, in the same
manner as provided in Section 2.6 with respect
to Loans made by such Lender (and Section 2.6 shall apply,
mutatis
mutandis, to the
payment obligations of the Lenders), and the Administrative Agent
shall promptly pay to the applicable Issuing Bank the amounts so
received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrowers pursuant to
this Section
2.5(e), the Administrative Agent shall distribute such
payment to the applicable Issuing Bank or, to the extent that
Lenders have made payments pursuant to this Section 2.5(e) to reimburse
such Issuing Bank, then to such Lenders and such Issuing Bank as
their interests may appear. Any payment made by a Lender pursuant
to this Section
2.5(e) to reimburse any Issuing Bank for any LC Disbursement
(other than the funding of Base Rate Loans as contemplated above)
shall not constitute a Loan and shall not relieve any Borrower of
its obligation to reimburse such LC Disbursement.



 

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(e) Obligations Absolute. Each
Borrower’s obligation to reimburse LC Disbursements as
provided in clause (e) of this
Section 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 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
any 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 (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, constitute a legal or
equitable discharge of, or provide a right of recoupment or setoff
against, any Borrower’s Obligations hereunder. None of the
Administrative Agent, the Lenders or any Issuing Bank, or 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 circumstance 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 any Issuing Bank; provided that the foregoing
shall not be construed to excuse any Issuing Bank from liability to
the Borrowers to the extent of any direct damages (as opposed to
indirect, special, punitive, consequential or exemplary damages,
claims in respect of which are hereby waived by each Borrower to
the extent permitted by Applicable Law) suffered by the Borrowers
that are caused by such 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 such Issuing Bank (as determined
in a final and non-appealable judgment by a court of competent
jurisdiction), such Issuing Bank shall be deemed to have exercised
care in each such determination. In furtherance of the foregoing
and without limiting the generality thereof, the parties hereto
expressly agree that the applicable Issuing Bank may, in its sole
discretion, either accept documents that appear on their face to be
in substantial compliance with the terms of the related Letter of
Credit, 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, and such Issuing Bank shall not be responsible for the
validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign a Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any
reason.


(f) Disbursement Procedures. Each
Issuing Bank shall, promptly following its receipt thereof, examine
all documents purporting to represent a demand for payment under a
Letter of Credit issued by it. Such Issuing Bank shall promptly
notify the Administrative Agent and the Borrowing Agent by
telephone (confirmed by telecopy or, if arrangements for doing so
have been approved by the Administrative Agent, electronic
communication) of such demand for payment and whether such 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
any Borrower of its obligation to reimburse such Issuing Bank and
the Lenders with respect to any such LC Disbursement.



 

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(g) Interim Interest. If any
Issuing Bank shall make any LC Disbursement, then, unless the
Borrowers shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made, 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 Base Rate Loans; provided that, if any Borrower
fails to reimburse such LC Disbursement when due pursuant to
clause (e) of
this Section, then
Section 2.12(c)
shall apply. Interest accrued pursuant to this clause (h) shall be for the
account of the applicable Issuing Bank, except that interest
accrued on and after the date of payment by any Lender pursuant to
clause (e) of this
Section to
reimburse such Issuing Bank shall be for the account of such Lender
to the extent of such payment.


(h) Replacement of Issuing Banks.
Any Issuing Bank may be replaced at any time by written agreement
among the Borrowing Agent, the Administrative Agent, the replaced
Issuing Bank and the successor Issuing Bank. The Administrative
Agent shall notify the Lenders of any such replacement of an
Issuing Bank. At the time any such replacement shall become
effective, the Borrowers shall pay all unpaid fees accrued for the
account of the replaced Issuing Bank pursuant to Section 2.11(b)(ii). From and
after the effective date of any such replacement, (i) the successor
Issuing Bank shall have all the rights and obligations of an
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 an Issuing Bank hereunder, the replaced Issuing Bank
shall remain a party hereto and shall continue to have all the
rights and obligations of an 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.


(i) Cash Collateralization. If any
Event of Default shall occur and be continuing, on the Business Day
that the Borrowing Agent receives notice from the Administrative
Agent or the Majority Lenders (or, if the maturity of the Loans has
been accelerated, Lenders with LC Exposures representing greater
than fifty percent (50.0%) of the aggregate LC Exposure) demanding
the deposit of cash collateral pursuant to this clause (j), the Borrowers shall
deposit in an account with the Administrative Agent, in the name of
the Administrative Agent and for the benefit of the Issuing Banks
and the Lenders, an amount in cash equal to 103% of the LC Exposure
as of such date; provided that the obligation to
deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable without
demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to any Borrower described in
Section 7.1(h) or
(i). Such deposit
shall be held by the Administrative Agent as collateral for the
payment and performance of the Obligations. Each Borrower hereby
grants to the Administrative Agent, for the benefit of the Issuing
Banks and the Lenders, and agrees to maintain, a first priority
security interest in all such Cash Collateral to secure the Secured
Obligations, free and clear of all other Liens. The Administrative
Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such cash collateral 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 each Borrower’s risk and
expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such cash
collateral account. Moneys in such cash collateral account shall be
applied by the Administrative Agent to reimburse the Issuing Banks
for LC Disbursements for which they have not been reimbursed and,
to the extent not so applied, shall be held for the satisfaction of
the reimbursement obligations of the Borrowers for the LC Exposure
at such time or, if the maturity of the Loans has been accelerated
(but subject to the consent of Lenders with LC Exposures
representing greater than fifty percent (50.0%) of the aggregate LC
Exposure), shall be applied to satisfy other Obligations. If any
Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default,
such amount (to the extent not applied as aforesaid) shall be
returned to the applicable Borrower within three Business Days
after all Events of Default have been cured or waived. Following
the Termination Date, the balance, if any, in such cash collateral
account shall be returned to the applicable Borrower (or such other
Person as may be lawfully entitled thereto).


(j) Applicability of ISP98 and UCP.
Unless otherwise expressly agreed by the applicable Issuing Bank
and the Borrowing Agent, on behalf of any Borrower, when a Letter
of Credit is issued, (i) the rules of ISP98 shall apply to each
standby Letter of Credit, and (ii) the rules of the Uniform Customs
and Practice for Documentary Credits, as most recently published by
the International Chamber of Commerce at the time of issuance shall
apply to each commercial Letter of Credit.



 

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(k) Letters of Credit Issued for
Subsidiaries. Notwithstanding that a Letter of Credit issued
or outstanding hereunder is in support of any obligations of, or is
for the benefit of, a Subsidiary, each Borrower shall be obligated
to reimburse the applicable Issuing Bank hereunder for any and all
drawings under such Letter of Credit. Each Borrower hereby
acknowledges that the issuance of Letters of Credit for the benefit
of any Subsidiary inures to the benefit of the Borrowers, and that
each Borrower’s business derives substantial benefits from
the business of such Subsidiary.


SECTION
2.6 Funding of Borrowings. 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. 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 Borrowers by promptly crediting the amounts so received, in
like funds, to an account of the Borrowing Agent maintained with
the Administrative Agent and designated by the Borrowing Agent in
the applicable Borrowing Request; provided that Base Rate Loans
made to finance the reimbursement of an LC Disbursement as provided
in Section 2.5(e)
shall be remitted by the Administrative Agent to the applicable
Issuing Bank.


(a) 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 clause (a) of this
Section and may, in
reliance upon such assumption, make available to the Borrowers 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 applicable
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 applicable 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
each Borrower, the interest rate applicable to Base Rate Loans of
the applicable Class. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing. If the applicable
Borrower and such Lender shall pay such interest to the
Administrative Agent for the same or an overlapping period, the
Administrative Agent shall promptly remit to the applicable
Borrower the amount of such interest paid by the applicable
Borrower for such period. Any payment by any Borrower shall be
without prejudice to any claim any Borrower may have against a
Lender that shall have failed to make such payment to the
Administrative Agent.


SECTION
2.7 Interest Elections. 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 or as otherwise specified in Section 2.3. Thereafter, the
Borrowing Agent, on the behalf of any 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. The Borrowing Agent
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.



 

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(a) To make an election
pursuant to this Section, the Borrowing Agent
shall notify the Administrative Agent of such election by telephone
by the time that a Borrowing Request would be required under
Section 2.3 if the
Borrowing Agent were requesting a Borrowing of the Type resulting
from such election to be made on the effective date of such
election. Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or
telecopy (or, if arrangements for doing so have been approved by
the Administrative Agent, electronic communication) to the
Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the
Borrowing Agent.


(b) Each telephonic and
written Interest Election Request shall specify the following
information in compliance with Section 2.2:


(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 clauses (iii)
and (iv) below
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 a Base Rate 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 Borrowing Agent shall
be deemed to have selected an Interest Period of one month’s
duration.


(c) 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.


(d) If the Borrowing
Agent fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing
shall be converted to a Base Rate Borrowing. Notwithstanding any
contrary provision hereof, (i) if an Event of Default has occurred
and is continuing and the Administrative Agent, at the request of
the Majority Lenders, so notifies the Borrowing Agent, then, so
long as an Event of Default is continuing (A) no outstanding
Borrowing may be converted to or continued as a Eurodollar
Borrowing and (B) unless repaid, each Eurodollar Borrowing shall
become a Base Rate Borrowing at the end of the Interest Period
applicable thereto and (ii) if a Borrowing Base Deficiency exists:
(A) outstanding Borrowings may not be converted or continued as
Eurodollar Borrowings to Base Rate Borrowings unless, after giving
effect thereto and to the conversion or continuation of Borrowings
to Base Rate Borrowings, there are Base Rate Borrowings in an
amount no less than the amount of such Borrowing Base Deficiency
and (B) unless sooner repaid, any Eurodollar Borrowing in excess of
the Borrowing Base shall be converted to a Base Rate Borrowing at
the end of the Interest Period applicable thereto.


SECTION
2.8 Termination and Reduction of Aggregate
Maximum Credit Amount.


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



 

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(b) Optional Termination and Reduction of
Aggregate Credit Amounts. The Borrowing Agent, on behalf of
any Borrower, may at any time terminate, or from time to time
reduce, the Aggregate Maximum Credit Amount; provided that (A) each
reduction of the Aggregate Maximum Credit Amount shall be in an
amount that is an integral multiple of $1,000,000 and not less than
$5,000,000 and (B) the Borrowing Agent shall not terminate or
reduce the Aggregate Maximum Credit Amount if, after giving effect
to any concurrent prepayment of the Loans in accordance with
Section 2.10(c),
the total Credit Exposures would exceed the total
Commitments.


(c) Notice of Optional Termination or
Reduction. The Borrowing Agent shall notify the
Administrative Agent of any election to reduce or terminate the
Aggregate Maximum Credit Amount under clause (b) of this
Section 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. Each notice delivered by the Borrowing Agent pursuant to
this Section shall
be irrevocable; provided that a notice of
termination of the Aggregate Maximum Credit Amount delivered by the
Borrowing Agent may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice
may be revoked by the Borrowing Agent (by notice to the
Administrative Agent on or prior to the specified effective date)
if such condition is not satisfied. Any reduction or termination of
the Aggregate Maximum Credit Amount shall be
permanent.


(d) Mandatory Reduction of Aggregate
Maximum Credit Amount. If any reduction in the Borrowing
Base pursuant to Section
2.4 would result in the Borrowing Base being less than the
Aggregate Maximum Credit Amount, the Aggregate Maximum Credit
Amount shall be automatically and permanently reduced, without
premium or penalty, contemporaneously with such reduction in the
Borrowing Base so that the Aggregate Maximum Credit Amount equals
the Borrowing Base as reduced. Concurrently with, and effective on,
the Redetermination Date applicable to such Borrowing Base
reduction, (i) Schedule 1.1(a) and the
Register shall each be amended to reflect the decrease in the
Aggregate Maximum Credit Amount and the Commitment of each Lender
and (ii) the Administrative Agent shall promptly distribute to
the Borrowing Agent, the Administrative Agent, the Issuing Bank and
each Lender the revised Schedule 1.1(a).


(e) Ratable Reduction. Each
reduction in the Aggregate Maximum Credit Amount shall be made
ratably among the Lenders in accordance with their respective
applicable Aggregate Maximum Credit Amount.


SECTION
2.9 Repayment of Loans; Evidence of
Debt. Each 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 Maturity
Date.


(a) Each Lender shall
maintain, in accordance with its usual practice, an account or
accounts evidencing the indebtedness of the Borrowers to such
Lender resulting from each Loan made by such Lender, including the
amounts of principal and interest payable and paid to such Lender
from time to time hereunder.


(b) The Administrative
Agent shall maintain a Register pursuant to Section 9.4(c) and an
account for each Lender in which it shall record (i) the
amount of each Loan made hereunder and any promissory note
evidencing such Loan, the Type thereof and the Interest Period, if
any, applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any
sum received by the Administrative Agent hereunder for the account
of the Lenders and each Lender’s share thereof.


(c) The entries made in
the Register and the accounts maintained pursuant to clause (b)
or (c) of this
Section shall be
prima facie evidence of the existence
and amounts of the Obligations recorded therein; provided that the failure of
any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of
each Borrower to repay the Obligations in accordance with the terms
of this Agreement.


(d) Any Lender may
request that Loans made by it be evidenced by a promissory note
(each, a “Note”) in the form of
Exhibit A. In
such event, each Borrower shall prepare, execute and deliver to
such Lender a Note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered
assigns). Thereafter, the Loans evidenced by such Note and interest
thereon shall at all times (including after assignment pursuant to
Section 9.4)
be represented by one or more Notes payable to the order of the
payee named therein.



 

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SECTION
2.10 Prepayment of
Loans.


(a) Optional Prepayments. The
Borrowing Agent, on behalf of each 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 clause (b) of this Section.


(b) Notice and Terms of Optional
Prepayment. The Borrowing Agent shall notify the
Administrative Agent by telephone (confirmed by telecopy or, if
arrangements for doing so have been approved by the Administrative
Agent, electronic communication) of any prepayment hereunder (i) in
the case of prepayment of a Eurodollar Borrowing, not later than
11:00 a.m. three (3) Business Days before the date of
prepayment, or (ii) in the case of prepayment of a Base Rate
Borrowing, not later than 11:00 a.m. one (1) Business Day
before the date of prepayment; provided that, if a notice of
prepayment is given in connection with a conditional notice of
termination of the Aggregate Maximum Credit Amount as contemplated
by Section 2.8, then such
notice of prepayment may be revoked if such notice of termination
is revoked in accordance with Section 2.8. 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 under
Section 2.10(a)
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 2.2. Prepayments
shall be accompanied by accrued interest to the extent required by
Section 2.12. If a
Eurodollar Loan is prepaid on any day other than the last day of
the Interest Period applicable thereto, the Borrowing Agent shall
also pay any amounts owing pursuant to Section 2.16.


(c) Mandatory
Prepayments.


(i) If, after giving
effect to any termination or reduction of the Aggregate Maximum
Credit Amount pursuant to Section 2.8, the total Credit
Exposures exceeds the total Commitments, then the Borrowing Agent,
on behalf of each Borrower, shall (A) prepay the Borrowings on the
date of such termination or reduction in an aggregate principal
amount equal to such excess, and (B) if any excess remains after
prepaying all of the Borrowings as a result of an LC Exposure, pay
to the Administrative Agent on behalf of the Lenders an amount
equal to such excess to be held as cash collateral as provided in
Section
2.5(j).


(ii) Upon
any redetermination of or adjustment to the amount of the Borrowing
Base in accordance with Section 2.4(b) at any time, if
the total Credit Exposures exceeds the redetermined or adjusted
Borrowing Base, then within ten (10) Business Days of receipt of
notice from the Administrative Agent that a Borrowing Base
Deficiency then exists, then Borrowing Agent must (A) notify the
Administrative Agent that it shall make a mandatory prepayment
equal to the amount of the Borrowing Base Deficiency within thirty
(30) days from and after receipt by the Borrowing Agent of notice
of the Borrowing Base Deficiency or elect to make payments at least
equal to the Required Deficiency Payment on each Borrowing Base
Deficiency Payment Date, (B) notify the Administrative Agent that
it shall execute and deliver, or cause one or more Subsidiaries to
execute and deliver, to the Administrative Agent within thirty (30)
days from and after receipt by the Borrowing Agent of notice of the
Borrowing Base Deficiency, supplemental or additional Security
Documents, in form and substance reasonably satisfactory to the
Administrative Agent securing payment of the Obligations and
covering other Properties of such Borrower or such Subsidiaries, as
applicable, including additional Oil and Gas Properties directly
owned by such Borrower or such Subsidiaries that are not then
covered by any Security Document and that are of a type and nature
satisfactory to the Administrative Agent, and having a value (as
determined by the Administrative Agent and the Lenders in their
sole discretion), in addition to other Oil and Gas Properties
already subject to a Mortgage, in an amount at least equal to the
Borrowing Base Deficiency; provided, that if the Borrowing
Agent shall elect to execute and deliver (or cause one or more
Subsidiaries to execute and deliver) supplemental or additional
Security Documents to the Administrative Agent pursuant to
subclause (B) of
this Section
2.10(c)(ii), it shall provide concurrently within such
thirty (30) day period to the Administrative Agent descriptions of
the additional assets to be mortgaged or pledged thereby (together
with current valuations, engineering reports, title evidence or
opinions applicable thereto and other documents (including opinions
of counsel) reasonably requested by the Administrative Agent, each
of which shall be in form and substance reasonably satisfactory to
the Administrative Agent) or (C) notify the Administrative Agent
that the Borrowing Agent will implement a combination of the
actions described in the foregoing subclauses (A) and (B) that are acceptable to the
Administrative Agent (and thereafter implement such actions in
accordance with subclauses
(A) and (B)); and further provided that if the
Administrative Agent has not received within such ten (10) Business
Day period the required notice from the Borrowing Agent that such
Borrower shall take the actions described in subclause (B) within such
thirty (30) day period, then without any necessity for notice to
the Borrowing Agent or any other Person, such Borrower shall be
deemed to have elected to make mandatory prepayments equal to at
least the Required Deficiency Payment for each Borrowing Base
Deficiency Payment Date. Notwithstanding the foregoing, all
payments required to be made pursuant to this Section 2.10(c)(ii) must
be made on or prior to the Termination Date.



 

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(iii) Upon
any adjustments to the Borrowing Base pursuant to Section 2.4(f) or
(g), if the total
Credit Exposures exceed the Borrowing Base as adjusted, then the
Borrowers 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, pay
to the Administrative Agent on behalf of the Lenders an amount
equal to such excess to be held as cash collateral as provided in
Section 2.5(j). The
Borrowers shall be obligated to make such prepayment and/or deposit
of cash collateral on the date of such Disposition or Hedge
Liquidation; provided that all payments
required to be made pursuant to this Section 2.10(c)(iii) must be
made on or prior to the Maturity Date.


(iv) If,
as of any Business Day, the Consolidated Cash Balance exceeds
$5,000,000, the Borrowers shall make a mandatory prepayment of
outstanding principal of the Loans in an amount equal to such
excess on the next succeeding Business Day, which prepayment shall
be applied pro rata among Loans constituting Base Rate Loans, if
any, until repaid in full, then to Loans constituting LIBO Rate
Loans having the same Interest Period, beginning with the LIBO Rate
Loans having the shortest remaining Interest Period, of all Lenders
until all Loans have been paid in full and, if any amount of such
proceeds remains, deposit Cash Collateral with the Administrative
Agent as security for the Letter of Credit Exposure in accordance
with Section 2.5(j);
provided,
however, that no
such prepayment shall be required in connection with the existence
of any such excess if a Responsible Officer of the Borrowing Agent
delivers a certificate to the Administrative Agent on or prior to
the date a prepayment would otherwise be required under this
Section 2.10(c)(iv)
certifying that such excess will be applied (and not retained by
any Borrower or any Subsidiary) within three (3) Business Days
thereafter for a purpose that is not prohibited by the Credit
Agreement (and agreeing and covenanting that, if not so used, such
excess will be repaid in accordance with this Section 2.10(c)(iv) on the
next Business Day).


SECTION
2.11 Fees. (a) The Borrowers agree
to pay to the Administrative Agent for the account of each Lender a
commitment fee, which shall accrue at the Commitment Fee Rate on
the daily amount of the unused Commitment of such Lender during the
period from and including the Effective Date to but excluding the
date on which such Commitment terminates. Accrued commitment fees
shall be payable in arrears on the last day of March, June,
September and December of each year and on the date on which the
Commitments terminate, commencing on the first such date to occur
after the date hereof.


(b) The Borrowers agree
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 Effective
Date 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 (provided that this clause (i) is subject to
Section 2.12(c))
and (ii) to each applicable 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) allocable to Letters
of Credit issued by such Issuing Bank during the period from and
including the Effective Date 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, as well as the applicable Issuing
Bank’s standard fees with respect to the issuance, amendment
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
Effective Date; provided that all such fees
shall be payable on the date on which the Commitments terminate,
and any such fees accruing after the date on which the Commitments
terminate shall be payable on demand. Any other fees payable to the
Issuing Banks pursuant to this Section 2.11(b) shall be
payable within ten days after demand.



 

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(c) The Borrowers agree
to pay to the Administrative Agent, for its own account, fees
payable in the amounts and at the times separately agreed upon
between the Borrowing Agent and the Administrative
Agent.


(d) All fees payable
under this Section
shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first
day but excluding the last day). Each determination by the
Administrative Agent of a fee hereunder shall be conclusive absent
manifest error.


(e) All fees payable
hereunder shall be paid on the dates due, in immediately available
funds, to the Administrative Agent (or to the applicable Issuing
Bank, in the case of fees payable to it) for distribution, in the
case of commitment fees and participation fees, to the Lenders.
Fees, once paid, shall be fully earned and shall not be refundable
under any circumstances.


SECTION
2.12 Interest. The Loans comprising
each Base Rate Borrowing shall bear interest at the Alternate
Base Rate plus the Applicable Margin.


(a) 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.


(b) Notwithstanding the
foregoing, (i) if any principal of or interest on any Loan or
any fee or other amount payable by any 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 2.10(c), or if an
Event of Default has occurred and is continuing, then, such overdue
amount, in the case of a failure to pay amounts when due, and at
the option of the Majority Lenders, all Loans outstanding, in the
case of any other Event of Default, shall bear interest, after as
well as before judgment, at a rate per annum equal to two percent
(2%) plus the rate applicable to Base Rate Borrowings as provided
in Section 2.12(a),
but in no event to exceed the Highest Lawful Rate, and
(ii) during any Borrowing Base Deficiency (after the
expiration of the 30-day period provided in Section 2.10(c)(ii)), all Loans
outstanding at such time shall bear interest, after as well as
before judgment, at the rate then applicable to such Loans, plus
the Applicable Margin, if any, plus an additional two percent (2%),
but in no event to exceed the Highest Lawful Rate.


(c) Accrued interest on
each Loan shall be payable in arrears on each Interest Payment Date
for such Loan upon termination of the Commitments; provided that (i) interest
accrued pursuant to clause
(c) of this Section shall be payable on
demand, (ii) in the event of any repayment or prepayment of any
Loan (other than a prepayment of a Base Rate Loan prior to the end
of the Availability Period), 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.


(d) All interest
hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime
Rate shall be computed on the basis of a year of 365 days (or 366
days in a leap year) and, in each case, shall be payable for the
actual number of days elapsed (including the first day but
excluding the last day). The applicable Alternate Base Rate or LIBO
Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest
error.


SECTION
2.13 Alternate Rate of Interest.
Notwithstanding any other provision of this Agreement (other than
Section 2.15), if
prior to the commencement of any Interest Period for a Eurodollar
Borrowing:



 

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


(b) the Administrative
Agent is advised by the Majority Lenders that the Adjusted LIBO
Rate 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 an Interest Period with the
duration of such Interest Period;


then
the Administrative Agent shall give notice thereof to the Borrowing
Agent and the Lenders by telephone, telecopy or (if arrangements
for doing so have been approved by the Administrative Agent)
electronic communication as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrowing Agent and the
Lenders that the circumstances giving rise to such notice no longer
exist, then (i) any Interest Election Request that requests the
conversion of any Borrowing to, or continuation of any Borrowing
as, a Eurodollar Borrowing with an Interest Period having the
duration of such Interest Period shall be ineffective and (ii) if
any Borrowing Request requests a Eurodollar Borrowing with an
Interest Period having the duration of such Interest Period, such
Borrowing shall be made as a Eurodollar Borrowing having an
Interest Period with the shortest available duration described in
the definition of “Interest Period” or, in the absence
of any such available duration, as a Base Rate
Borrowing.


SECTION
2.14 Increased Costs.


(a) Increased Costs Generally. If
any Change in Law shall:


(i) impose, modify or
deem applicable any reserve, special deposit, liquidity, compulsory
loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or
participated in by, any Lender (except any reserve requirement
contemplated by Section
2.14(e)) or any Issuing Bank;


(ii) subject
any Recipient to any Taxes (except to the extent such Taxes are
Indemnified Taxes for which relief is sought under Section 2.17, Taxes described
in clauses (b)
through (d) of the
definition of “Excluded Taxes” or
Connection Income Taxes) on its loans, loan principal, letters of
credit, commitments or other obligations, or its deposits,
reserves, other liabilities or capital attributable thereto;
or


(iii) impose
on any Lender or any Issuing Bank or the London interbank market
any other condition, cost or expense (other than Taxes) affecting
this Agreement or Loans made by such Lender or any Letter of Credit
or participation therein;


and the
result of any of the foregoing shall be to increase the cost to
such Lender or such other Recipient of making, converting to,
continuing or maintaining any Eurodollar Loan (or, in the case of
any Change in Law with respect to Taxes, any Loan) or of
maintaining its obligation to make any such Loan, or to increase
the cost to such Lender, such Issuing Bank or such other Recipient
of participating in, issuing or maintaining any Letter of Credit
(or of maintaining its obligation to participate in or to issue any
Letter of Credit), or to reduce the amount of any sum received or
receivable by such Lender, Issuing Bank or other Recipient
hereunder (whether of principal, interest or any other amount),
then, upon request of such Lender, Issuing Bank or other Recipient,
the Borrowers will pay to such Lender, Issuing Bank or other
Recipient, as the case may be, such additional amount or amounts as
will compensate such Lender, Issuing Bank or other Recipient, as
the case may be, for such additional costs incurred or reduction
suffered.


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



 

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(c) Certificates for Reimbursement.
A certificate of a Lender, Issuing Bank or other Recipient setting
forth the amount or amounts necessary to compensate such Lender,
Issuing Bank or other Recipient or its holding company, as the case
may be, as specified in clause (a) or (b) of this Section and delivered to the
Borrowing Agent, shall be conclusive absent manifest error. The
Borrowers shall pay such Lender, Issuing Bank or other Recipient,
as the case may be, the amount shown as due on any such certificate
within ten days after receipt thereof.


(d) Delay in Requests. Failure or
delay on the part of any Lender, Issuing Bank or other Recipient to
demand compensation pursuant to this Section shall not constitute a
waiver of such Lender’s, Issuing Bank’s or other
Recipient’s right to demand such compensation.


(e) Eurocurrency Liabilities. Each
Borrower shall pay to each Lender, as long as such Lender shall be
required to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits
(currently known as “Eurocurrency
liabilities”), additional interest on the unpaid
principal amount of each Eurodollar Loan equal to the actual costs
of such reserves allocated to such Loan by such Lender (as
determined by such Lender in good faith, which determination shall
be conclusive), which shall be due and payable on each date on
which interest is payable on such Loan; provided the Borrowing Agent
shall have received at least ten days’ prior notice (with a
copy to the Administrative Agent) of such additional interest from
such Lender. If a Lender fails to give notice ten days prior to the
relevant Interest Payment Date, such additional interest shall be
due and payable ten days from receipt of such notice.


SECTION
2.15 Change in Legality.
Notwithstanding any other provision of this Agreement, if any
Change in Law shall make it unlawful for any Lender to make or
maintain, or convert any Loan into, a Eurodollar Loan, then, upon
written notice by such Lender to the Borrowing Agent and to the
Administrative Agent, which notice shall specify the extent of such
unlawfulness (e.g., whether such unlawfulness applies to Eurodollar
Loans generally or only to Interest Periods of a particular
length):


(a) any request for the
making or continuation of, or the conversion of Base Rate Loans
into, Eurodollar Loans shall, solely as to such Lender and to the
extent a Eurodollar Loan by such Lender would be (or during the
applicable Interest Period would become) unlawful, be disregarded
and the Loan of such Lender that would be part of the applicable
Borrowing of Eurodollar Loans shall be made as, converted to or
continue to be maintained as a Base Rate Loan; and


(b) each outstanding
Eurodollar Loan of such Lender shall, on the last day of the
Interest Period therefor (unless such Loan may be continued as a
Eurodollar Loan for the full duration of any requested new Interest
Period without being unlawful) or on such earlier date as such
Lender shall specify is necessary pursuant to the applicable Change
in Law, convert to a Base Rate Loan.


SECTION
2.16 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 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 (regardless of whether such notice
may be revoked under Section 2.8(c) and is
revoked in accordance therewith) 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 Borrowing Agent
pursuant to Section 2.20, then, in any
such event, the Borrowers shall compensate each Lender for the
loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, such loss, cost or expense to any Lender shall be
deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest that would have
accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate that would have been applicable
to such Loan, for the period from the date of such event to the
last day of the then-current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period
that would have been the Interest Period for such Loan) over (ii)
the amount of interest that would accrue on such principal amount
for such period at the interest rate that 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
shall be delivered to the Borrowing Agent and shall be conclusive
absent manifest error. The Borrowers shall pay such Lender the
amount shown as due on any such certificate within ten days after
receipt thereof.



 

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SECTION
2.17 Taxes.


(a) Issuing Bank; FATCA. For
purposes of this Section
2.17, the term “Lender” includes any Issuing
Bank and the term “Applicable Law” includes
FATCA.


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


(c) Payment of Other Taxes by the
Borrowers. Each Borrower shall timely pay to the relevant
Governmental Authority in accordance with Applicable Law, or, at
the option of the Administrative Agent, timely reimburse it for the
payment of, any Other Taxes.


(d) Indemnification by the
Borrower. Each Borrower hereby indemnifies each Recipient,
within ten days after demand therefor, for the full amount of any
Indemnified Taxes (including Indemnified Taxes imposed or asserted
on or attributable to amounts payable under this Section) payable or paid by
such Recipient or required to be withheld or deducted from a
payment to such Recipient and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.
Promptly upon having knowledge that any such Indemnified Taxes have
been levied, imposed or assessed, and promptly upon notice by the
Administrative Agent or any Lender, the Borrowers shall pay such
Indemnified Taxes directly to the relevant taxing authority or
Governmental Authority, provided that neither the
Administrative Agent nor any Lender shall be under any obligation
to provide any such notice to any Borrower. A certificate as to the
amount of such payment or liability delivered to the Borrowing
Agent by a Lender (with a copy to the Administrative Agent), or by
the Administrative Agent on its own behalf or on behalf of a
Lender, shall be conclusive absent manifest error. Each Borrower
hereby indemnifies the Administrative Agent, and shall make payment
in respect thereof within ten days after demand therefor, for any
amount that a Lender for any reason fails to pay indefeasibly to
the Administrative Agent as required by Section 2.17(e). Each
Lender shall indemnify each Borrower, and shall make payment in
respect thereof, within ten days after demand therefor, for any
amount that any Borrower is required to pay to the Administrative
Agent pursuant to the immediately preceding sentence.


(e) Indemnification by the Lenders.
Each Lender shall severally indemnify the Administrative Agent,
within ten days after demand therefor, for (i) any Indemnified
Taxes attributable to such Lender (but only to the extent that the
Loan Parties have not already indemnified the Administrative Agent
for such Indemnified Taxes and without limiting the obligation of
the Loan Parties to do so), (ii) any Taxes attributable to such
Lender’s failure to comply with the provisions of
Section 9.4(d)
relating to the maintenance of a Participant Register and (iii) any
Excluded Taxes attributable to such Lender, in each case, that are
payable or paid by the Administrative Agent in connection with any
Loan Document, and any reasonable expenses arising therefrom or
with respect thereto, whether or not such Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability
delivered to any Lender by the Administrative Agent shall be
conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at
any time owing to such Lender under any Loan Document or otherwise
payable by the Administrative Agent to the Lender from any other
source against any amount due to the Administrative Agent under
this clause
(e).



 

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(f) Evidence of Payments. As soon
as practicable after any payment of Taxes by any Borrower to a
Governmental Authority pursuant to this Section 2.17, the
Borrowing Agent 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.


(g) Status of Lenders. Any Lender
that is entitled to an exemption from or reduction of withholding
Tax with respect to payments made under any Loan Document shall
deliver to the Borrowing Agent and the Administrative Agent, at the
time or times reasonably requested by the Borrowing Agent or the
Administrative Agent, such properly completed and executed
documentation reasonably requested by the Borrowing Agent or the
Administrative Agent as will permit such payments to be made
without withholding or at a reduced rate of withholding. In
addition, any Lender, if reasonably requested by the Borrowing
Agent or the Administrative Agent, shall deliver such other
documentation prescribed by Applicable Law or reasonably requested
by the Borrowing Agent or the Administrative Agent as will enable
the Borrowing Agent 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 Sections 2.17(g)(ii)(A)
and (ii)(B) and
2.17(h) 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, in the event that any Borrower is
a U.S. Person,


(A) any Lender that is
a U.S. Person shall deliver to the Borrowing Agent 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 Borrowing Agent 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 Borrowing Agent 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 Borrowing Agent 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 or IRS Form W-8BEN-E, 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 or IRS Form W-8BEN-E, as applicable,
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 IRC, (x) a certificate
substantially in the form of Exhibit G-1 to the effect
that such Foreign Lender is not a “bank” within the
meaning of Section 881(c)(3)(A) of the IRC, a “10 percent
shareholder” of any Borrower within the meaning of Section
881(c)(3)(B) of the IRC, or a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the
IRC (a “U.S. Tax
Compliance Certificate”) and (y) executed copies of
IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable;
or



 

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


(C) any Foreign Lender
shall, to the extent it is legally entitled to do so, deliver to
the Borrowing Agent 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 Borrowing Agent 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
Borrowing Agent or the Administrative Agent to determine the
withholding or deduction required to be made.


(h) Documentation Required by
FATCA. 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 IRC, as applicable), such Lender shall deliver to
the Borrowing Agent and the Administrative Agent at the time or
times prescribed by law and at such time or times reasonably
requested by the Borrowing Agent or the Administrative Agent such
documentation prescribed by Applicable Law (including as prescribed
by Section 1471(b)(3)(C)(i) of the IRC) and such additional
documentation reasonably requested by the Borrowing Agent or the
Administrative Agent as may be necessary for the Borrowing Agent
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 (h),
“FATCA”
shall include any amendments made to FATCA after the date of this
Agreement.


(i) Treatment of Certain Refunds.
Unless required by Applicable Law, at no time shall the
Administrative Agent have any obligation to file for or otherwise
pursue on behalf of any Recipient, or have any obligation to pay to
any Recipient, any refund of Taxes withheld or deducted from funds
paid for the account of such Recipient, as the case may be. If any
Recipient determines, in its sole discretion, that it has received
a refund of any Taxes as to which it has been indemnified pursuant
to this Section 2.17 (including by
the payment of additional amounts pursuant to this Section 2.17), it shall
pay to the indemnifying party an amount equal to such refund (but
only to the extent of indemnity payments made under this
Section with
respect to the Taxes giving rise to such refund), net of all
out-of-pocket expenses (including Taxes) of such indemnified party
and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund). Such
indemnifying party, upon the request of such Recipient, shall repay
to such Recipient the amount paid over pursuant to this
clause (i) (plus
any penalties, interest or other charges imposed by the relevant
Governmental Authority) in the event that such Recipient is
required to repay such refund to such Governmental Authority.
Notwithstanding anything to the contrary in this clause (i), in no event
will a Recipient be required to pay any amount to an indemnifying
party pursuant to this clause (i) the payment of which
would place such Recipient in a less favorable net after-Tax
position than such Recipient would have been in if the Tax subject
to indemnification and giving rise to such refund had not been
deducted, withheld or otherwise imposed and the indemnification
payments or additional amounts with respect to such Tax had never
been paid. This clause (i) shall not be
construed to require any Recipient to make available its Tax
returns (or any other information relating to its Taxes that it
deems confidential) to the indemnifying party or any other
Person.



 

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(j) Survival. Each party’s
obligations under this Section 2.17 shall survive the
resignation or replacement of the Administrative Agent or 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.


(k) Updates. Each Lender agrees
that if any form or certification it previously delivered pursuant
to this Section
2.17 expires or becomes obsolete or inaccurate in any
respect, it shall update such form or certification or promptly
notify the Borrowing Agent and the Administrative Agent in writing
of its legal inability to do so.


SECTION
2.18 Payments Generally. Each
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 2.14, 2.16 or 2.17, or otherwise) prior to
11:00 a.m. on the date when due, in immediately available
funds, without defense, deduction, recoupment, set-off or
counterclaim. 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 and fees with respect thereto. All
such payments shall be made to the Administrative Agent to such
account as the Administrative Agent shall specify from time to time
by notice to the Borrowing Agent, except payments to be made
directly to any Issuing Bank as expressly provided herein and
except that payments pursuant to Sections 2.14, 2.16, 2.17 and 9.3 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.


SECTION
2.19 Pro-Rata Treatment; Sharing of
Set-offs.


(a) 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.


(b) If any Lender
shall, by exercising any right of setoff or counterclaim or
otherwise, obtain payment or other recovery in respect of any
principal of or interest on any of its Loans or other obligations
hereunder resulting in such Lender receiving payment of a
proportion of the aggregate amount of its Loans and accrued
interest thereon or other such obligations greater than its
pro rata share thereof as provided
herein, then the Lender receiving such greater proportion shall (i)
notify the Administrative Agent of such fact and (ii) purchase (for
cash at face value) participations in the Loans and such other
obligations of the other Lenders, or make such other adjustments as
shall be equitable, 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 other amounts owing to them; provided that:


(x) 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 the purchase price restored to the extent of such
recovery, without interest; and


(y) the
provisions of this Section
2.19 shall not be construed to apply to (A) any payment
made by any Borrower pursuant to and in accordance with the express
terms of this Agreement (including the application of funds arising
from the existence of a Defaulting Lender), (B) the application of
Cash Collateral provided for in Section 2.21, or (C) 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 any
Borrower or any Subsidiary or Affiliate thereof (as to which the
provisions of this Section 2.19 shall
apply).


Each
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 each Borrower rights of setoff and counterclaim with
respect to such participation as fully as if such Lender were a
direct creditor of each Borrower in the amount of such
participation.



 

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(c) Unless the
Administrative Agent shall have received notice from the Borrowing
Agent prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing
Banks hereunder that any Borrower will not make such payment, the
Administrative Agent may assume that each 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
Banks, as the case may be, the amount due. In such event, if any
Borrower has not in fact made such payment, then each of the
Lenders or the Issuing Banks, 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.


(d) The obligations of
the Lenders hereunder to make Loans, to fund participations in
Letters of Credit and to make payments pursuant to Section 9.3(c) are several
and not joint. The failure of any Lender to make any Loan, to fund
any such participation or to make any payment under Section 9.3(c) on any date
required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall
be responsible for the failure of any other Lender to so make its
Loan, to purchase its participation or to make its payment under
Section 9.3(c).


SECTION
2.20 Mitigation Obligations; Replacement of
Lenders.


(a) Designation of a Different Lending
Office. If any Lender requests compensation under
Section 2.14,
or delivers a notice described in Section 2.15, or requires any
Borrower to pay any Indemnified Tax or additional amount to any
Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.17, then such
Lender shall (at the request of the Borrowing Agent) use reasonable
efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i)
would eliminate or reduce any amount payable pursuant to
Section 2.14 or
2.17, or
illegality, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. Each Borrower
hereby agrees to pay all reasonable costs and expenses incurred by
any Lender in connection with any such designation or
assignment.


(b) Replacement of Lenders. If any
Lender (i) requests compensation under Section 2.14, or if any
Lender delivers a notice described in Section 2.15 or if any Borrower
is required to pay any Indemnified Tax or additional amount to any
Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.17, and, in each
case, such Lender has declined or is unable to designate a
different lending office in accordance with Section 2.20(a) (each such
Lender, an “Increased Cost Lender”),
or (ii) is a Defaulting Lender or a Non-Consenting Lender, or (iii)
does not give its consent or deemed consent to any proposed
increase in the Borrowing Base set forth in a Proposed Borrowing
Base Notice as to which the Required Lenders have given their
consent or deemed consent, then the Borrowing Agent may, at its
sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the
restrictions contained in, and consents required by, Section 9.4), all of its
interests, rights (other than its existing rights to payments
pursuant to Section 2.14 or
Section 2.17)
and obligations under this Agreement and the related Loan Documents
to an Eligible Assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such
assignment); provided that:


(i) the Borrowing Agent
shall have paid to the Administrative Agent the assignment fee (if
any) specified in Section 9.4;



 

49







 






(ii) such
Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder and under the other Loan Documents
(including any amounts under Section 2.16) from the
assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrowing Agent (in the case of all other
amounts);


(iii) in
the case of any such assignment resulting from a claim for
compensation under Section
2.14 or payments required to be made pursuant to
Section 2.17, such
assignment will result in a reduction in such compensation or
payments thereafter;


(iv) in
the case of any such assignment resulting from a notice of
illegality under Section
2.15, such assignment will eliminate such
illegality;


(v) such assignment
does not conflict with Applicable Law;


(vi) in
the case of any such assignment resulting from a Lender becoming a
Non-Consenting Lender, the applicable assignee shall have consented
to the applicable amendment, waiver or consent;


(vii) in
the case of any such assignment resulting from a Lender not giving
its consent to a proposed increase in the Borrowing Base as
described in Section
2.20(b), the applicable assignee shall have consented to the
proposed increase; and


(viii) no
Event of Default shall then exist.


A
Lender shall not be required to make any such assignment or
delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrowers to
require such assignment and delegation cease to apply.
Notwithstanding the foregoing, a Lender shall not be required to
make any such assignment or delegation if such Lender or any
Affiliate thereof has any outstanding Secured Party Hedge
Transaction, unless on or prior thereto, all such Secured Party
Hedge Transactions 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. Each Lender and Issuing Bank hereby
grants to the Administrative Agent an irrevocable power of attorney
(which power is coupled with an interest) to execute and deliver,
on behalf of such Lender or Issuing Bank, as the case may be, as
assignor, any Assignment and Assumption necessary to effect any
assignment of such Lender’s or Issuing Bank’s interests
hereunder in the circumstances contemplated by this Section 2.20. Each Lender
agrees that if the Borrowing Agent exercises its option hereunder
to cause an assignment by such Lender as an Increased Cost Lender,
Non-Consenting Lender or Defaulting Lender, such Lender shall,
promptly after receipt of written notice of such election, execute
and deliver all documentation necessary to effect such assignment
in accordance with Section
9.4. In the event that a Lender does not comply with the
requirements of the immediately preceding sentence within one
Business Day after receipt of such notice, each Lender hereby
authorizes and directs the Administrative Agent to execute and
deliver such documentation as may be required to give effect to an
assignment in accordance with Section 9.4 on behalf of an
Increased Cost Lender, Non-Consenting Lender or Defaulting Lender
and any such documentation so executed by the Administrative Agent
shall be effective for purposes of documenting an assignment
pursuant to Section
9.4.


SECTION
2.21 Cash Collateral. At any time
that there shall exist a Defaulting Lender, within one Business Day
following the written request of the Administrative Agent or any
Issuing Bank (with a copy to the Administrative Agent), each
Borrower shall Cash Collateralize the Issuing Banks’ Fronting
Exposures with respect to such Defaulting Lender (determined after
giving effect to Section 2.22(a)(iv) and
any Cash Collateral provided by such Defaulting Lender) in an
amount not less than the Minimum Cash Collateral
Amount.


(a) Grant of Security Interest.
Each Borrower, and to the extent provided by any Defaulting Lender,
such Defaulting Lender, hereby grants to the Administrative Agent,
for the benefit of the Issuing Banks, and agrees to maintain, a
first priority security interest in all such Cash Collateral as
security for such Defaulting Lender’s obligation to fund
participations in respect of LC Exposure, to be applied pursuant to
clause (b) below.
If, at any time, the Administrative Agent determines that Cash
Collateral is subject to any right or claim of any Person other
than the Administrative Agent and the Issuing Banks as herein
provided, or that the total amount of such Cash Collateral is less
than the Minimum Cash Collateral Amount, each Borrower will,
promptly upon demand by the Administrative Agent, pay or provide to
the Administrative Agent additional Cash Collateral in an amount
sufficient to eliminate such deficiency (after giving effect to any
Cash Collateral provided by the applicable Defaulting
Lender).



 

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(b) Application. Notwithstanding
anything to the contrary contained in this Agreement, Cash
Collateral provided under this Section 2.21 or Section 2.22 in respect of
Letters of Credit shall be applied to the satisfaction of the
Defaulting Lender’s obligation to fund participations in
respect of LC Exposure (including, as to Cash Collateral provided
by a Defaulting Lender, any interest accrued on such obligation)
for which the Cash Collateral was so provided, prior to any other
application of such property as may otherwise be provided for
herein.


(c) Termination of Requirement.
Cash Collateral (or the appropriate portion thereof) provided to
reduce any Issuing Bank’s Fronting Exposure shall no longer
be required to be held as Cash Collateral pursuant to this
Section 2.21
following (i) the elimination of the applicable Fronting Exposure
(including by the termination of Defaulting Lender status of the
applicable Lender) or (ii) the determination by the Administrative
Agent and each Issuing Bank that there exists excess Cash
Collateral; provided that, subject to
Section 2.22, the
Person providing Cash Collateral and each Issuing Bank may agree
that Cash Collateral shall be held to support future anticipated
Fronting Exposure or other obligations; and provided further that, to the extent
that such Cash Collateral was provided by any Borrower, such Cash
Collateral shall remain subject to the security interest granted
pursuant to the Loan Documents.


SECTION
2.22 Defaulting
Lenders.


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


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


(ii) Defaulting
Lender Waterfall. Any payment of principal, interest, fees
or other amounts received by the Administrative Agent for the
account of such Defaulting Lender (whether voluntary or mandatory,
at maturity, pursuant to Article VII or otherwise), or
received by the Administrative Agent from a Defaulting Lender
pursuant to Section
9.8, shall be applied at such time or times as may be
determined by the Administrative Agent as follows: first, to the
payment of any amounts owing by such Defaulting Lender to the
Administrative Agent hereunder; second, to the payment on a pro
rata basis of any amounts owing by such Defaulting Lender to any
Issuing Bank hereunder; third, to Cash Collateralize the Issuing
Banks’ Fronting Exposures with respect to such Defaulting
Lender in accordance with Section 2.21; fourth, as the
Borrowing Agent may request (so long as no Default exists), to the
funding of any Loan in respect of which such Defaulting Lender has
failed to fund its portion thereof as required by this Agreement,
as determined by the Administrative Agent; fifth, if so determined
by the Administrative Agent in its discretion, to be held in a
deposit account as Cash Collateral for release in such order as the
Administrative Agent shall determine in order to satisfy (x) such
Defaulting Lender’s potential future funding obligations with
respect to Loans under this Agreement, (y) the Issuing Banks’
future Fronting Exposure with respect to such Defaulting Lender
with respect to future Letters of Credit issued under this
Agreement, in accordance with Section 2.21, and (z) such
Defaulting Lender’s future indemnity obligations to the
Administrative Agent under this Agreement; sixth, to the payment of
any amounts owing to the Lenders or the Issuing Banks as a result
of any judgment of a court of competent jurisdiction obtained by
any Lender or the Issuing Banks against such Defaulting Lender as a
result of such Defaulting Lender’s breach of its obligations
under this Agreement; seventh, so long as no Default exists, to the
payment of any amounts owing to any Borrower as a result of any
judgment of a court of competent jurisdiction obtained by such
Borrower against such Defaulting Lender as a result of such
Defaulting Lender’s breach of its obligations under this
Agreement; and eighth, to such Defaulting Lender or as otherwise
directed by a court of competent jurisdiction; provided that, if (x) such
payment is a payment of the principal amount of any Loans or LC
Disbursements in respect of which such Defaulting Lender has not
fully funded its appropriate share and (y) such Loans were made, or
the related Letters of Credit were issued, at a time when the
conditions set forth in Section 4.2 were satisfied or
waived, such payment shall be applied solely to pay the Loans of,
and LC Disbursements owed to, all Non-Defaulting Lenders on a pro
rata basis prior to being applied to the payment of any Loans of,
or LC Disbursements owed to, such Defaulting Lender until such time
as all Loans and funded and unfunded participations in LC Exposure
are held by the Lenders pro rata in accordance with the Commitments
without giving effect to Section 2.22(a)(iv). Any
payments, prepayments or other amounts paid or payable to a
Defaulting Lender that are applied (or held) to pay amounts owed by
a Defaulting Lender or to post Cash Collateral pursuant to this
Section 2.22(a)(ii)
shall be deemed paid to and redirected by such Defaulting Lender,
and each Lender irrevocably consents hereto..



 

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(iii) Certain
Fees.


(A) No Defaulting
Lender shall be entitled to receive any commitment fee pursuant to
Section 2.11(a) for
any period during which that Lender is a Defaulting Lender (and the
Borrowers shall not be required to pay any such fee that otherwise
would have been required to have been paid to that Defaulting
Lender).


(B) Each Defaulting
Lender shall be entitled to receive participation fees under
Section 2.11(b)
with respect to its participation in Letters of Credit for any
period during which that Lender is a Defaulting Lender only to the
extent allocable to its Applicable Percentage of the stated amount
of Letters of Credit for which it has provided Cash Collateral
pursuant to Section
2.21.


(C) With respect to any
participation fees with respect to Letters of Credit not required
to be paid to any Defaulting Lender pursuant to clause (B) above, the Borrowers
shall (x) pay to each Non-Defaulting Lender that portion of any
such fee otherwise payable to such Defaulting Lender with respect
to such Defaulting Lender’s participation in LC Exposure that
has been reallocated to such Non-Defaulting Lender pursuant to
clause (iv) below,
(y) pay to each Issuing Bank the amount of any such fee otherwise
payable to such Defaulting Lender to the extent allocable to such
Issuing Bank’s Fronting Exposure to such Defaulting Lender
and (z) not be required to pay the remaining amount of any such
fee.


(iv) Reallocation
of Participations to Reduce Fronting Exposure. All or any
part of such Defaulting Lender’s participation in LC Exposure
shall be reallocated among the Non-Defaulting Lenders in accordance
with their respective Applicable Percentages (calculated without
regard to such Defaulting Lender’s Commitment) but only to
the extent that (x) the conditions set forth in Section 4.2 are satisfied at
the time of such reallocation (and, unless the Borrowing Agent
shall have otherwise notified the Administrative Agent at such
time, each Borrower shall be deemed to have represented and
warranted that such conditions are satisfied at such time) and
(y) such reallocation does not cause the aggregate Credit
Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting
Lender’s Commitment. No reallocation hereunder shall
constitute a waiver or release of any claim of any party hereunder
against a Defaulting Lender arising from that Lender having become
a Defaulting Lender, including any claim of a Non-Defaulting Lender
as a result of such Non-Defaulting Lender’s increased
exposure following such reallocation.


(v) Cash Collateral. If the
reallocation described in clause (iv) above cannot, or
can only partially, be effected, each Borrower shall, within one
Business Day following notice by the Administrative Agent, without
prejudice to any right or remedy available to it hereunder or under
law, Cash Collateralize the Issuing Banks’ Fronting Exposure
in accordance with the procedures set forth in Section 2.20.


(b) Defaulting Lender Cure. If the
Borrowing Agent, on behalf of the Borrowers, the Administrative
Agent, and each Issuing Bank agree in writing that a Lender is no
longer a Defaulting Lender, the Administrative Agent will so notify
the parties hereto, whereupon as of the effective date specified in
such notice and subject to any conditions set forth therein (which
may include arrangements with respect to any Cash Collateral), that
Lender will, to the extent applicable, purchase at par that portion
of outstanding Loans of the other Lenders or take such other
actions as the Administrative Agent may determine to be necessary
to cause the Loans and funded and unfunded participations in
Letters of Credit to be held pro rata by the Lenders in
accordance with the Commitments (without giving effect to
Section
2.22(a)(iv)), whereupon such Lender will cease to be a
Defaulting Lender; provided that no adjustment
will be made retroactively with respect to fees accrued or payments
made by or on behalf of the Borrowers while that Lender was a
Defaulting Lender; and provided, further, that except to the
extent otherwise expressly agreed by the affected parties, no
change hereunder from Defaulting Lender to Lender will constitute a
waiver or release of any claim of any party hereunder arising from
that Lender’s having been a Defaulting Lender.



 

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(c) New Letters of Credit. So long
as any Lender is a Defaulting Lender, no Issuing Bank shall be
required to issue, extend, renew or increase any Letter of Credit
unless it is satisfied that it will have no Fronting Exposure after
giving effect thereto.


SECTION
2.23 Disposition of Proceeds of
Production. The Security Documents contain an assignment by
each Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of each
Borrower’s or each Guarantor’s interest in and to
production and all proceeds attributable thereto that may be
produced from or allocated to the Mortgaged Property. The Mortgages
further provide in general for the application of such proceeds to
the satisfaction of the Indebtedness and other obligations
described therein and secured thereby. Notwithstanding the
assignment contained in such Mortgages, until the occurrence 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
Borrowers and their respective 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
such Borrower and/or such Subsidiaries.

ARTICLE
III



Representations and
Warranties


Each
Borrower represents and warrants to the Administrative Agent, the
Issuing Banks and the Lenders that:


SECTION
3.1 Organization; Powers. Each
Borrower and its Subsidiaries is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its
business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, is qualified to do business
in, and is in good standing in, every jurisdiction where such
qualification is required. No Borrower nor any Subsidiary thereof
is an EEA Financial Institution.


SECTION
3.2 Authorization; Enforceability.
The Transactions are within the powers of each Loan Party and have
been duly authorized by all necessary action. This Agreement has
been, and each other Loan Document, when delivered hereunder, will
have been, duly executed and delivered by each Loan Party that is a
party thereto and constitutes, or will constitute, a legal, valid
and binding obligation of such Loan Party, 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
3.3 Approvals; No Conflicts. 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 Person, 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 Documents as required
by this Agreement and (ii) those third party approvals or consents
that, 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 the
Organization Documents of any Borrower or any Subsidiary or any
order of any Governmental Authority, (c) will not violate or result
in a default under any indenture, agreement or other instrument
binding upon any Borrower or any Subsidiary or their assets, or
give rise to a right thereunder to require any payment to be made
by any Borrower or any Subsidiary, and (d) will not result in the
creation or imposition of any Lien on any asset of any Borrower or
any Subsidiary (except for Liens under the Security
Documents).



 

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SECTION
3.4 Financial Condition; No Material
Adverse Effect. Each of Yuma Energy and DPAC has heretofore
furnished to the Lenders its consolidated balance sheet and
statements of income, stockholders’ equity and cash flows (i)
as of and for the fiscal year ended December 31, 2015,
reported on (respectively) by Grant Thornton, LLP, independent
public accountants, PricewaterhouseCoopers LLP, independent public
accountants, and (ii) as of and for the fiscal quarter and the
portion of the fiscal year ended June 30, 2016, all as
set forth in the Merger Proxy Statement. Such financial statements
present fairly in all material respects the financial position and
results of operations and cash flows of Yuma Energy, Inc. and DPAC
Petroleum Acquisition Corp., each as in existence prior to the
consummation of the Davis Merger Agreement, and their respective
consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the
absence of footnotes in the case of the statements referred to in
clause (ii)
above.


(a) No Borrower or any
Subsidiary has any material liabilities, contingent or otherwise,
or forward or long-term commitments that are not disclosed in the
financial statements referred to in Section 3.4(a) or in the notes
thereto. No Material Adverse Effect has occurred since the date of
the filing of the Merger Proxy Statement with the SEC.


(b) All balance sheets,
all statements of income and of cash flows, and all other financial
information of the Borrowers and their Subsidiaries furnished
pursuant to Section 5.1(a) and
(b) have been and will for periods
following the Effective Date be prepared in accordance with GAAP
consistently applied with the financial statements referred to in
Section 3.4(a), and do or
will present fairly in all material respects the consolidated
financial condition of the Persons covered thereby as at the dates
thereof and the results of their operations for the periods then
ended.


SECTION
3.5 Properties; Titles,
Etc.


(a) Except (i) for the
Oil and Gas Properties Disposed of as permitted by this Agreement
since the delivery of the most recently delivered Reserve Report,
(ii) leases that have expired in accordance with their terms, and
(iii) properties with title defects disclosed in writing to the
Administrative Agent: (y) each Borrower and their respective
Subsidiaries has good and defensible title to the Oil and Gas
Properties evaluated in the most recently delivered Reserve Report
and good title to all its personal Properties, in each case, free
and clear of all Liens except Liens permitted by Section 6.3 and (z) after
giving full effect to the Permitted Encumbrances, any Borrower or
the Subsidiary specified as the owner owns the net interests in
production attributable to the Hydrocarbon Interests as reflected
in the most recently delivered Reserve Report, and, except as
otherwise provided by statute, law, regulation or the standard and
customary provisions of any applicable joint operating agreement,
the ownership of such Properties shall not in any material respect
obligate such Borrower or such Subsidiary to bear the costs and
expenses relating to the maintenance, development and operations of
each such Property in an amount in excess of the working interest
of each Property set forth in the most recently delivered Reserve
Report that is not offset by a corresponding proportionate increase
in such Borrower’s or such Subsidiary’s net revenue
interest in such Property.


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


(c) The rights and
Properties presently owned, leased or licensed by each Borrower and
its respective Subsidiaries including all easements and rights of
way, include all rights and Properties necessary to permit such
Borrower and its respective Subsidiaries to conduct their business
in all material respects in the same manner as its business has
been conducted prior to the date hereof.



 

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(d) All of the
Properties of the Borrowers and their respective Subsidiaries
(other than the Oil and Gas Properties, which are addressed in
Section 3.22) that
are reasonably necessary for the operation of their businesses are
in good working condition and are maintained in accordance with
prudent business standards.


(e) Each of the
Borrowers and their respective Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents, domain names
and other intellectual Property material to its business, and the
use thereof by such Borrower and its Subsidiaries 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. Each
Borrower and its respective Subsidiaries either own or have valid
licenses or other rights to use all databases, geological data,
geophysical data, engineering data, seismic data, maps,
interpretations and other technical information used in their
businesses as presently conducted, subject to the limitations
contained in the agreements governing the use of the same, which
limitations are customary for companies engaged in the business of
the exploration and production of Hydrocarbons, with such
exceptions as could not reasonably be expected to have a Material
Adverse Effect.


SECTION
3.6 Litigation and Environmental
Matters.


(a) There are no
actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the
Borrowing Agent, threatened against or affecting any Borrower or
any Subsidiary (i) as to which there is a reasonable
possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the
Disclosed Matters) or (ii) that involve this Agreement, any
other Loan Document or the Transactions.


(b) Except for the
Disclosed Matters and except with respect to any other matters
that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, no Borrower or any
Subsidiary (i) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other
approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental
Liability.


(c) Except for the
Disclosed Matters and except with respect to any other matters
that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, with respect to
any real property owned or leased by any Borrower or any of its
Subsidiaries, (i) there has been no release of Hazardous Materials
at, from, or to the real property, including the soils, surface
waters, or ground waters thereof, and (ii) there are no conditions
at the real property that, with the passage of time, or giving of
notice, or both, would be reasonably likely to result in an
Environmental Liability.


(d) Since the date of
this Agreement, there has been no change in the status of the
Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material
Adverse Effect.


SECTION
3.7 Compliance with Laws and
Agreements.


(a) Each Borrower and
its respective Subsidiaries is in compliance in all material
respects with all Applicable Law. Each Borrower and its respective
Subsidiaries is in compliance with all indentures, agreements and
other instruments binding upon 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. No
Default has occurred and is continuing or would result from the
consummation of the Transactions.


(b) No Borrower or any
Subsidiary is in default nor has any event or circumstance occurred
that, but for the expiration of any applicable grace period or the
giving of notice, or both, would constitute a default or would
require a Borrower or a Subsidiary to Redeem or make any offer to
Redeem under any indenture, note, credit agreement or instrument
pursuant to which any Material Indebtedness is outstanding or by
which any Borrower or any Subsidiary or any of their Properties is
bound.



 

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SECTION
3.8 Investment Company Status; Other
Laws. No Borrower or any Subsidiary is an
“investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940 or is subject
to any other law restricting its ability to incur
Indebtedness.


SECTION
3.9 Taxes. Each Borrower and its
respective Subsidiaries has timely filed or caused to be filed all
federal and other material Tax returns and reports required to have
been filed and has paid or caused to be paid all federal and other
material Taxes required to have been paid by it, except Taxes
that are being contested in good faith by appropriate proceedings
and for which such Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves.


SECTION
3.10 ERISA Compliance. Each Plan is
in compliance in all material respects with all applicable
requirements of ERISA, the IRC and other Applicable Law. No ERISA
Event has occurred or is reasonably expected to occur that, when
taken together with all other such ERISA Events for which liability
is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. Each Borrower and each ERISA
Affiliate has complied with the Funding Rules with respect to each
Pension Plan, and no waiver of the minimum funding requirements
under the Funding Rules has been applied for or obtained. As of the
most recent valuation date for any Pension Plan, the funding target
attainment percentage (as defined in Section 430 of the IRC) is 60%
or higher and no facts or circumstances exist that could reasonably
be expected to cause the funding target attainment percentage to
drop below such threshold as of the most recent valuation
date.


SECTION
3.11 Insurance. Set forth on
Schedule 3.11 is a
complete and accurate summary of the property and casualty
insurance program of the Loan Parties as of the Effective Date
(including the names of all insurers, policy numbers, expiration
dates, amounts and types of coverage, annual premiums, exclusions,
deductibles, self-insured retention and a description in reasonable
detail of any self-insurance program, retrospective rating plan,
fronting arrangement or other risk assumption arrangement involving
any Loan Party). The properties of each Borrower and its
Subsidiaries are insured with financially sound and reputable
insurance companies not Affiliates of any Borrower, in such
amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and
owning similar properties in localities where applicable Borrower
or the applicable Subsidiary operates.


SECTION
3.12 Margin Regulations. No Borrower
or any Subsidiary is engaged or will engage, principally or as one
of its important activities, in the business of purchasing or
carrying margin stock (within the meaning of Regulation U), or
extending credit for the purpose of purchasing or carrying margin
stock.


SECTION
3.13 Subsidiaries; Equity Interests.
No Borrower has Subsidiaries other than those specifically
disclosed in Part I
of Schedule 3.13,
and any Subsidiaries that are permitted to have been organized or
acquired after the Effective Date in accordance with Section 6.6 and all of the
outstanding Equity Interests in such Subsidiaries have been validly
issued, are fully paid and nonassessable and, as of the Effective
Date, are owned by a Loan Party in the amounts specified on
Part I of
Schedule 3.13 free
and clear of all Liens (other than Liens under the Security
Documents). No Borrower has equity investments in any other Person
other than those specifically disclosed in Part II of Schedule 3.13 or permitted to
have been acquired after the Effective Date in accordance with
Section 6.6. All of
the outstanding Equity Interests in each Borrower have been validly
issued, are fully paid and nonassessable and are owned by the
Borrowers in the amounts specified on Part III of Schedule 3.13 free and clear of
all Liens. All of the outstanding Equity Interests in the Yuma
Energy have been validly issued, and are fully paid and
nonassessable.


SECTION
3.14 Anti-Money Laundering and
Anti-Terrorism Finance Laws. To the extent applicable, each
Loan Party and each Subsidiary thereof is in compliance, in all
material respects, with anti-money laundering laws and
anti-terrorism finance laws including the Bank Secrecy Act and the
PATRIOT Act (the “Anti-Terrorism
Laws”).


SECTION
3.15 Disclosure.


(a) Each Borrower has
disclosed to the Lenders all agreements, instruments and corporate
or other restrictions to which it or any Subsidiary is subject, and
all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material
Adverse Effect. None of the reports, financial statements,
certificates or other information furnished by or on behalf of the
Borrowers or any other Loan Party or Subsidiary thereof or any of
their respective authorized representatives to the Administrative
Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by
other information so furnished) contains any material misstatement
of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided that, with respect to
projected financial information, each Borrower represents only that
such information was prepared in good faith based upon assumptions
believed to be reasonable at the time. There are no statements or
conclusions in any Reserve Report or any projections delivered
under Section 6.18 that 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 and production and cost
estimates contained in each Reserve Report or any projections
delivered under Section
6.18 are necessarily based upon professional opinions,
estimates and projections and that the Borrowers and their
respective Subsidiaries do not warrant that such opinions,
estimates and projections will ultimately prove to have been
accurate.



 

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(b) All of the
information provided by the Borrowers to any Lender or the
Administrative Agent under this Agreement is true and complete, and
no Borrower is aware of any information that, if it had been
disclosed to any Lender, could have altered the decision of any
Lender to enter into this Agreement.


SECTION
3.16 Security Documents. The
Guarantee and Collateral Agreement is effective to create in favor
of the Administrative Agent, for the benefit of the holders of
Secured Obligations, a legal, valid and enforceable security
interest in the Collateral described therein and proceeds thereof.
In the case of the pledged Equity Interests described in the
Guarantee and Collateral Agreement, when the Administrative Agent
obtains control of stock certificates representing such pledged
Equity Interests, and in the case of the Collateral described in
the Guarantee and Collateral Agreement, when financing statements
and other filings in appropriate form are or have been filed in the
appropriate offices, the Guarantee and Collateral Agreement shall
constitute a fully perfected Lien on, and security interest in, all
right, title and interest of the Loan Parties in such Collateral
and the proceeds thereof to the extent a security interest can be
perfected by filing or other action required thereunder as security
for the Secured Obligations, in each case prior and superior in
right to any other Person (except, in the case of Collateral other
than pledged Equity Interests with respect to which the
Administrative Agent has control, Liens permitted by Section 6.3).


(a) Each of the
Mortgages is effective to create in favor of the Administrative
Agent, for the benefit of the holders of Secured Obligations, a
legal, valid and enforceable Lien on the mortgaged properties
described therein and proceeds thereof, contains all remedies
customarily afforded to a commercial lender in the jurisdiction in
which the applicable mortgaged property is located, and when the
Mortgages are or have been filed in the appropriate offices, each
such Mortgage shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan
Parties in such properties and the proceeds thereof, as security
for the Secured Obligations, in each case prior and superior in
right to any other Person (except for Liens permitted by
Section
6.3).


SECTION
3.17 Solvency, etc. On the Effective
Date, and immediately prior to and after giving effect to the
issuance of each Letter of Credit and each Borrowing hereunder and
the use of the proceeds thereof, with respect to each Loan Party,
individually, (a) the fair value of its assets is greater than the
amount of its liabilities (including disputed, contingent and
unliquidated liabilities) as such value is established and
liabilities evaluated, (b) the present fair saleable value of its
assets is not less than the amount that will be required to pay the
probable liability on its debts as they become absolute and
matured, (c) it is able to realize upon its assets and pay its
debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of
business, (d) it does not intend to, and does not believe that it
will, incur debts or liabilities beyond its ability to pay as such
debts and liabilities mature and (e) it is not engaged in business
or a transaction, and is not about to engage in business or a
transaction, for which its property would constitute unreasonably
small capital.


SECTION
3.18 Burdensome Obligations. No Loan
Party is a party to any agreement or contract or subject to any
restriction contained in its organizational documents that could
reasonably be expected to have a Material Adverse
Effect.


SECTION
3.19 Labor Matters. Except as set
forth on Schedule
3.19, no Loan Party is subject to any labor or collective
bargaining agreement. There are no existing or threatened strikes,
lockouts or other labor disputes involving any Loan Party that
singly or in the aggregate could reasonably be expected to have a
Material Adverse Effect. Hours worked by and payment made to
employees of the Loan Parties are not in violation of the Fair
Labor Standards Act or any other Applicable Law dealing with such
matters.



 

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SECTION
3.20 Related
Agreements, etc.


(a) The Borrowing Agent
has heretofore furnished the Administrative Agent a true and
correct copy of each Related Agreement.


(b) Each Loan Party
and, to each Borrower’s knowledge, each other party to the
Related Agreements, has duly taken all necessary corporate,
partnership or other organizational action to authorize the
execution, delivery and performance of the Related Agreements and
the consummation of the Related Transactions.


(c) The Related
Transactions will comply with all applicable legal requirements,
and all necessary governmental, regulatory, creditor, shareholder,
partner and other material consents, approvals and exemptions
required to be obtained by the Loan Parties and, to each
Borrower’s knowledge, each other party to the Related
Agreements in connection with the Related Transactions will be,
prior to consummation of the Related Transactions, duly obtained
and will be in full force and effect.


(d) The execution and
delivery of the Related Agreements did not, and the consummation of
the Related Transactions will not, violate any Applicable Law
binding on any Loan Party or, to each Borrower’s knowledge,
any other party to the Related Agreements, or result in a breach
of, or constitute a default under, any agreement, indenture,
instrument or other document, or any judgment, order or decree, to
which any Loan Party is a party or by which any Loan Party is bound
or, to each Borrower’s knowledge, to which any other party to
the Related Agreements is a party or by which any such party is
bound.


(e) No statement or
representation made in the Related Agreements by any Loan Party or,
to each Borrower’s knowledge, any other Person, contains any
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under
which they are made, not misleading.


SECTION
3.21 [Reserved].


SECTION
3.22 Maintenance of Properties.
Except for such acts or failures to act as could not be reasonably
expected to have a Material Adverse Effect, the Oil and Gas
Properties (and Properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner
and in conformity with all Applicable Laws 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.
Specifically, in connection with the foregoing, except for those as
could not be reasonably expected to have a Material Adverse Effect,
(1) no Oil and Gas Property is subject to having allowable
production reduced below the full and regular allowable (including
the maximum permissible tolerance) because of any overproduction
(whether or not the same was permissible at the time), and (2) none
of the wells comprising a part of the Oil and Gas Properties (or
Properties unitized therewith) is deviated from the vertical more
than the maximum permitted by Applicable Laws, and such wells are,
in fact, bottomed under and are producing from, and the well bores
are wholly within, the Oil and Gas Properties (or in the case of
wells located on Properties unitized therewith, such unitized
Properties). The wells drilled in respect of Oil and Gas Properties
comprising proved developed producing reserves described in the
most recent Reserve Report (other than wells drilled in respect of
such Oil and Gas Properties comprising proved developed producing
reserves that have been subsequently Disposed of in accordance with
the terms of this Agreement) are capable of, and are presently,
either producing Hydrocarbons in commercially profitable quantities
or in the process of being worked over or enhanced, and the Loan
Party that owns such Oil and Gas Properties comprising proved
developed producing reserves is currently receiving payments for
its share of production, with no funds in respect of any thereof
being presently held in suspense, other than any such funds being
held in suspense pending delivery of appropriate division orders.
All pipelines, wells, gas processing plants, platforms and other
material improvements, fixtures and equipment owned in whole or in
part by any Borrower or any of its Subsidiaries that are necessary
to conduct normal operations are being maintained in a state
adequate to conduct normal operations, and with respect to such of
the foregoing that are operated by any Borrower or any of its
Subsidiaries, in a manner consistent with each Borrower’s or
its Subsidiaries’ past practices (other than those the
failure of which to maintain in accordance with this Section 3.22 could not
reasonably be expect to have a Material Adverse
Effect).



 

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SECTION
3.23 Gas Imbalances, Prepayments.
Except as set forth on Schedule 3.23 or on the most
recent certificate delivered pursuant to Section 5.14(c), on a net basis
there are no gas imbalances, take or pay or other prepayments
(including pursuant to an Advance Payment Contract) that would
require any Borrower or any Subsidiary to deliver Hydrocarbons
produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment
therefor.


SECTION
3.24 Marketing of Production. Except
for contracts listed and in effect on the date hereof on
Schedule 3.24, 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 each Borrower represents that it
or its Subsidiaries are receiving a price for all production sold
thereunder that 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), no agreements exist that are not cancelable by any
borrower or any Subsidiary on 60 days’ notice or less without
penalty or detriment to any Borrower or any Subsidiary for the sale
of production from each Borrower’s or its Subsidiaries’
Hydrocarbons (including calls on or other rights to purchase,
production, whether or not the same are currently being exercised)
that (i) pertain to the sale of production at a fixed price and
(ii) have a maturity or expiry date of longer than six (6) months
from the date hereof (in the case of Schedule 3.24) or the date of
disclosure to the Administrative Agent in writing (in the case of
each other such agreement), as applicable.


SECTION
3.25 Hedge Agreements and Hedge
Transactions. Schedule 3.25, as of the date
hereof, and after the date hereof, each report required to be
delivered by each Borrower pursuant to Section 5.1(e), sets forth, a
true and complete list of all Hedge Agreements and Hedge
Transactions of each Borrower and each Subsidiary, the material
terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net mark to
market value thereof, all credit support agreements relating
thereto (including any margin required or supplied) and the
counterparty to each such agreement.


SECTION
3.26 Location of Business and
Offices.


(a) Each
Borrower’s jurisdiction of organization, name as listed in
the public records of its jurisdiction of organization and the
location of its principal place of business and chief executive
office is stated on Schedule 3.26(a) (or as set
forth in a notice delivered pursuant to Section 9.1(c)) (or, in each
case, as set forth in a notice delivered to the Administrative
Agent pursuant to Section
5.1(m) in accordance with Section 9.1(c)).


(b) Each
Subsidiary’s jurisdiction of organization, name as listed in
the public records of its jurisdiction of organization,
organizational identification number in its jurisdiction of
organization, and the location of its principal place of business
and chief executive office is stated on Schedule 3.26(b) (or as set
forth in a notice delivered pursuant to Section 9.1(c)).


SECTION
3.27 [Reserved].


SECTION
3.28 Anti-Corruption Laws. No part
of the proceeds of the Loans or Letters of Credit shall be used,
directly or indirectly: (a) to offer or give anything of value to
any official or employee of any foreign government department or
agency or instrumentality or government-owned entity, to any
foreign political party or party official or political candidate or
to any official or employee of a public international organization,
or to anyone else acting in an official capacity (collectively,
“Foreign
Official”), in order to obtain, retain or direct
business by (i) influencing any act or decision of such
Foreign Official in his official capacity, (ii) inducing such
Foreign Official to do or omit to do any act in violation of the
lawful duty of such Foreign Official, (iii) securing any improper
advantage or (iv) inducing such Foreign Official to use his
influence with a foreign government or instrumentality to affect or
influence any act or decision of such government or
instrumentality; (b) to cause any Lender to violate the U.S.
Foreign Corrupt Practices Act of 1977; or (c) to cause any Lender
to violate any other anti-corruption law applicable to such Lender
(all laws referred to in clause (b) and (c) being “Anti-Corruption
Laws”).



 

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SECTION
3.29 Sanctions Laws. No Loan Party,
and to the knowledge of each Borrower, no director, officer, agent
employee or Affiliate or other agent of any Loan Party acting or
benefiting in any capacity in connection with the Loans or Letters
of Credit is any of the following (a “Restricted Person”): (a)
a Person that is listed in the annex to, or is otherwise subject to
the provisions of, Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001 (the
“Executive
Order”); (b) a Person that is named as a
“specially designated national and blocked person” on
the most current list published by the U.S. Treasury Department
Office of Foreign Assets Control (“OFAC”) at its official
website or any replacement website or other replacement official
publication of such list or similarly named by any similar foreign
governmental authority; (c) a Person that is owned 50 percent or
more by any Person described in Section 3.29(b); (d) any
other Person with which any Lender is prohibited from dealing under
any Sanctions laws applicable to such Lender; or (e) a Person that
derives more than 10% of its annual revenue from investments in or
transactions with any Person described in Section 3.29(a), (b), (c) or (d). Further, none of the
proceeds from the Loans or Letters of Credit shall be used to
finance or facilitate, directly or indirectly, any transaction
with, investment in, or any dealing for the benefit of, any
Restricted Person or any transaction, investment or dealing in
which the benefit is received in a country for which such benefit
is prohibited by any Sanctions laws applicable to any
Lender.

ARTICLE
IV



Conditions


SECTION
4.1 Effective Date. The obligations
of the Lenders to amend and restate the Existing Credit Agreement
and 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 9.2):


(a) The Administrative
Agent (or its counsel) shall have received from each party hereto
either (i) a counterpart of this Agreement signed on behalf of
such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a
signed signature page of this Agreement) that such party has signed
a counterpart of this Agreement.


(b) The Administrative
Agent shall have received the Assignment Agreement duly executed
and delivered by the parties thereto and the Administrative Agent
shall be reasonably satisfied that the transactions thereunder
shall have been or will concurrently with the Effective Date will
be consummated in accordance therewith.


(c) The Administrative
Agent shall have received evidence, reasonably satisfactory to it,
that the Borrowers have completed, or concurrently with the initial
credit extension hereunder will complete, the Related Transactions
in accordance with the terms of the Related Agreements (without any
amendment thereto or waiver thereunder unless consented to by the
Lenders).


(d) The Administrative
Agent shall have received a counterpart of the Secured Hedge
Intercreditor Agreement executed by BP Energy Company, each Loan
Party and the Administrative Agent, together with all certificates
and other items required to be delivered in connection
therewith.


(e) The Administrative
Agent shall have received the following, each in form and substance
satisfactory to the Administrative Agent:


(i) a counterpart of
the Guarantee and Collateral Agreement executed by each Loan Party,
together with all certificates, instruments, transfer powers and
other items required to be delivered in connection therewith,
except as set forth in clause (g) of Section 5.9
hereof;


(ii) each
document (including Uniform Commercial Code financing statements)
required by the Security Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or
recorded in order to create in favor of the Administrative Agent,
for the benefit of the holders of Secured Obligations, a perfected
Lien on the Collateral described therein, prior to all other Liens
(subject only to Liens permitted pursuant to Section 6.3), in proper
form for filing, registration or recording;



 

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(iii) all
environmental site assessment reports requested by the
Administrative Agent;


(iv) certified
copies of Uniform Commercial Code and other Lien search reports
dated a date near to the Effective Date, listing all effective
financing statements and other Lien filings that name any Loan
Party (under their current names and any previous names) as
debtors, together with (A) copies of such financing statements or
other Lien filings and (B) such Uniform Commercial Code termination
statements or amendments or other Lien terminations as the
Administrative Agent may request;


(v) such documents and
certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good
standing of the Loan Parties, the authorization of the Transactions
and any other legal matters relating to the Loan Parties, this
Agreement or the Transactions;


(vi) evidence
satisfactory to the Administrative Agent of the receipt of all
consents required to effect the Transactions, including all
regulatory approvals and licenses, if applicable;


(vii) evidence
of the existence of insurance required to be maintained pursuant to
Section 5.5,
together with evidence that the Administrative Agent and each
Lender has been named as a lender’s loss payee and an
additional insured on all related insurance policies;


(viii) copies
of the Related Agreements, certified by an authorized
representative of the Borrowing Agent as being true, accurate and
complete;


(ix) a
certificate, dated the Effective Date and signed by a Responsible
Officer of the Borrowing Agent, confirming compliance with the
conditions set forth in Section 4.2;


(x) a solvency
certificate as to each Borrower, executed by a Financial Officer of
each Borrower;


(xi) with
respect to the Oil and Gas Properties of any Loan Party, all
documents and instruments, including Uniform Commercial Code or
other applicable personal property financing statements and
Mortgages or assignments, amendments or supplements to existing
Mortgages securing the Existing Yuma Agreement and the Existing
Davis Agreement to be filed, registered or recorded to create or
continue, as applicable, the Liens intended to be created by any
Security Document and perfect such Liens to the extent required by,
and with the priority required by such Security Document. In
connection with the execution and delivery of the Mortgages, the
Administrative Agent shall be reasonably satisfied that the
Mortgages create first priority, perfected Liens (subject only to
Permitted Encumbrances) on at least the Collateral Coverage Minimum
of the Oil and Gas Properties evaluated in the Initial Reserve
Report;


(xii) duly
executed counterparts of all Control Agreements and other Security
Documents or assignments, amendments or supplements to existing
Control Agreements and other Security Documents, executed by each
applicable Loan Party;


(xiii) duly
executed counterparts of the Fee Letter; and


(xiv) duly
executed counterparts of an amendment and ratification of the
Hazardous Materials Indemnity and Environmental
Undertaking.


(f) The Administrative
Agent shall have received a favorable signed opinion (addressed to
the Administrative Agent and the Lenders and dated the Effective
Date) of (i) Jones & Keller, counsel for the Loan Parties,
substantially in the form of Exhibit H, and covering
such other matters relating to the Loan Parties, the Loan Documents
or the Transactions as the Majority Lenders shall reasonably
request and (ii) Randazzo Giglio & Bailey LLC, special
Louisiana counsel for the Loan Parties, in each case, in form and
substance reasonably satisfactory to the Administrative Agent and
its counsel and including an opinion that the amendments to
existing Mortgages and any new Mortgages (if any) covering any
Mortgaged Property located in, as applicable, the States of Texas
and Louisiana are each in proper form for recordation in the States
of Texas and Louisiana, respectively. The Borrowers hereby request
such counsel to deliver such opinions.



 

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(g) Each Lender shall
have received payment of all fees and other 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 Borrowers
hereunder.


(h) The Administrative
Agent and each Lender shall have received, at least five (5)
Business Days prior to the Effective Date, all documentation and
other information required by bank regulatory authorities under
applicable “know your customer” and anti-money
laundering rules and regulations, including the PATRIOT
Act.


(i) The Administrative
Agent shall have received title information as the Administrative
Agent may reasonably require satisfactory to the Administrative
Agent that, together with title information previously provided to
the Administrative Agent, shall set forth the status of title to at
least 90% of the PV-10 Value of the “proved” Oil and
Gas Properties evaluated in the Initial Reserve Report
(provided that, in
any event, the Borrower shall not be required to provide title
information with respect to any Oil and Gas Properties covered by
an existing Mortgage securing the Existing Yuma
Agreement).


(j) The Administrative
Agent shall have received the financial statements referred to in
Section 3.4(a) and
the Initial Reserve Report accompanied by a certificate covering
the matters described in Section 5.14(c).


(k) On the date of the
initial Borrowing and after giving effect to the initial Borrowing
and the other transactions to occur on or before the initial
Borrowing, including the matters described in Section 4.1(b) and (c), Yuma Energy and its
Subsidiaries will have cash and Cash Equivalent Investments,
together with borrowing availability under this Agreement of at
least $5,000,000.


(l) The Administrative
Agent shall have received a Compliance Certificate, evidencing pro
forma compliance with Section 6.1.


(m) The Administrative
Agent shall have received a certificate of each Loan Party dated
the Effective Date and executed by a Financial Officer, its
Secretary or Assistant Secretary, that shall (i) certify the
resolutions of its Board of Directors, members or other body
authorizing the execution, delivery and performance of the Loan
Documents to which it is a party, (ii) identify by name and title
and bear the signatures of the officers of each Loan Party
authorized to sign the Loan Documents to which it is a party, and
(iii) contain appropriate attachments, including the Organization
Documents of each Loan Party certified by the relevant authority of
the jurisdiction of organization of each Loan Party and a true and
correct copy of its operating agreement, or other organizational or
governing documents.


The
Administrative Agent shall notify the Borrowing Agent 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 Banks to issue Letters of
Credit hereunder shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to
Section 9.2) at or
prior to 3:00 p.m. on October 31, 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 4.1, each Lender that
has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless the Administrative
Agent shall have received notice from such Lender prior to the
proposed Effective Date specifying its objection
thereto.



 

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SECTION
4.2 Each Credit Event. The
obligation of each Lender to make a Loan on the occasion of any
Borrowing, and of each Issuing Bank to issue, amend or extend any
Letter of Credit, is subject to the satisfaction of the following
conditions:


(a) The representations
and warranties of the Loan Parties set forth in the Loan Documents
shall be true and correct on and as of the date of such Borrowing
or the date of issuance, amendment or extension of such Letter of
Credit, as applicable, except to the extent that such
representations and warranties specifically refer to an earlier
date, in which case they shall be true and correct as of such
earlier date.


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


(c) 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, the total Credit Exposure shall not exceed the
Borrowing Base then in effect.


(d) the Consolidated
Cash Balance shall not exceed $5,000,000; provided, however, that this clause (d) shall not apply if
an Responsible Officer of the Borrowing Agent, on behalf of any
Borrower, delivers a certificate to the Administrative Agent (or
includes a certification in the Borrowing Request to similar
effect) certifying that such excess will be applied (and not
retained by any Borrower or any Subsidiary) within three (3)
Business Days of such Borrowing for purposes that are not
prohibited by Credit Agreement (provided, further, that if,
notwithstanding such certification, all or a portion of such excess
remains after three (3) Business Days of such Borrowing, such
Borrower shall repay such excess Consolidated Cash Balance in
accordance with Section 2.10(c)(iv) of the
Credit Agreement).


Each
Borrowing and each issuance, amendment or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty
by each Borrower on the date thereof as to the matters specified in
clauses (a),
(b), (c) and (d) of this Section.

ARTICLE
V



Affirmative
Covenants


Each
Borrower covenants and agrees with the Administrative Agent, the
Issuing Banks and the Lenders that, until the Termination
Date:


SECTION
5.1 Financial Statements and Other
Information. The Borrowing Agent shall furnish to the
Administrative Agent and each Lender:


(a) Annual Financial Statements.
Within 120 days after the end of each fiscal year of Yuma
Energy, its audited consolidated balance sheet and related
statements of operations, Shareholders’ 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 Grant Thornton, LLP or other independent public
accountants of recognized national standing or other independent
auditor reasonably acceptable to the Administrative Agent (without
any qualification or exception that (x) is of a “going
concern” or similar nature or (y) relates to the limited
scope of examination of matters relevant to such financial
statement) to the effect that such consolidated financial
statements present fairly in all material respects the financial
condition and results of operations of the Yuma Energy and its
consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied.


(b) Quarterly Financial Statements.
Within 60 days after the end of each of the first three fiscal
quarters of each fiscal year of Yuma Energy, its 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 Yuma Energy 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.



 

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(c) Certificate of Financial Officer
– Compliance. Concurrently with any delivery of
financial statements under clause (a) or (b) above, a Compliance
Certificate of a Financial Officer of the Borrowing Agent
(x) 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,
(y) setting forth reasonably detailed calculations
demonstrating compliance with Section 6.1 and
(z) stating whether any change in GAAP or in the application
thereof has occurred since the date of the audited financial
statements referred to in Section 3.4 and, if any
such change has occurred, specifying the effect of such change on
the financial statements accompanying such
certificate.


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


(e) Certificate of Financial Officer --
Hedge Agreements and Hedge Transactions.


(i) Concurrently with
the delivery of each Reserve Report hereunder, 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 Hedge Agreements of each Borrower and each
Subsidiary, the material terms of all Hedge Transactions thereunder
(including the type, term, effective date, termination date and
notional amounts or volumes), the net mark-to-market value therefor
and the counterparty to each such agreement.


(ii) Together
with the delivery of the Compliance Certificate under Section 5.1(c), the
Borrowing Agent will deliver a certificate of a Financial Officer
comparing aggregate monthly notional volumes of all Hedge
Transactions of each Borrower and each Subsidiary that were in
effect during each month of such period (other than Hedge
Transactions with respect to basis differentials) and the actual
production volumes for each of natural gas and crude oil for each
month during such period, which certificate shall certify that the
hedged volumes for each of natural gas and crude oil
(x) satisfied the minimum volume requirements set forth in
Section 5.10
and (y) did not exceed 100% of actual production of
Hydrocarbons (or if such hedged volumes did exceed actual
production of Hydrocarbons, specify the amount of such
excess).


(f) Management Reports. Promptly
upon receipt thereof, copies of all detailed financial and
management reports submitted to any Borrower by independent
auditors in connection with each annual or interim audit made by
such auditors of the books of such Borrower.


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


(h) [Reserved].


(i) Certificate of Insurer -- Insurance
Coverage. Concurrently with any delivery of financial
statements under Section
5.1(a), a certificate of insurance coverage from each
insurer with respect to the insurance required by Section 5.5, in form and
substance satisfactory to the Administrative Agent, and, if
requested by the Administrative Agent or any Lender, all copies of
the applicable policies.


(j) Lists of Purchasers.
Concurrently with the delivery of any Reserve Report to the
Administrative Agent pursuant to Section 5.14, a list of Persons
purchasing Hydrocarbons from any Borrower or any Subsidiary
accounting for at least 85% of the revenues resulting from the sale
of all Hydrocarbons in the one-year period prior to the “as
of” date of such Reserve Report.



 

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(k) Notice of Dispositions of Oil and Gas
Properties and Hedge Liquidations. In the event any Borrower
or any Subsidiary intends to sell, transfer, assign or otherwise
Dispose of any Oil and Gas Properties or any Equity Interests in
any Subsidiary in accordance with Section 6.5(d) or
consummate a Hedge Liquidation not otherwise prohibited by
Section 6.19
that will or could reasonably be expected to yield gross proceeds
in excess of $1,000,000, written notice of, as applicable, such
Disposition at least ten (10) Business Days prior thereto, or such
Hedge Liquidation at least five (5) Business Days prior thereto,
the price thereof and the anticipated date of closing and any other
details thereof requested by the Administrative Agent or any
Lender.


(l) Notice of Casualty Events.
Prompt written notice, and in any event within three Business Days,
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.


(m) Information Regarding Borrower and
Subsidiary. Prompt written notice (and in any event within
thirty (30) days prior thereto) of any change in any
Borrower’s or any Subsidiary’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, in the location of
any Borrower’s or any Subsidiary’s chief executive
office or principal place of business, in any Borrower’s or
any Subsidiary’s identity or corporate structure or in the
jurisdiction in which such Person is incorporated or formed, in any
Borrower’s or any Subsidiary’s jurisdiction of
organization, and in any Borrower’s or any Subsidiary’s
federal taxpayer identification number.


(n) Production Report and Lease Operating
Statements. Within 60 days after the end of each fiscal
quarter, a report setting forth, for each calendar month during the
then current fiscal year to date, (i) the volume of production and
sales attributable to production (and the prices at which such
sales were made and the revenues derived from such sales) for each
such calendar month from the Oil and Gas Properties, and setting
forth the related ad valorem, severance and production taxes and
lease operating expenses attributable thereto and incurred for each
such calendar month, (ii) any changes to any producing reservoir,
production equipment, or producing well during each such quarter,
that changes could reasonably be expected to have a Material
Adverse Effect, and (iii) any sales of any Borrower’s or any
Subsidiary’s Oil and Gas Properties during each such
quarter.


(o) Projected Budget. Concurrently
with the delivery to the Administrative Agent of a Reserve Report
prepared by Approved Petroleum Engineers in Section 5.14(a), a report, in a
form satisfactory to the Administrative Agent, prepared by or on
behalf of the Borrowers detailing on a monthly basis for the next
twelve month period (i) the projected production of crude oil and
natural gas, each calculated separately, by the Borrowers and the
Subsidiaries and the assumptions used in calculating such
projections, (ii) an annual operating budget for the Borrowers and
its respective Subsidiaries, with a breakdown of those capital
expenditures to be used for the development of Oil and Gas
Properties comprising proved undeveloped reserves of the Borrowers
and its respective Subsidiaries, and the assumptions used in
calculating such projections, and (iii) such other information
as may be reasonably requested by the Administrative Agent which
report shall in each case be accompanied by a certificate of a
Financial Officer stating that such report has been prepared in
good faith on the basis of the assumptions stated therein, which
assumptions were believed to be reasonable at the time of
preparation of such report, it being understood that actual results
may vary from such projections.


(p) Subsidiaries, etc. If any
Borrower or any Subsidiary has (subject to the requirements and
limitations of this Agreement and the other Loan Documents) formed
or acquired a new Subsidiary or Disposed of or dissolved a
Subsidiary, or made any additional equity investment in any Person
or Disposed of any equity investment in any Person, in each case,
since the date of the most recently delivered schedule, a
substitute (or supplement to) Schedule 3.13.


(q) KYC. Promptly upon the request
of any Lender, each Borrower shall supply, or procure the supply
of, such documentation and other evidence as is requested by such
Lender (for itself or on behalf of any prospective Lender) to carry
out and be satisfied with the results of all necessary “know
your customer” or other checks in relation to the Borrowers
under all applicable laws and regulations pursuant to the
transactions contemplated under the Loan Documents.


(r) Other Requested Information.
Promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition
of any Borrower or any Subsidiary, or compliance with the terms of
the Loan Documents, as the Administrative Agent or any Lender may
reasonably request.



 

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Documents required
to be delivered pursuant to Section 5.1(a), (b) or (g) (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 (i) on which the
Borrowing Agent posts such documents, or provides a link thereto on
the Borrowing Agent’s website on the Internet at the website
address specified pursuant to Section 9.1; or (ii) on which
such documents are posted on the Borrowing Agent’s behalf 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); provided
that: (i) the Borrowing Agent shall deliver paper copies of such
documents to the Administrative Agent or any Lender that requests
the Borrowing Agent to deliver such paper copies until a written
request to cease delivering paper copies is given by the
Administrative Agent or such Lender and (ii) the Borrowing Agent
shall notify the Administrative Agent and each Lender (by telecopy
or e-mail) of the posting of any such documents and provide to the
Administrative Agent by e-mail electronic versions (i.e., soft copies) of such
documents. Notwithstanding anything contained herein, in every
instance the Borrowing Agent shall be required to provide paper
copies of the compliance certificates required by Section 5.1(c) to the
Administrative Agent. Except for such certificates, the
Administrative Agent shall have no obligation to request the
delivery or to maintain copies of the documents referred to above,
and in any event shall have no responsibility to monitor compliance
by the Borrowing Agent with any such request for delivery, and each
Lender shall be solely responsible for requesting delivery to it or
maintaining its copies of such documents.


SECTION
5.2 Notices of Material Events. The
Borrowing Agent shall furnish to the Administrative Agent and each
Lender written notice of the following:


(a) as soon as possible
and in any event within three days after any Borrower or any other
Loan Party obtains knowledge thereof, the occurrence of any
Default;


(b) as soon as possible
and in any event within three days after any Borrower or any other
Loan Party obtains knowledge thereof, the filing or commencement of
any action, suit or proceeding by or before any arbitrator or
Governmental Authority against or affecting any Borrower or any
Affiliate thereof that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect;


(c) promptly upon any
Borrower or any other Loan Party obtaining knowledge thereof, the
occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected
to result in liability of any Borrower, any Subsidiaries or its
ERISA Affiliates in an aggregate amount exceeding
$1,000,000;


(d) promptly after the
furnishing thereof, copies of any statement or report furnished to
any holder of debt securities of any Loan Party or any Subsidiary
thereof pursuant to the terms of any indenture, loan or credit or
similar agreement and not otherwise required to be furnished to the
Lenders pursuant to Section 5.1 or any other clause
of this Section
5.2;


(e) promptly, and in
any event within five Business Days after receipt thereof by any
Loan Party or any Subsidiary thereof, copies of each notice or
other correspondence received from the SEC (or comparable agency in
any applicable non-U.S. jurisdiction) concerning any investigation
or possible investigation or other inquiry by such agency regarding
financial or other operational results of any Loan Party or any
Subsidiary thereof;


(f) promptly, all title
or other information received after the Effective Date by any Loan
Party that discloses any material defect in the title to any
material asset included in the Borrowing Base; and


(g) promptly upon any
Borrower or any other Loan Party obtaining knowledge thereof, any
other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.


Each
notice delivered under this Section 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.



 

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SECTION
5.3 Existence; Conduct of Business;
Governmental Approvals. Each Borrower shall, and shall cause
each Subsidiary to, do, obtain and maintain, or cause to be done,
obtained and maintained, all Governmental Approvals and other
things necessary to preserve, renew and keep in full force and
effect its legal existence and the rights, licenses, permits,
privileges and franchises necessary or desirable in the conduct of
its business and maintain, if necessary, its qualification to do
business in each other jurisdiction in which any of its Oil and Gas
Properties is located or the ownership of its Properties requires
such qualification, except where the failure to so satisfy the
foregoing qualification requirements 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 6.4.


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


SECTION
5.5 Insurance. Each Borrower shall,
and shall cause each Subsidiary to, maintain, with financially
sound and reputable insurance companies, not Affiliates of any
Borrower, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations. Each
Borrower shall cause each issuer of an insurance policy to provide
the Administrative Agent with an endorsement (i) showing the
Administrative Agent as lenders’ loss payee with respect to
each policy of property insurance and naming the Administrative
Agent and each Lender as an additional insured with respect to each
policy of liability insurance, (ii) providing that 30 days’
notice shall be given to the Administrative Agent prior to any
cancellation of, material reduction or change in coverage provided
by or other material modification to such policy, and (iii)
reasonably acceptable in all other respects to the Administrative
Agent. Each Borrower shall execute and deliver to the
Administrative Agent a collateral assignment, in form and substance
satisfactory to the Administrative Agent, of each business
interruption insurance policy maintained by each
Borrower.


SECTION
5.6 Books and Records; Inspection
Rights. Each Borrower shall, and shall cause each Subsidiary
to, keep proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in
relation to its business and activities. Each Borrower shall, and
shall cause each Subsidiary 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, all at such reasonable times and as often
as reasonably requested; provided, that when a Default
exists the Administrative Agent or any Lender (or any of their
respective representatives) may do any of the foregoing at the
expense of the Borrowers at any time during normal business hours
and without advance notice. All such inspections or audits by the
Administrative Agent shall be at the Borrowers’ expense. Each
Borrower hereby authorizes and instructs its independent
accountants to discuss such Borrower’s affairs, finances and
condition with the Administrative Agent and any Lender, at the
Administrative Agent’s or such Lender’s
request.


SECTION
5.7 Compliance with Laws. Each
Borrower shall, and shall cause each Subsidiary to, comply in all
material respects with Applicable Law. Each Borrower will maintain
in effect and enforce policies and procedures designed to ensure
compliance by each Borrower, its Subsidiaries and their respective
directors, officers, employees and agents with Anti-Corruption Laws
and applicable Sanctions.


SECTION
5.8 Use of Proceeds and Letters of
Credit. The proceeds of the Loans shall be used only to
continue, renew and extend (but not repay) the Effective Date
Indebtedness of the Existing Yuma Entities and of Davis under the
Existing Agreements, to finance permitted acquisitions of Oil and
Gas Properties and other assets related to the exploration,
production and development of Oil and Gas Properties, to provide
working capital for exploration and production operations, and for
general corporate purposes; provided that the proceeds of Loan
shall not be used to fund the purchase of Oil and Gas Properties
comprising primarily undeveloped acreage (which, for the avoidance
of doubt, the Borrowers acknowledge and agree shall be funded with
the proceeds of equity issuances, capital contributions or
operations (subject to the terms and conditions of this
Agreement)). No part of the proceeds of any Loan or Letter of
Credit shall be used, whether directly or indirectly, for any
purpose that entails a violation of any Regulation of the FRB,
including Regulations T, U and X. Letters of Credit shall be
issued only to support the Borrowers and their respective
Subsidiaries.



 

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SECTION
5.9 Further Assurances; Additional
Collateral or Guarantors.  (a) In connection with each
redetermination of the Borrowing Base, the Borrowing Agent shall
review the Reserve Report and the list of current Mortgaged
Properties (as described in Section 5.14(c)(vi)) to
ascertain whether the Mortgaged Properties represent at least the
Collateral Coverage Minimum of the Oil and Gas Properties evaluated
in the most recently completed Reserve Report after giving effect
to exploration and production activities, acquisitions,
dispositions and production. In the event that the Mortgaged
Properties do not represent at least such Collateral Coverage
Minimum, then each Borrower shall, and shall cause its Subsidiaries
to, promptly grant to the Administrative Agent as security for the
Obligations a first-priority Lien interest (subject only to Liens
permitted by Section
6.3) on additional Oil and Gas Properties evaluated in the
most recently delivered Reserve Report not already subject to a
Lien of the Security Documents such that after giving effect
thereto, the Mortgaged Properties will represent at least such
Collateral Coverage Minimum. 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 Documents, all in form and substance reasonably
satisfactory to the Administrative Agent and in sufficient executed
(and acknowledged where necessary or appropriate) counterparts for
recording purposes. In order to comply with the foregoing, if any
Subsidiary places a Lien on its Oil and Gas Properties and such
Subsidiary is not a Guarantor, then it shall become a Guarantor and
comply with Section
5.9(a).


(b) It is understood
that the obligation to pledge and provide first priority perfected
liens on only the Collateral Coverage Minimum of the Borrowing Base
Properties is a matter of administrative convenience only and it is
the intention of the parties that the Administrative Agent benefit
from an all assets pledge of the Loan Parties’ Properties;
accordingly the percentage of the PV-10 Value of the Oil and Gas
Properties evaluated in the most recent Reserve Report delivered to
the Lenders and pledged to the Administrative Agent for the benefit
of the Secured Parties may be up to 100% at any time.


(c) For each Subsidiary
of Yuma Energy (whether existing on the Effective Date or newly
formed or acquired after the Effective Date) that becomes a
Material Subsidiary after the Effective Date, within 15 days
(or such longer period as the Administrative Agent may agree) after
such Subsidiary becomes a Material Subsidiary, Yuma Energy shall
(i) cause such Material Subsidiary to execute and deliver a
Joinder Agreement pursuant to which such Material Subsidiary
becomes a party to the Guarantee and Collateral Agreement and
becomes a Guarantor and grants a first-priority security interest
in substantially all of its personal Property, and (ii) execute and
deliver a Joinder Agreement pursuant to which Yuma Energy will
grant a first-priority security interest in all of the Equity
Interests in such Material Subsidiary (and will, without
limitation, deliver original certificates (if any) evidencing the
Equity Interests of such Subsidiary, together with undated stock
powers (or the equivalent for any such Subsidiary that is not a
corporation) for each certificate duly executed in blank by the
registered owner thereof).


(d) In the event that
any Borrower or any other Guarantor acquires any material Property
(other than any Oil and Gas Property and any Property in which a
security interest is already created under the Security Documents)
after the Effective Date, such Borrower shall, or shall cause such
other Guarantor to, promptly (and, in any event, within 10 days (or
such later date as agreed to by the Administrative Agent in its
sole discretion)) execute and delivery any Security Documents
reasonably required by the Administrative Agent in order to create
a first-priority security interest in such Property.


(e) In the event that
any Borrower makes any loans or advances to any Subsidiary, or any
Subsidiary makes any loans or advances to any Borrower or any other
Subsidiary, such Borrower, shall, and shall cause each such
Subsidiary, to (i) make such loans in the form of an intercompany
note and (ii) collaterally assign the applicable Borrower’s
or the applicable Subsidiary’s interests in such intercompany
note to the Administrative Agent for the benefit of the Lenders to
secure the Indebtedness as provided in the Security
Documents.


(f) In furtherance of
the foregoing in this Section 5.9, each Loan Party
(including any newly created or acquired Subsidiary) shall promptly
(and, in any event, within 10 days (or such later date as agreed to
by the Administrative Agent in its sole discretion)) execute and
deliver (or otherwise provided, as applicable) to the
Administrative Agent such other additional Security Documents,
documents, certificates, legal opinions, title insurance policies,
surveys, abstracts, appraisals, and/or environmental assessments,
in each case, as may be reasonably requested by the Administrative
Agent and as reasonably satisfactory to the Administrative
Agent



 

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(g) Within thirty (30)
days following the Effective Date, Borrowing Agent shall deliver to
the Administrative Agent one or more stock certificates, together
with undated blank stock powers, issued by DPAC to Yuma Energy and
by Davis to DPAC.


SECTION
5.10 Minimum Hedging
Requirements.


(a) Unless otherwise
agreed to by the Administrative Agent and the Lenders, the
Borrowing Agent shall provide to the Administrative Agent within
ten (10) Business Days after the Effective Date evidence
satisfactory to the Administrative Agent that the Borrowers have
entered into (and thereafter, the Borrower shall maintain in
effect) Hedge Transactions with Approved Counterparties with
respect to at least the monthly notional volumes of natural gas and
crude oil, as applicable, set forth in on Schedule 5.10 for
each such month and having the floor price levels indicated therein
(it being acknowledged and agreed that the intention of the parties
is that the Borrowers shall have entered into (and shall thereafter
maintain) Hedge Transactions with Approved Counterparties
(including the Hedge Transactions described above) such that
(x) the notional volumes of all natural gas related Hedge
Transactions of the Borrowers and their respective Subsidiaries, in
the aggregate, equal or exceed 80% of the Borrowers’ and
their respective Subsidiaries’ reasonably anticipated
projected production of natural gas for each month during the
period from ten (10) Business Days after the Effective Date through
December 31, 2018, and (y) the notional volumes of
all crude oil related Hedge Transactions of the Borrowers and their
respective Subsidiaries, in the aggregate, equal or exceed 80% of
the Borrowers’ and their respective Subsidiaries’
reasonably anticipated projected production of natural gas for each
month during the period from ten (10) Business Days after the
Effective Date through December 31, 2019).


(b) Without limiting
the foregoing requirements set forth in Section 5.10(a) in any
manner, the Borrowers shall enter into from time to time and
maintain Hedge Transaction with Approved Counterparties in respect
of natural gas and crude oil so that the notional aggregate volumes
of natural gas and crude oil covered by all Hedge Transactions of
the Borrowers as of any date of determination equal or exceed 50%
of the reasonably anticipated projected production of natural gas
and crude oil, respectively, from Oil and Gas Properties comprising
proved developed producing reserves of the Borrowers and their
Subsidiaries evaluated in such Reserve Report, for each month
during period of twenty-four calendar months the immediately
following such date of determination.


SECTION
5.11 Deposit Accounts.


(a) Except as provided
in clause (b)
hereof, from and after the Effective Date, each Borrower shall, and
shall cause each of its Subsidiaries to, maintain all of its
respective operating, revenue, collection or other deposit accounts
(other than Excluded Accounts) (i) with one or more Lenders or (ii)
any other financial institution reasonably acceptable to the
Administrative Agent and subject to the Administrative
Agent’s control pursuant to a Control Agreement.


(b) From and after the
thirtieth (30th) day after the
Effective Date (or such later date as the Administrative Agent
shall agree in its sole discretion), Yuma Energy shall, and shall
cause DPAC and each of DPAC’s Subsidiaries to, maintain all
of its respective operating, revenue, collection or other deposit
accounts (other than Excluded Accounts) (i) with one or more
Lenders or (ii) any other financial institution reasonably
acceptable to the Administrative Agent and subject to the
Administrative Agent’s control pursuant to a Control
Agreement.


SECTION
5.12 Environmental
Matters.


(a) Each Borrower shall
at its sole expense (including such contribution from third parties
as may be available): (i) comply, and shall cause its Properties
and operations and each Subsidiary and each Subsidiary’s
Properties and operations to comply, with all applicable
Environmental Laws, the breach of which could be reasonably
expected to have a Material Adverse Effect; (ii) not dispose of or
otherwise release, and shall cause each Subsidiary not to dispose
of or otherwise release, any oil, oil and gas waste, hazardous
substance, or solid waste on, under, about or from any
Borrower’s or any Subsidiaries’ Properties or any other
Property to the extent caused by any Borrower’s or any of its
Subsidiaries’ operations except in compliance with applicable
Environmental Laws, the disposal or release of which could
reasonably be expected to have a Material Adverse Effect; (iii)
timely obtain or file, and shall cause each Subsidiary to timely
obtain or file, all notices, permits, licenses, exemptions,
approvals, registrations or other authorizations, if any, required
under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of any Borrower’s or its
Subsidiaries’ Properties, which failure to obtain or file
could reasonably be expected to have a Material Adverse Effect;
(iv) promptly commence and diligently prosecute to completion, and
shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation,
monitoring, containment, cleanup, removal, repair, restoration,
remediation or other remedial obligations (collectively, the
“Remedial
Work”) in the event any Remedial Work is required or
reasonably necessary under applicable Environmental Laws because of
or in connection with the actual or suspected past, present or
future disposal or other release of any oil, oil and gas waste,
hazardous substance or solid waste on, under, about or from any
Borrower’s or its Subsidiaries’ Properties, which
failure to commence and diligently prosecute to completion could
reasonably be expected to have a Material Adverse Effect; and
(v) establish and implement, and shall cause each Subsidiary
to establish and implement, such reasonable policies of
environmental audit and compliance as may be reasonably necessary
to continuously determine and assure that each Borrower’s and
its Subsidiaries’ obligations under this Section 5.12(a) are timely and
fully satisfied, which failure to establish and implement could
reasonably be expected to have a Material Adverse
Effect.



 

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(b) The Borrowing Agent
will promptly, but in any event within five (5) Business Days
thereof, notify the Administrative Agent and the Lenders in writing
of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any
landowner or other third party against any Borrower or its
Subsidiaries or their Properties of which such Borrower has
knowledge in connection with any Environmental Laws (excluding
routine testing and corrective action) if such Borrower reasonably
anticipates that such action will result in liability (whether
individually or in the aggregate) in excess of $1,000,000, not
fully covered by insurance, subject to normal deductibles, or could
in any case be reasonably expected to have a Material Adverse
Effect.


(c) Each Borrower will,
and will cause each Subsidiary to, provide such environmental
audits, studies and tests as may be reasonably requested by the
Administrative Agent and the Lenders, in connection with any future
acquisitions of material Oil and Gas Properties or other material
Properties.


SECTION
5.13 Operation and Maintenance of
Properties. Each Borrower, at its own expense, will, and
will cause each Subsidiary to:


(a) operate its Oil and
Gas Properties and other material Properties or cause such Oil and
Gas Properties and other material Properties to be operated in
accordance with the practices of the industry and in compliance
with all applicable contracts and agreements and in compliance with
all Applicable Laws, including applicable pro ration requirements
and Environmental Laws, and all applicable laws, rules and
regulations of every other Governmental Authority from time to time
constituted to regulate the development and operation of its Oil
and Gas Properties and the production and sale of Hydrocarbons and
other minerals therefrom, except, in each case, where the failure
to comply could not reasonably be expected to have a Material
Adverse Effect;


(b) keep and maintain
all Property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted, and
preserve, maintain and keep in good repair, working order and
efficiency (ordinary wear and tear excepted) all of its material
Oil and Gas Properties and other material Properties, including all
equipment, machinery and facilities, except to the extent a portion
of such Property is no longer capable of producing Hydrocarbons in
economically reasonable amounts; provided that the foregoing shall
not prohibit any Disposition of any assets permitted by
Section
6.5;


(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;



 

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(d) promptly perform or
make reasonable and customary efforts to cause to be performed, in
accordance with industry standards, the obligations required by
each and all of the assignments, deeds, leases, sub-leases,
contracts and agreements affecting its interests in its Oil and Gas
Properties and other material Properties; and


(e) to the extent a
Borrower is not the operator of any Property, each Borrower shall
use commercially reasonable efforts to cause the operator to comply
with this Section 5.13.


SECTION
5.14 Reserve Reports.


(a) On or before March
1st and September 1st of each year, commencing
March 1, 2017, the Borrowing Agent shall furnish to the
Administrative Agent and the Lenders a Reserve Report evaluating
the Oil and Gas Properties of each Borrower and its Subsidiaries as
of the immediately preceding December 31st or June 30th, as
applicable; provided, however, that the first Reserve
Report shall be delivered on or before December 15, 2016,
evaluating the Oil and Gas Properties of each Borrower and its
Subsidiaries as of December 1, 2016. The Reserve Report
as of December 31st of each year shall be prepared by one or more
Approved Petroleum Engineers, and all other Reserve Reports shall
be prepared by or under the supervision of the chief engineer of
the Borrowing Agent and otherwise in a manner consistent with the
preceding December 31st Reserve Report. Each Reserve Report
prepared by or under the supervision of the chief engineer of the
Borrowing Agent shall be certified by the chief engineer to be true
and accurate in all material respects and to have been prepared in
accordance with the procedures used in the immediately preceding
December 31st Reserve Report.


(b) In the event of a
request for an Interim Redetermination, the Borrowing Agent shall
furnish to the Administrative Agent and the Lenders a Reserve
Report prepared by or under the supervision of the chief engineer
of the Borrowing Agent who shall certify such Reserve Report to be
true and accurate in all material respects and to have been
prepared in accordance with the procedures used in the immediately
preceding December 31st Reserve Report. For any Interim
Redetermination requested by the Administrative Agent or the
Borrowing Agent pursuant to Section 2.4(b), the Borrowing
Agent 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 Borrowing Agent shall provide to the
Administrative Agent and the Lenders a certificate from a
Responsible Officer certifying that in all material
respects:


(i) the information
contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, except that, with
respect to projections, the Borrowing Agent represents only that
such projections have been prepared in accordance with SEC
regulations in good faith based upon assumptions believed by the
Borrowing Agent to be reasonable, subject to uncertainties inherent
in all projections;


(ii) the
representations and warranties contained in Section 3.5 and Section 3.16 remain true
and correct as of the date of such certificate;


(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 3.23 with respect
to its Oil and Gas Properties evaluated in such Reserve Report that
would require any Borrower or any Subsidiary to deliver
Hydrocarbons either generally or produced from such Oil and Gas
Properties at some future time without then or thereafter receiving
full payment therefor;


(iv) none
of their Oil and Gas Properties having a fair market value in
excess of $1,000,000 in the aggregate have been sold since the date
of the last Reserve Report except as set forth on an exhibit to the
certificate, which certificate shall list all of its Oil and Gas
Properties sold (other than Hydrocarbons sold in the ordinary
course of business) and in such detail as reasonably required by
the Administrative Agent;



 

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(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 that any Borrower could reasonably be
expected to have been obligated to list on Schedule 3.24 had such
agreement been in effect on the date hereof;


(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 Borrowing Base that the value of such
Mortgaged Properties represent and that such percentage is in
compliance with Section
5.9;


(vii) attached
thereto is a projection of its reasonably anticipated projection of
natural gas and crude oil (which shall reflect the adjustments
referred to above) for the 36-month period commencing with the end
of the calendar month during which the associated Reserve Report is
delivered;


(viii) attached
to the certificate is a list of its Oil and Gas Properties added to
the immediately prior Reserve Report and a list showing any change
in working interest or net revenue interest in its Oil and Gas
Properties occurring and the reason for such change;
and


(ix) attached
to the certificate is a list of all Persons disbursing proceeds to
any Borrower or to any Subsidiary, as applicable, from its Oil and
Gas Properties.


The
Borrowing Agent may supplement or update such projections at any
time without any obligation to do so.


SECTION
5.15 Title Information.


(a) On or before the
delivery to the Administrative Agent and the Lenders of each
Reserve Report required by Section 5.14, and from time to
time upon the reasonable request of the Administrative Agent, each
Borrower will deliver title information in form and substance
reasonably acceptable to the Administrative Agent covering enough
of the Oil and Gas Properties that were not included in the most
recently delivered Reserve Report, so that the Administrative Agent
shall have received, together with title information previously
delivered to the Administrative Agent, reasonably satisfactory
title information on the 90% of PV-10 of the Oil and Gas Properties
evaluated by such Reserve Report and together with any Oil and Gas
Properties acquired since the date of such Reserve
Report.


(b) If any Borrower has
provided title information for additional Properties under
Section 5.15(a),
such Borrower shall, within 60 days of notice from the
Administrative Agent that title defects or exceptions exist with
respect to such additional Properties, either (1) cure any
such title defects or exceptions (including defects or exceptions
as to priority) that are not permitted by Section 6.3 raised by such
information, (2) substitute acceptable Mortgaged Properties (with
no title defects or exceptions except for Permitted Encumbrances)
having an equivalent value or (3) deliver title information in form
and substance reasonably acceptable to the Administrative Agent so
that the Administrative Agent shall have received, together with
title information previously delivered to the Administrative Agent,
reasonably satisfactory title information on at least the
Collateral Coverage Minimum of the Oil and Gas Properties evaluated
by such Reserve Report and together with any Oil and Gas Properties
acquired since the date of such Reserve Report.


(c) If any 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 such
Borrower does not comply with the requirements to provide
acceptable title information covering at least the Collateral
Coverage Minimum of the Oil and Gas Properties evaluated in the
most recent Reserve Report and together with any Oil and Gas
Properties acquired since the date of such Reserve Report, such
inability 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 has elapsed, such
unacceptable Mortgaged Property shall not count towards the
requirement, and the Administrative Agent may send a notice to the
Borrowing Agent and the Lenders that the then outstanding Borrowing
Base shall be reduced by an amount as determined by the Required
Lenders to cause each Borrower to be in compliance with the
requirement to provide acceptable title information on at least the
Collateral Coverage Minimum of the Oil and Gas Properties. This new
Borrowing Base shall become effective immediately after receipt of
such notice.



 

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SECTION
5.16 Consolidated Cash Balance
Information. Within one (1) Business Day after the request
of the Administrative Agent, and one (1) Business Day after any
Business Day on which the Consolidated Cash Balance exceeds
$5,000,000, the Borrowing Agent shall provide to the Administrative
Agent summary and balance statements, in form and substance
reasonably acceptable to the Administrative Agent, for each deposit
account, securities account or other account in which any
Consolidated Cash Balance is held or to which any Consolidated Cash
Balance is credited and detail all outstanding checks.


SECTION
5.17 Keepwell. Each Borrower hereby
absolutely, unconditionally and irrevocably undertakes to provide
such funds or other support as may be needed from time to time by
each other Loan Party to honor all of its obligations under each
Loan Document or any Secured Party Hedge Transaction in respect of
Hedge Obligations (provided, however, that each Borrower
shall only be liable under this Section 5.17 for the
maximum amount of such liability that can be hereby incurred
without rendering its obligations under this Section 5.17 or otherwise
under this Agreement voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer, and not for any
greater amount). The obligations of each Borrower under this
Section 5.17
shall remain in full force and effect until all Obligations have
been repaid in full. Each Guarantor intends that this Section 5.17 constitute,
and this Section 5.17 shall be
deemed to constitute, a “keepwell, support, or other
agreement” for the benefit of each other Loan Party for all
purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange
Act


SECTION
5.18 Post-Closing Covenant. By not
later than ten (10) Business Days following the Effective Date, the
Administrative Agent shall have received a favorable signed opinion
(addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of (i) Jones, Davis & Jackson, PC,
special California counsel for the Loan Parties, and
(ii) Crowley Fleck PLLP, special North Dakota counsel for the
Loan Parties, in each case, in form and substance reasonably
satisfactory to the Administrative Agent and its counsel and
including an opinion that the amendments to existing Mortgages and
any new Mortgages (if any) covering any Mortgaged Property located
in, as applicable, the States California and North Dakota are each
in proper form for recordation in the States of California and
North Dakota, respectively. The Borrowers hereby request such
counsel to deliver such opinions.

ARTICLE
VI



Negative Covenants


Each
Borrower covenants and agrees with the Administrative Agent, the
Issuing Banks and the Lenders that, until the Termination
Date:


SECTION
6.1 Financial
Covenants.


(a) Ratio of Total Debt to EBITDAX.
Yuma Energy will not permit, as of any date of determination, its
ratio of Total Debt as of such day to EBITDAX for the four fiscal
quarters ending on the last day of the fiscal quarter immediately
preceding such date of determination to be greater than 3.50 to
1.00.


(b) Current Ratio. Yuma Energy will
not permit, as of the last day of any fiscal quarter, its ratio of
(i) consolidated current assets of such Borrower and its
Subsidiaries (including the unused amount of the total Commitments
(but only to the extent that no Event of Default then exists), but
excluding non-cash assets under ASC Topic 815, formerly FAS 133) to
(ii) consolidated current liabilities of such Borrower and its
Subsidiaries (excluding non-cash obligations under ASC Topic 815,
formerly FAS 133), that may be classified as current liabilities
and current maturities under this Agreement to be less than 1.00 to
1.00.



 

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(c) Interest Coverage Ratio. Yuma
Energy will not permit, as of any date of determination, its ratio
of EBITDAX as of such date to Interest Expense for the four fiscal
quarters ending on the last day of the fiscal quarter immediately
preceding such date of determination to be less than 2.75 to
1.00.


(d) Liquidity. Yuma Energy and its
Subsidiaries shall maintain at all times cash and Cash Equivalent
Investments held in accounts that are not subject to any
restriction on use or designated for a particular purpose or any
Lien other than the security interest in favor of the
Administrative Agent under the Security Documents (net of the
amount of any Borrowing Base Deficiency, if any), together with
borrowing availability under this Agreement, of at least
$3,000,000.


Notwithstanding the
foregoing, the ratios discussed in provisions (a) and (c) above shall be calculated
using Annualized EBITDAX and Annualized Interest Expense for the
fiscal quarters ending prior to (but not including) the fiscal
quarter ending December 31, 2017.


SECTION
6.2 Indebtedness. Each Borrower
shall not, and shall not permit any Subsidiary to, create, incur,
assume or permit to exist any Indebtedness, except:


(a) Indebtedness
created under the Loan Documents;


(b) Indebtedness
existing on the date hereof and set forth in Schedule 6.2, but not any
extension, renewal or replacement of any such
Indebtedness;


(c) Indebtedness of any
Borrower to any Subsidiary and of any Subsidiary to any Borrower or
any other Subsidiary; provided that such Indebtedness
is not held, assigned, transferred, negotiated or pledged to any
Person other than a Borrower or a Wholly-Owned Subsidiary
Guarantor; and provided further, that any such
Indebtedness owed by either a Borrower or a Wholly-Owned Subsidiary
Guarantor shall be subordinated to the Obligations on terms set
forth in the Guarantee and Collateral Agreement;


(d) Guarantees by any
Borrower of Indebtedness otherwise permitted hereunder of any
Subsidiary and by any Subsidiary of Indebtedness otherwise
permitted hereunder of any Borrower or any other Subsidiary;
provided that (A) if the Indebtedness being guaranteed under this
Section 6.2(d)
is subordinated to the Obligations, such Guarantee obligations
shall be subordinated to the Guarantee of the Obligations on terms
at least as favorable to the Lenders as those contained in the
subordination of such Indebtedness and (B) the aggregate amount of
Guarantee obligations incurred by Loan Parties under this
clause (d) in
respect of obligations owed by Persons that are not Loan Parties
and the aggregate amount of Guarantee obligations incurred by
Subsidiaries that are not Guarantors under this clause (d), when combined
with the total amount of Indebtedness incurred by Subsidiaries that
are not Guarantors pursuant to Section 6.2(j), shall not
exceed $1,000,000;


(e) Indebtedness of any
Borrower or any Subsidiary incurred to finance the acquisition,
construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a
Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that
do not increase the outstanding principal amount thereof;
provided that (i)
such Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement
and (ii) the aggregate principal amount of Indebtedness permitted
by this clause (e)
shall not exceed $1,000,000 at any time outstanding;


(f) Indebtedness of any
Borrower or any Subsidiary as an account party in respect of trade
letters of credit and Indebtedness associated with bonds or surety
obligations required by Governmental Requirements in connection
with the operation of the Oil and Gas Properties;


(g) obligations
(contingent or otherwise) of any Borrower or any Subsidiary
existing or arising under any Hedge Transaction permitted under
Section
6.18;



 

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(h) [reserved];


(i) contingent
liabilities arising with respect to customary indemnification
obligations in favor of sellers in connection with acquisitions
permitted under Section 6.4 and purchasers
in connection with Dispositions permitted under Section 6.5;


(j) other unsecured
Indebtedness owed to Persons other than any Borrower or any
Subsidiary thereof in an aggregate principal amount not exceeding
$1,000,000 at any time outstanding; provided that the aggregate
principal amount of Indebtedness of each Borrower’s
Subsidiaries that are not Guarantors permitted by this clause (j) when combined with
the total amount of Indebtedness incurred by Subsidiaries that are
not Guarantors pursuant to Section 6.2(d) and the
aggregate amount of Guarantee obligations incurred by Loan Parties
pursuant to Section
6.2(d) in respect of obligations by Subsidiaries that are
not Guarantors, shall not exceed $500,000 at any time
outstanding;


SECTION
6.3 Liens. Each Borrower shall not,
and shall not permit any Subsidiary to, create, incur, assume or
permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any
thereof, except:


(a) Liens pursuant to
any Loan Document (including, for the avoidance of doubt, Liens
granted under the Security Documents to secure Secured Party Hedge
Transactions);


(b) Permitted
Encumbrances;


(c) any Lien on any
property or asset of any Borrower or any Subsidiary existing on the
date hereof and set forth in Schedule 6.3; provided that (i) such Lien
shall not apply to any other property or asset of any Borrower or
any Subsidiary and (ii) such Lien shall secure only those
obligations of any Borrower or any Subsidiary that it secures on
the date hereof and permitted by Section 6.2(b);


(d) any Lien existing
on any property or asset prior to the acquisition thereof by any
Borrower or any Subsidiary or existing on any property or asset of
any Person that becomes a Subsidiary after the date hereof prior to
the time such Person becomes a Subsidiary; provided that (i) such
Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, as the case may
be, (ii) such Lien shall not apply to any other property or
assets of any Borrower or any Subsidiary, and (iii) such Lien shall
secure only those obligations that it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the
case may be and permitted by Section 6.2(e);


(e) Liens on fixed or
capital assets acquired, constructed or improved by any Borrower or
any Subsidiary; provided that (i) such
security interests secure Indebtedness permitted by clause (e) of Section 6.2,
(ii) such security interests and the Indebtedness secured
thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement,
(iii) the Indebtedness secured thereby does not exceed the
cost or fair market value, whichever is lower, of the fixed or
capital assets being acquired, constructed or improved, and
(iv) such security interests shall not apply to any other
property or assets of any Borrower or any Subsidiary;
and


(f) Liens and rights of
setoff of banks and securities intermediaries in respect of deposit
accounts and securities accounts maintained in the ordinary course
of business.


Notwithstanding the
foregoing, none of the Liens permitted pursuant to this
Section 6.3 (other
than Liens described in Section 6.3(b)) may at any time
attach to any Oil and Gas Properties directly owned (whether in fee
or by leasehold) by any Borrower or any Subsidiary and evaluated in
the most recently delivered Reserve Report.


SECTION
6.4 Fundamental Changes. Each
Borrower shall not, and shall not permit any Subsidiary to, merge
into 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 (in one transaction or in a series of
transactions) all or substantially all of its assets, or all or
substantially all of the Equity Interests of any Subsidiary (in
each case, whether now owned or hereafter acquired), or liquidate
or dissolve, or purchase or otherwise acquire all or substantially
all of the assets or any Equity Interests of any class of, or any
partnership or joint venture interest in, any other Person, or
permit any Subsidiary to issue any Equity Interests, except that,
if at the time thereof and immediately after giving effect thereto
no Default shall have occurred and be continuing (i) any
Subsidiary may merge into a Borrower in a transaction in which the
Borrower is the surviving corporation, (ii) any Subsidiary may
merge into any Subsidiary in a transaction in which the surviving
entity is a Wholly-Owned Subsidiary, (iii) any Subsidiary may sell,
transfer, lease or otherwise dispose of its assets to, or issue
Equity Interests to, a Borrower or to a Wholly-Owned Subsidiary,
(iv) any Subsidiary may liquidate or dissolve if the Borrowing
Agent determines in good faith that such liquidation or dissolution
is in the best interests of the Borrowers and is not materially
disadvantageous to the Lenders, (v) any Borrower or any Subsidiary
may make any Investment permitted by Section 6.6, and (vi) any
Borrower or any Subsidiary may make any Disposition permitted by
Section 6.5;
provided that any
such merger involving a Person that is not a Wholly-Owned
Subsidiary immediately prior to such merger shall not be permitted
unless also permitted by Section 6.6.



 

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SECTION
6.5 Disposition of Properties. Each
Borrower shall not, and shall not permit any Subsidiary to, Dispose
of any of its property, whether now owned or hereafter acquired, or
in the case of any Subsidiary, issue or sell any shares of such
Subsidiary’s Equity Interests to any Person, except
for:


(a) the sale of
Hydrocarbons in the ordinary course of business;


(b) farmouts of
undeveloped acreage, zones or depths with respect to which no
proved reserves are attributable and assignments in connection with
such farmouts;


(c) the sale or
transfer of obsolete or worn out equipment of such Borrower or such
Subsidiary or equipment that is replaced by equipment of at least
comparable value and use;


(d) if no Default
exists either before or after giving effect to such Disposition,
the Disposition of any Oil and Gas Property or any interest therein
or any Subsidiary owning Oil and Gas Properties; provided that:


(i) at least 85% of the
consideration received in respect of such Disposition shall be cash
or Cash Equivalent Investments;


(ii) any
non-cash consideration received (to the extent constituting an
Investment) is permitted by Section 6.6;


(iii) 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 Subsidiary that is the subject of
such Disposition (as reasonably determined by the board of
directors of the Borrowing Agent and, if requested by the
Administrative Agent, the Borrowing Agent shall deliver a
certificate of a Responsible Officer of the Borrowing Agent
certifying to that effect);


(iv) (A)
if such Disposition of Oil and Gas Property or Subsidiary owning
Oil and Gas Properties included in the most recently delivered
Reserve Report during any period between two successive Scheduled
Redetermination Dates (or, in the case of any such event occurring
prior to January 1, 2017, the period from the Effective Date to
January 1, 2017) has a Borrowing Base Value that, when aggregated
with the Hedge Termination Value of all Hedge Liquidations during
such period, will exceed five percent (5%) of the then effective
Borrowing Base (in each case, as reasonably determined by the
Administrative Agent), individually or in the aggregate, the
Borrowing Base shall be adjusted pursuant to Section 2.4(f); provided,
that to the extent that the Borrowing Agent is notified by the
Administrative Agent that a Borrowing Base Deficiency could result
from an adjustment to the Borrowing Base resulting from such
Disposition, after the consummation of such Disposition(s), the
applicable Borrower or other Loan shall have received Net Cash
Proceeds, or shall have cash on hand, sufficient to eliminate any
such potential Borrowing Base Deficiency;



 

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(v) if any such
Disposition is of a Subsidiary owning Oil and Gas Properties, such
Disposition shall include all the Equity Interests of such
Subsidiary;


(vi) both
before and after giving effect to such Disposition, Yuma Energy
shall be in pro forma compliance with Section 6.1; and


(vii) no
such Disposition (whether pursuant to one transaction or a series
of related transactions) is a Disposition of all or substantially
all of the Borrowing Base properties (whether pursuant to a
Disposition of all, but not less than all, of the Equity Interests
of any Subsidiary or otherwise);


(e) Dispositions among
the Borrowers and their Wholly-Owned Subsidiary Guarantors;
provided that both
before and after giving effect to such transfer or disposition,
(i) no Default exists or would exist and (ii) such Borrower
and the Subsidiaries are in compliance with Section 5.9(c) as of the date
of such Disposition without giving effect to the 15 day grace
period specified in such Section;


(f) if no Default
exists either before or after giving effect to such Disposition,
sales and other Dispositions of Properties (other than Hydrocarbon
Interests and Equity Interests) to one or more Persons other than a
Loan Party or any Subsidiary thereof not regulated by this
Section 6.5
having a fair market value not to exceed, in the aggregate,
$1,000,000 during any 6-month period;


(g) Dispositions of Oil
and Gas Properties to one or more Persons other than a Loan Party
or any Subsidiary thereof that are not then classified as
“proved”, provided that no Default or Borrowing Base
Deficiency exists or would result therefrom;


(h) the sale or
issuance of any Subsidiary’s Equity Interests to any Borrower
or any Wholly-Owned Subsidiary Guarantor;


(i) from a
non-Guarantor Subsidiary to a Loan Party;


(j) sales of Cash
Equivalent Investments in the ordinary course of business and for
fair market value;


(k) the sale and
discount of receivables permitted by Section 6.21;


(l) the Disposition of
other property not described in clauses (a) through
(k) above for not
less than fair market value as long as (i) at least 75% of the
consideration therefor consists of cash and Cash Equivalent
Investments, (ii) the aggregate fair market value of such property
so disposed of does not exceed $1,000,000, and (iii) no Default or
Borrowing Base Deficiency exists or would result therefrom;
provided, that
neither any Borrower nor any Subsidiary Guarantor shall make
Dispositions, the proceeds of which are reinvested in Subsidiaries
that are not Guarantors, with respect to property having an
aggregate fair market value in excess of $500,000;


provided, however, than any Disposition
pursuant to this Section
6.5 (other than clauses (c) and (e)) shall be for fair market
value. Notwithstanding anything to the contrary herein contained,
(i) such Borrower shall use the Net Cash Proceeds, if any, of
any Disposition made while a Borrowing Base Deficiency exists to
reduce such Borrowing Base Deficiency (ii) any Disposition
constituting an Investment by a Borrower or a Guarantor in a
Subsidiary that is not a Guarantor shall be subject to Section 6.6, (iii) in the event
of the Disposition of Equity Interests in any Subsidiary to any
Person other than a Borrower or a Guarantor, the Disposition shall
be of all such Equity Interests held by a Borrower and its
Subsidiaries and (iv) any Disposition of Oil and Gas Properties
included in the Borrowing Base or the Equity Interests of any
Subsidiary owning Oil and Gas Properties included in the Borrowing
Base, shall be permitted only by Section 6.5(d) and
(e). Neither any
Borrower nor any Subsidiary will discount, sell, pledge or assign
any notes payable to it, accounts receivable or future income
except for Dispositions permitted by Section 6.21.



 

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SECTION
6.6 Investments, Loans, Advances and
Guarantees. Each Borrower shall not, and shall not permit
any Subsidiary to, purchase, hold or acquire (including pursuant to
any merger with any Person that was not a Wholly-Owned Subsidiary
prior to such merger) any Investment, except:


(a) cash and Cash
Equivalent Investments;


(b) Investments by the
Borrowers and the Guarantors existing on the date hereof in the
Equity Interests of its Subsidiaries;


(c) Investments (i) by
any Borrower or any Guarantor in any Guarantor (or in any
newly-formed or acquired Subsidiary that becomes a Guarantor
pursuant to Section
5.9) or by any Guarantor in any Borrower, (ii) by any
Subsidiary that is not a Guarantor in any Borrower or any other
Subsidiary (provided that loans by a Subsidiary that is not a
Guarantor to the Borrowing or a Guarantor shall be subordinated in
right of payment to the Obligations), and (iii) by any
Borrower or any Guarantor in any existing Subsidiary (or in any
newly-formed Subsidiary or any Person that as a result of such
transaction shall become a Subsidiary) that is not a Guarantor,
valued at the fair market value (determined by the Borrowing Agent
in good faith) of such Investment at the time each such Investment
is made in an aggregate amount pursuant to this Section 6.6(c)(iii) not to
exceed $1,000,000; provided, however, that any Investment by
any Borrower or any Subsidiary constituting a Guarantee shall be
permitted only to the extent permitted by Section 6.6(d);


(d) Guarantees
constituting Indebtedness permitted by Section 6.2(d);


(e) advances to
officers, directors and employees of a Borrower and its
Subsidiaries in an aggregate amount not to exceed $500,000, at any
time outstanding, for travel, entertainment, relocation and
analogous ordinary business purposes;


(f) [Reserved];


(g) Investments
consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade
credit in the ordinary course of business, and Investments received
in satisfaction or partial satisfaction thereof from financially
troubled account debtors to the extent reasonably necessary in
order to prevent or limit loss;


(h) non-cash
consideration received, to the extent permitted by the Loan
Documents, in connection with the Disposition of property permitted
by this Agreement, provided that any Oil and Gas
Properties received as non-cash consideration shall comply with
Section 6.5(d); and
any Equity Interests received as non-cash consideration shall
comply with Section
6.10 and the provision to this Section 6.6; and


(i) Investments listed
on Schedule 6.6 as
of the Effective Date;


provided (i) that any
Investment that when made complies with the requirements of the
definition of the term “Cash Equivalent
Investment” may continue to be held notwithstanding
that such Investment if made thereafter would not comply with such
requirements; (ii) Investment in a Borrower through redemptions,
purchases, acquisitions or other retirements of Equity Interests in
such Borrower shall only be permitted to the extent constituting a
Restricted Payment permitted by Section 6.8 and (iii) any
Investment constituting a Disposition of Oil and Gas Properties
included in the Borrowing Base or Equity Interests in a Subsidiary
owning Oil and Gas Properties included in the Borrowing Base shall
be subject to Section
6.5(d) and (e).


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



 

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SECTION
6.8 Restricted Payments. Each
Borrower shall not, and shall not permit any Subsidiary to, declare
or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, except (a) each Borrower may declare and pay
dividends with respect to its Equity Interests payable solely in
additional shares of Equity Interests (other than Disqualified
Equity Interests), (b) Subsidiaries may declare and pay dividends
ratably with respect to their Equity Interests, and (c) the
Yuma Energy may make Restricted Payments pursuant to and in
accordance with stock option plans or other benefit plans for
management or employees of Yuma Energy and its Subsidiaries in an
aggregate amount not exceeding $500,000 per calendar
year.


SECTION
6.9 Transactions with Affiliates.
Each Borrower shall not, and shall not permit any Subsidiary to,
sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices
and on terms and conditions not less favorable to such Borrower or
such Subsidiary than could be obtained on an arm’s-length
basis from unrelated third parties, (b) transactions between or
among any Borrower and its Wholly-Owned Subsidiaries not involving
any other Affiliate, and (c) any Restricted Payment permitted
by Section
6.8.


SECTION
6.10 Changes in Nature of Business; Nature
of Business; International Operations. Neither any Borrower
nor any Subsidiary will allow any material change to be made in the
character of its business as an independent oil and gas exploration
and production company doing business within the geographical
boundaries of the United States (including the offshore area
adjacent thereto). From and after the date hereof, the Borrower and
its Subsidiaries will not acquire or make any other expenditure
(whether such expenditure is capital, operating or otherwise) in or
related to, any Oil and Gas Properties or businesses not located
within the geographical boundaries of the United States or in the
offshore area adjacent thereto. Notwithstanding anything herein to
the contrary, in no event shall any Borrower or any Subsidiary,
create, acquire or own any interest in (i) any Subsidiary organized
under the laws of any jurisdiction other than jurisdictions within
the United States, (ii) any foreign joint venture or (iii) any
Subsidiary other than a Wholly-Owned Subsidiary.


SECTION
6.11 Restrictive Agreements. Each
Borrower shall not, and shall not permit any Subsidiary to,
directly or indirectly, enter into, incur or permit to exist any
agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of any Borrower or any
Subsidiary to create, incur or permit to exist any Lien upon any of
its property, (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to any shares of its
Equity Interests or to make or repay loans or advances to any
Borrower or any other Subsidiary or to Guarantee Indebtedness of
any Borrower or any other Subsidiary or transfer any of its
properties to any Loan Party or (c) the ability of any Loan Party
to amend or otherwise modify this Agreement or any other Loan
Document; provided
that (i) the foregoing shall not apply to restrictions and
conditions imposed by Applicable Law or by the Loan Documents,
(ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.11 (but shall apply
to any extension or renewal of, or any amendment or modification
expanding the scope of, any such restriction or condition), (iii)
the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such
sale is permitted hereunder, (iv) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the
property or assets securing such Indebtedness, and (v) clause (a) of the foregoing
shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.


SECTION
6.12 Restriction of Amendments to Certain
Documents. Each Borrower shall not, and shall not permit any
Subsidiary to, amend or otherwise modify, or waive any rights
under, its Organization Documents if any such amendment,
modification or waiver could reasonably be expected to be adverse
to the interests of the Administrative Agent, the Issuing Bank or
the Lenders.



 

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SECTION
6.13 Changes in Fiscal Periods. Each
Borrower shall not permit the fiscal year of the Borrower to end on
a day other than December 31 or change any Borrower’s method
of determining fiscal quarters.


SECTION
6.14 [Reserved].


SECTION
6.15 Sanctions.


(a) No Borrower shall
(and each Borrower shall ensure that no Subsidiary will) directly
or indirectly, use the proceeds of the Loans (or lend, contribute
or otherwise make available such proceeds to any Person) in any
manner that would result in a violation of Sanctions by any Secured
Party (including, without limitation, as a result of the proceeds
of the Facility being used to fund or facilitate any activities or
business of, with or related to (or otherwise to make funds
available to or for the benefit of) any Person who is a Sanctioned
Person).


(b) Each Borrower shall
ensure that (i) no Person that is a Sanctioned Person will have any
legal or beneficial interest in any funds repaid or remitted by any
Borrower to any Secured Party in connection with the Obligations,
and (ii) no Loan Party shall use any revenue or benefit derived
from any activity or dealing with a Sanctioned Person for the
purpose of discharging amounts owing to any Secured Party in
respect of the Facility.


(c) Each Borrower shall
implement and maintain appropriate safeguards designed to prevent
any action that would be contract to paragraph (a) or (b) above.


(d) Each Loan Party
shall, and shall procure that each Borrower and each Subsidiary
will, promptly upon becoming aware of the same, supply to the
Administrative Agent details of any claim, action, suit,
proceedings or investigation against it with respect to
Sanctions.


SECTION
6.16 Limitation on Leases. Neither
any Borrower nor any Subsidiary will create, incur, assume or
suffer to exist any obligation for the payment of rent or hire of
Property of any kind whatsoever (real or personal but excluding
Capital Leases and leases of Hydrocarbon Interests), under leases
or lease agreements that would cause the aggregate amount of all
payments made by the Borrowers and the Subsidiaries pursuant to all
such leases or lease agreements, including any residual payments at
the end of any lease, to exceed $1,000,000 in any period of twelve
consecutive calendar months during the life of such
leases.


SECTION
6.17 Gas Imbalances, Take-or-Pay or Other
Prepayments. Each Borrower will not, and will not permit any
Subsidiary to, allow gas imbalances, take-or-pay or other
prepayments (including pursuant to an Advance Payment Contract)
with respect to the Oil and Gas Properties of any Borrower or any
Subsidiary that would require such Borrower or such Subsidiary to
deliver Hydrocarbons at some future time without then or thereafter
receiving full payment therefor.


SECTION
6.18 Hedge Transactions. Each
Borrower will not, and will not permit any of its Subsidiaries to,
enter into any Hedge Transaction except that each Borrower or other
Loan Party shall be permitted to enter into, as of any
date:


(a) Hedge Transactions
(other than Excluded Hedge Transactions) with an Approved
Counterparty related to bona fide (and not speculative) hedging
activities of such Borrower or other Loan Party with respect to
which the aggregate notional volumes covered thereby do not exceed,
when aggregated and netted with all other Hedge Transactions of the
Borrowers and the other Loan Parties then in effect, for any month
during the period from the then-current date until four (4) years
after the then-current date, 85% of the Borrowers’ and the
other Loan Parties’ reasonably anticipated projected
production of crude oil (for crude oil related Hedge Transactions),
and 85% of the Borrowers’ and the other Loan Parties’
reasonably anticipated projected production of natural gas (for
natural gas related Hedge Transactions), in each case, for such
month, from the Borrowers’ and the other Loan Parties’
Oil and Gas Properties constituting proved developed producing
reserves.


(b) [Reserved].



 

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(c) Notwithstanding
anything to the contrary in this Section 6.18, there shall
be no prohibition under this Agreement or any other Loan Document
against any Borrower or any other Loan Party entering into Excluded
Hedge Transactions not otherwise prohibited hereunder, in each
case, so long as such agreements are entered into with an Approved
Counterparty in the ordinary course of business for the purpose of
hedging against fluctuations of commodity prices.


(d) No Borrower or any
Subsidiary will enter into any Hedge Transaction for the purpose of
speculation with respect to the levels of commodity prices in the
future.


(e) In no event shall
any Hedge Agreement contain any requirement, agreement or covenant
for any Borrower or any Subsidiary to post collateral, credit
support (including a letter of credit) or margin to secure their
obligations under such Hedge Agreement or to cover market
exposures, provided
that this sentence shall not (i) prevent a Secured Hedge Party from
requiring the obligations under its Hedge Agreement with any Loan
Party to be secured by the Liens granted to the Administrative
Agent under the Security Documents, or (ii) prohibit any Loan
Party from being party to any Hedge Agreement with an Approved
Counterparty that contains a requirement, agreement or covenant for
any Person other than a Loan Party to post collateral, credit
support (including a letter of credit) or margin to secure such
Loan Party’s obligations under such Hedge Agreement or to
cover market exposures.


(f) No Borrower or any
of its Subsidiaries shall enter into any Hedge Transaction with a
term longer than 48 months from the date such transaction is
entered into.


(g) If, after the end
of any calendar month, Borrowing Agent determines that the
aggregate volume of all commodity Hedge Transactions for which
settlement payments were calculated in such calendar month exceeded
100% of actual production of crude oil and natural gas, calculated
separately, in such calendar month, then Borrowing Agent shall, or
shall cause one or more other Loan Parties to, within five (5)
Business Days of such determinations terminate, create off-setting
positions, allocate volumes to other production for which the
Borrowers and the other Loan Parties are marketing, or otherwise
unwind existing Hedge Transactions such that, at such time, future
hedging volumes will not exceed 100% of reasonably anticipated
projected production for the then-current and any succeeding
calendar months.


For
purposes of this Section 6.18, forecasts of
projected production shall equal the projections for proved
developed producing reserves of each crude oil and natural gas set
out in the most recent Reserve Report delivered to the
Administrative Agent as revised in good faith to account for any
increase or reductions therein anticipated based on information
obtained by any Borrower subsequent to the publication of the such
Reserve Report, including such Borrower’s internal forecasts
of production decline rates for existing wells and additions to or
deletions from anticipated future production from new wells and
acquisitions coming on stream or failing to come on stream and
Dispositions of Oil and Gas Properties, each as reflected in a
separate or supplemental Reserve Report delivered to the
Administrative Agent and otherwise satisfactory to the
Administrative Agent.


SECTION
6.19 Hedge Transaction Termination.
Except upon the terms provided under Section 2.4(c) and
Section 6.18(g), each
Borrower shall maintain the hedged positions established pursuant
to Hedge Transactions used to calculate the then effective
Borrowing Base and shall neither enter into or suffer or exist any
Hedge Liquidation if the effect of such action (when taken together
with any other Hedge Transactions executed contemporaneously with
the taking of such action) would have the effect of canceling its
positions under any such Hedge Transactions; provided that notwithstanding
the foregoing, any Borrower may enter into or suffer or exist any
Hedge Liquidation with the effect of canceling its position if it
provides prior written notice of such intent to the Administrative
Agent and the Lenders pursuant to Section 5.1(k) and concurrently
with such cancellation the Borrowing Base is adjusted pursuant to
Section 2.4(f).


SECTION
6.20 Sale and Leaseback Transactions and
other Off-Balance Sheet Liabilities. Each Borrower will not,
nor will any Borrower permit any of its Subsidiaries to, enter into
or suffer to exist any (i) sale and leaseback transaction or (ii)
any other transaction pursuant to which it incurs or has incurred
Off-Balance Sheet Liabilities, except for (x) Hedge Transactions to
the extent permitted under the terms of Section 6.18 and (y) Advance
Payment Contracts to the extent permitted under the terms of
Section
6.17.



 

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SECTION
6.21 Sale or Discount of
Receivables. Except for receivables obtained by any Borrower
or any Subsidiary that are outside 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, neither any Borrower nor any Subsidiary will
discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.


SECTION
6.22 [Reserved.]


SECTION
6.23 Additional Deposit Accounts.
From and after the Effective Date, each Borrower shall not, and
shall not permit any of its Subsidiaries to, open, establish or
maintain any operating, revenue, collection or other deposit
accounts (other than Excluded Accounts) with any depositary bank
other than those depositary banks with whom such Borrower or such
Subsidiary maintains its deposit accounts on and as of the
Effective Date unless (a) the Administrative Agent shall have
consented in writing to the opening or establishment of a new
deposit account and (b) such new deposit account shall be,
concurrently with its opening or establishment, subject to the
Administrative Agent’s control pursuant to a Control
Agreement.

ARTICLE
VII



Events of Default


SECTION
7.1 Events of Default. If any of
the following events (“Events of Default”) shall
occur:


(a) any 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 or otherwise;


(b) any 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 7.1(a)) payable under
this Agreement, when and as the same shall become due and payable,
and such failure shall continue unremedied for a period of three
(3) Business Days;


(c) any representation
or warranty made or deemed made by or on behalf of any Borrower or
any other Loan Party in or in connection with this Agreement, any
other Loan Document or any amendment or modification hereof or
thereof or waiver hereunder or thereunder, or in any report,
certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement, any other Loan
Document or any amendment or modification hereof or thereof or
waiver hereunder or thereunder, shall prove to have been incorrect
or misleading in any material respect when made or deemed
made;


(d) any Borrower shall
fail to observe or perform any covenant, condition or agreement
contained in Section 5.2(a),
5.3 (with respect
to the existence of any Loan Party), 5.8, 5.13 or in Article VI;


(e) any Borrower or any
other Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement or any other
Loan Document (other than those specified in clause (a), (b) or (d) of this Section 7.1), and such failure
shall continue unremedied for a period of thirty (30) days
after the earlier of (x) notice thereof from the Administrative
Agent to the Borrowing Agent (which notice will be given at the
request of any Lender) and (y) the date a Responsible Officer of
any Borrower or such other Loan Party had actual knowledge of such
failure;


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


(g) any event or
condition occurs that results in any Material Indebtedness becoming
due prior to its scheduled maturity or that enables or permits
(with or without the giving of notice, the lapse of time or both)
the holder or holders of any Material Indebtedness or any trustee
or agent on its or their behalf to cause any Material Indebtedness
to become due, or to require the prepayment, repurchase, redemption
or defeasance thereof, or require cash collateral in respect
thereof, prior to its scheduled maturity or (in the case of any
Material Indebtedness constituting a Guarantee) to become payable
or require cash collateral in respect thereof; provided that this clause (g) shall not apply
to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness if such voluntary sale or transfer is permitted under
this Agreement;



 

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(h) an involuntary
proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief
in respect of any Borrower or any Subsidiary 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 any Borrower or any Subsidiary or for a substantial part of its
assets, and, in any such case, such proceeding or petition shall
continue undismissed for sixty (60) days or an order or decree
approving or ordering any of the foregoing shall be
entered;


(i) any Borrower or any
Subsidiary 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 7.1(h)
of this Article, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or
similar official for any Borrower or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting
the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of
creditors or (vi) take any action for the purpose of effecting
any of the foregoing;


(j) any Borrower or any
Subsidiary 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 $1,000,000 shall be rendered against any Borrower, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of thirty (30) consecutive days
during which execution shall not be effectively stayed, or any
action shall be legally taken by a judgment creditor to attach or
levy upon any assets of any Borrower or any Subsidiary to enforce
any such judgment;


(l) an ERISA Event
shall have occurred that when taken together with all other ERISA
Events that have occurred, could reasonably be expected to result
in liability of any Borrower, its Subsidiaries or its ERISA
Affiliates in an aggregate amount exceeding
$1,000,000;


(m) any provision of
any Loan Document, at any time after its execution and delivery and
for any reason other than as expressly permitted hereunder or
thereunder or satisfaction in full of all the Obligations, shall
cease to be in full force and effect; or any Loan Party or any
other Person shall contest in any manner the validity or
enforceability of any provision of any Loan Document; or any Loan
Party shall deny that it has any or further liability or obligation
under any Loan Document, or shall purport to revoke, terminate or
rescind any provision of any Loan Document; or any Lien securing
any Obligation shall, in whole or in part, fail to be a perfected
Lien having first priority (subject only to such other Liens
permitted to have priority over it pursuant to the Loan Documents);
or


(n) a Change in Control
shall occur;


then,
and in every such event (other than an event with respect to any
Borrower described in clause (h) or (i) of this Section 7.1), and at any time
thereafter during the continuance of such event, the Administrative
Agent may, and at the request of the Majority Lenders shall, by
notice to the Borrowing Agent, take any or all of the following
actions, at the same or different
times:  (i) terminate the Commitments, and thereupon
the Commitments (if not theretofore terminated) shall terminate
immediately, (ii) foreclose on the Collateral and
(iii) accelerate and declare 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 Borrowers
(including all amounts of LC Exposure, whether or not the
beneficiary of any then-outstanding Letter of Credit shall have
demanded payment thereunder) accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by each
Borrower; and in case of any event with respect to any Borrower
described in clause
(h) or (i)
of this Section
7.1, the Commitments (if not theretofore terminated) shall
automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees
and other Obligations of each Borrower and the other Loan Parties
(including all amounts of LC Exposure, whether or not the
beneficiary of any then-outstanding Letter of Credit shall have
demanded payment thereunder) accrued hereunder, shall automatically
become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by each
Borrower. In addition, the Administrative Agent may also exercise
on behalf of itself, the Lenders and the Issuing Banks all other
rights and remedies available to it, the Lenders and the Issuing
Banks under the Loan Documents or applicable law. With respect to
all Letters of Credit having undrawn and unexpired amounts at the
time of an acceleration pursuant to this clause, each Borrower
shall at such time deposit in a cash collateral account opened by
the Administrative Agent an amount equal to 103% of the aggregate
then undrawn and unexpired amount of such Letters of Credit in
accordance with Section
2.5(j).



 

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SECTION
7.2 Application of
Proceeds. After the
exercise of remedies provided for in Section 7.1 (or after the
Commitments have automatically terminated and the principal of the
Loans then outstanding, together with accrued interest thereon and
all fees and other Obligations of each Borrower accrued hereunder,
have automatically become due and payable under Section 7.1), subject to
the provisions of the Secured Hedge Intercreditor Agreement, any
amounts received on account of the Obligations shall be applied by
the Administrative Agent in the following order:


FIRST,
to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts (including fees, charges
and disbursements of counsel to the Administrative Agent incident
to the enforcement of any Loan Document and amounts payable under
Sections 2.14,
2.15, 2.16 or 2.17) payable to the
Administrative Agent (or to the trustee under any Mortgages) in its
capacity as such;


SECOND,
to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest)
payable to the Lenders and the Issuing Banks (including fees,
charges and disbursements of counsel to the respective Lenders and
the Issuing Banks and amounts payable under Sections 2.14,
2.15, 2.16 or 2.17), ratably among them in
proportion to the amounts described in this clause SECOND payable to
them;


THIRD,
to payment of that portion of the Obligations constituting accrued
and unpaid interest on the Loans, unreimbursed disbursements under
Letters of Credit and other Obligations, ratably among the Lenders
and the Issuing Banks in proportion to the respective amounts
described in this clause
THIRD payable to them;


FOURTH,
to payment of that portion of the Obligations constituting unpaid
principal of the Loans and unreimbursed disbursements under Letters
of Credit or payments for early termination of Secured Party Hedge
Transactions (and any other unpaid amount then due and owing under
any Secured Party Hedge Transaction) or any unpaid amount then due
and owing under any Lender Provided Financial Service Product, in
each case owed to a Person that is or was a Secure Hedge Party at
the time such Person entered into such Secured Party Hedge
Transaction, or is or was a Lender or Affiliate of a Lender at the
time such Person entered into such Lender Provided Financial
Service Product, as the case may be, ratably among the Lenders,
Affiliates of Lenders (if applicable), other Secured Hedge Party
(if applicable), Person (if applicable), and the Issuing Banks in
proportion to the respective amounts described in this clause FOURTH held by
them;


FIFTH,
to the Administrative Agent for the account of each applicable
Issuing Bank, to Cash Collateralize the aggregate undrawn amount of
all outstanding Letters of Credit;


SIXTH,
the balance, if any, after all of the Obligations have been paid in
full, to the Borrowers or other Loan Party entitled thereto or as
otherwise required by Applicable Law.


Amounts
used to Cash Collateralize the aggregate undrawn amount of Letters
of Credit pursuant to clause Fifth above shall be
applied to satisfy drawings under such Letters of Credit as they
occur. If any amount remains on deposit as Cash Collateral after
all Letters of Credit have either been fully drawn or expired, such
remaining amount shall be applied to the other Obligations, if any,
in the order set forth above. Excluded Hedge Obligations with
respect to any Guarantor shall not be paid with amounts received
from such Guarantor or its assets, but at the discretion of the
Administrative Agent and to the extent not prohibited under
applicable law, appropriate adjustments shall be made with respect
to payments from other Loan Parties to preserve the allocation to
Indebtedness otherwise set forth above in this Section 7.2 assuming that,
solely for purposes of such adjustments, Indebtedness includes
obligations in respect of Excluded Hedge Transactions.



 

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Notwithstanding the
foregoing, Obligations arising under Lender Provided Financial
Service Products and Secured Party Hedge Transactions shall be
excluded from the application described above if the Administrative
Agent has not received written notice thereof, together with such
supporting documentation as the Administrative Agent may request,
from the applicable Lender, Lender Affiliate or Approved
Counterparty that is a party to a Secured Party Hedge Transaction,
as the case may be.

ARTICLE
VIII



The Administrative
Agent


SECTION
8.1 Appointment and Authority. Each
of the Lenders and the Issuing Banks hereby irrevocably appoints
SocGen to act on its behalf as the Administrative Agent hereunder
and under the other Loan Documents 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 or thereof, 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 Banks, and neither any Borrower nor any
other Loan Party shall have any rights as a third-party beneficiary
of any of such provisions. It is understood and agreed that the use
of the term “agent” herein or in any other Loan
Documents (or any other similar term) with reference to the
Administrative Agent is not intended to connote any fiduciary or
other implied (or express) obligation arising under agency doctrine
of any Applicable Law. Instead such term is used as a matter of
market custom, and is intended to create or reflect only an
administrative relationship between contracting
parties.


SECTION
8.2 Rights as a Lender. The Person
serving as the Administrative 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 the Administrative
Agent, and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context
otherwise requires, include the Person serving as the
Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to,
own securities of, act as the financial advisor or in any other
advisory capacity for, and generally engage in any kind of business
with, any Borrower or any Subsidiary or other Affiliate thereof as
if such Person were not the Administrative Agent hereunder and
without any duty to account therefor to the Lenders.


SECTION
8.3 Exculpatory Provisions. The
Administrative Agent shall not have any duties or obligations
except those expressly set forth herein and in the other Loan
Documents, and its duties hereunder shall be administrative in
nature. Without limiting the generality of the foregoing, the
Administrative Agent:


(i) shall not be
subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing;


(ii) shall
not have any duty to take any discretionary action or exercise any
discretionary power, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that
the Administrative Agent is required to exercise as directed in
writing by the Majority Lenders (or such other number or percentage
of the Lenders as shall be expressly provided for herein or in the
other Loan Documents); provided that the
Administrative Agent shall not be required to take any action that,
in its opinion or the opinion of its counsel, may expose the
Administrative Agent to liability or that is contrary to any Loan
Document or Applicable Law, including for the avoidance of doubt
any action that may be in violation of the automatic stay under any
Debtor Relief Law or that may effect a forfeiture, modification or
termination of property of a Defaulting Lender in violation of any
Debtor Relief Law; and



 

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


(a) The Administrative
Agent shall not be liable for any action taken or not taken by it
(i) with the consent or at the request of the Majority Lenders (or
such other number or percentage of the Lenders as shall be
necessary, or as the Administrative Agent shall believe in good
faith shall be necessary, under the circumstances as provided in
Section 9.2 and
Article VII)
or (ii) in the absence of its own gross negligence or willful
misconduct as determined by a court of competent jurisdiction by
final and nonappealable judgment. The Administrative Agent shall be
deemed not to have knowledge of any Default unless and until notice
describing such Default is given to the Administrative Agent in
writing by the Borrowing Agent, a Lender or an Issuing
Bank.


(b) The Administrative
Agent 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 thereunder or in connection herewith or
therewith, (iii) the performance or observance of any
covenant, agreement or other term or condition set forth herein or
therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document
or (v) the satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required
to be delivered to the Administrative Agent.


SECTION
8.4 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 (including any electronic message,
Internet or intranet website posting or other distribution)
believed by it to be genuine and to have been signed, sent or
otherwise authenticated 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 have been made by the proper
Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the making
of a Loan, or the issuance, extension or increase of a Letter of
Credit, that by its terms must be fulfilled to the satisfaction of
a Lender or an Issuing Bank, the Administrative Agent may presume
that such condition is satisfactory to such Lender or Issuing Bank
unless the Administrative Agent shall have received notice to the
contrary from such Lender or Issuing Bank prior to the making of
such Loan or the issuance of such Letter of Credit. The
Administrative Agent may consult with legal counsel, 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.


SECTION
8.5 Delegation of Duties. The
Administrative Agent may perform any and all of its duties and
exercise its rights and powers hereunder or under any other Loan
Document 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 of its duties and exercise its
rights and powers by or through their respective Related Parties.
The exculpatory provisions of this Article shall apply to any such
sub-agent and to the Related Parties of the Administrative Agent
and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the Facilities as
well as activities as Administrative Agent. The Administrative
Agent shall not be responsible for the negligence or misconduct of
any sub-agent except to the extent that a court of competent
jurisdiction determines in a final and nonappealable judgment that
the Administrative Agent acted with gross negligence or willful
misconduct in the selection of such sub-agent.


SECTION
8.6 Resignation of Administrative
Agent. (a) The Administrative Agent may at any time give
notice of its resignation to the Lenders, the Issuing Banks and the
Borrowers. Upon receipt of any such notice of resignation, the
Majority Lenders shall have the right, in consultation with the
Borrowing Agent, to appoint a successor. If no such successor shall
have been so appointed by the Majority Lenders and shall have
accepted such appointment within thirty (30) days after the
retiring Administrative Agent gives notice of its resignation (or
such earlier day as shall be agreed by the Majority Lenders) (the
“Resignation
Effective Date”), then the retiring Administrative
Agent may (but shall not be obligated to), on behalf of the Lenders
and the Issuing Banks, appoint a successor Administrative Agent
meeting the qualifications set forth above. Whether or not a
successor has been appointed, such resignation shall become
effective in accordance with such notice on the Resignation
Effective Date.



 

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(b) If the Person
serving as Administrative Agent is a Defaulting Lender pursuant to
clause (d) of the
definition thereof, the Majority Lenders may, to the extent
permitted by Applicable Law, by notice in writing to the Borrowing
Agent and such Person remove such Person as Administrative Agent
and, in consultation with the Borrowing Agent, appoint a successor.
If no such successor shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within thirty (30)
days (or such earlier day as shall be agreed by the Majority
Lenders) (the “Removal Effective Date”),
then such removal shall nonetheless become effective in accordance
with such notice on the Removal Effective Date.


(c) With effect from
the Resignation Effective Date or the Removal Effective Date (as
applicable) (1) the retiring or removed Administrative Agent shall
be discharged from its duties and obligations hereunder and under
the other Loan Documents (except that in the case of any Collateral
held by the Administrative Agent on behalf of the Lenders or the
Issuing Banks under any Loan Document, the retiring or removed
Administrative Agent shall continue to hold such Collateral until
such time as a successor Administrative Agent is appointed) and (2)
except for any indemnity payments owed to the retiring or removed
Administrative Agent, all payments, communications and
determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender and
Issuing Bank directly, until such time, if any, as the Majority
Lenders appoint a successor Administrative Agent as provided for
above. Upon the acceptance of a successor’s appointment as
Administrative Agent hereunder, such successor shall succeed to and
become vested with all of the rights, powers, privileges and duties
of the retiring or removed Administrative Agent (other than any
rights to indemnity payments owed to the retiring or removed
Administrative Agent), and the retiring or removed Administrative
Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents. The fees payable by
the Borrowers to a successor Administrative Agent shall be the same
as those payable to its predecessor unless otherwise agreed between
the Borrowing Agent and such successor. After the retiring or
removed Administrative Agent’s resignation or removal
hereunder and under the other Loan Documents, the provisions of
this Article and Section 9.3 shall continue
in effect for the benefit of such retiring or removed
Administrative Agent, its sub-agents and their respective Related
Parties in respect of any action taken or omitted to be taken by
any of them while the retiring or removed Administrative Agent was
acting as Administrative Agent.


SECTION
8.7 Non-Reliance on Administrative Agent
and Other Lenders. Each Lender and Issuing Bank acknowledges
and agrees that the extensions of credit made hereunder are
commercial loans and letters of credit and not investments in a
business enterprise or securities. Each Lender and Issuing Bank
represents that it is engaged in making, acquiring or holding
commercial loans in the ordinary course of its business and that it
has, independently and without reliance upon the Administrative
Agent or any other Lender or any of their Related Parties and based
on such documents and information (which may contain material,
non-public information within the meaning of the United States
securities laws concerning any Borrower and its respective
Affiliates) as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender and
Issuing Bank also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender
or any of their Related Parties 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 or any
related agreement or any document furnished hereunder or
thereunder.


SECTION
8.8 No Other Duties, etc. Anything
herein to the contrary notwithstanding, none of the Bookrunners or
Arrangers listed on the cover page hereof shall have any powers,
duties or responsibilities under this Agreement or any other Loan
Document, except in its capacity, as applicable, as the
Administrative Agent, a Lender or an Issuing Bank
hereunder.


SECTION
8.9 Enforcement. Notwithstanding
anything to the contrary contained herein or in any other Loan
Document, the authority to enforce rights and remedies hereunder
and under the other Loan Documents against any Loan Party shall be
vested exclusively in, and all actions and proceedings at law in
connection with such enforcement shall be instituted and maintained
exclusively by, the Administrative Agent in accordance with
Section 8.1 for the
benefit of all the Lenders and the Issuing Banks; provided that the foregoing
shall not prohibit (a) the Administrative Agent from
exercising on its own behalf the rights and remedies that inure to
its benefit (solely in its capacity as Administrative Agent)
hereunder and under the other Loan Documents, (b) any Issuing Bank
or Lender from exercising the rights and remedies that inure to its
benefit (solely in its capacity as Issuing Bank) hereunder and
under the other Loan Documents, (c) any Lender from enforcing its
right to payment when due of the principal of and interest on its
Loans, fees and other amounts owing to such Lender under the Loan
Documents, (d) any Lender from exercising setoff rights in
accordance with Section
9.8 (subject to the terms of Section 2.19) or (e) any
Lender from filing proofs of claim or appearing and filing
pleadings on its own behalf during the pendency of a proceeding
relative to any Loan Party under any Debtor Relief Law; and
provided,
further, that if at
any time there is no Person acting as Administrative Agent
hereunder and under the other Loan Documents, then (i) the Required
Lenders shall have the rights otherwise ascribed to the
Administrative Agent pursuant to this Article VIII and (ii) in
addition to the matters set forth in clauses (b), (c) , (d) and (e) of the preceding
proviso and subject
to Section 2.19,
any Lender may, with the consent of the Required Lenders, enforce
any rights and remedies available to it and as authorized by the
Required Lenders.



 

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SECTION
8.10 Administrative Agent May File Proofs
of Claim. In case of the pendency of any proceeding under
any Debtor Relief Law or any other judicial proceeding relative to
any Loan Party, the Administrative Agent (irrespective of whether
the principal of any Loan or LC Exposure 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 Borrowing Agent) shall be entitled and empowered
(but not obligated) by intervention in such proceeding or
otherwise:


(a) to file and prove a
claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans, LC Exposure 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, the Issuing Banks and the Administrative
Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders, the Issuing
Banks and the Administrative Agent and their respective agents and
counsel and all other amounts due the Lenders, the Issuing Banks
and the Administrative Agent under Sections 2.11 and
9.3) 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 and Issuing Bank 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 and the Issuing Banks, 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 Sections 2.11 and
9.3.


SECTION
8.11 Collateral and Guaranty
Matters. (a)  Each Lender, on behalf of itself and each
Lender’s Affiliate that is a counterparty to a Secured Party
Hedge Transaction or Lender Provided Financial Service Product,
irrevocably authorizes the Administrative Agent, at its option and
in its discretion,


(i) to release any Lien
on any property granted to or held by the Administrative Agent
under any Loan Document (x) on or after the Termination Date, (y)
that is sold or otherwise disposed of or to be sold or otherwise
disposed of as part of or in connection with any sale or other
Disposition permitted under the Loan Documents or (z) subject to
Section 9.2,
if approved, authorized or ratified in writing by the Majority
Lenders; and


(ii) to
release any Guarantor from its obligations under the Loan Documents
if such Person ceases to be a Subsidiary as a result of a
transaction permitted under the Loan Documents.


Upon
request by the Administrative Agent at any time, the Majority
Lenders will confirm in writing the Administrative Agent’s
authority to release its interest in particular types or items of
property, or to release any Guarantor from its obligations under
the Loan Documents pursuant to this Section 8.11.



 

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(b) The Administrative
Agent shall not be responsible for or have a duty to ascertain or
inquire into any representation or warranty regarding the
existence, value or collectability of any Collateral, the
existence, priority or perfection of the Administrative
Agent’s Lien thereon, or any certificate prepared by any Loan
Party in connection therewith, nor shall the Administrative Agent
be responsible or liable to the Lenders for any failure to monitor
or maintain any portion of the Collateral.


SECTION
8.12 Secured Party Hedge Transactions and
Lender Provided Financial Service Products.


(a) No holder of
Secured Obligations in respect of Secured Party Hedge Transactions
or Lender Provided Financial Service Products shall have any right
to notice of any action or to consent to, direct or object to any
action hereunder or under any other Loan Document or otherwise in
respect of the Collateral (including the release or impairment of
any Collateral) other than in its capacity as a Lender and, in such
case, only to the extent expressly provided in the Loan Documents
or as otherwise set forth in its applicable Secured Hedge
Intercreditor Agreement. Notwithstanding any other provision of
this Article VIII to the
contrary, the Administrative Agent shall not be required to verify
the payment of, or that other satisfactory arrangements have been
made with respect to, such Secured Obligations unless the
Administrative Agent has received written notice of such Secured
Obligations, together with such supporting documentation as the
Administrative Agent may reasonably request, from the applicable
Lender, Affiliate of a Lender or other Secured Hedge
Party.


(b) The benefit of the
Security Documents and the provisions of this Agreement and the
other Loan Documents relating to the Collateral shall also extend
to, secure and be available on a pro rata basis (as set forth in
Section 7.2 of this
Agreement) to each Secured Hedge Party that is a counterparty to a
Secured Party Hedge Transaction (including any Secured Party Hedge
Transaction in existence prior to the date hereof) with respect to
any obligations of any Borrower or any Subsidiary arising under
such Secured Party Hedge Transaction, but only with respect to any
Secured Party Hedge Transaction, and the transactions thereunder,
that were entered into while such Person was a Secured Hedge Party
until either (x) such obligations arising under such Secured
Party Hedge Transactions are paid in full or otherwise expire or
are terminated or (y) the Security Documents are otherwise released
in accordance with Section 8.11(a)(i) or
terminate; provided
that with respect to any Secured Party Hedge Transaction that
remains secured after the counterparty thereto is no longer a
Secured Hedge Party or the outstanding Obligations have been repaid
in full and the Commitments have terminated, the provisions of this
Article VIII shall
also continue to apply to such counterparty in consideration of its
benefits hereunder and each such counterparty shall, if requested
by the Administrative Agent, promptly execute and deliver to the
Administrative Agent all such other documents, agreements and
instruments reasonably requested by the Administrative Agent to
evidence the continued applicability of the provisions of this
Article
VIII.


(c) Notwithstanding
anything contained in any of the Loan Documents to the contrary,
each Borrower, the Administrative Agent, and each Lender, for
itself and on behalf of its Affiliates party to Secured Party Hedge
Transactions, hereby agree that no Lender, Affiliate of a Lender or
other party to any Loan Document (other than the Administrative
Agent) or a Secured Party Hedge Transaction shall have any right
individually to realize upon any of the Collateral or to enforce
any Security Document, it being understood and agreed that all
powers, rights and remedies hereunder and under the Security
Documents may be exercised solely by Administrative Agent on behalf
of the Lenders in accordance with the terms hereof. By accepting
the benefit of the Liens granted pursuant to the Security
Documents, each Secured Hedge Party that is not a party hereto
hereby agrees to the terms of this Section 8.12.


(d) To the extent any
Affiliate of a Lender provides any Lender Provided Financial
Service Products and thereby becomes a beneficiary of the Liens
pursuant to any Security Documents, such Affiliate of a Lender
shall be deemed to appoint the Administrative Agent its nominee and
agent to act for and on behalf of such Affiliate in connection with
such Security Documents and to be bound by the terms of this
Article VIII and the other provisions of this
Agreement.


SECTION
8.13 Credit Bidding.



 

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(a) The Administrative
Agent, on behalf of itself and the Secured Parties, shall have the
right, at the direction of the Majority Lenders, to credit bid and
purchase for the benefit of the Administrative Agent and the
Secured Parties all or any portion of Collateral at any sale
thereof conducted by the Administrative Agent under the provisions
of the UCC, including pursuant to Sections 9-610 or 9-620 of the
UCC, at any sale thereof conducted under the provisions of the
United States Bankruptcy Code, including Section 363 thereof, or a
sale under a plan of reorganization, or at any other sale or
foreclosure conducted by the Administrative Agent (whether by
judicial action or otherwise) in accordance with Legal
Requirements.


(b) Each Secured Party
hereby agrees that, except as otherwise provided in any Loan
Documents or with the written consent of the Administrative Agent
and the Majority Lenders, it will not take any enforcement action,
accelerate obligations under any Loan Documents, or exercise any
right that it might otherwise have under Legal Requirements to
credit bid at foreclosure sales, UCC sales or other similar
Dispositions of Collateral; provided that, for the avoidance of
doubt, this subsection (b) shall not limit the rights of any Lender
(i) to terminate any Secured Party Hedge Transaction or net out any
resulting termination values, or (ii) to terminate any Lender
Provided Financial Service Product or set off against any deposit
accounts.


SECTION
8.14 Secured Hedge Intercreditor
Agreement. The Administrative Agent is authorized to enter
into one or more Secured Hedge Intercreditor Agreements with
Approved Counterparties, and the parties hereto acknowledge, on
behalf of themselves and their Affiliates, that the Secured Hedge
Intercreditor Agreement is binding upon them and their Affiliates
without execution thereof.

ARTICLE
IX



Miscellaneous


SECTION
9.1 Notices; Effectiveness; Electronic
Communication.


(a) Notices Generally. Except in
the case of notices and other communications expressly permitted to
be given by telephone (and except as provided in clause (b) below), 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, sent by telecopy
or (if arrangements for doing so have been approved by the
Administrative Agent) electronic communication as
follows:


(i) if to the Borrowing
Agent, on behalf of any Borrower, to it at 1177 West Loop South,
Suite 1825, Houston, Texas 77027, Attention of James Jacobs
(Telecopy No. 713-968-7016; Telephone No. 713-768-7054; E-mail:
james.jacobs@yumacompanies.com);


(ii) if
to the Administrative Agent, to SocGen at 480 Washington Blvd.,
20th Floor, Jersey City, New Jersey 07310, Attention of Ann
Mc-Donough/Cheriese Brathwaite, Portfolio Administrator (Telecopy
No. 201-693-4233; Telephone No. 201-839-8461 or 201-839-8460,
E-mail: cheriese.brathwaite@sgcib.com);


(iii) if
to SocGen in its capacity as Issuing Bank, to it at 480 Washington
Blvd., 20th Floor, Jersey City, New Jersey 07310, Attention of Ann
Mc-Donough/Cheriese Brathwaite, Portfolio Administrator (Telecopy
No. 201-693-4233; Telephone No. 201-839-8461 or
201-839-8460, E-mail: cheriese.brathwaite@sgcib.com);
and


(iv) if
to a Lender, to it at its address (or telecopy number or e-mail
address) set forth in its Administrative
Questionnaire.


Notices
and other communications sent by hand or overnight courier service,
or mailed by certified or registered mail, shall be deemed to have
been given when received; notices and other communications sent by
telecopy shall be deemed to have been given when sent (except that,
if not given during normal business hours for the recipient, shall
be deemed to have been given at the opening of business on the next
business day for the recipient). Notices and other communications
delivered through electronic communications, to the extent provided
in clause (b)
below, shall be effective as provided in said clause (b).



 

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(b) Electronic Communications.
Notices and other communications to the Lenders and the Issuing
Banks hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by the Administrative Agent;
provided that the
foregoing shall not apply to notices to any Lender or Issuing Bank
pursuant to Article
II if such Lender or Issuing Bank, as applicable, has
notified the Administrative Agent that it is incapable of receiving
notices under such Article by electronic communication. The
Administrative Agent or the Borrowing Agent may, in its discretion,
agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it;
provided that
approval of such procedures may be limited to particular notices or
communications.


Unless
the Administrative Agent otherwise prescribes, (i) notices and
other communications sent to an e-mail address shall be deemed
received upon the sender’s receipt of an acknowledgement from
the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other
written acknowledgement) and (ii) notices or communications posted
to an Internet or intranet website shall be deemed received upon
the deemed receipt by the intended recipient, at its e-mail address
as described in the foregoing clause (i), of notification
that such notice or communication is available and identifying the
website address therefor; provided that, for both
clauses (i) and
(ii) above, if such
notice, e-mail or other communication is not sent during the normal
business hours of the recipient, such notice or communication shall
be deemed to have been sent at the opening of business on the next
business day for the recipient.


(c) Change of Address, etc. Any
party hereto may change its address, telecopy number or e-mail
address for notices and other communications hereunder by notice to
the other parties hereto.


(d) Platform.


(i) Each Borrower (on
behalf of itself and each other Loan Party) agrees that (A) the
Administrative Agent may, but shall not be obligated to, make the
Communications (as defined below) (including of materials and/or
information provided by or on behalf of any Borrower hereunder
(collectively, the “Borrower Materials”))
available to the Issuing Banks and the other Lenders by posting the
Communications on Debt Domain, Intralinks, Syndtrak or a
substantially similar electronic transmission system (the
“Platform”), and (B)
certain of the Lenders may be “public-side” Lenders (i.e.,
Lenders that do not wish to receive material non-public information
with respect to any Borrower or its securities) (each, a
“Public
Lender”). Each Borrower hereby agrees that (w) all
Borrower Materials that are to be made available to Public Lenders
shall be clearly and conspicuously marked “PUBLIC” which, at a minimum,
shall mean that the word “PUBLIC” shall appear prominently
on the first page thereof; (x) by marking Borrower Materials
“PUBLIC”, each
Borrower shall be deemed to have authorized the Administrative
Agent and the Lenders to treat such Borrower Materials as not
containing any material non-public information with respect to any
Borrower or its securities for purposes of United States federal
and state securities laws (provided, that to the extent
such Borrower Materials constitute Information, they shall be
treated as set forth in Section 9.12); (y) all
Borrower Materials marked “PUBLIC” are permitted to be made
available through a portion of the Platform designated as
“Public
Investor”; and (z) the Administrative Agent shall be
entitled to treat any Borrower Materials that are not marked
“PUBLIC” as
being suitable only for posting on a portion of the Platform not
marked as “Public
Investor.” Notwithstanding the foregoing, the
following Borrower Materials shall be marked “PUBLIC”, unless the Borrowing
Agent notifies the Administrative Agent promptly that any such
document contains material non-public information: (1) the Loan
Documents and (2) any notification of changes in the terms of the
Facilities. Each Public Lender agrees to cause at least one
individual at or on behalf of such Public Lender to at all times
have selected the “Private
Side Information” or similar designation on the
content declaration screen of the Platform in order to enable such
Public Lender or its delegate, in accordance with such Public
Lender’s compliance procedures and Applicable Law, including
United States Federal and state securities laws, to make reference
to Communications that are not made available through the
“Public Side
Information” portion of the Platform and that may
contain material non-public information with respect to any
Borrower or its securities for purposes of United States Federal or
state securities laws.


(ii) The
Platform is provided “as is” and “as
available.” The Agent Parties (as defined below) do not
warrant the adequacy of the Platform and expressly disclaim
liability for errors or omissions in the Communications. No
warranty of any kind, express, implied or statutory, including any
warranty of merchantability, fitness for a particular purpose,
non-infringement of third-party rights or freedom from viruses or
other code defects, is made by any Agent Party in connection with
the Communications or the Platform. In no event shall the
Administrative Agent or any of its Related Parties (collectively,
the “Agent
Parties”) have any liability to any Borrower or the
other Loan Parties, any Lender or any other Person or entity for
damages of any kind, including direct or indirect, special,
incidental, consequential, punitive or exemplary damages, losses or
expenses (whether in tort, contract or otherwise) arising out of
any Borrower’s, any other Loan Party’s or the
Administrative Agent’s transmission of communications through
the Platform. “Communications” means,
collectively, any notice, demand, communication, information,
document or other material provided by or on behalf of any Borrower
or any other Loan Party pursuant to any Loan Document or the
transactions contemplated therein that is distributed to the
Administrative Agent, any Lender or any Issuing Bank by means of
electronic communications pursuant to this Section, including through the
Platform.



 

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SECTION
9.2 Waivers; Amendments. No failure
or delay by the Administrative Agent, any Issuing Bank or any
Lender in exercising any right or power hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps
to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent, the Issuing Banks
and the Lenders hereunder 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 consent to any departure by any
Borrower therefrom shall in any event be effective unless the same
shall be permitted by clause (b) of this
Section, 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 Lender or any
Issuing Bank may have had notice or knowledge of such Default at
the time.


(a) No
Loan Document nor any provision thereof may be waived, amended or
modified except, in the case of this Agreement, pursuant to an
agreement or agreements in writing entered into by each Borrower
and the Majority Lenders or, in the case of any other Loan
Document, by an agreement in writing entered into with the consent
of the Majority Lenders; provided that no such agreement
shall:


(i) increase
the Maximum Credit Amount of any Lender without the written consent
of such Lender;


(ii) increase
the Borrowing Base without the written consent of all of the
Lenders (other than any Defaulting Lender) and each
Borrower;


(iii) decrease
or maintain the Borrowing Base without the consent of the Required
Lenders, or modify Section
2.4 or the definition of the term “Borrowing
Base” without the consent of each Lender (other than any
Defaulting Lender), provided that a Scheduled
Redetermination may be postponed by the Required
Lenders;


(iv) reduce
the principal amount of any Loan or LC Disbursement or reduce the
rate of interest thereon, or reduce any fees payable hereunder, or
reduce any other Obligation hereunder or under the Loan Document
without the written consent of each Lender affected
thereby;


(v) postpone
the scheduled date of payment or prepayment of the principal amount
of any Loan or LC Disbursement, or any interest thereon, or any
fees payable hereunder, or any other Obligations hereunder or under
the Loan Document or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected
thereby;


(vi) change
Section 2.19(a) or
(b) in a manner
that would alter the pro rata sharing of payments
required thereby, without the written consent of each
Lender;


(vii) [Reserved];



 

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(viii) release
any Guarantor from the Guarantee and Collateral Agreement, or
release all or substantially all of the Collateral in any
transaction or series of related transactions, in each case without
the written consent of each Lender;


(ix) change
any provision of this Section or the definition of
“Majority
Lenders,” “Required Lenders” or any
other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or
make any determination or grant any consent hereunder, without the
written consent of each Lender;


(x) waive
or amend Section
2.10(c), Section
4.1, Section 5.9, Section 7.2 or
Section 8.11 or
change the definition of the terms “Subsidiary” or
“Material
Subsidiary”, without the consent of each Lender;
and


(xi) reduce
the percentage of Oil and Gas Properties comprising proved reserves
required to be mortgaged, without the written consent of each
Lender (other than a Defaulting Lender);


provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or any Issuing Bank hereunder without the
prior written consent of the Administrative Agent or such Issuing
Bank, as the case may be.


(b) Notwithstanding
anything to the contrary contained in any Loan Document, the
Administrative Agent and the Borrowers may amend, modify or
supplement any Loan Document without the consent of any Lender in
order to (i) correct, amend, cure or resolve any ambiguity,
omission, defect, typographical error, inconsistency or other
manifest error therein that is not adverse to the Lenders,
(ii) add a guarantor or collateral or otherwise enhance the
rights and benefits of the Lenders, (iii) make administrative or
operational changes not adverse to any Lender or (iv) adhere
to any local Governmental Requirement or advice of local
counsel.


(c) Notwithstanding
anything to the contrary contained in any Loan Documents, the
Commitment of any Defaulting Lender may not be increased without
its consent (it being understood, for avoidance of doubt, that no
Defaulting Lender shall have any right to approve or disapprove any
increase, decrease or reaffirmation of the Borrowing Base) and the
Administrative Agent may with the consent of the Borrower amend,
modify or supplement the Loan Documents to effectuate an increase
to the Borrowing Base where such Defaulting Lender does not consent
to an increase to its Commitment, including not increasing the
Borrowing Base by the portion thereof applicable to the Defaulting
Lender.


SECTION
9.3 Expenses; Indemnity; Damage
Waiver.


(a) Costs and Expenses. The
Borrowing Agent, on behalf of each Borrower, shall pay (i) all
reasonable out-of-pocket expenses incurred by the Administrative
Agent and its Affiliates (including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent), in
connection with the syndication of the Facilities, the preparation,
negotiation, execution, delivery and administration of this
Agreement and the other Loan Documents, or any amendment,
modification or waiver of the provisions hereof or thereof (whether
or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all out-of-pocket expenses incurred by any
Issuing Bank in connection with the issuance, amendment or
extension of any Letter of Credit or any demand for payment
thereunder, and (iii) all out-of-pocket expenses incurred by
the Administrative Agent, any Lender or any Issuing Bank (including
the fees, charges and disbursements of any counsel or any financial
advisor for the Administrative Agent, any Lender or any Issuing
Bank), incurred during any workout, restructuring or negotiations
in respect thereof, or in connection with the enforcement or
protection of its rights (A) in connection with this Agreement and
the other Loan Documents, including its rights under this
Section or (B) in
connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of
such Loans or Letters of Credit, in each case, whether before or
after the occurrence of an Event of Default.



 

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(b) Indemnification by each
Borrower. Each Borrower shall indemnify the Administrative
Agent (and any sub-agent thereof), each Lender and each Issuing
Bank, and each Related Party of each of the foregoing Persons (each
such Person being called an “Indemnitee”) against, and
hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses (including the fees,
charges and disbursements of any counsel or any financial advisor
for any Indemnitee), and shall indemnify and hold harmless each
Indemnitee from all fees and disbursements for counsel, incurred by
any Indemnitee or asserted against any Indemnitee by any Person
(including any Borrower or any other Loan Party) arising out of, in
connection with, or as a result of (i) the execution or delivery of
this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or
thereunder or the consummation of the transactions contemplated
hereby or thereby, (ii) any Loan or Letter of Credit or the use or
proposed use of the proceeds therefrom (including any refusal by
any 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), (iii)
any actual or alleged presence or release of Hazardous Materials on
or from any property owned or operated by any Borrower or any
Subsidiary, or any Environmental Liability related in any way to
any Borrower or any Subsidiary or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory,
whether brought by a third party or by any Borrower or any other
Loan Party, 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 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 (x)
are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence
or willful misconduct of such Indemnitee or (y) result from a claim
brought by any Borrower or any other Loan Party against an
Indemnitee for breach in bad faith of such Indemnitee’s
obligations hereunder or under any other Loan Document, if such
Borrower or such Loan Party has obtained a final and nonappealable
judgment in its favor on such claim as determined by a court of
competent jurisdiction. This Section 9.3(b) shall not apply
with respect to Taxes other than any Taxes that represent losses,
claims, damages, liabilities and related expenses arising from any
non-Tax claim.


(c) Reimbursement by Lenders. To
the extent that any Borrower for any reason fails to indefeasibly
pay any amount required under clause (a) or (b) of this Section to be paid by it to the
Administrative Agent (or any sub-agent thereof), any Issuing Bank
or any Related Party of any of the foregoing, each Lender severally
agrees to pay to the Administrative Agent (or any such sub-agent),
such Issuing Bank or such Related Party, as the case may be, such
Lender’s pro
rata share
(determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought based on each Lender’s share
of the total Credit Exposure at such time) of such unpaid amount
(including any such unpaid amount in respect of a claim asserted by
such Lender); provided that with respect to
such unpaid amounts owed to any Issuing Bank solely in its capacity
as such, only the Lenders shall be required to pay such unpaid
amounts, such payment to be made severally among them based on such
Lenders’ Applicable Percentages (determined as of the time
that the applicable unreimbursed expense or indemnity payment is
sought); provided,
further, that the
unreimbursed expense or indemnified loss, claim, damage, liability
or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent (or any such sub-agent), or such
Issuing Bank in its capacity as such, or against any Related Party
of any of the foregoing acting for the Administrative Agent (or any
such sub-agent) or such Issuing Bank in connection with such
capacity. The obligations of the Lenders under this clause (c) are subject to the
provisions of Section
2.19(d).


(d) Waiver of Consequential Damages,
etc. To the fullest extent permitted by Applicable Law, each
Borrower shall not assert, and hereby waives, any claim against any
Indemnitee, on any theory of liability, for indirect, special,
punitive, consequential or exemplary 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
contemplated hereby or thereby, any Loan or Letter of Credit, or
the use of the proceeds thereof. No Indemnitee referred to in
clause (b) above
shall be liable for any damages arising from the use by unintended
recipients of any information or other materials distributed by it
through telecommunications, electronic or other information
transmission systems in connection with this Agreement or the other
Loan Documents or the transactions contemplated hereby or
thereby.


(e) Payments. All amounts due under
this Section shall
be payable not later three (3) Business Days after demand
therefor.



 

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(f) Survival. Each party’s
obligations under this Section shall survive the
termination of the Loan Documents and payment of the other
Obligations.


SECTION
9.4 Successors and
Assigns.


(a) Successors and Assigns
Generally. 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, except that no
Borrower may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and each Lender, and no Lender may assign or
otherwise transfer any of its rights or obligations hereunder
except (i) to an assignee in accordance with the provisions of
clause (b) of this
Section, (ii) by
way of participation in accordance with the provisions of
clause (d) of this
Section or (iii) by
way of pledge or assignment of a security interest subject to the
restrictions of clause (e) of this
Section (and any
other attempted assignment or transfer by any party hereto shall be
null and void). 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, Participants to the extent provided in clause (d) of this Section and, to the extent
expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.


(b) Assignments by Lenders. Any
Lender (“Assigning
Lender”) may at any time assign to one or more
assignees (“New
Lender”) all or a portion of its rights and
obligations under this Agreement (including all or a portion of its
Commitments and the Loans at the time owing to it); provided that any such
assignment shall be subject to the following
conditions:


(i) Minimum Amounts.


(A) in the case of an
assignment of the entire remaining amount of the assigning
Lender’s Commitment and/or the Loans at the time owing to it
or in the case of an assignment to a Lender, an Affiliate of a
Lender or an Approved Fund, no minimum amount need be assigned;
and


(B) in any case not
described in clause
(b)(i)(A) of this Section, the aggregate amount
of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the applicable Commitment is not
then in effect, the principal outstanding balance of the 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 or, if a
“Trade
Date” is specified in the Assignment and Assumption,
as of the Trade Date) shall not be less than $5,000,000 and the
assignor shall hold no interest or a minimum $5,000,000 interest,
unless each of the Administrative Agent and, so long as no Event of
Default has occurred and is continuing, each Borrower otherwise
consents (each such consent not to be unreasonably withheld or
delayed).


(ii) Proportionate
Amounts. 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 with
respect to the Loan or the Commitment assigned.


(iii) Required
Consents. No consent shall be required for any assignment
except to the extent required by clause (b)(i)(B) of this
Section and, in
addition:



 

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(A) the consent of each
Borrower (such consent not to be unreasonably withheld or delayed)
shall be required unless (x) an Event of Default has occurred and
is continuing at the time of such assignment or (y) such assignment
is to a Lender, an Affiliate of a Lender or an Approved Fund;
provided that each
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 Business Days after having
received notice thereof; and provided, further, that each
Borrower’s consent shall not be required during the primary
syndication of the Commitments;


(B) the consent of the
Administrative Agent (such consent not to be unreasonably withheld
or delayed) shall be required for assignments in respect of the
Facility or any unfunded Commitments if such assignment is to a
Person that is not a Lender with a Commitment, an Affiliate of such
Lender or an Approved Fund with respect to such Lender;
and


(C) the consent of each
Issuing Bank shall be required for any assignment.


(iv) Assignment
and Assumption. 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; provided
that the Administrative Agent may, in its sole discretion, elect to
waive such processing and recordation fee in the case of any
assignment. The assignee, if it is not a Lender, shall deliver to
the Administrative Agent an Administrative
Questionnaire.


(v) No Assignment to Certain
Persons. No such assignment shall be made to (A) any
Borrower or any of such Borrower’s Affiliates or Subsidiaries
or (B) to any Defaulting Lender or any of its Subsidiaries or to
any Person that, upon becoming a Lender hereunder, would constitute
any of the foregoing Persons described in this clause (B).


(vi) No
Assignment to Natural Persons. No such assignment shall be
made to a natural Person (or a holding company, investment vehicle
or trust for, or owned and operated for the primary benefit of, a
natural Person).


(vii) Certain
Additional Payments. In connection with any assignment of
rights and obligations of any Defaulting Lender hereunder, no such
assignment shall be effective unless and until, in addition to the
other conditions thereto set forth herein, the parties to the
assignment shall make such additional payments to the
Administrative Agent in an aggregate amount sufficient, upon
distribution thereof as appropriate (which may be outright payment,
purchases by the assignee of participations or subparticipations,
or other compensating actions, including funding, with the consent
of each Borrower and the Administrative Agent, the applicable
pro rata share of Loans previously
requested but not funded by the Defaulting Lender, to each of which
the applicable assignee and assignor hereby irrevocably consent),
to (x) pay and satisfy in full all payment liabilities then owed by
such Defaulting Lender to the Administrative Agent, each Issuing
Bank, and each other Lender hereunder (and interest accrued
thereon) and (y) acquire (and fund as appropriate) its full
pro rata share of all Loans and
participations in Letters of Credit in accordance with its
Applicable Percentage. Notwithstanding the foregoing, in the event
that any assignment of rights and obligations of any Defaulting
Lender hereunder shall become effective under Applicable Law
without compliance with the provisions of this clause, then the assignee of
such interest shall be deemed to be a Defaulting Lender for all
purposes of this Agreement until such compliance
occurs.


Subject
to acceptance and recording thereof by the Administrative Agent
pursuant to clause (c) of this
Section, from and
after the effective date specified in each Assignment and
Assumption, the assignee thereunder shall be a party to this
Agreement 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 Sections 2.14, 2.16, 2.17 and 9.3 with respect to facts and
circumstances occurring prior to the effective date of such
assignment; provided, that except to the
extent otherwise expressly agreed by the affected parties, no
assignment by a Defaulting Lender will constitute a waiver or
release of any claim of any party hereunder arising from that
Lender’s having been a Defaulting Lender. Any assignment or
transfer by a Lender of rights or obligations under this Agreement
that does not comply with this clause 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
clause (d) of this
Section.


(c) Register. The Administrative
Agent, acting solely for this purpose as an agent of each 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 amounts (and stated interest) of the Loans
owing to, each Lender pursuant to the terms hereof from time to
time (the “Register”). The entries
in the Register shall be conclusive absent manifest error, and each
Borrower, the Administrative Agent and the Lenders shall 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.
The Register shall be available for inspection by the Borrowing
Agent and any Lender, at any reasonable time and from time to time
upon reasonable prior notice. Upon its receipt of a duly completed
Assignment and Assumption executed by an assigning Lender and an
assignee, the assignee’s Administrative Questionnaire (unless
the assignee shall already be a Lender hereunder), the processing
and recordation fee referred to in clause (b) of this Section and any written consent
to such assignment required by clause (b) of this Section, the Administrative
Agent shall accept such Assignment and Assumption and record the
information contained therein in the Register; provided that if either the
assigning Lender or the assignee shall have failed to make any
payment required to be made by it pursuant to this Agreement, the
Administrative Agent shall have no obligation to accept such
Assignment and Assumption and record the information therein in the
Register unless and until such payment shall have been made in
full, together with all accrued interest thereon. No assignment
shall be effective for purposes of this Agreement unless it has
been recorded in the Register as provided in this
paragraph.



 

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(d) Participations. Any Lender may
at any time, without the consent of, or notice to, any Borrower or
the Administrative Agent, sell participations to any Person (other
than a natural Person, or a holding company, investment vehicle or
trust for, or owned and operated for the primary benefit of, a
natural Person, or any Borrower or any Borrower’s Affiliates
or Subsidiaries) (each, a “Participant”) in all or a
portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the
Loans owing to it); provided that (i) such
Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations
and (iii) each Borrower, the Administrative Agent, the Issuing
Banks and Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and
obligations under this Agreement. For the avoidance of doubt, each
Lender shall be responsible for the indemnity under Section 2.17(e) with
respect to any payments made by such Lender to its
Participant(s).


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 first proviso to Section 9.2(b) that
affects such Participant. Each Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.14, 2.16 and 2.17 (subject to the
requirements and limitations therein, including the requirements
under Section 2.17(g) (it being
understood that the documentation required under Section 2.17(g) shall be
delivered to the participating Lender)) to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant
to clause (b) of
this Section;
provided that such
Participant (A) agrees to be subject to the provisions of
Section 2.19
as if it were an assignee under clause (b) of this Section and (B) shall not be
entitled to receive any greater payment under Section 2.14 or 2.17, with respect to any
participation, than its participating Lender would have been
entitled to receive, except to the extent such entitlement to
receive a greater payment results from a Change in Law that occurs
after the Participant acquired the applicable participation. Each
Lender that sells a participation agrees, at the Borrowing
Agent’s request and expense, to use reasonable efforts to
cooperate with the Borrowing Agent to effect the provisions of
Section 2.20(b) with
respect to any Participant. To the extent permitted by Applicable
Law, each Participant also shall be entitled to the benefits of
Section 9.8 as
though it were a Lender; provided that such Participant
agrees to be subject to Section 2.19(b) as though
it were a Lender. Each Lender that sells a participation shall,
acting solely for this purpose as a non-fiduciary agent of each
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”);
provided that no
Lender shall have any obligation to disclose all or any portion of
the Participant Register (including the identity of any Participant
or any information relating to a Participant’s interest in
any commitments, loans, letters of credit or its other obligations
under any Loan Document) to any Person except to the extent that
such disclosure is necessary to establish that such commitment,
loan, letter of credit or other obligation is in registered form
under Section 5f.103-1(c) of the United States Treasury
Regulations. The entries in the Participant Register shall be
conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the
owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. For the avoidance of
doubt, the Administrative Agent (in its capacity as Administrative
Agent) shall have no responsibility for maintaining a Participant
Register.



 

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(e) Certain Pledges. Any Lender may
at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge or
assignment shall release such Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.


(f) Administrative Agent’s
Authority. Each New Lender, by executing the relevant
Assignment and Assumption, confirms, for the avoidance of doubt,
that the Administrative Agent has authority to execute on its
behalf any amendment or waiver that has been approved by or on
behalf of the requisite Lender or Lenders in accordance with this
Agreement on or prior to the date on which the assignment becomes
effective in accordance with this Agreement and that it is bound by
that decision to the same extend as the Assigning Lender would have
been had it remained a Lender.


Subject
to this Section
9.4, the Assigning Lender may assign any of its rights to
another bank or financial institution or to a trust, fund or other
entity that is regularly engaged in or established for the purpose
of making, purchasing or investing in loans, securities or other
financial assets and that has the status of FATCA Exempt Party on
the relevant Transfer Date.


SECTION
9.5 Survival. All covenants,
agreements, representations and warranties made by each Borrower
herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement 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 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
until the Termination Date. The provisions of Sections 2.14, 2.16, 2.17, 2.18 and 9.3 and Article VIII shall survive and
remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the
Obligations, the expiration or termination of the Letters of Credit
and the Commitments or the termination of this Agreement or any
provision hereof.


SECTION
9.6 Counterparts; Integration;
Effectiveness; Electronic Execution.


(a) Counterparts; Integration;
Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract.
This Agreement and 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 supersede any and
all previous agreements and understandings, oral or written,
relating to the subject matter hereof. Except as provided in
Section 4.1, 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 that, when taken together, bear
the signatures of each of the other parties hereto. Delivery of an
executed counterpart of a signature page of this Agreement by
telecopy or in electronic (i.e., “pdf” or
“tif”) format shall be effective as delivery of a
manually executed counterpart of this Agreement.


(b) Electronic Execution of
Assignments. The words “execution,”
“signed,” “signature,” and words of like
import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form,
each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent
and as provided for in any Applicable Law, including the Federal
Electronic Signatures in Global and National Commerce Act, the New
York State Electronic Signatures and Records Act, or any other
similar state laws based on the Uniform Electronic Transactions
Act.


SECTION
9.7 Severability. Any provision of
this Agreement 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; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.



 

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SECTION
9.8 Right of Setoff.


(a) If an Event of
Default shall have occurred and be continuing, each Lender, each
Issuing Bank and each of their respective Affiliates is hereby
authorized at any time and from time to time, after obtaining the
prior written consent of the Administrative Agent, to the fullest
extent permitted by Applicable Law, to set off and apply any and
all deposits (general or special, time or demand, provisional or
final, in whatever currency) at any time held, and other
obligations (in whatever currency) (including obligations under
Secured Party Hedge Transactions) at any time owing, by such
Lender, such Issuing Bank or any such Affiliate, to or for the
credit or the account of any Borrower or any other Loan Party
against any and all of the obligations of such Borrower or such
Loan Party now or hereafter existing under this Agreement or any
other Loan Document to such Lender or such Issuing Bank or their
respective Affiliates, irrespective of whether or not such Lender,
Issuing Bank or Affiliate shall have made any demand under this
Agreement or any other Loan Document and although such obligations
of such Borrower or such Loan Party may be contingent or unmatured
or are owed to a branch, office or Affiliate of such Lender or such
Issuing Bank different from the branch, office or Affiliate holding
such deposit or obligated on such indebtedness; provided that in the event that
any Defaulting Lender shall exercise any such right of setoff, (x)
all amounts so set off shall be paid over immediately to the
Administrative Agent for further application in accordance with the
provisions of Section 2.22 and, pending
such payment, shall be segregated by such Defaulting Lender from
its other funds and deemed held in trust for the benefit of the
Administrative Agent, the Issuing Banks and the Lenders, and (y)
the Defaulting Lender shall provide promptly to the Administrative
Agent a statement describing in reasonable detail the Obligations
owing to such Defaulting Lender as to which it exercised such right
of setoff. The rights of each Lender, each Issuing Bank and their
respective Affiliates under this Section are in addition to
other rights and remedies (including other rights of setoff) that
such Lender, such Issuing Bank or their respective Affiliates may
have. Each Lender and Issuing Bank agrees to notify the Borrowing
Agent and the Administrative Agent promptly after any such setoff
and application; provided that the failure to
give such notice shall not affect the validity of such setoff and
application.


(b) Without limiting
the generality of the foregoing, “set off” as used
herein shall include the set off and application of any amounts
owed by any Lender or its Affiliates to any Loan Party under any
Secured Party Hedge Transaction against all obligations and
indebtedness owed by such Loan Party to such Lender under this
Agreement or the other Loan Documents, whether direct or indirect,
contingent or liquidated, matured or unmatured, including, without
limitation, any amounts owed under any participation in amounts
owed by any Borrower to such Lender purchased by such Lender (or
its Affiliates) under Section 2.19 or any other
similar provisions for the pro rata sharing of payments received
from or on behalf of the Loan Parties among the
Lenders.


SECTION
9.9 Governing Law; Jurisdiction;
Etc.


(a) Governing Law. This Agreement
and the other Loan Documents and any claim, controversy, dispute or
cause of action (whether in contract or tort or otherwise) based
upon, arising out of or relating to this Agreement or any other
Loan Document (except, as to any other Loan Document, as expressly
set forth therein) and the transactions contemplated hereby and
thereby shall be governed by, and construed in accordance with, the
law of the State of New York.


(b) Jurisdiction. Each Borrower
irrevocably and unconditionally agrees that it will not commence
any action, litigation or proceeding of any kind or description,
whether in law or equity, whether in contract or in tort or
otherwise, against the Administrative Agent, any Lender, any
Issuing Bank or any Related Party of the foregoing in any way
relating to this Agreement or any other Loan Document or the
transactions relating hereto or thereto, in any forum other than
the courts of the State of New York sitting in New York County, and
of the United States District Court for the Southern District of
New York, and any appellate court from any thereof, and each of the
parties hereto irrevocably and unconditionally submits to the
jurisdiction of such courts in any action or proceeding arising out
of or relating to this Agreement, or for recognition or enforcement
of any judgment, and agrees that all claims in respect of any
action, litigation or proceeding of any kind or description,
whether in law or equity, whether in contract or in tort or
otherwise, in any way relating to this Agreement or any other Loan
Document or the transactions relating hereto or thereto may be
heard and determined in such New York State court or, to the
fullest extent permitted by Applicable Law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such
action, litigation or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any
other manner provided by Applicable Law. Nothing in this Agreement
or in any other Loan Document shall affect any right that the
Administrative Agent, any Lender or any Issuing Bank may otherwise
have to bring any action or proceeding relating to this Agreement
or any other Loan Document against any Borrower, any other Loan
Party or their properties in the courts of any
jurisdiction.



 

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(c) Waiver of Venue. Each Borrower
irrevocably and unconditionally waives, to the fullest extent
permitted by Applicable Law, any objection that it may now or
hereafter have to the laying of venue of any action or proceeding
arising out of or relating to this Agreement or any other Loan
Document in any court referred to in clause (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted
by Applicable Law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such
court.


(d) Service of Process. Each party
hereto irrevocably consents to service of process in the manner
provided for notices in Section 9.1. Nothing in
this Agreement will affect the right of any party hereto to serve
process in any other manner permitted by Applicable
Law.


SECTION
9.10 Waiver of Jury Trial. EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.


SECTION
9.11 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
9.12 Treatment of Certain Information;
Confidentiality.


Each of
the Administrative Agent, the Lenders and the Issuing Banks agree
to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed: (a) to its
Affiliates and to its Related Parties (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 required or requested
by any regulatory authority purporting to have jurisdiction over
such Person or its Related Parties (including any self-regulatory
authority, such as the National Association of Insurance
Commissioners); (c) to the extent required by Applicable Law or by
any subpoena or similar legal process; (d) to any other party
hereto; (e) in connection with the exercise of any remedy hereunder
or under any other Loan Document or any 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, to
(i) any assignee of or Participant in, or any prospective assignee
of or Participant in, any of its rights and obligations under this
Agreement or (ii) any actual or prospective party (or its Related
Parties) to any swap, derivative, credit insurance or other
transaction under which payments are to be made by reference to the
Borrowers and their obligations, this Agreement or payments
hereunder; (g) on a confidential basis to (i) any rating agency in
connection with rating any Borrower or its Subsidiaries or the
Facilities, (ii) the CUSIP Service Bureau or any similar agency in
connection with the issuance and monitoring of CUSIP numbers with
respect to the Facilities, or (iii) to any Lender’s or the
Administrative Agent’s, any Issuing Bank’s or such
other Agent’s attorneys, advisors, financial or business
consultants, accountants, independent auditors, trustees or
Affiliates, in each case who need to know such information in
connection with the administration of the Loan Documents; (h) with
the consent of the Borrowing Agent; (i) to the extent such
Information (x) becomes publicly available other than as a result
of a breach of this Section or (y) becomes
available to the Administrative Agent, any Lender, any Issuing Bank
or any of their respective Affiliates on a nonconfidential basis
from a source other than any Borrower or any Subsidiary or (j) to
any Person with (or through) whom it enters into (or may
potentially enter into), whether directly or indirectly, any
transaction under which payments are to be made or may be made by
referent to, one or more Loan Documents and/or one or more Loan
Parties and to any of that Person’s Affiliates, related
funds, representatives and professional advisers. 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 Administrative Agent and the Lenders in
connection with the administration of this Agreement, the other
Loan Documents and the Commitments.



 

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For
purposes of this Article, “Information” means all
information received from any Borrower or any Subsidiary relating
to any Borrower or any Subsidiary or any of their respective
businesses, other than any such information that is available to
the Administrative Agent, any Lender or any Issuing Bank on a
nonconfidential basis prior to disclosure by any Borrower or any
Subsidiary; provided that, in the case of
information received from any Borrower or any Subsidiary after the
date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 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
9.13 Interest Rate Limitation.
Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to any Loan, together with all fees,
charges and other amounts that are treated as interest on such Loan
under Applicable Law (collectively the “Charges”), shall exceed
the maximum lawful rate (the “Maximum Rate”) that may
be contracted for, charged, taken, received or reserved by the
Lender holding such Loan in accordance with Applicable Law, the
rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest
and Charges that would have been payable in respect of such Loan
but were not payable as a result of the operation of this
Section shall be
cumulated and the interest and Charges payable to such Lender in
respect of other Loans or periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the
date of repayment, shall have
been received by such Lender.


SECTION
9.14 PATRIOT Act. Each Lender that
is subject to the requirements of the PATRIOT Act hereby notifies
each Borrower that pursuant to the requirements of the PATRIOT Act,
it is required to obtain, verify and record information that
identifies each Borrower, which information includes the name and
address of each Borrower and other information that will allow such
Lender to identify each Borrower in accordance with the PATRIOT
Act.


SECTION
9.15 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) 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
9.16 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:



 

101







 






(a) the application of
any Write-Down and Conversion Powers by an EEA Resolution Authority
to any such liabilities arising hereunder that may be payable to it
by any party hereto that is an EEA Financial Institution;
and


(b) the effects of any
Bail-in Action on any such liability, including, if
applicable:


(i) a reduction in full
or in part or cancellation of any such liability;


(ii) a
conversion of all, or a portion of, such liability into shares or
other instruments of ownership in such EEA Financial Institution,
its parent undertaking, or a bridge 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.


SECTION
9.17 Final Agreement of the Parties.
THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THIS AGREEMENT AMENDS
AND RESTATES IN ITS ENTIRETY THE EXISTING
AGREEMENTS.


THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

ARTICLE
X



Borrowing Agency


SECTION
10.1 Borrowing Agency
Provisions.


(a) Each Borrower
hereby irrevocably designates Borrowing Agent to be its attorney
and agent and in such capacity to (i) borrow, (ii) request
advances, (iii) request the issuance of Letters of Credit, (iv)
sign and endorse notes, (v) execute and deliver all instruments,
documents, applications, security agreements, reimbursement
agreements and letter of credit agreements for Letters of Credit
and all other certificates, notice, writings and further assurances
now or hereafter required hereunder, (vi) make elections regarding
interest rates, (vii) give instructions regarding Letters of Credit
and agree with Issuer upon any amendment, extension or renewal of
any Letter of Credit, and (viii) otherwise take action under and in
connection with this Agreement and the Loan Documents, all on
behalf of and in the name of such Borrower or Borrowers, and hereby
authorizes Agent to pay over or credit all loan proceeds hereunder
in accordance with the request of Borrowing Agent.


(b) The handling of
this Facility as a co-borrowing facility with a borrowing agent in
the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither the
Administrative Agent nor any Lender shall incur liability to
Borrowers as a result thereof. To induce the Administrative Agent
and Lenders to do so and in consideration thereof, each Borrower
hereby indemnifies Agent and each Lender and holds Agent and each
Lender harmless from and against any and all liabilities, expenses,
losses, damages and claims of damage or injury asserted against the
Administrative Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of
Borrowers as provided herein, reliance by Agent or any Lender on
any request or instruction from the Borrowing Agent or any other
action taken by the Administrative Agent or any Lender with respect
to this Section
10.1 except due to willful misconduct or gross (not mere)
negligence by the indemnified party (as determined by a court of
competent jurisdiction in a final and non-appealable
judgment).


(c) All Obligations
shall be joint and several, and each Borrower shall make payment
upon the maturity of the Obligations (other than Obligations
arising in connection Secured Party Hedge Transactions and Lender
Provided Financial Service Products) by acceleration or otherwise,
and such obligation and liability on the part of each Borrower
shall in no way be affected by any extensions, renewals and
forbearance granted by the Administrative Agent or any Lender to
any Borrower, failure of the Administrative Agent or any Lender to
give any Borrower notice of borrowing or any other notice, any
failure of the Administrative Agent or any Lender to pursue or
preserve its rights against any Borrower, the release by the
Administrative Agent or any Lender of any Collateral now or
thereafter acquired from any Borrower, and such agreement by each
Borrower to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by the
Administrative Agent or any Lender to the other Borrowers or any
Collateral for such Borrower’s Obligations or the lack
thereof. Each Borrower waives all suretyship defenses.



 

102







 






SECTION
10.2 Waiver of Subrogation. Each
Borrower expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution of any other
claim that such Borrower may now or hereafter have against the
other Borrowers or any other Person directly or contingently liable
for the Obligations hereunder, or against or with respect to any
other Borrowers’ property (including any property that is
Collateral for the Obligations), arising from the existence or
performance of this Agreement, until termination of this Agreement
and repayment in full of the Obligations (other than Obligations
arising in connection Secured Party Hedge Transactions and Lender
Provided Financial Service Products).


 




 

103








 






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






	
 

	
 




BORROWERS


 


YUMA
ENERGY, INC.


 


 


By
/s/ James J.
Jacobs


Name:
James J. Jacobs


Title:
Chief Financial Officer


 


 


YUMA
EXPLORATION AND PRODUCTION COMPANY, INC.


 


 


By
/s/ James J.
Jacobs


Name:
James J. Jacobs


Title:
Chief Financial Officer


 


 


PYRAMID
OIL LLC


 


 


By
/s/ James J.
Jacobs


Name:
James J. Jacobs


Title:
Chief Financial Officer


 


 


DAVIS
PETROLEUM CORP.


 


 


By
/s/ James J.
Jacobs


Name:
James J. Jacobs


Title:
Chief Financial Officer

 













 



Signature Page








 






 


	
 

	
 



SOCIÉTÉ
GÉNÉRALE, individually, as Administrative Agent, Issuing
Bank and Lender





 


By
/s/ Max
Sonnonstine


Name:  Max
Sonnonstine


Title:    Director,
Portfolio Manager


 


 


CIT
BANK, N.A., as a Lender


 


 


By
/s/ John
Feeley


Name:  John
Feeley


Title:    Director


 


 


LEGACYTEXAS BANK,
as a Lender


 


 


By
/s/ Davis
Carter


Name:  David
Carter


Title:    Vice
President

 









 




Signature
Page